Transcript Document 7253978

INVESTING IN INFRASTRUCTURE
FOR PRO-POOR GROWTH AND
POVERTY REDUCTION
Ernest Aryeetey
ISSER, UNIVERSITY OF GHANA
OUTLINE
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Introduction
Overview of Infrastructure in Africa
Changing Perspectives on Investment in
Infrastructure - Ownership
Evidence of Infrastructure Investment Impact
on Poverty Reduction
Making Infrastructure more beneficial for the
Poor
INTRODUCTION
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There has been a lot of discussion of what constitutes
infrastructure: e.g. economic and social infrastructure,
hard and soft infrastructure, etc.
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There is also a growing recognition of the role that
different types of infrastructure play in reducing
poverty.
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Beyond social infrastructure, such as those for health
and education, economic infrastructure is expected to
underpin poverty reduction:
Introduction (Contd)

Energy, flood protection and drainage, irrigation, information
and communications technologies (ICT), transport, water and
sanitation.
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Infrastructure enhances the productivity of the poor.
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Enhances the employment-creation effects of economic
growth.
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Infrastructure can offer social protection.
SOME STATISTICS ON
INFRASTRUCTURE PROVISION
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In Burkina Faso, Uganda, and Zambia, walking is the
principal means of transport for 87%of rural households.
In most SSA countries it is over 80%
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Less than half the people in Sub-Saharan Africa have
access to safe drinking water.
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Over two-thirds of the continent’s population lack
adequate sanitation services.
Some Statistics….
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Only about 5 percent of Africa’s rural residents have
access to modern electricity, while over 95 percent are
dependent on traditional fuels, mainly wood or cow dung
for cooking, heating and lighting.
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Telephone lines serve primarily urban areas in Africa;
very few African villages have a single telephone. The
average disparity of “teledensity” (number of lines per
person) between urban and rural areas in Africa is
estimated to be as high as 25:1
CHANGING PERSPECTIVES ON
INFRASTRUCTURE OWNERSHIP/
MANAGEMENT
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Reforms in the 1980s led to the dominant public sector role
being muted with efforts to draw in private participation with
controversial outcomes.
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Transport:
 Proposals for improved efficiency included efforts to
develop BOT arrangements and the use of labour intensive
methods for road construction, using local labour.
Reason:
 If encouraged, local firms partnering with foreign firms
would be better suited to finding technical solutions
appropriate to local skills and resources, and to manage the
work within local commercial, social and political
constraints.
Changing Perspectives ……
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Water Supply and Sanitation:
 Efforts to attract private participation in urban water has
been most controversial;
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Rural Water Supply and Sanitation (WSS) infrastructure is
considered community or local government -owned.
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Investment decisions are made on the basis of perceived
needs.
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Cost sharing has been extremely problematic in many
parts of Africa, both urban and rural.
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The result is that supply systems are still ineffective and
inefficient, with little investment.
Changing Perspectives ……
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Telecommunications:
 Historically, telecommunication services have been provided
by monopoly agencies or state owned enterprises.
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Service has been dominated by the urban areas, with rural
extensions consisting primarily of pay phones and public
call offices at national post and telecommunications offices.
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Currently, with new technologies, varying degrees of
liberalization are occurring and have opened opportunities
for innovative private sector participation to expand access
to rural areas.
Changing Perspectives ……
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Energy:
 For electricity, the national monopoly utilities,
financially crippled by below-cost universal tariffs,
are unable to expand service to meet demand.
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Low tariffs make it difficult to attract private
investment.
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The technology available puts the service beyond
the reach of poor households
INFRASTRUCTURE INVESTMENT AS
CHANNEL FOR POVERTY REDUCTION
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Enable individuals, firms, governments – to respond to new
types of demand in different places.
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Creating employment to serve as social protection and as a
counter-cyclical policy in times of recession.
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Enhancing human capital by improving access to schools
and health centers.
