*EPF207 02/19/2002
Text: World Bank Says More Funds Needed for Infrastructure
(Public/private partnerships sought) (2790)

Cutting poverty in half by 2015 will not be possible unless the world's poor gain greater access to basic infrastructure and services, the World Bank says.

In a February 19 press release, the bank said that a doubling of official development aid combined with increased private sector investment is needed to achieve the internationally agreed poverty reduction goal.

The bank and its donor partners are exploring an aid strategy that ties public funding to results achieved in selected areas, the bank said. This approach puts pressure on aid donors to provide resources effectively and on aid recipients to utilize them efficiently.

"We know how to deliver infrastructure aid effectively, despite some doubts about it," Nemat Shafik, the bank's vice president for private sector development and infrastructure said during a February 19 news conference. While in the past the bank focused on large, public projects that often failed, she said, it now is in the process of a "model change."

The bank "completely" agrees with the Bush administration that aid efficiency is a key to a successful development, Shafik said. But even with increased efficiency, a doubling of official assistance is necessary, she added.

The infrastructure needs of developing countries, however, cannot be met without the participation of the private sector, the bank said.

So the governments of these countries must do more to improve the investment climate by promoting good governance and financial transparency, the bank said.

This becomes an imperative, Shafik said, in light of falling private fund flows to developing countries in recent years.

The International Finance Corporation, an arm of the bank that supports private sector investment in developing countries, estimates that between 1996 and 2000 these flows fell from $128,000 million to $92,000 million per year. Uncertainty in financial markets created by the September 11 terrorist attacks has lead to a further fall, the bank said.

According to bank estimates, 7,000 million people lack access to potable water, adequate sanitation, energy and roads, making them vulnerable to diseases and malnutrition and limiting their access to education, health care, business opportunities and jobs.

The bank warned that unless the infrastructure shortfalls in developing countries are addressed in the near future, they are likely to become even more serious because of the continued population growth in these nations.

(Note: In the text below "billion" equals 1,000 million.)

Following is the text of bank's news release:

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The World Bank

Making Infrastructure Work for the Poor
Providing the poor with access to infrastructure services requires increased public aid as well as private sector involvement

WASHINGTON, February 19, 2002

Unless the world's poor -- from South Asia to Latin America to Sub-Saharan Africa -- gain greater access to transport, electricity, water and telecommunications, the likelihood of achieving the internationally agreed goal of cutting extreme poverty in half by 2015 will remain in serious doubt. Related goals include ensuring universal primary education, improving the living conditions of slum dwellers, bolstering the level of girls in school, reducing child mortality, combating HIV/AIDS and ensuring environmental sustainability. According to the World Bank, a doubling in official development assistance, combined with increased private sector investment, is needed to finance infrastructure and help meet universally agreed Millennium Development Goals.

"Developing country governments need to set the stage for better infrastructure provision by promoting good governance and making key regulatory reforms to improve the investment climate and leverage private sector investment," says James D. Wolfensohn, President of the World Bank Group." The needs are vast -- from the slums to the remote countryside. Rich-country donors must support this and other urgent needs by doubling official development assistance. Currently rich countries spend 7 times as much on agricultural subsidies as they do on aid."

The numbers of "infrastructure poor" people are vast in every region of the developing world. Some 1.2 billion currently lack access to safe, potable water, making them vulnerable to water-borne illness. Inadequate sanitation for 2.4 billion people means they are having to live in degraded environments where disease can easily spread. An estimated 2.5 billion remain without access to modern energy supplies, often meaning no light for studying or learning and only dirty fuel to burn for heating and cooking (leading to respiratory illness). And, for the 900 million rural dwellers in developing countries who live without reliable all-season roads, access to markets, jobs and clinics is limited.

Regionally, the data are just as sobering. In Sub-Saharan Africa, less than 8 percent of the population is connected to the power grid system and between 10-75 percent of the population, depending on the country, live without all-season motorable road access within 1-2 km of their homes. In Latin America, 125 million people still lack access to safe water, 200 million live without adequate sanitation, and about 70 million still lack access to modern energy supplies.

Over two thirds of the world's population and the vast majority of poor people live in rural areas. No one is worse served than the rural poor. To them, the absence of basic infrastructure services limits their access to markets and effectively excludes them and their children from education, health, and other services. It also consumes their time and energy -- in rural Sub-Saharan Africa, the daily transport effort of a typical adult woman is equivalent to carrying a load of 20 kg for 1.4-5.3 kilometers -- and prevents them from participating in political processes. Increased public resources in partnership with the private sector and communities and users themselves is critical to close the rural service gap.

The scope of infrastructure shortfalls in poor nations continues to grow in line with burgeoning populations in low-income countries, especially in cities. Of the 2 billion people who will be added to the developing world's population by the year 2025, over 90 percent will live in urban areas -- which will double in size. Based on current trends, these new urban residents will live in overcrowded and unserviced slums, with no property rights, no security of tenure, struggling to survive in unregulated and expensive parallel markets. Upgrading slums, providing affordable clean water and roads to connect the poorest urban areas, and engaging the urban poor as partners in the process are indispensable in tackling poverty.

