Infrastructure: A survey of recent and upcoming issues

This paper surveys the recent academic empirical economic literature on the main current infrastructure policy issues in developing and transition economies--infrastructure is defined here as all the facilities used to deliver energy, water and sanitation, telecommunication and transport services. The survey tries to provide an unbiased coverage of the discussions on the linkages between infrastructure and, respectively, institutions, growth, equity, finance and corruption. The bulk of the analytical evidence draws on quantitative analytical assessments of the key lessons on these interactions from the 1990s and of the early part of the 2000s. In the process, the paper provides a rough blue print for a research agenda on infrastructure since one of the main overarching lessons is that the knowledge gap is not a small one. The main policy conclusions of the paper can be summarized as follows. First, the data gaps are so large that they impede an effective monitoring of the evolution of performance in terms of access, efficiency, equity or fiscal costs for most sub-sectors. As a consequence, there is less global accountability in this sector than in health or education. Governments should spend as much time benchmarking and assessing the performance of public operators as they do or would do for private operators to increase the accountability of the sector and minimize costs to the users and the taxpayers. Second, the debate on the growth relevance of infrastructure shows that investment planning and policy coordination in infrastructure or improvements in the assessment of the sectoral dimensions of fiscal sustainability analysis are not “textbookish” concerns of the past, they are still essential to avoid bottlenecks slowing down national and/or regional growth or distorting urban vs. rural resource allocation decisions. Third, the experience of the last 15 years shows that most countries will be better off working out a partnership with the private sector to achieve sustained efficiency gains and minimize fiscal financing requirements. However, not every sector of every country has been or will be able to achieve this. Moreover, even when these partnerships will be possible, the main responsibility for financing many of the investment needs will fall onto the taxpayers rather than the residential users, at least in capital intensive transport and water and sanitation. Fourth, the recent experience also shows that to ensure the sustainability of reforms and to ensure the fair distribution of their gains, possible trade-offs between efficiency and equity need to be diagnosed very early on in the reform process—and the tools to do so are available, they are simply not used as widely as they are in other sectors such as education or health. Fifth, the research on poverty shows that if there is a political will to address the infrastructure needs of the poor in the short to medium run and if the country can’t generate the tax revenue to finance well targeted direct subsidies, well targeted inter-user, inter-usage or inter-regional cross-subsidies can deliver. Finally, the research on corruption shows that there is no simple institutional solution to reduce its impact in the sector. Based on the evidence available so far, the international infrastructure community does not yet have strong specific recommendations, besides the obvious ones on the need to generate information to increase accountability. This may be the main new area for research emerging from this survey because it touches on all the dimensions of infrastructure policymaking. 1 I am grateful to F. Bourguignon, J.J. Dethier, M. Fay, A. Goicoechea, M. Kerf, C. Kessides, M. Khalil, L. Lovei, M. Monteliu, J. Narkevic, M.-Y. Pleissis-Fraissard, J. Saghir, K. Sierra, M. Torero, L. Trujillo, Q. Wodon and two anonymous reviewers for useful feedbacks on an earlier version. The views expressed in this paper are my own and should not be attributed to the World Bank, its affiliated organizations, its board or the governments they represent. Any mistake or misinterpretation of facts is my responsibility.