ASi" kUCTURE FlOR DEVELOPMENT

vestment included drainage and completion of un-
- water 4 anctsewemge, the.tter finished projects. In Indonesia, rates of return on op-
.-. b
erations and maintenance for irrigation and roads
have been found to be as high as 100 percent, indicating
that maintenance has been neglected.
; 0 X 7 }Doayuu u o Y -In many countries, increasing spending on basic
rural infrastructure is an economic priority that may
contribute significantly to poverty reduction. China
has been successful in integrating agricultural development
with industria development by building
up rural industrial infrastructure. Consequently,
rural industries have prospered and rural populations
have become employed in industry without
major dislocation. Township and rural enterpises
in China now employ more than 100 million people
ii M Mand produce more than one-third of gross national
outpuL In Indonesia and Malaysia since the late
:
priority for the governent has
E __ _been balancing regional development and reducing
_oet.To this end, infrastructure expendituresparticularly
in transport and irrigation-have been
directed to rural areas. In Malaysia in 1965, earth
and gravel roads represented 18 percent of the total
- . length - of the road network (15,356 kilometers). By
1990 such roads constituted 32 percent of the 50,186-
dkilometer network in the country. During this period,
poverty in Malaysia fell dramatically. Rural
mpovert, which in 1973 affected 553 percent of the
; . i t _ population, had fallen to 19.3 percet-by 1989. A
World Bank study of poverty in Malaysia identified
* 2 the | government's _
programs to raise land productiv-
- _ ity _ g as _ a jg primary factor in this impressive improvement,
and noted the importance of rural road and
1960s, an 9important
irrigation infrastructure-
Subsidies and transfers to the poor
Although the relationship between infrastructure
and poverty is pivotal, infrastructure is nevertheless
- 0 -: Decisions on expenditure allocation within infra- a blunt instrument for intervening directly on behalf
structure sectors as well as across sectors should be of the poor. Adequate budgetary allocations to parguided
by consideration of the countrfy's underlying ticular sectors or to poor regions, removal of price
development goals. Governments must choose be- distortions which support biases against the poor,
tween new construction and maintenance, and be- and the selection of appropriate standards and detween
ruraland urban sectors among regions. Allo- sign are generally the most effective ways to ensure
cating expenditures to different activities on the that infrastructure realizes its potential for fostering
basis of soa rates of return is an important labor-intensive growth and helping the poor to parmethod
of establishing priorities- Analysis of such ticipate in the growth process. Subsidized provision
retur.Ls in most developing countries reveals the of infrastrcture is often proposed as a means of re-
; critical importance of maintenance over new con- distributing resources from higher-income housestruction.
A. study of irrigation expenditumes in holds to the poor. Yet its effectdveness depends on
India identified maintenance of irrigation canals as whether subsidies actually reach the poor, on the
a top. priority, with retums as high as 40 percent adniinistrative costs assocated with such targeting,
Other actvities that deserved priority over new in- and on the scope for allocatng budgetary resources
*so.