Transcript How much do demographic factors influence the demand for

Should policymakers take
account of demographic
factors in considering
investments in infrastructure?
Peter S. Heller (SAIS)
Presentation to POPNET Conference on
Population, Reproductive Health, and
Economic Development
Dublin, January 16, 2009
Defining infrastructure: a broad concept
Typically, an investment in basic structures
(not machinery or equipment)
• Spatially universal infrastructure: housing,
water, sanitation, social services
• Economically productive infrastructure:
energy, ICT, irrigation, ports, transport
(roads, railroads)
• Spatially connective infrastructure within a
country
• Regional infrastructure (whether to regional
markets or to global markets)
Distinguish
New investment
vs
Rehabilitation investment for existing
infrastructure
vs.
Operations and maintenance (O&M)
• There are substitution possibilities: an increase in
the quality of infrastructure investment changes
level of demand and periodicity of demand for
O&M, with obvious fiscal consequences
•
•
•
•
Four Issues to Examine
How might demographic factors
influence the demand for
infrastructure?
Have demographic factors played a
key role in the past in influencing
infrastructure investments?
What do future demographic trends
suggest about infrastructure needs,
particularly in LICs?
What might be the policy implications?
Issue 1
How might demographic factors
influence the demand for
infrastructure?
In principle, many demographic variables
influence the need for infrastructure
• Population size of a country or urban agglomeration
• Population dynamics of a country: what stage of the
demographic transition? Implies age structure
• Age structure of the population of country or city
– Share of young? Elderly?
• Density: rural; smaller cities (<100,000; 100,000--1
million, rural settlements) vs. mega-cities
• Extent of migration: urban-rural; international
Note: basic econometric models typically include:
population size, density, urbanization rate
Population size and age structure
• Population size influences the demand for spatially
universal service infrastructure (though influenced
by economies of scale):
– Water and sanitation
– Basic social services infrastructure (number of schools,
health facilities
• Age structure of population:
– Young population: obvious bias toward demand for
educational infrastructure
– Working age group: public infrastructure to provide
complementary inputs for private sector productivity and
job creation
– Elderly population: need an elderly-friendly infrastructure
Dynamics of population structure
• Stage of demographic transition determines
appropriate composition of infrastructure investment
• Not yet in transition: need to scale up educational and
health infrastructure as well as provide infrastructure
for jobs of growing labor force
– Youth dependency rate still high--conflicting challenge
between meeting needs of youth and infrastructural
requirements for growth (e.g., Kenya, Vision 2030)
• As overall dependency rates decline and growing
labor force: need infrastructure to foster job creation;
slowing growth of youth population
•
•
•
•
•
In principle, demographic transition can allow
for higher savings and investment rate
Higher working age group share and lower dependency
rate: potential for increased savings rate and higher rate
of capital formation (including of infrastructure), and
economic growth rate.
Such investments vital to absorb growing labor force
As with Asia, higher growth in labor force might prove
attractive for foreign investment. Also financing
infrastructure
But note difference between Latin America and Asia in
level of investment associated with lower dependency
rate in 80’s &90s. Higher savings may not materialize
So, higher growth may not materialize commensurate
with higher level of productive age work force
Contrast Asia and Latin America: A lower dependency rate not
necessarily associated with higher investment rate
Gross fixed capital formation (% of GDP)
0.63
China
Gross fixed capital formation (% of GDP)
0.57
0.59
Argentina
0.66
0.58
0.63
Indonesia
0.66
0.68
Korea
0.54
0.57
Philippines
0.69
0.68
Singapore
10
20
30
40
0.58
0.61
Peru
0.56
0.59
0.58
0.58
0.57
0.60
Venezuela
0.67
0
Colombia
Uruguay
0.63
Thailand
0.61
0.63
Chile
0.57
0.61
Malaysia
0.58
0.63
Brazil
50
1987 to 1996
Source: World Development Index
Numbers indicate Ratio of 15 to 59 age group to total population
0
10
20
1997 to 2006
30
40
50
Dynamics of population structure (cont)
• Later in demographic transition, should
observe an increased elderly share & falling
youth share (note: some youth bubbles do
occur) and possibly declining population
– Downsizing may be necessary (too many schools?
Infrastructure system too large &uneconomic?)
– Need infrastructure appropriate for elderly
– Can expect this to happen in Eastern and Western Europe
looking forward; also rural China in future
– Particularly a challenge in smaller cities where there may
be diseconomies of scale associated with limited client
population served by overbuilt infrastructure
Urbanization: Mixed evidence for its
implications for infrastructure
• Economies of scale and benefits of higher density in
reducing per capita costs for water, sanitation, power, transport
infrastructure, and possibly social services.