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Improving environmental conditions, which link to
improved livelihoods, better health and reduced
vulnerability of the poor.
SOME PLANNED REGIONAL
INFRASTRUCTURE PROJECTS
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West Africa
 For energy, there is large scope for economic regional and cross
border investments among countries in West Africa.
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In 2000 the heads of state of ECOWAS approved a master plan
to complete the integration of national electricity grids and to
establish a regional electricity market, the West African Power
Pool (WAPP).
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Phase 1 of the transmission projects were completed in 2002
(between Ivory Coast and Burkina Faso, and between Mali,
Senegal and Mauritania)
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Two others were due in 2006 (between Ivory Coast/Mali, and
Nigeria/Benin). For 2008, there is Ghana to Togo/Benin
Planned Regional Projects …..
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East Africa
 In October 2004, the African Development Fund approved
funding for a study to determine the optimum solution for the
operation of a railway line between Isaka (Tanzania) and
Kigali (Rwanda).
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Covered regions are Shinyanga and Kagera in Tanzania,
Burundi, and the east of the Democratic Republic of Congo.
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The area is mainly rural, but has an abundant mineral wealth
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The aim of the project is to open up new development
opportunities to create employment, increase income and
reduce poverty.
INVESTMENT IN INFRASTRUCTURE AND
POVERTY REDUCTION: EVIDENCE
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There are hardly any studies of the direct effect
of infrastructure on poverty reduction in Africa.
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There are, however, good examples from Asia
where Yao (2003) has documented the poverty
reducing effects of rural roads in India and the
People’s Republic of China.
Table 1: Poverty Reducing Effects of Rural
Road Investment
India
Poverty Reducing Effects
Rural Road Investment
Elasticity*
% Share
Peoples Republic of China
Elasticity*
% Share
Direct effect through
increase in agricultural
productivity
-0.0119
17.92
-0.0450
28.46
Direct effect through
increase in non-farm
employment
-0.0300
45.18
-.0417
26.38
Direct effect through
increase in rural wages
-0.0204
30.72
-0.0399
25.24
Indirect follow-on effect
through higher economic
growth
-0.0041
6.18
-0.0315
19.92
Overall
-0.0664
100.00
-0.1581
100.00
* The elasticity estimates measure the percentage changes of the rural poverty incidence with
respect to road infrastructure investments, working through different channels.
Ghana: Indirect Evidence
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Steady growth over 24 years propelled by
steady capital expenditures has been assessed
to be pro-poor (Aryeetey and McKay 2005);
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Infrastructure investments (10% of total
expenditures) have risen steadily in roads,
health and education infrastructure and rural
water
Poverty Incidence by Main Economic Activity
1991/92
1998/99
2005/06
80
Incidence (in percent)
70
68
64
59
60
52
46
50
40
30
39
35
29
25
23
29
24
17
8
40
38
30
20
10
39
17
11 10
19 20
13
0
Public Sector
Employment
Private
Private
Formal
Informal
Employment Employment
Export
Farming
Food Crop
Farming
Main Economic Activity
Non-Farm
SelfEmpolyment
NonWorking
Ghana
Poverty Incidence by Administrative Regions
1991/92
1998/99
2005/06
100
88 88
84
Incidence (in percentage)
90
80
70
65
60
52
48
44
50
48
44
38
40
20
67
70
57
60
30
69
63
88
31
27
18
26
20
40
28
36
29
29
20
12
10
0
41
52
15
5
Western Central
Gt. Eastern Volta Ashanti Brong Northern Upper Upper Ghana
Accra
Ahafo
West East
Administrative Regions
CONCLUSION: MAKING INFRASTRUCTURE
INVESTMENT WORK FOR THE POOR
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Private participation is not necessarily the problem;
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For water and energy, not being able to influence
technology is what makes it difficult to sustain
infrastructure;
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Use new regulatory regimes to enforce standards that
take into account the poverty of the poor. New
research should help.
End
Thank You