ASi" kUCTURE FlOR DEVELOPMENT

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- -. *1t a-N -. X m.-0 - :9t '4:-~~~~~~~~~~~~~~~~~~' *~~~~~~M n z ce-. it& P -- SffLfXf00: |f. 4- t - ~A . liars~~~~~~~~~ ~has4Jcreased2,butpiihI uaate ,-h,_., W _ t d -bf17 6lirs *;i needed in0 ( q y * 'StS th ff"'; f-S X "W C, f:~~~~~ Pi: - U Mi. - . 5 -I n o : . - - nt direcll generatethe forein exchangMearning :5 frte -_ coiintd fiang, re. ios uedn geaf,eate pr mr,pon 4, .c- .~~~~~~~~cosrit, n 9asoue o iac oclepn . -f iuWlstructure andervices- edaotbe fpinaced land soxp : - men inxretment s rard less han 30 t andt dir-ecd gfor t he ton for;eqigmnt ehande ernaings sometimes as much as 70 pecent (Chapter 1). hi ad- .nnce when public sector sau ngs i are imited. The dition, maitenance and operatng expenchtures Dominied nRepubliciis onesof severalycounihies with :t. comrnand a high share of current exSpenditures..--avr heavy reifance on foreign funding, which fi- - Governments have relied to va.ying degrees on nanced tee to 8m percent of inftastructure invest- -foreign finaig for infastructure- Official devel- ments in 1991. In the late 1980s the c aunty had a : - opmenlt finance (including concessional and non- -nlarge pubcsc sector deficgt (due in part to low pnces councessionar funds fromboth multrateral andsbidat- of winastruchme services), and a freeze was iceial sources) has increaset over the past decade and- posed on the pubic sectors use of domestic credit,xpn currently amounts to nearly $24 bihion a3 yearc thus a order to crb infsationa,y eqpectations and per-- sprovmidine on averages about7 2 percent of totaI re- nianc wein puaseic credittothe pinvate sector. T sources for investment in these rne sectors. over- D R i o o s whelmig share of these flows has been direced to IAv NSe OFrTHE oRE SYSfuM gNT The mawi adenergy and n sort (Fhgure 5.1) In contrast to the vantage of 8e present system is thatin most counfcrease in offici ng for infras tructur e, devel- puO mtients inent islthe most creditworuntry hada Iicly guaranteed commercial financing has delined and is able to bordw at the lowest rates, maliceg c(oeiogure whelming :- shr fun) :: d enrg an trnpr :these r flw t has bee e -diece ad b - to (Fgr 5 .1). In cotrs to th . oble L--TTIN infrastructure OP :.E -REE: provects -wr that might Th not mai owaersuc ad: :- vanag of th prsn syte is tha in mos coun- fo i t in ths s . The over-
Box 5.1 Is there a free lunch?-limits to govemment finance In infrastructure projects, the cheaper credit available to centage-point advantage tmnslates into a unit cost reducgover:unents needs to be weighed against possible inef- don of 20 percent. In other words, it would take almost a ficiencies in channeling funds through government. in- 6-percentage-point Interest rate advantage to negate the efficiencies arise when financial dWipline is relaxed as a inefficiencies described. result of government sponsorship. Consumers would undoubtedly benefit if it were pos- For n powergeneration plant, with construction costs sible to combine low interest rates and efficient provision. acounting for 70 percent of ail costs and a 10 pent In- But the goal of a free lunch may be illusory. Even creditterest rate, construction cost overnuns of 20 percent and worthy govenuments cannot borrow unlimited amounts delays in construction of two years each lead to a 15 per- at low cost. The evidence Is that governments' costs of cent increase in unit costs of power produced. The track raising funds rise with the level of bornwins& Also, high record for publicly sponsored projectshows that such levels of bormroing at a particular time increase debt levcost overruns and time delays are conunon, leading to a els and limit the amount that can be borrowed later, cumulative cost increase of about 35 percent Compare thereby redudng goverunent liquidity. These are further this with an interest-rate advantage for governnent, reasonswhygovenmmentsmaybeweBladvisedtoentrust which can borrow at, for example, 10 percent rather than to private sponsorshlp those infrastructure investments the 13 percent available to private investors. This 3-per- that can be undertaken by private entrepreneurs. vise be financially viable Balanced against this ad- contrast, policy or institutional reforms and prcvantage has been the difficulty of maintaining ac- tices that build long-term sustainability (such as countability, leading often to high costs of provision maintenance and user participation) require greater for the consumer (Box 5.1). Moreover, being credit- donor commitment to providing steady support, worthy does not imply that governments have un- through longer-periods of preparation and implelimited access to resources. mentation. Governments' ability to spend on infrastructure A World Bank review of urban water supply and has been severely constrained, in part because poor sanitation projects identified typical proolems. Seriperformance and pncing have strained govemment ous cost overuns (the group of projects as a whole budgets, as described in Chapter 2. Where budgets cost 33 percent more than the appraisal estimates) have been tightened for macroeconomic reasons, and time overruns (46 percent of the projects rethe large share that infrastructure represents in gov- quired two to four extra years to complete) greatly ernment investment has led to proportionately increased costs of service provision. Maintenance sharp reductions in spending in this sector. In the was severely neglected because a lack of funds cre- Philippines, for example, public mivestment in infra- ated shortages of skilled staff and spare parts. The structure fell from 5 percent of GDP between 1979 review found that borrowers had often failed to and 1983 to less than 2 percent during the remain- comply with loan covenants, especially those relatder of the 1980s. Such sharp declines are appropni- ing to prcing and