AT A GLANCE: - Infrastructure is recognized as a key factor in reducing poverty, increasing growth, and reaching the Mil-lennium Development Goals (MDGs).
- Developing countries need more infrastructure that is environmentally sound, socially acceptable, and financially sustainable.
- Private sector investment in infrastructure declined significantly in developing countries since its peak in 1997 but has rebounded in recent years.
- WB lending for infrastructure related programs and projects amounted to US$10.2 billion dollars during fiscal year 2007.
- The Infrastructure Action Plan (2003) was successful in scaling up support for infrastructure develop-ment.
- The WBG is preparing a second action plan for the period FY09-11 to effectively address the challenges of globalization, social inclusion, and environmental sustainability.
The WBG’s Infrastructure Business. The WBG supports infrastructure services across a wide array of sec-tors: energy, transport, water supply and sanitation, urban management, water resources, environmental infra-structure, information and communications technology, oil, gas, and mining. Specifically, the Bank’s Interna-tional Development Association (IDA) has been playing a critical role in extending infrastructure services to poor countries:
IDA has become the single largest source of financial assistance for improving water supply and sani-tation (WSS) in low-income countries. IDA assistance helped to provide water supply and sanitation services to at least 25 million people (22 million for water) in 2003–06.
IDA funding in FY04-06 has helped to construct 6,250 km, rehabilitate more than 10,700 km, and maintain more than 46,000 km of roads.
Infrastructure Development and Gaps. Infrastructure development contributes to poverty reduction; there-fore, it is key to achieving the MDGs, both directly through improving access to vital services such as water, electricity, and telecommunications, and indirectly by enabling access to other key services such as schools, hospitals, and markets. For example: Access to and use of improved sanitation mitigates roughly one third of the impacts of poor nutrition, with proven effects on child growth and reductions in anemia in developing countries.
The availability of Information and Communications Technology (ICT) services helps to empower thou-sands of women by leveraging micro-loans to provide mobile pay phone service in shops, local markets, and elsewhere.
Despite its importance for economic growth and poverty reduction, infrastructure development has been char-acterized by: An Access Gap: An estimated 1.1 billion people in developing countries are without safe water; 1.6 billion are without electricity; 2.6 billion without sanitary facilities; and more than 1 billion without access to an all-weather road. Access rates are lowest in IDA countries and in rural areas, and the gap is most pronounced in Sub-Saharan Africa and Asia. For example, there is almost no city in South Asia that supplies water “24x7” to its residents. A Finance Gap: Developing countries today invest, on average, 3-4 percent of their GDP on infrastructure annually, but should spend an estimated 7-9 percent of their GDP for both new investment and the mainte-nance of existing infrastructure to sustain broader economic growth and poverty reduction efforts. Of this, public funding currently accounts for around 70% and private financing account for around 20% (Official Development Assistance finances less than 10% of investments in infrastructure). Private sector investment commitments for infrastructure projects have risen from a low of US$62.5 billion in 2003 to US$114 billion in 2006, but remain concentrated in telecommunications and in a small number of middle income countries. Achievements Since 2003. The WBG responded to demands from clients by scaling up assistance for infra-structure as laid out in the Infrastructure Action Plan (IAP) in 2003. Achievements under the IAP included:
WB lending for infrastructure grew by 88% since 2003, reaching US$10.3 billion in FY07. WB assis-tance for infrastructure in Africa almost doubled, rising from US$1.4 billion to over US$2.5 billion, dur-ing the same period.
More operations involved cooperation between IBRD/IDA and IFC and MIGA. New instruments, such as sector-wide approaches (SWAPs) and Output-Based Aid (OBA), were developed.
Multi-country operations received a significant boost.
The WB and the IFC combined their resources to expand assistance to sub-national governments without requiring sovereign guarantees.
The quality of the infrastructure portfolio has remained sound, including compliance with safeguards.
Emerging Strategic Challenges for Sustainable Infrastructure Development. Several global challenges have emerged to affect infrastructure development: - The continuing globalization of trade and investment requires a strong platform of interlinked infrastruc-ture services for developing countries to benefit from expanding economic integration. This includes transport and logistics systems, regional energy markets and power pools, joint management of trans-boundary waters and the expansion of regional telecommunications networks.
- The rapid increase in energy prices heightens concern for energy security, putting a premium on diversifi-cation of fuel sources, especially non-fossil based power generation, energy efficiency, and improved spa-tial planning and mass transit.
- A growing consensus on the need to act to curb greenhouse gas emissions and address the consequences of global warming in terms of adapting infrastructure systems to manage increased variability of weather related events.
- Rapid urbanization and declining air and water quality call for improvements in urban transport and wastewater management systems. Across the board, innovative approaches need to be scaled up for ur-ban planning, financing, and service delivery.
Going Forward. In light of these challenges, the WBG has repositioned its infrastructure business to (i) sus-tain growth in financial assistance in response to continuing strong demand, (ii) strengthen the integration of economic, social, and environmental aspects of infrastructure development, and (iii) more fully leverage its own resources with those of the private sector, donors and national governments. Specifically:
The WBG will continue to focus on the core service delivery agenda by improving the reach and quality of infrastructure to support achieving the MDGs
The WBG will design infrastructure programs and advisory work that will actively promote environ-mental sustainability and social inclusion and strengthen development effectiveness through a strong fo-cus on governance at the project, sector and country levels.
The WBG will expand use of regional/multi-country approaches to deliver economies of scale in produc-tion and delivery of infrastructure services, particularly in Africa.
The WBG will leverage financing from private sources through expanded application of risk mitiga-tion instruments (currency, interest, liquidity and policy/performance risks), combining them with co-ordinated Bank-IFC-MIGA direct financing, and broadening reach of advisory services for improving the business environment and oversight of public-private partnerships for infrastructure.
The World Bank Group will strengthen partnerships with multi- and bilateral organizations at the country and global levels to improve integration of cross-cutting issues and donor alignment for infra-structure development, including emerging donors such as Russia, China, Korea, and the Gulf States.
Special attention will continue to be given to Africa, in line with the international focus on the region and on implementation of the Africa Action Plan.
- ### - Updated March 2008 Media Contacts:
Roger Morier, 202-473-5675, Email: Rmorier@worldbank.org |
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