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The World Bank, a strong advocate of private sector
investment in infrastructure, is now calling on governments around the
world to increase their investment in infrastructure, noting that
private sector investment in the sector can never be enough and has
often brought about an unintended consequence: the victimizing of the
poor.
Speaking at the opening of the Annual Bank Conference on Development
Economics (ABCDE), World Bank President Paul Wolfowitz noted that
attempts to differentiate between "public" and "private" approaches to
infrastructure provision were misplaced.
"We have moved away from a paradigm which once expected the private
sector to play the dominant role in infrastructure. The private sector
can -- and does -- play an important role in increasing investment and
strengthening service delivery.
"But it is apparent that the capacity or willingness of the private
sector to respond to all the infrastructure needs is limited,"
Wolfowitz said.
According to the World Bank, private sector investment in the
infrastructure sector in developing countries continued to decline from
a peak of US$128 billion in 1997 to a mere $58 billion in 2003.
Antonio Estache, senior economic adviser to the infrastructure vice
presidency of The World Bank, said that not only was private sector
investment in infrastructure declining, but public sector investment in
the sector was also falling.
This was happening because many governments of developing countries had
deliberately reduced their investments in the sector as a result of
zealous privatization drives.
He noted that private sector investment only accounted for about 20
percent of all investment needs in developing countries, and,
therefore, public investment was badly needed to make up the shortfall.
Much of the private sector investment has been concentrated on the more
lucrative sectors, especially telecommunications, while sectors
important to the poor, particularly water and sanitation, were very
much neglected.
Even when the private sector did become involved, the governments of
developing countries often failed to provide the necessary regulatory
frameworks that would ensure access and affordability for the poor. And
again, the poor were victimized by not having access to services or,
even when they did have access, by being forced to spend too much of
their incomes to buy the services.
Therefore, Wolfowitz warned that the public sector approach to
infrastructure must focus not only on economic growth, but also on what
he termed "smart" growth, i.e. "growth that is economically sound,
environmentally friendly, socially acceptable, locally desirable and,
most important, growth that makes a difference in people's lives."
Wolfowitz also called on the governments of developing countries to get
tough on corruption as corruption once again penalized the poor more
than any other bracket in society.
"Ordinary people will not fully benefit from new infrastructure such as
roads if -- as in the case of certain projects in Asia -- the improved
access is accompanied by 'informal' levies or charges that raise
transport costs back to previous levels," he said.
To that end, Wolfowitz noted that the World Bank would continue to
support infrastructure development in developing countries.
In the global order of infrastructure, the bank sees itself as a "two
percent solution" as the bank currently contributes about 2 percent of
the some $400 billion invested annually on developing countries'
infrastructure.
Public investment in infrastructure is becoming more important now, not
only because of declining private investment but also because of the
increasing needs for infrastructure in developing countries as a result
of population growth, as well as the increasing movement of people from
rural to urban areas.
Today, of the 6.3 billion people in the world, 1.6 billion do not have
access to energy services, and 2.6 billion people lack access to water
and sanitation services.
In the next 25 years, another 2 billion people will be born -- 97
percent of them in developing countries. Not only that, more than half
of these people will live in urban areas, creating more challenges in
meeting their basic infrastructure needs. They will need access to
water and sanitation services, energy, transport and telecommunication
services.
"We know, however, that this is not an impossible task. Sustainable
development can go hand-in-hand with responsible infrastructure
development, which takes into account social and environmental
considerations from the outset," Wolfowitz said.
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