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Infrastructure for development
Friday, 11 September 2009 10:18

 

Infrastructure is critical for economic, social and political development.  As the word infrastructure implies, it represents the sub-structure of life.  But the state of infrastructure in much of the developing world is lamentable.  Too many people do not have access to basic services.  But it is worse than that.  The United States, the world’s richest country, has roads and railways which are barely better than many third world countries.  In short, our governments are not doing their job in providing infrastructure for development.  And the importance of this job is growing with globalization.  Today, we need infrastructure to not only connect people within our countries, but also to connect people in neighbouring countries.

 

What do we actually mean by infrastructure?  The World Bank defines economic infrastructure to include: (i) Public utilities – power, telecommunications, piped water supply, sanitation and sewerage, solid waste collection and disposal, and piped gas; (ii) Public works – roads and major dams and canal works for irrigation and drainage; and (iii) Other transport sectors – urban and interurban railways, urban transport, ports and waterways, and airports.  Economic infrastructure usually has the following characteristics, economies of scale and spillovers from users to non-users.

 

Contrary to widespread impressions, a large proportion of infrastructure services are still mainly delivered by the state, even though the relative importance of the private sector has increased significantly in some sectors.  The interest of the private sector is highest for the highest income countries.  Only one-third of developing countries can count on the private sector for the delivery of electricity, water or railway services.  The largest presence is in the fixed line telecoms business where about 60 per cent of the countries rely on private operators.  Overall, the private sector has roughly contributed 20-25 per cent of the investment realized in developing countries on average over the last 15 years or so.  In Africa, it has probably contributed less than 10 per cent of the needs.

 

What is the state of infrastructure in the developing world?  The developing world is very diverse, and so is the state of infrastructure.  The best infrastructure is in East Asia and the worst in Sub-Saharan Africa.  Too many people still do not have access to basic services.  For example, about 1 billion people still do not have access to safe drinking water, and 2.5 billion lack access to basic sanitation services.  Some 2.4 billion people live without access to modern cooking and heating services, and 1.6 billion have no access to electricity.  Partly this is caused by great inefficiencies and waste both in investment and in delivering services.  Up to half of power generation capacity is unavailable.  Investments in roads are wasted due to lack of maintenance.

 

There are of course success stories, such as China’s provision of transport, telecommunication and power at the village level.  Infrastructure can also help environmental sustainability.  Clean water and sanitation, nonpolluting sources of power, safe disposal of solid waste, and better management of traffic in urban areas provide environmental benefits.  But in East Asia, a relative infrastructure success story, rapid economic growth in recent years has put enormous pressure on transport, energy, and communications infrastructure and unless these can be improved they will continue to be a bottleneck to growth, a threat to competitiveness, and an obstacle to poverty reduction.

 

Overall, there has been too much new investment, not enough maintenance, too many low priority projects, not enough essential services, and way too much corruption.  To improve the provision of infrastructure we need: wider application of commercial principles to service providers, broader use of competition, and increased involvement of users where commercial and competitive behaviour is constrained.  Developing countries need about $900 billion (7-9% of their GDP) a year to maintain infrastructure and start new projects, yet only half this amount is actually spent. The funding gap for new infrastructure projects has risen by about $20 billion a year as prospects for private sector financing recede.

 

Another important issue is connecting economies and peoples through infrastructure.  This can help in achieving an integrated, poverty-free, prosperous, and peaceful world.  Asia’s trade competitiveness—particularly in its increasingly sophisticated production networks—depends to a large extent on efficient, fast, reliable, and seamless infrastructure connections. But many parts of Asia—including inland and remote areas, landlocked countries and distant islands—are isolated economically as well as geographically. While some of the existing infrastructure is world class, much of it is below average.  Increasing infrastructure investment should remain a priority for governments during the current global financial crisis.

 

Asia’s infrastructure investment needs are large.  From 2010 to 2020, the region will need to invest $8 trillion in overall national infrastructure, and about $290 billion in regional infrastructure projects. On average, Asia will need to invest around $750 billion per year during this period.

 

 

 

References:

 

World Development Report 1994: Infrastructure for Development

www.worldbank.org

Infrastructure: A survey of recent and upcoming issues, Antonio Estache.  World Bank ABCDE Conference 2006.

www.worldbank.org

Global Monitoring Report, 2009 -- A Development Emergency
www.worldbank.org

 


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