ASi" kUCTURE FlOR DEVELOPMENT

BoxL12 The importance of infrastructure to economic development an example
fErom China
The fact thiat infrastucture provides critical support to ture, as tratiifeste by thie growth of bottlenecks in the
the growth of an economy can be clearly seen when bot- railway network the severe rationing of transport capactieneciks
arise One of the mast striking examples is that ity on railway lines, and the poor quality of service expeof
China's intercit transport system. with its links to th.e rienced by shippers and passenger.
Supply of raw materials, coal, and dectricity.
Transport shortaes have adversely affected the SUP-
'The coverage of China's intenrity transport.networks ply of coal hin particular. Coal is the source of some 73
is one of the thinnest in the world the total route length percent of China's comumeria energy and represents
per capt or per unit oF amable land-for highways. or about 43 percent of the total tonnage of freight handled
raiways-is similar to, or lower'than, thiat in Brazil. by the railways. The shortage of coal has in turn ad-
India, and Russia. This has. res-ulted mainy from chronic versely affected suppli'as of electricity, about 76 percent
underimnvestment in China's transport infrastructure. of which is generated by thermal plants. In 1989, China
China's transport investments amounted to only 1.3 per- was experiencing: a shortfall in available porwer of about
cent of GNP' annually during 1981-90, a period of rapid 20 percent of industrial electridity requirements. Central
growth in transport demand,
and local authorities established quotas for allocting*
Since the oniset of China's open door policy in 1979, electricity and rationed new connections, but power cuts
economic growth averaging 9 percent a year has resulted have nevertheless been frequent.
in an unprecedented expansion in interdity traffic--with A conservative estimate is that the annual ecoonomic
growth averaging 8 percet a year for freightand 12 per- costs of not having adequate tr:ansport infrastructure in
cent a- year for passengers. This traffic growth has imn- Ch'ina during the past several years amount to about I
posed tremendous strains on'the transport infrastruc- percent of China's ONP
to order, and "just-in-dine" delivery of products has adapt to containerization and are subject.to regulabecome
the norm innmany sectors. Because about 60 tory delays, freight transport to the United States is
percent of their exports are directed to OECD mar- one-third more expensive from Indian ports than
-
kets, developing oDuntres must meet these stan- from Bangkok or Singapore.
1
dardsrmCia--8
Virtually all the improved practices designed The availability of infrastructure services valued
to reduce logistics costs, induding those in trans- by users is also critical for the modernization and
port, have been based on informationL technologies diversification of production. The growth of elecusing
telecommunications infrastructure. Cost re- tronic data exchange involving telecommunicaductions
and the increased speed of fr-eight move- tions-informnatics-is central to efficient opera.--
* ~~ments over the past few decades have also been in- Etons in manufacturing, servies, the financial sector,
creasingly based on multimodlal transport involving and government. -Availability of power alows subcontainerization,
which requires intensive coorclina- stantial improvements in workers' productivity (for
tlion by shippers across rail, port. air and road example, in the transition frOmn fDoot-powered to
freight modes.
electrically powered sewing), whie international
For developing countres wishing -to compete in telecommunications, facsimile sevcs - and rapid
global markets, or to particip;ate in "global sourc- transport of goods permit the artisan to produce to
inc (the fimIting of businesses in several countries order for a computerized global market. A hiher
*producing different compo:ments for a final prod- qualit of water anLd sanitation is required to s-hiftuct),
not just any kind of taunsport and teleconmmu- from production of raw agriculturl commnodities to
nications infrastruLcture will do. Manufacturing as- processed foods. Surveys of prospective foreign
sembly operations in Mexico and horticultural investors over a wide range of countries show that
exports from Kenya are examples of the diversifica- the quality of infrastructure is an important factor
don of trade permitted by appropriate logistical in ranking potential sites for location of direct
support and multimodal facilities. During the 1980s, investmnent.
* the proportion of garments, shoes, and handhcraft Tfhe nature of an economy's infrastructure is cenexports
shipped by air from northiern India quintu- tral to its ability to respond to chanAges in demand
pled because land and ocean transport systems and prices or to take adveantage of other resources.
were no longer able to meet demanding delivery re- TIhe formerly socialist countries (particularly those
- -cqirements. Because India's vorts have been slow to in Central and Easten Europe and the-former So