Speakers in the
interactive dialogue stressed the link between infrastructure development and
poverty alleviation, saying that both domestic savings and a combination of
official development assistance (ODA) and foreign direct investment (FDI) were
needed in the LDCs. They favoured the
development of technology-intensive services, along with more traditional infrastructure
sectors, and addressed the risks involved in infrastructure investments. Of key importance to the LDCs, however, were
international programmes for infrastructure-building, as poor countries alone
could not cope with the tasks before them.
Statements were also made by:
Rubens Ricupero, Secretary-General of the United Nations Conference on
Trade and Development (UNCTAD); Jean Pierre Verbiest, Manager, Strategy
Planning and Policy Coordination Division, Asian Development Bank; Samuel
Nnama, Manager, Operations Support Division, African Development Bank; and
Hamadoun Touré, Director of the Telecommunication Development Bureau,
International Telecommunication Union.
The Conference will meet at 3 p.m. to hold
an interactive thematic session on “Transport and Development”.
Thematic Session
Issues Paper
An issues paper for the session,
circulated by the World Bank (not available as an official document), contained
chapters on: infrastructure as an agent
for economic development; the infrastructure sector in the 1990s; and the
infrastructure agenda for the next decade, which includes increasing finance in
infrastructure, improving its development impact, and developing new approaches
to infrastructure service provision. An
annex describes “General directions for setting policy and channeling funds”.
With figures and tables, the 24-page paper supplied information
on, among others, the inequality of access to electricity services within
countries, the comparative extent of private sector participation across
countries and sectors, official development assistance (ODA) and private
capital flows to infrastructure in developing countries and least developed
countries (LDCs), and ODA and private capital flows in LDCs by sector.
The paper began by stating that “the development of
infrastructure networks is intimately connected with the process of economic
growth”. Among many other areas, it
examines the impact of transport infrastructure on facilitating economic
integration, the importance of the Internet in facilitating trade, and the
connection between infrastructure and poverty reduction.
Statements
MASIHUR RAHMAN, Permanent Secretary,
Ministry of Finance, of Bangladesh, said that in 1994 the World Bank had
defined the infrastructure as a framework that included, but was not limited
to, bridges, telephone services, electricity, transportation, water supply and
so on. Such a definition recognized
activities requiring substantial investment that were important for
development. The issue paper to be
introduced today showed that private and foreign investment had been directed,
to a large extent, towards certain aspects of the infrastructure, such as
telephone services, rather than others.
Along with the general infrastructure, he continued, developing
the rural infrastructure was important to the LDCs, including the construction
of roads and providing access to markets.
Development assistance for infrastructure in the LDCs had been
inadequate. A substantial amount of
capital was needed, which could be spread out over a long period of time. Most of foreign investors asked for
government guarantees and for long-term contracts, in order to distribute the
risks. In most cases, governments of
the importing countries had to take the greater risk.
It was important to find new methods of financing for such
infrastructure elements as transport, he said.
In search of investment, the fiscal implications, including the
magnitude of a government’s contingent liabilities, needed to be specified,
which could be redeemed in the long term.
In early 1980s, his Government had carried out a railroad restructuring
programme. Initially, both the
Government and the donors made their decisions based on financial interests,
without taking into account the implications of railroad closures on the
population. Later, however, in order to
maintain service, some of the lines were leased out to private companies. In the long term, both public and private
sides profited. His Government was
facilitating private investment in public infrastructures, but, he asked, “How
do we get enough investment, though, to ensure adequate level of services to
the population?” Before making big
plans, basic needs must be satisfied.
Kimio
Fujita,
Special Assistant to the Minister of Foreign Affairs of Japan, also a
co-Chair, said that following the Second World War his country was one of the
poorest countries in the world. In
1952, with admittance to the World Bank, it began constructing its
infrastructure. Today, his country’s
strategy as a donor of development assistance was based on its experience as a
recipient. Official development
assistance loans were provided to East Asian nations for building
infrastructure, and technology was transferred through technical assistance. Private investment followed to construct
industrial capacity. That idea -- that
the development of infrastructure was the basis for economic growth, which, in
turn, created the conditions for poverty reduction -- had been maintained, as
Japan expanded its ODA beyond East Asia.