• But demand for higher quality and quantity of services
increases overall costs per capita in urban areas for spatially
universal services. This is particularly the case for larger cities.
– Differential in infrastructure costs per capita with rural areas may be less
in smaller cities.
• But lack of financial resources may prevent necessary
infrastructure investments from occurring
• Note the significant disparities within urban areas between
urban poor and other groups; slums;
Evidence; relative costs in urban and rural
areas of water
Two offsetting forces
• Capital costs and salaries in urban areas are much higher
• But lower population densities and longer distances can
imply a higher cost of providing rural populations with
access to water.
• Millennium Project: assumed that rural capital costs for
boreholes, rainwater collection, and dug wells are about 40
percent of urban cost
• But household connections and public stand posts in rural
areas are assumed to be twice as expensive as in dense
urban areas!
Recognition that urbanization will require
infrastructure is only first step
• As noted, two critical types of infrastructure:
– Universal services infrastructure--water, sanitation; Also need for
housing as infrastructure
– Economically productive infrastructure (related to job creation-ICT, transport links for export, electricity
• But how to approach the creation of urban infrastructure?
– Many possible choices--very different cost profile!
• Upgrading slums--upgrading housing, retrofitting
infrastructure for water supply, sanitation, transport and energy
services
– Requires strong focus on networked technologies--sewers,
piped water and electricity grids, storm drainage;
– Also, water storage
• New urban developments as alternatives to formation of new
slums
• In Transport: large scale road and rail-based transport
infrastructure vs bus-based mass transit approaches
With urbanization, there is potential for
unbundling
Example: Sewerage
• For large urban areas, unbundling a service area into
parallel independent service zones, each with its own
sewerage network leads to lower average diameter and
average depth for the entire city
• Leads thus to lower capital costs, stretching funds; also
leads to management of smaller areas of service--thus,
easier to manage
– Example: Bangkok: a megacity where unbundling of sewerage has
been successfully applied
Again, note the cost differentials cited by
Millennium Project
• Slum Upgrading: Average investment per person ($) over
15 years (including. physical improvements to housing
stock, basic physical infrastructure--water, sanitation,
drainage, road paving, and electricity)
– Upgrading slums:: $670 or about $42 per beneficiary
per year
– Providing alternatives to formation of new slums: $400
($26 p.b.p.a)
– Implication: new settlements can be build for one third
to one half lower than the cost of comprehensive
upgrading.
Source: Millennium Project
• Cost of water storage infrastructure: to reach South African
standards, need roughly $15-$70 per capita per year!
Urbanization by design?
• Some countries have tried to proactively influence
where urbanization occurs by investments in
infrastructure
– Sometimes successful, e.g., Korea and China
– But also note failed cases: often around EPZs (e.g., Kenya)
– May result in costly and inefficient infrastructure provision
• Most countries have less proactive policies:
urbanization: governments imply respond to forces in
growing economy: agglomeration economies: job
opportunities that pull in labor and/or weak
agricultural sector that pushes labor out
Other infrastructural consequences of
urbanization
• The need to feed an urban population creates
pressure for
– infrastructure in rural areas to support domestic
agricultural production and to facilitate transport of
commodities from the rural areas to cities
– Need the capacity to both supply a city (railways,
roads)
• As city grows, existing infrastructure may become
inadequate and may need to be upgraded or
replaced
– Creates opportunity for investments in new approaches
for supplying water or sanitation
– Need to reconsider urban transport infrastructure
Other infrastructural consequences of
urbanization (cont)
• Increased urbanization, particularly coastal cities,
puts pressure on ground water
• Forces consideration of alternative sources of
water & requires better urban water demand
management
• With ground subsidence, infrastructure needed to
limit risks posed from storms, wind damage, storm
surges
– Higher likelihood of residual damage from the
occasional extreme storm event.
• Coastal protection infrastructure will be a key
element in reducing risk. Climate change will
exacerbate these forces (as will be discussed later)
Migration will also shape demand
for infrastructure
• Will migration be to smaller cities? To mega
cities? To peripheral exurbs?
• Sources of internal migration and effects on
infrastructure needs in exporting areas
• Endogeneity factor: provision of infrastructure
may induce in-migration! But not strong evidence
of this
• Is immigration likely from neighboring countries?
Conversely, will out-migration dampen domestic
demographic pressures and influence population
size and age structure?
