AT A GLANCE: Infrastructure is recognized as a key factor in reducing poverty, increasing economic growth, and reaching the Millennium Development Goals (MDGs).
Developing countries need more infrastructure that is environmentally sound, socially acceptable, and financially sustainable.
World Bank lending for infrastructure related programs and projects amounted to US$11.9 billion dollars during fiscal year 2008.
The World Bank Group (WBG) approved in early summer 2008 the Sustainable Infrastructure Action Plan, a roadmap for action over the next three years 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 sectors: energy, transport, water supply and sanitation, urban management, water resources, environmental infrastructure, information and communications technology, oil, gas, and mining. Specifically, the Bank’s International Development Association (IDA) has been playing a critical role in extending infrastructure services to poor countries:
has become the single largest source of financial assistance for improving water supply and sanitation (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; therefore, 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:
The cost of not having adequate sanitation in Vietnam , Indonesia , and the Philippines , is estimated at approximately $9 billion a year, or about 2% of their combined GDP.
Over 500,000 women die each year due to childbirth complications; most of these deaths could be prevented through timely access to essential childbirth-related care, for which road access is crucial.
Despite its recognized importance for economic growth and poverty reduction, infrastructure development has been characterized by: An Access Gap: An estimated 884 million people in developing countries are without safe water; 1.6 billion are without electricity; 2.5 billion are without sanitary facilities; and nearly one billion are 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: The total demand for infrastructure investment and maintenance from developing countries is estimated at over US$900 billion per annum. 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 maintenance of existing infrastructure to sustain broader economic growth and poverty reduction efforts. Of the investments, public funding currently accounts for approximately 70% and private financing account for about 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 the telecommunications sector and in a relatively small number of middle income countries. Achievements Since 2003. The World Bank Group responded to demands from clients by scaling up assistance for infrastructure under the Infrastructure Action Plan (IAP) of 2003. Achievements under the IAP included the following.
World Bank lending for infrastructure grew by 88% since 2003, reaching US$10.3 billion in FY07. Assistance for infrastructure in Africa almost doubled, rising from US$1.4 billion to over US$2.5 billion, during 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 infrastructure services for developing countries to benefit from expanding economic integration. This includes, for example, 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 diversification of fuel sources, especially non-fossil based power generation, energy efficiency, and improved spatial planning and mass transit.
There is 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 urban planning, financing, and service delivery.
Potential breakthroughs in technologies for delivering infrastructure services in a more sustainable manner.
The food price crisis. The ongoing food crisis has mobilized multilateral development banks under the umbrella of the United Nations for immediate action, and the WBG has outlined its action plan under the recently approved Global Food Crisis Response Program (please see Issue Brief on Global Food Prices).
Going Forward. In light of these challenges, the Bank Group has repositioned its infrastructure business: to sustain growth in financial assistance in response to continuing strong demand; to strengthen the integration of economic, social, and environmental aspects of infrastructure development; and to more fully leverage its own resources with those of the private sector, donors and national governments.
The World Bank Group estimates that by the end of the Sustainable Infrastructure Action Plan in 2011, its direct financing support for infrastructure investments will reach US$59-72 billion. We also anticipate that these amounts will leverage an additional US$109-149 billion in public and private financing for infrastructure. For its part, the Bank Group will: Continue to focus on the core service delivery agenda by improving the reach and quality of infrastructure to support achieving the MDGs.
Design infrastructure programs and advisory work that will actively promote environmental sustainability and social inclusion and strengthen development effectiveness through a strong focus on governance at the project, sector, and country levels.
Expand use of regional/multi-country approaches to deliver economies of scale in the production and delivery of infrastructure services, particularly in Africa .
Leverage financing from private sources through expanded application of risk mitigation instruments (currency, interest, liquidity, and policy/performance risks), combining them with coordinated Bank-IFC-MIGA direct financing, and broadening the reach of advisory services for improving the business environment and oversight of public-private partnerships for infrastructure.
Strengthen partnerships with multi- and bilateral organizations at the country and global levels to improve integration of cross-cutting issues and donor alignment for infrastructure 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.
For more information, see the web site:
www.worldbank.org/sustainabledevelopment Media Contacts :
Roger Morier: (202) 473-5675
Email: rmorier@worldbank.org Robert Bisset: (202) 458-5191
Email: rbisset@worldbank.org Karolina Ordon: (202) 458-5971
Email: kordon@worldbank.org Updated September 2008 |
RSS