Private capital flows had been
concentrated in some upper middle-income countries and to specific sectors,
namely, telecommunications and energy, he said. Consequently, ODA remained the
dominant source of infrastructure finance for LDCs over the last decade; more
than $35 billion in ODA, versus less than $5 billion in capital flows. Since 1997, the decline of both ODA and
private capital flows to the infrastructure sectors in LDCs was dramatic,
falling from around $4.5 billion in the mid-1990s to $2.5 billion at the close
of the decade. The benefits that
private capital could bring had been amply illustrated by the experience in the
last decade, even in the poorest countries, but in order to secure and expand
the inflow of private capital, greater market reform would be necessary.
Infrastructure served as a means for
wider development ends, he said. Yet,
the link between infrastructure development and wider development outcomes was
still poorly understood. Infrastructure
development projects had to meet the true needs of the local residents,
especially the poor, and they would be more successful with the participation
of local residents. An example of that
was the Jamuna Multipurpose Bridge Project in Bangladesh. That $950 million project was co-financed by
Japan, the World Bank and the Asian Development Bank. The project linked the rest of the country to the north-west,
boosting the region’s economy, and was also noteworthy for the effective
collaboration between the Government of Bangladesh and non-governmental
organizations in the resettlement of about 100,000 people. Similarly, in 13 African countries, as well
as in many of the Asian States, the water supply projects carried out by Japan
and the respective host nations had achieved various social development
impacts. Infrastructure development was
the sector that the preference of the beneficiaries should be most respected
and where the demand-driven approach should always be taken.
Panellists
Presenting the issue paper of the World
Bank, NEMAT SHAFIK, Vice-President, Infrastructure and Private Sector
Development, World Bank Group, said that the infrastructure formed a foundation
on which economies were built. To build
such a foundation, it was important to make clear the link between
infrastructure and poverty reduction. Many examples in poor countries demonstrated that investment in
infrastructure led to a use in gross domestic product (GDP). Growing infrastructures also increased
employment and facilitated access to markets.
The tragedy, however, remained that many poor countries still had no
access to developed infrastructures, and had to pay more for the services that
they did get.
A paradigm shift was needed in providing
infrastructure services, she continued.
While some governments had succeeded in attracting investments into
telecommunications and power, least successful were attempts to attract private
investment in transport and water.
Also, capital flows were volatile and investments had been unevenly
distributed among the countries.
Official flows towards infrastructure had fallen by almost half in the
last 10 years. About one third of the
World Bank’s activities were devoted to infrastructure, but that was clearly
not enough to meet the huge needs of the LDCs.
In terms of infrastructure services by sector,
telecommunications had
been the
most successful, she said. Electricity
was a different story; almost
2 billion
people in the world still had no access to electricity. Water supply services and road
infrastructures had actually been deteriorating, largely due to a lack of
maintenance. Looking forward, the needs
were going to grow even further. In
Africa and Asia, the urban populations were expected to double. The question was how the new paradigm --
which included increased financial flows to the infrastructure sector,
improvement of the development impact of infrastructures, and development of
new approaches to infrastructure services provision -- could be made to work
for the poor.
The decline in external finance must be
reversed, and the gross waste of infrastructure resources eliminated, she
said. At the same time, the old
paradigm of direct public provision must be avoided. Fostering public-private co-financing could prove useful. Turning to examples of regional cooperation,
she said that it was estimated that by exchanging electricity with its
neighbours, South Africa could save $80 million each year in operating costs
and $700 million in investment costs over the next 20 years. She also referred
to the Greater Mekong Sub-Regional Programme, which was supported by the Asian
Development Bank, which aimed to integrate regional roads, railways and
information and communication technology (ICT) networks, in the context of a
wider reform process. Regarding new
approaches, she said that beneficiaries’ views had often been overlooked in
infrastructure project design. It was
essential for infrastructure service providers to look “beyond the meter” and
try to work proactively with end-users.