• All questions for policy maker to consider
Technological factors also shape level and
character of demand for infrastructure
• Technological change can induce or create demand for
new kinds of infrastructure or substitutions, particularly
for big ticket items: energy, transport, ICT
– Dedicated urban bus lanes vs auto-driven transport network in
urban areas
– ICT: role of land lines vs. cable optic fibre vs cell phone
towers; do conventional technologies become outmoded? Cell
phone technologies leapfrogging over demands for landlines
– Energy sector: Is there a shift towards renewables?
• Is there a potential for economies of scale for a given
type of infrastructure?
• For certain types of infrastructure (power, transport),
demographic variables (e.g., population size) may be
dominant consideration) relative to technological factors
Policy makers should consider choices
among existing technologies
• Avoid adopting technical design standards from industrial
countries.
• Consider adaptation to local circumstances (e.g.,Brazil
and Australia)
• Millennium Project examples
– Pour-flush systems (the Sulabh program in India) vs.
flush toilets: pour-flush systems reduce quantity of
water demanded and quantity of wastewater produced;
low-volume-flush toilets are water-saving devices
– Consider potential for labor-intensive roads to create
employment and minimize adverse environmental
impact
– Water supply: choose infrastructure that matches
occurrence and sources of water, treatment needs;
socioeconomic status of intended users; and location
and size;
Example: choosing among alternative water
supply technologies: what size of city?
• Large cities: rely on surface water: Construct
dams:
• For large scale systems, institutions, and domestic
and small scale agricultural uses: can also rely on
ground water; Dig boreholes and tube wells
• For village or community or household uses:
large diameter wells: dug wells or mechanically
dug:
• For rural areas: rely on ground water & spring
water: protected spring box;
Example: selected technological options for
sustainable access to sanitation
• On-site sanitation: (function of how much water usage, permeability
of soil, depth of water table, density of housing)
Excreta Disposal
– Simple unventilated double pit toilet
– Pour-flush toilet with twin soak-away pits
– Pour-flush toilet plus septic tank with twin-pit soak-away pits
Wastewater disposal
– Separate twin-pit soak-away system for sewage disposal
• Off-site sanitation: function of amount of water usage, soil
permeability, housing density, depth of water table
– Wastewater conveyance: simple sewer system
– Primary treatment: sludge drying beds and Imhoff tank
– Secondary treatment: trickling filters , sludge digesters, co-composting
of sludge with garbage
– Alternative treatment options: constructed wetlands, in-stream wetlands
and waste-stabilization ponds
Source: UN Millennium Project Task Force
Energy
• Millennium Project illustrates case of Brazil, where
significant effort to move away from biomass production
of energy through use of across-the-board and targeted
subsidies to the poor for natural gas including in rural
areas.
• Implies a shifting of infrastructure strategy from existing
technology to an alternative
• Infrastructure requirements? Actually, principal upfront
cost is the purchase of LPG cylinder and stove
Level of development and growth imperatives
• Infrastructure can facilitate/stimulate growth
– Provide complementary inputs to private sector
– Key policy issue: what infrastructure
appropriate at different phases of development?
– Role of FDI
• But reverse causality may apply: growth and
rising PCI will stimulate demand for infrastructure
– Need to upgrade infrastructure to meet
pressures and demands for energy; ICT; water;
transport networks, etc
– Demand for higher standards of infrastructure
Stage of development itself fosters demand
• In LICs and MICs, major differential between
infrastructure in urban and rural areas. Often, a major
backlog owing to previous lack of investment!
• In industrial countries, observe a convergence in
quality of spatially universal infrastructure (WSS,
medical, roads, education) per capita in urban and rural
areas.
• Also, what is defined as “spatially universal” evolves.
In MDCs, electricity becomes necessity!
• WEO (2008) notes rapid growth of demand for car
ownership as PCI approaches a given threshold:
intensifies demand for associated infrastructure: urban
and interurban
Convergence of demand for spatially
universal infrastructure
Demand for
Infrastructure
Quality of infrastructure
increasing
P er capit a income
Another factor to consider: the MDGs!