financial performance. ate where unnecessary or inefficient spending on in- hn the case of bilateral assistance, a furither probfrastructure is the cause of budgetary problems, or' lem that especially afflicts infrastructure arises from where macroeconomic adjustment is needed. How- the full or partial tying of aid-the requirement that ever, a continued low level of spending on infra- funds be spent on goods or services purchased only structure is not sustainable in the long term; re- from specified countries. In recent years between newal of economic growth requires accompanying two-thirds and three-quarters of official developinvestments ir infrastructure. ment assistance to infrastructure has been fully or International donor policies and practices have parally tied. By contrast, less than 20 percent of ofsometimes reinforced distortions in recipient coun- ficial development assistance going to areas other tries. Many donors have focused on financing new than ifrastructure is tied. By definition, tying aid physial construction rather than on maintaining or precludes international competition in procureimproving existing infrastructure Like mmistries menL The Principles for Effective Aid agreed on in of public works, donor agencies find it easier to 1992 by the Development Assistance Committee measure their acidevements in new project ap- (DAC) of the OECD reaffirmed the superiority of provals. Moreover, physical works draw on the untied aid and specfied that, except for the least de-. well-practiced technical skills of donor agencies. By veloped countries, tied aid should not be extended 91
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3jQi'[~~~~~~~~~~~~~ ~~~~~~~ I -:A -
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... ..... Oxford University Prss :O
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-: .- : 7 - A- - .~ g ------ Vry. _
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. 6 Setting priorities and implemen
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3.1. Contractual anrangements for p
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Because of changes in GNP per capit
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- - Infrastruckure's roleand record
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L ~ ~ ~ ~ ~ ... ~ ~ ~ ~ ~ C- l' __
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Diagnosing the causes of poor perfo
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private sector have evolved. Port f
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tradability of infrastructure servi
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fits. The way ahead is one of 'cont
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Eior - 1 a iX for. - '1~t'*%~ E 6 -
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;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~W.:-
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BoxL12 The importance of infrastruc
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and reliability, as well as on quan
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Expansion of transport infrastructu
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Roads are not private goods, althou
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Table 1.3 Expansion of infrastructu
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: ~ ~ 2 A :0::~~~~~~~~~~~~~~ 9 0 0
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pie of Latin American water utiltie
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straint to their mobility (Figure 1
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Box 1.7 Infastiucture activities ti
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* Option A: Public ownership and op
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Lessons of success and failure mana
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-~~~~o 22, -Svrac pa eae layoffs tt
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vices. These concerns are particula
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Management conitracting wHEN is Ir
Page 57 and 58: - :. : : . - I- ~~*r~ 4.~ accounts
Page 59 and 60: The best way of reducing the gap be
Page 61 and 62: the high rates of return for mainte
Page 63 and 64: l:: :: . - : 0~ ,aSn- ::~~~i /W-#H
Page 65 and 66: egional gas distributors, and an en
Page 67 and 68: 5 : zFigre3C4mnbndbgl atvitie ices
Page 69 and 70: Helped in part by sectoral unbundli
Page 71 and 72: ;t~~1F D ¢- l- e as is demnonstrat
Page 73 and 74: short-mn gain and skimp on routine
Page 75 and 76: Table 3.2 Value of infrastructure p
Page 77 and 78: Box 3.6 Telecom piivatizati6ci the
Page 79 and 80: Box 3.8 Regulation and privatizatio
Page 81 and 82: private management can become compl
Page 83 and 84: this chapter shows, where regulator
Page 85 and 86: transport ministries in Africa is o
Page 87 and 88: Unlodking local effort through- dec
Page 89 and 90: Box 4.3 Power in Purang and roads i
Page 91 and 92: ->W>
Page 93 and 94: way of achieving distributional obj
Page 95 and 96: are bundled into low-cost loans to
Page 97 and 98: powerful minorities can capture the
Page 99 and 100: to this purpose without sacrificing
Page 101 and 102: found that although households were
Page 103 and 104: 4 I~~~Z Box46 W canbenefitftbm ibut
Page 105 and 106: I Box. 4.9 Icroaigenviironmental. c
Page 107: . ............ --S - Financigneeded
Page 111 and 112: Box 52 Tapping international capita
Page 113 and 114: 1~~~~D Clt ,-,.Re -b cope an tie 0
Page 115 and 116: V Box 5A A successfl-firtt step in
Page 117 and 118: change risk through the passing on
Page 119 and 120: Box 5.8 Look before you leap: limit
Page 121 and 122: poor financial discipline, and subs
Page 123 and 124: 'sv,t-za6oapioceeds (billions of VS
Page 125 and 126: -~ f4' * ; ylkj XtLSidolkits.(1. -~
Page 127 and 128: .*,mmr ''', '- ' f - .,__ -, 6.. -.