Jean Pierre
Verbiest, Manager, Strategy Planning and Policy Coordination Division,
Asian Development Bank, said his Bank was currently supporting three
subregional initiatives. The first was
the Greater Mekong Subregion (GMS), which was the case study of his presentation. The second was the South Asia Subregional
Economic Cooperation Programme, where the Bank was helping to identify and set
priorities. The third was the Central
Asian Regional Economic Cooperation initiative, which promoted subregional
economic cooperation among the Central Asian countries, which were now in
transition towards a market economy.
He said the GMS
Programme promoted closer cooperation among the six countries that shared the
Mekong River -- Cambodia, Lao People’s Democratic Republic, Myanmar, Thailand,
Viet Nam and the Yunnan Province of China.
The Programme began by focusing on basic infrastructure, such as
transportation and energy, but had since been broadened and deepened to include
social sectors, such as human resource development, tourism, the environment,
investment and trade and transborder issues to resolve policy regulatory and
other non-physical barriers to cross-border traffic.
He said the Programme was developed
to be results-oriented and, as a result, the various projects had several aims
in that respect. The first was to
facilitate subregional trade and investment, and private sector participation
in subregional infrastructure development in energy, transportation, tourism
and agriculture. The second was to
facilitate the resolution of transborder issues and the fulfilment of common
resource needs. The GMS Programme also
had a peace dividend, for it contributed to stability and better relationships.
He said that there had been some
success in developing subregional infrastructure in three areas. Major transportation infrastructure projects
now linked the different countries in the subregion and were facilitating the
greater movement of goods and services.
In the energy sector, the 210 megawatt Theun Hinboun Hydropower project
in the Lao People’s Democratic Republic contributed significantly to its
economy by earning substantial foreign exchange from selling excess power to
Thailand. Also, subregional cooperation
in telecommunication had created a reliable high-quality, low-cost
telecommunications service that linked the six countries.
SAMUEL NNAMA, Manager, Operations Support Division, African
Development Bank, said that the objective of the Bank was to contribute to more
sustained development and poverty alleviation through appropriate lending and
investment policies. The major
impediments to growth in Africa included the lack of openness to trade,
conflict, governance issues, human capital development problems and poor
infrastructure. The lack of
infrastructure was a major obstacle to economic development. Africa could be significantly strengthened
as a result of improved regional integration and cooperation.
Roads should receive special treatment, he continued, as the
failure to expand and improve the transportation infrastructure resulted in
poor access to neighbouring countries.
Development of transport required a large amount of capital investment,
which was beyond the economic capacity of most African countries and was
generally financed through foreign aid.
African countries accorded high priority to the Trans-African Highway
project, being implemented since 1971.
The road network would link areas of production to areas of
consumption. The system consisted of
nine groups of road links servicing different subregions of the continent.
Promoting inter-African and international trade, the roads had a
beneficial effect on the economies of LDCs, particularly the landlocked
ones. The roads generated tremendous
transit traffic, which was required to bolster tourism and service industries,
thereby creating primary and secondary employment. The project also stimulated agricultural production by reducing
waste and promoted the development of light and medium-scale industrial
production along the routes of the highway network.
Turning to the financing of the project, he said that most LDCs
and regional member countries could not bear the full cost of building the
roads. The project was supported by
African Development Bank, the Organization of African Unity (OAU) and other
partners who shared the cost of road-building.
Donors should also help with the road construction. It was important to finance a study of the
missing links of the network, and that could be done through a donor
conference, which could be organized next year. He also asked for donors’ and development partners’ support in
establishing of a trans-African highway bureau to develop and implement the
work programmes for the project.
RUBENS RICUPERO, Secretary-General of the United Nations
Conference on Trade and Development (UNCTAD), stressed the importance of
competition in infrastructure. Problems
such as corruption had been identified, but while he agreed, he said it was
often forgotten that competitive environments did arise automatically. In Brazil, for example, the ports had been
privatized, but they had still had a tendency to be dominated by cartels.
He said there were similar problems in neighbouring countries,
where airports were affected, as well.