• MDG 7 relates to “ensuring environmental sustainability”
– Target 7c: Reduce by half the proportion of people without
sustainable access to safe drinking water and basic sanitation
• 7.8 Proportion of population using an improved drinking
water source
• 7.9 Proportion of population using an improved sanitation
facility
– Arguably Target 7d: Achieve significant improvement in
lives of at least 100 million slum dwellers, by 2020
• 7.10 Proportion of urban population living in slums
• Simply to meet MDGs, particularly with rapidly growing urban
populations, need to invest significant sums in infrastructure
• Millennium Project: estimates it would cost roughly $293.5
billion over the period 2005-2020, or roughly $20 billion
annually (of which $11 billion from ODA). Averages 70-80$ per
capita to meet all MDGs
Millennium Project estimates of annual
investment costs per capita to meet MDGs
(as opposed to universal provision!)
For Bangladesh, Cambodia, Ghana, Tanzania, and
Uganda
• WSS: $5 - $7 per capita annually: more generally,
$2-$6, rising to $6-$12
• Improve lives of slum dwellers $2 - $4
• Energy: $11-$19; more generally $6-$20 rising to
$18-$23
• Roads: $21
• Note; these are rough averages; lower in
beginning years, higher later on. Countries of
course differ
Source: Millennium Project Overview: chapter 17
Cost of just meeting water and sanitation MDGs
• Global finance costs range from $51 billion to $102 billion
for water supply; and from $24 billion to $42 billion for
sanitation for the period 2001-15; average $68 billion for
water and $33 billion for sanitation: aver annually $6.7
billion
• No absolute cost figure--would depend upon the
technologies adopted and country-specific preferences and
conditions.
• Estimates are for a minimum package of services, in which
low service levels (in terms of technologies and costs)
were applied for rural populations and intermediate service
levels were applied for urban populations. The vast
majority of need was assumed to be in periurban areas and
slums.
Another factor influencing demand for
infrastructure in future: Climate Change
• Future climate change may significantly exacerbate
pressures from urbanization.
– Undercut viability of some areas for settlement
– Increased risk of flooding, major disruption of trade
– Looking forward, may engender migration or
resettlement, creating new demands for infrastructure
– May influence the viability of existing infrastructure
• Difficult to separate out the pressures from demographic
change from the associated developments that can
accompany such demographic change
– viz., subsidence; socioeconomic development; etc
A further consideration: do demographic
considerations have adequate voice?
• An important political economy question in low income countries
particularly, is whether
– The fact of demographic needs for infrastructure are articulated
and responded to by policy decision-makers. If decisions on
demography are made on technocratic or political grounds,
demographic-related needs may not be taken into account;
– Also, in many societies, there may be various sociological factors
that ignore the needs or demands of important segments of the
population.
• Women, for example, may be effectively supplying
infrastructural services (water, energy) and their needs may not
be adequately considered by the political forces that shape
infrastructural investment decisions
• Women may also want preference given to technologies for
infrastructure for which they can have some control, rather
than large infrastructure projects
Finally: fiscal constraints limit whether
infrastructure investments respond to
demographic needs !
Infrastructure: usually a public good—subject to
economies of scale; externalities; spillover of
benefits (and costs)
• Externalities often large and capacity for
excludability may be limited--- such infrastructure
may not be viable on commercial terms for much
of the population
• Observe only limited private investment in dams,
power, highways, reservoirs; water and sanitation
• Some exceptions: some infrastructure, e.g.,
satellites, telecommunications, can be undertaken
privately; private willingness to pay; significant
private investment developing (e.g., East Africa)
Fiscal constraints (continued)
• At all PCI levels, fiscal constraints dictate
adequacy, quality, and magnitude of the
infrastructure to be provided
• These constraints are more binding for LICs with
low tax ratios, limited capacity for debt
absorption, and heavy reliance on external
assistance
• Even where public-private-partnerships (PPPs) are
used, fiscal contingent liabilities engendered;
• Public policy thus critical in influencing what
infrastructure choices are made: where?; how
much? what technology? what policy issues
dominate?
Issue 2
Have demographic factors played a
key role in the past in influencing
infrastructure investments?
Raw facts suggest otherwise. Look at Africa’s
infrastructure deficit relative to other low income
countries (Foster, 2008, p.2)
Africa’s infrastructure deficit
SSA
Other LICs
Paved road density (km/km2)
31
134
Total road density (km/km2)
137
211
Mainline density (lines/1000 inhab)
10
78
Mobile density (lines/1000 inhab)
55
76
Internet density (lines/1000 inhab)
2
3
Power generation capacity (MgWt/M3inhab) 27
326
Electricity coverage (% of population)
16
41
Improved water (% of population)
60
72
Improved sanitation (% of population)
34
51
Recent World Bank Africa Infrastructure
Diagnostic studies reveal that
• Power consumption in Africa only 10% that in
developing world and falling (124 kwh per capita
per year)
• Since 1990, little change in share of population
with access to land-line telephones, flush toilets or
piped water. Little improvement in population
share with access to electricity (from 22% to 28%)
• Rapid urban growth “leaving infrastructure service
providers severely stretched,…resulting gap [in
water and sanitation] filled by lower cost
alternatives such as boreholes and pit latrines”
Source: Foster 2008
Issue 3
What do projected demographic
trends suggest about infrastructure
needs, particularly in LICs?
