ASi" kUCTURE FlOR DEVELOPMENT

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Financigneededmivesotments
Innovative and diverse ficigtchniqtues are the project involved. Because infrastructure investbeing
employed to- sutpport an accelerating transi-' ments command such a large part of total financial
tion from public to private sector risk bearing in infirastructure
poion. Mechanisms for financing
flows, imnproving the efficiency of infrastructure fi-
nandingwilspr the general development of, capispecific
stand-alone projects are contributing to the tal miarkets. And as governments focus, more on
learning procxess as goverments shift from being being facilitators rather than financiers, interainfrastructure.
providers to, becoming facilitators, tional development banks-long the partners of
and as priv-ate enrpeer and lenders take a governments in supporting traditional financing
more direct role. But if there is to be sustained prin- systems-will need to experiment with new ways
vate risk bearing and investment in infrastructur, of doing business.
parallel and far-reaching actions"are required to reform
legal and fintancial institutions and to develop Old ways of financing inrsrcueadnew
capital markets- that efficiently intermediate savings'
into investment attovernments
have beent beairing more of the burden
Governments atpresent provide obrkrte
of infrastructure expenditure than they can reasonbulk
of infrastrucftur financing: about 90 percent of ably be expected to manage. Under today's system,
financial flows for. infrastructure are channeled tax revenues and government. borrowings are the
through a government sponsor, which bears almost predominant source of infrastructure finance. Boralpoetriskcs.
Private financing is needed to ease rowing--whether from official or piaesucs
the burden on government finances, but, more ira- is backed by a governmuent's full faith and credit,
portant, it wfi encourage. better risk sharing, ac- and thus by its tax powers. Under this systemi govcountability,
monitoring, and management in infra- eruments bear virtually all risks associated with instructure
provision. In some sectors, such as power frastructure financing. Private sponsorship and fif
or telecommunications, the scope'for private financ- nancing offer the twin benefits of additional funds
ing is great In others, such as road networks, and in and more efficient provision-especially valuable
some low-income countries, the opporthnities are because substantial new investmnents are needed to.
more liied ltog even there increasing room meet pent-up demandfor
financial market discipline exists..
The challenge for the future is to r.oute private Todaysfiadgste
savings directly to private risk bearers who make
*long-term investmnents in infrastructur projects. Developing countries now spend around $200 bil-
Doing so wfi require institutions and financing in- linaya n nrsrcue investment, some 90
struments adapted to the varying needs of Min- percent or more of i;t derived from government tax
vestors in different types of projects and at different revenues or initermediated by governments. The
stages in a project's life. The benefits of thus flnanc- burden on public finances Is enormous. On average,
ing private initiatives in hinfrastructure go beyond half of government investment spending is.ac-
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