Regulatory agencies had to be strong and should seek good examples of
regulation in that area. If there was
no competitive environment, countries could end up worse off than they were
before. While globalization had
eliminated the importance of time and space, people made a conceptual error
when they equated the reduction of time, because of telecommunication, to the
reduction in distance. Very little had been reduced in terms of distance and
very little had occurred in the maritime sector vis-à-vis radical changes.
Hamadoun
Touré,
Director of the Telecommunication Development Bureau, International
Telecommunication Union (ITU), said the role of his organization in fighting
LDC marginalization was unquestionable.
At its last conference, held in Malta in 1998, the ITU’s Bureau came up
with road map to guide it in achieving its key objectives and to adapt to
changes in the environment. That road
map was called the “Valleta Action Plan”.
Of utmost importance was the fact that the Conference introduced a special
programme for LDCs. That programme
called for increased and more focused assistance for LDCs in the areas of: sector reform and restructuring;
introduction of new technologies; rural telecommunication development; and
financing, tariffs and partnerships.
He said that, judging from the
adoption and implementation of the Valletta Plan, 10 LDCs had now attained
better tele-density than some non-LDCs in the low-income bracket. There had been striking growth in mobile
use, Internet users, satellite antennas and personal computers. The environment was rapidly changing. There
was a convergence of technologies and an emergence of smart technologies. Those
technologies could provide a global information infrastructure that could help
LDCs leapfrog into the information age, without having to spend a lot of money
digging trenches and wiring the cities and rural areas. The ITU, as the lead agency, was ready and
geared to assist all its constituencies to emerge from the jaws of
telecommunications poverty.
Interactive Dialogue
A speaker informed the participants about
the outcome of a high-level international dialogue on infrastructure
development, which had taken place in Bonn in March. The participating governments, international organizations and
non-governmental organizations had made some recommendations on the subject,
stressing the need for a stronger regulatory framework and the public/private
partnership. It was important, however,
not to replace the public monopoly with private ones. Local capital markets needed to be developed, along with
mechanisms for foreign investment.
Subsidies for such basic services as water
provision were also mentioned in the debate.
Market liberalization and the opening of borders had not improved the
situation in many LDCs, which meant that investors were “not exactly rushing”
to participate in the development of those services, a speaker said. What could underdeveloped countries do to
secure funding for their infrastructures, if it was precisely the lack of those
infrastructures that prevented investors from investing in the first place? one
speaker asked.
The use of advanced technologies received
support from the floor, for the rapid development of telecommunications and
Internet services, for example, could have a beneficial effect on the economy,
which, in turn, could result in increased investments. Fair competition in granting licenses was
also stressed, along with the need for a regulatory framework for
infrastructure development. The were
also requests for information and assistance with particular projects of
interest to underdeveloped countries, including irrigation, road building and
water use, for the lack of resources prevented many LDCs from implementing
much-needed measures.
Policy implementation should be based on
feasibility studies, a speaker said.
Genuine international support was needed for infrastructure development
projects, and human rights should be taken into account. Smaller communities and businesses should
have their say in policy formulation and participation in infrastructure
development. If people considered such
infrastructure elements as schools and hospitals as their own, those structures
would not be the first to be destroyed at the time of conflict.
Higher GDP growth could be achieved
through domestic savings, and ODA in combination with foreign direct investment
(FDI), a speaker said. The risks and
costs of doing business in the LDCs needed to be evaluated, and their markets
needed to be enlarged. Nothing could be
achieved, however, if international financial institutions, including the World
Bank and the African Development Bank, continued to insist on the same
conditions and requirements. If a
country came to them asking for help in building a bridge, those banks should
not insist that it needed to build a school first.
Another speaker said that infrastructures were the first to
suffer in armed conflicts, and direct assistance was needed to reconstruct
them. What countries needed what not
charity, but a meaningful partnership, for many opportunities were emerging in
the LDCs when they were in transition from conflict to development. The world’s poorest countries could benefit
from special programmes, designed to attract investments and advance the cause
of development. Also raised in the
discussion were the issues of human rights, including the rights of women,
training, environmental protection, and legal measures against corruption.