A few key demographic factors to consider
• Growth of population
• Projected urbanization rates
• Projected growth in the size of school age
and working age populations
• Projected growth of elderly--in LICs and
MICs; in industrial countries
Africa: Seeking to catch up
Asia: moving to the next level
Compare two recent estimates of infrastructure
needs over next 5 -10 years in Asia (Yepes, 2008)
and Africa (Foster (2008)
Africa
Annual required spending as
percent of GDP per annum
New
ICT
.1
Irrigation
.2
Power
Asia
O&M New O&M
.1
.5
.9
4.2
2.4
2
1
Transport
1.7
1.5
.9
.5
Water and Sanitation
Services
.4
1.2
.2
.4
6.9
5.2
3.6
2.8
Total
In considering linkage between demographic
projections and infrastructure needs, policy
makers should differentiate need for:
• Spatially universal infrastructure: WSS and
infrastructure for basic social services (education and
health)
– Influenced by overall pop. growth & age structure (# of youth)
– Recognize “need” and “effective demand” are different
• Economically productive infrastructure:
complementing workforce in manufacturing and services
& facilitating growth and employment in urban areas
– Influenced more by urban growth & demographic transition
– Examples: power, transport, ITC, ports
• Spatially connective infrastructure: WDR2009
emphasizes need to facilitate growth in non-urban areas
through transport connections: rural-urban links
What do demographic projections portend
about the overall need for infrastructure?
2005-2025
Africa
Asia
2025 - 2050
0-14 15-59 60+
urban 0-14
15-59
60+
+124 +306
+42
+285
+53
+434
+117 +584
-26
+346
+795
-132
+80
+886 +1046
+521
urban
• First, start with absolute growth of population between 20052025: Africa 482 million Asia 841 million
• Whether in absolute population increase, level per capita of
infrastructure, and even in terms of capital complementing
increased workers, the major focus: Asia through 2025
• But, after 2025, Africa will be focus for the major increase in
infrastructure required for economic growth
• Minimal increase in working age group in Asia after 2025 and
large increase in the number of elderly
Let us define three categories
of country
1. Early in demographic transition
2. Mid-demographic transition
3. Late demographic transition
First category of countries: those now experiencing
fastest rates of population growth : still early in
demographic transition
• Niger, Burundi, Liberia, Guinea-Bissau, Uganda, Mali, DR
Congo, Chad, Afghanistan, Timor Leste, Yemen, Nigeria,
Ethiopia, Kenya, Tanzania.
• For these, a need for spatially universal services
infrastructure, particularly in 2005-2025
– UN Population projections (med variant) assume gradual
reduction in fertility rate over time.
– If this holds, countries will observe classic early phase of
the demographic transition:
• falling dependency rates,
• rising shares of the population in the 15-59 working age group.
– Higher fertility assumption would imply need for
additional infrastructure for schooling and less domestic
resource availability with higher dependency burden!
Category 1 countries
• 2005-2025: Still substantial rapid growth in
population: much still in rural areas,
including many in working age groups
• 2025-2050: with fertility reduction:
population growth rate falling and
urbanization accelerating
– See that growth in urban population largely
concentrated in 15-59 age group
• These are also countries where a significant
percentage of the increased population will be in
urban areas, particularly during 2025-2050, as the
demographic transition takes hold
• In some countries, particularly in 2025-50 the
increased urban population will be dominated by
the working age group,
– Suggests relatively greater importance in later
period of economically productive
infrastructure —power, telecommunication,
transport—that facilitates increased investments
for services and manufacturing, relative to
“basic services” infrastructure.
– But there will still be demand for such
infrastructure in earlier period--rising L force!