Page 129 and 130: Box 6.1 Ingedientr. of good peromne
Page 131 and 132: government and e strength of the co
Page 133 and 134: = -ableb 6.Te tspbrhivaof jrnte' sc
Page 135 and 136: elements of natural monopoly and mu
Page 137 and 138: solid waste disposal through metrop
Page 139 and 140: portant that uinstituitional activi
Page 141 and 142: V-~~~~~~ : ~~~~ :: . = .-s Bibliogr
Page 143 and 144: on. grwh once more sophisticated ec
Page 145 and 146: structure and explain the importanc
Page 147 and 148: 1993, Drtze and Stern 1987, Goldste
Page 149 and 150: Ailken, J., G. Cromwell and C. Wish
Page 151 and 152: Easterly, William and Sergio ReWo.
Page 153 and 154: Paul, Samuel. 1991a. -Accomitabilit
Page 155 and 156: Shirley; Mary and John Nellia 1991.
Page 157 and 158: *:: Appendix: Infrastr cture data T
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Piual aolai Ekd rkrilytarnyftig' nz
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*TLqdqmrc Main (rsRaiilwad tracks I
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*Teplephmein lines Railnnd tmcts rs
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Acress to safe drIPAIng zmfer Acem
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Table AS3 IBRD and IDA commitments
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* ;;\ * i Contents Key 154 Introduc
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mairking Popzdaliou: hrf htt Total
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.~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~I .- In
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into the following broad areas: pro
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: - .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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Pqm&uem Airs GN'perafii -AY an!A Uj
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GDP AgmIrflun"y Alatmqjrmd Senrrk.
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Disurihhhiuuefgrmd dmndprSarrf 11 G
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Frnltioirruapm Food pnafaai fndia $
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E-wapro&d-rrm &-VWrvaimdVf Penwifr
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Drnbmdnlnfmafaaummtwdwhirdalf%J 197
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73 Ukraine.. ... 74 Algeria ~~~~~-.
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Gewmt~ ~ Awgsaagsns 1 1970-80 *fl3)
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Aimor GOUANWnk Gniadonmk piomm cama
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D!~~me. MasSe limit ~~mar.w-fftw sf
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Perauagrq JwL node riseiiv swim na
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19M410 1.931-9 Sm 193 199 I93-92 PM
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hfar~uNzr,,~r(udWrnSIAwwunqem-fgmi.
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0hsrpflra Maudhmer& Dinf B21) 1992
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P---rAgetrefurerd.ds&rcpans FiEs. n
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73 Ukruin 339 10.3 33.0 3.2 IDA) 43
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MD3 599 197f 19 197) 199 ami 1992 i
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OECD Net bilatral flows to 1ew4ineo
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~~~~~~~Fcquaa MSraefMIm Par iS&f WV
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TowdrreTaRr -- Inc~~t mz2 ]m im mm
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Dbimnsuzm pulEIMS) RqrsYWwsefpdnr4u
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* ~~~~~~~~~~~~~ToAd njinuc Net FDI
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Wpram agwofamdamrsdddirm S of~~~S.f
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Caiwhssu ~~~An iwqr6atwe A-ragromaB
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Tot 1.iS. 1lj9muksud Awiugnwf-guw*
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Cnd&bin CswkdtmuhArifuve rno fjrIUA
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1970 199 1971 POO0 199 1970 1992 1O
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_ _ __ _ _ _ _ _ _ * A~~~~~~~~ifm a
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Luje'ecam=rurabt @vs A&J a(nionrper
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PPPEJrImE4fGNp Tar Is seon N i Fe I
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M%qainl in. Elm arrarein 1992.. 5 %
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ParTr TdecImUmfaIUkdIS Pawr,! at Wa
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Taunt iFemifirnms Fwstr,srsuahmrd.
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E000 *t Technical notes' The main c
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practical and conceptual difficulti
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ties, and any statistical discrepan
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ily workers, they exdude homeworker
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and bxes not allocable to other cat
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derived from shorter-term stays are
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table, goods and services include w
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aise the isk of infant mortaliyand
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Columns 2 thrugh 7 give the shares
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the ICP Phase IV report, World Comp
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mation explicitly excludes decade-l
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t 1 Classfiction orec"onomuies by i
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Part 2 Clssfcation of economies by
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ASi" kUCTURE FlOR DEVELOPMENT

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