Chapter 4: Prevention through Governments
109
Figure 4.3 Per capita spending is greater for physical capital
Growth rate (percent)
4 3
Growth of physical capital per capita
2
Growth of human environmental assets per capita
1
Growth of net total wealth per capita
0 –1 –2 –3 –4
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Source: Adapted from López and Toman 2006.
protection and education (World Bank 2000; López and Toman 2006). Per capita spending, except for rapidly growing Ireland and the Republic of Korea, is greater for physical capital than for intangibles, which also have high rates of return (figure 4.3).1 In Vietnam, because of a rule that the growth rate of capital expenditure should be higher than the growth rate of recurrent expenditure, capital budgets grew faster than recurrent budgets. A decline in recurrent expenditure has been particularly acute in transport (figure 4.4) while capital expenditure boomed. Were expenditure to remain at its current level, the percentage of national roads in good condition would fall to just 10 percent of the total network. In its funding request for 2003 to 2005, the Vietnam Roads Agency secured less than half of the finance required to cover all maintenance needs on national highways (World Bank 2007). Poor coordination between capital and maintenance expenditure is common in countries that operate dual budgeting systems. The introduction of medium-term expenditure frameworks may help address the issue, since a medium-term perspective helps highlight the capital savings offered by adequate maintenance. Implementing such frameworks effectively, however, is fraught with difficulties if the institutional environment remains poor.