Rapid urbanization dominated by working age
group population
Change in total pop / Change in urban pop
Change in 15 to 59 age group / Change in urban pop
Niger
Burundi
Liberia
Guinea-Bissau
Uganda
Mali
DRC
Chad
Nigeria
Ethiopia
Kenya
Tanzania
Yemen
Timor Leste
Afghanistan
0
100
200
300
400
2005 to 2025
Source: United Nations Population Division
0
50
100
150
2025 to 2050
200
250
Despite urbanization, for many countries, also a
growing number living in the rural areas needing
basic infrastructure
• Particularly for next 20 years, before urbanization
process in these countries picks up stream
• Rural infrastructure needed both to address dramatic
existing deficiencies &to respond to rural pop. growth
• For rapidly growing population countries—Niger,
Burundi, Guinea-Bissau, Uganda, Ethiopia, Kenya and
to lesser extent Tanzania, DRCongo, and Afghanistan,
spatially connective transport infrastructure will also
be important to facilitate demand for agricultural
production from rural areas--supplied to urban areas
• Numbers may be even larger if one accepts that
median population variant probably too optimistic
Countries in early phase of demographic transition:
rapid urbanization but rural areas still important
Change in rural pop
Change in urban pop
Niger
Burundi
Liberia
Guinea-Bissau
Uganda
Mali
DRC
Chad
Nigeria
Ethiopia
Kenya
Tanzania
Timor Leste
Afghanistan
-10,000
0
10,000 20,000 30,000
0
2005 to 2025
Source: United Nations Population Division
Light areas indicate high variant projection - Population in 1,000s
50,000
2025 to 2050
100000
150000
A second category of high population growth
countries: but with fertility declining
• Further along the demographic transition: India,
Pakistan, Bangladesh, Philippines, and Egypt.
• Significant absolute increases in population through 2050.
• Share of working age population will remain roughly
unchanged (as will the dependency rate),
• But significant shift in population structure towards elderly
and away from youth populations.
• Also a dramatic shift, particularly after 2025, in
urbanization rate, with sharp fall in rural population.
• Higher urbanization in these more lower-middle and
middle income countries may entail higher per capita
infrastructure costs
Countries where urbanization starts to deplete
rural areas and include all age groups
Change in total pop / Change in urban pop
Change in 15 to 59 age group / Change in urban pop
India
Pakistan
Bangladesh
Phillipines
Egypt
0
50
100
150
200
2005 to 2025
Source: United Nations Population Division
0
50
2025 to 2050
100
150
• For 2000-2025, growth of rural population will
still be substantial, particularly for India,
Pakistan and Egypt, even though dwarfed by
growth in urban areas. Spatially universal
infrastructure required as well as spatially
connective transport infrastructure
• However, dramatic decline in rural sector post2025 suggests limits on quantity and quality of
infrastructure needed for next decade or so
Third category of country: low fertility rates
and well advanced in demographic transition.
• Project increase in overall population in coming
decades
• But sharp decrease in share of young, increase in
elderly
• Large drop in working age population share an
increase in overall dependency rate
• Substantial increase in urbanization rate
• Absolute population decline in rural areas, even in
next decade or so
• Category includes: China, Vietnam, Mexico,
Brazil, Indonesia
Third category of country (cont)
• Expect, over time, deceleration in the
growth in demand for productive
infrastructure
• Demand for more basic infrastructure
services may be greater, reflecting higher
level of urbanization
• With rising incomes, demands for upgraded
quality of infrastructure in rural areas:
convergence factor
Advanced demographic transition: rural areas losing
population and shift of urban population towards the elderly
Change in total pop / Change in urban pop
Change in 15 to 59 age group / Change in urban pop
-50
-100
Vietnam
Indonesia
China
Mexico
Brazil
0
50
100
150
2005 to 2025
Source: United Nations Population Division
-50
0
2025 to 2050
50
100
Footnote issue: the elderly and infrastructure
• In many industrial and middle income countries, will see a
large increase in the both the share and absolute numbers
of elderly, relative to other segments of the population.
• Many retired, many working part-time
• How would this population transition be reflected in
demands for infrastructure?
• Singapore: one of the few countries that have actively
considered this issue and asked what
policy/spatial/infrastructural changes would be needed to
cope with an aged society (Committee on Ageing Issues:
Report on the Ageing Population (2007)
Example: Recommendations of Singapore’s
Commission on Aging
• Guidelines needed on providing accessibility and safety
features in the homes for seniors,
• Make all new public buses low floor step-free and wheelchairaccessible to allow everyone to use the public transport system.
• Expand and accelerate the upgrading and improvement of
existing barrier-free measures on road facilities to enhance
accessibility between destinations
• Establish a new intermediate government residential care
facility to address the current service gap in intermediate
residential care for seniors.
• Develop integrated models of day care and day rehabilitation
centres, based on market driven needs, to provide more clientcentric and efficient services.
