Infrastructure's Impact on Development: Lessons from WDR 1994

Abstract

As documented in the World Development Report 1994 , infrastructure's links to economic development work through its contributions to economic growth, poverty alleviation, and environmental sustainability. These benefits are realized through the services infrastructure delivers. Widespread failures to provide reliable services that users demand stem from inadequate maintenance, misallocated investment, and inefficient operation, which in turn are largely rooted in institutional factors including the following: lack of competition in infrastructure service provision; lack of managerial autonomy for service providers; pricing practices that involve heavy public subsidies; and few incentives for service providers to be responsive to the needs of users. An opportunity to improve infrastructure's performance in developing countries is being created by technology change in some sectors, by successful experiments in many countries with new ways of providing services, and by a new willingness of many governments to involve the private sector in infrastructure provision. Improvements in infrastructure's performance has the potential to produce for developing countries $50 billion per year in efficiency gains and $123 billion dollars per year in fiscal revenue savings. Such amounts are large fractions of the $200 billion per year these countries currently invest in new infrastructure facilities.