But fiscal constraints will determine
whether infrastructure needs can be met
• How to finance higher urban infrastructure spending?
• Many high population growth, rapidly urbanizing
countries, have economic growth rates less than rate
of urbanization.
• Raises the question of whether revenue growth
will be sufficient to create the fiscal space for
investments in necessary urban infrastructure-both for basic services and economic
infrastructure
(Issue: projections of urbanization presumed not to be a
function of an assumed higher rate of economic
growth)
Will growth be sufficient to meet the needs of
rapidly urbanizing population: 2005-10?
Will growth be sufficient to meet the needs of
rapidly urbanizing population: 2025-30?
Links of demography with climate change and
urbanization will influence infrastructure
spending
• Significant concentration of major urban areas in
coastal or river ports or in deltaic regions.
• Combination of socioeconomic development,
population growth, and possibility of humaninduced subsidence in these urban centres will
dramatically increase the risk of their exposure-both in terms of population numbers and value of
assets--to the impact of flooding, storm surges and
wind damage even in the absence of the higher sea
level and increased storm intensity associated with
climate change (Source: OCED (2008))
• Population increases alone would see a
150% increase in number of population
exposed to risk of 1:100 year storm, even
with no other factors involved (40 million in
2000 to 95 million in 2070);
• Including storm enhancement, sea level rise,
human-induced subsidence, population at
risk rises to 140 million
• Assets at risk rise from $3 trillion to $35
trillion over the period
The largest increase in exposure to such
risks will be in LICs in Asia and Africa
• Significantly exposed in terms of population at
risk if not value of assets Reflecting minimal
existing flood/coastal protection infrastructure;
sharp increases in population centres; limited
urban land-settlement programs; and rapid
socioeconomic development
• In terms of magnitude of exposure, Asian cities
will be among the greatest at risk
• But a number of African countries as well will be
Among top 30 cities with maximum exposure in
terms of population at risk
• Asian non-MDC cities at risk
(population)
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•
•
•
•
•
•
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•
•
•
•
•
•
•
•
Kolkata
Mumbai
Dhaka
Guangzhou
Ho Chi Minh City
Shanghai
Bangkok
Rangoon
Haiphong
Tianjin
Khulna (Bangladesh)
Ningbo
Chittagong (Bangladesh)
Jakarta
Shenzen
Qingdao
• Africa
– Alexandria
– Lagos
– Abidjan
• South America
– Guayaquil
NOTE: 13-17 deltaic
cities found in top 20
rankings
Source: OECD (2008)
Among top 20 world cities with highest
proportional increase in exposed assets at risk by
2070 relative to current situation, 19 are in Asia
Asia
• Ningbao
• Dhaka
• Kolkata
• Fuzhou
• Tianjin
• Surat
• Xiamen
• Guangzhou
• Mumbai
• Hong Kong
• Jakarta
• Zhanjiang
• Haiphong
• Bangkok
• Shanghai
• Ho Chi Minh City
• Shenzen
• Guayaquil
Africa:
• Alexandria
Source: OECD (2008)
Issue 4
Policy Implications
What are the implications for policy makers
in considering infrastructure investments?
Projecting infrastructure needs: yes, consider
demographics but…….
• Cannot simply project growth of population and
apply existing per capita infrastructure to the growth in
the population: backlogs may be substantial!
• Need to examine the nature of demographic change-dynamics of age structure; aging population or young
population; urbanization profile and trends; migration-all will influence infrastructure priorities
• And, infrastructure may influence demographic trends-fertility rates as well as migration patterns
Demographics only takes you so far in
considering policy
• Fiscal constraints force choices--may require a
balancing in responsiveness to demographic
factors vs other factors, such as:
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Providing preconditions for growth
Responding to new technological developments
Climate change impacts
Choosing among alternative technologies and
standards in providing basic infrastructure
• And no easy out on fiscal constraints: PPPs
typically entail significant contingent liabilities
Indeed, economics and policy literature
predominantly focus on how infrastructure can
contribute to growth!
What are good choices? Bad choices? WDR 2009
would say:
• In considering whether to invest in infrastructure,
follow the market, don’t lead it!
• In LICs, issues of equalization /convergence
assumes much less prominence than arguments that
offer prospect of higher economic growth.
• Equalizing infrastructure per capita only assumes
importance when countries become sufficiently
developed that it becomes politically unacceptable to
have significant inequalities
Prioritizing for the MDGs
• Absent fiscal space, Sachs emphasizes importance of some
“quick-wins”-- providing access to electricity, water,
sanitation and the internet for all hospitals, schools, and other
social service institutions
– Use off-grid diesel generators, solar panels, or other
appropriate technologies (Millennium Project Main
Report, Ch. 5 (MPMR5)
• Combine a growth focus with broader MDG objectives; Green
Revolution in rural areas--would require improved rural
infrastructure services in the form of
– Roads and means of transport-- construction and
rehabilitation of footpaths, feeder, district, and national
roads
– Modern energy services
– Communication technologies
Other policy considerations
• What infrastructure is needed to become or
maintain competitiveness? To attract FDI?
– Evidence is clear: need reliable electricity and water,
adequate for globalized communications, and efficient
and low-cost transport connections to global and
regional markets.
• What infrastructure required to restructure modes
of energy generation? To adjust to higher future
carbon prices? Geo engineering? Clean coal? etc
• What is required to achieve greater efficiency in
use of water resources?
• What may be required to adapt to climate change
(to maintain economic viability)?
Infrastructural Investments unaccompanied
by good policies--likely to be, inefficient &
prone to failure!
• Also, installing infrastructure without responding to user
preferences or user capacity to pay for acquisition, operation,
and maintenance operations likely to be unsuccessful
• Underscore also importance of sustainability of service
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Is technology choice responsive to demand?
Is there proper design of chosen technology?
Consistency of installed infrastructure with chosen design?
Use of installed facility as intended in the design?
Is there maintenance of facility for proper functioning?
Is there available competent technical staff or support?
Is there a reliable flow of revenue to pay for all of these requirements?
And policy choices on infrastructure can be made
for the wrong reasons
In LICs, large scale of infrastructure spending contracts
can lead to
• Rent-seeking
• Inappropriate absorption by the public sector of
contingent fiscal risks in negotiation of PPP contracts
• Corruption inducing
• Collusion between donors (seeking export promotion
favoring industrial interests) and politicians seeking
graft
• Prestige projects (politicians; donors)-ribbon cutting
What countries have been more successful
in thinking about infrastructural
implications of demographic change?
• Bombay
• Bangkok
• Korea--particularly re decentralization
urbanization through transportation linkages
• Shanghai
• Singapore: re elderly issues
• Mumbai: example where 3 local associations --SPARC formed an
alliance to raise the political visibility of issues affecting the poor and
to promote creative solutions, particularly re land tenure, adequate
housing, an access to electricity, transport, sanitation and related
services--used precedent setting pilot projects to show feasible low
cost designs for affordable hosing an sanitation
• Bangkok: illustrates regional governance approach in which both
central and local government play a role in the administration of a
region
• Korea: better transport links within and outside the capital region
greatly facilitated decentralization
• Shanghai: a city that took steps early to address risks associated with
sea level rise; also CT suggests it as example of a large city
confronting its service and infrastructure challenges in an energetic and
innovative fashion. Central Gov gave city more autonomy in revenue
collection and expenditure. Also the city established a foundation to
mobilize funds for urban construction (Shanghai Urban construction
investment and Development Company
Shanghai (cont)
• “Company has displayed an impressive record of achievement in
infrastructure financing since its creation.” CGT 366 quoting Wu
• Most spectacular outcome is development of Pudong New Area,
virtually new district from the old commercial center
• Has employed wide range of financing mechanisms through state and
non state channels as international capital, bank loans and credits,
construction bonds, stock market and service concessions. Entered into
concessions with profit-making enterprises to operate three bridges and
a tunnel across Huanpu River; established subordinate entities in
charge of water supply.
• But still severe backlogs on the housing side for low income groups,
despite impressive delivery or urban services and urban infrastructure
improvement.
Two final questions? Is there a link from
infrastructure to demography? Should it
motivate policy on infrastructure spending?
• Might the availability of infrastructure influence
the extent, focus, and direction of migration (e.g.,
China’s strategy for employment creation in
eastern regions?)
• Absence of infrastructure: clean water, sanitation,
medical care infrastructure, and transport (to
facilitate access to health facilities)—may increase
mortality and morbidity rates. Might it delay
decline in fertility associated with demographic
transition?
• Provision of infrastructure, e.g., facilitating girl’s
education (separate toilets), may indirectly
influence fertility decisions
The cost of infrastructure may influence
policies towards fertility
• Awareness of cost of infrastructure--and need to meet
basic needs and provide basic infrastructural services--may sensitize policy makers to the importance of
policies shaping demographic situation
• Failure to limit population growth, resources
will be preempted by need to respond in terms
of more infrastructure for schools, etc