Working in partnership will remain critical to solving these massive problems. Initiatives such as the Cities Alliance, which the World Bank supports with the United Nations, are focusing the efforts of a broad range of partners on making unprecedented improvements in the living conditions of the urban poor over the next two decades. The Water and Sanitation Program, an international partnership to help the poor gain access to improved water supply and sanitation services, has a strong field presence in Africa, East Asia, Latin America and South Asia and focuses its efforts on policy reforms and institutional change in the water supply and sanitation sector. The Energy Sector Management Assistance Programme (ESMAP) is a global technical program supported by the Bank, the United Nations Development Programme (UNDP) and others which helps build consensus and provides policy advice on sustainable energy development to governments. The program promotes the transfer of technology and knowledge, in part by suggesting "cutting edge" solutions to governments in both traditional and non-traditional energy use.

Rebuilding after wars and natural disasters

Afghanistan is an extreme example of a country needing to reconstruct its infrastructure virtually from scratch. In January, the World Bank, the Asian Development Bank and the UNDP made an early estimate that it would cost $15 billion over 10 years to rebuild. Priorities include landmine clearance, improving access to clean water and sanitation, meeting essential electricity needs (data from 1993 show that only 6 percent of Afghans have access to electricity), and restoring the primary road network (an estimated 2,500 kilometers of road need rebuilding). All these challenges are exacerbated by the effects of a long term drought which also calls for investments that will help mitigate and reduce the effects of natural disasters that overwhelmingly affect the poor.

However, progress in Kosovo shows that improvements in such circumstances are possible. Two and a half years have now passed since that crisis and early results are positive. For example, some 183,000 people have benefited as a result of infrastructure micro-projects in water supply, school rehabilitation, sewage, and roads. In addition to reconstruction activities, there is an increasing emphasis on prevention and mitigation efforts that are now underway in a number of countries such as India, Nicaragua, Honduras and Mexico.

Rebuilding in the wake of Colombia's earthquake also shows what can be done in emergency situations. With the help of a Bank financed project, 560,000 people are benefiting from rebuilding and repairing public infrastructure. Some 80,000 houses are being constructed as part of the project, which is benefiting from a $225 million emergency loan. Families are contributing labor, which is helping reactivate the community. Water systems, schools and health clinics are being rebuilt.

Poor people, public leaders and business people want infrastructure

In surveys of the poor, in conversations with country leaders, and in feedback from foreign investors and local entrepreneurs, the World Bank has heard repeatedly that the provision of infrastructure is essential to health, national prosperity, and business.

In Voices of the Poor, a World Bank study that brings together the voices of over 60,000 poor people from 60 countries, respondents repeatedly stressed the importance of key services such as roads, transportation, water, sewage, electricity, and healthcare. A poor farmer from Guatemala told researchers, "We think the earth is generous; but what is the incentive to produce more than the family needs if there are no access roads to get one's produce to a market?"

In India, poor mothers report that the lack of safe drinking water means that water-borne diseases are very common, and the lack of reliable roads and transport means that the number of maternal deaths is high in isolated villages. In the Georgian capital, Tbilisi, people living in some outlying districts of the city have power outages that last from one day to one month. Even where some of these basic services are available, people still have to contend with scarcity and shortages. In Algeria and Jordan, for example, piped water is available, but, due to rationing, flows just a few hours daily. In Nigeria's capital, Lagos, many residents make do with water drawn from wells or boreholes on a permanent basis.

Attracting finance for infrastructure: the role private sector investment

Between 1990 and 2000, more than 2,300 private infrastructure projects were implemented in developing countries, attracting investment commitments of over $690 billion -- far exceeding the level of official development assistance. However, 75 percent of this investment was in Latin America and the Caribbean and East Asia and the Pacific. Nearly 80 percent of this investment was in the telecommunications and energy sectors.

"The investment resources required for infrastructure expansion and modernization in developing countries are huge," says Nemat Shafik, World Bank Vice President for Private Sector Development and Infrastructure. The public sector cannot do it alone. Private capital is needed to meet the challenge, but governments must channel that capital with sound policies and regulations. The key to success is getting those policies and regulations right. Public-private partnerships can move the process along and spur entrepreneurship."

The Bank Group provides advice, finance, risk mitigation, and knowledge and information services to help countries improve their infrastructure (see example below of a project in Moldova involving three parts of the Bank Group).

Generating income and employment

Investments in infrastructure services are essential for the development of viable economic enterprises. Transport, energy, communications and water are prerequisites for manufacturing and other enterprises in rural and urban areas. But more important is the fact that when implemented well, infrastructure investments can support the development of local enterprises, cooperatives, small businesses and community-based initiatives that lead to direct increases in income for poor communities and households. For example, the Bank-financed Lesotho Roads Rehabilitation and Maintenance Project is building interesting experience in developing a pool of small local entrepreneurs for rural road rehabilitation. It includes women entrepreneurs and ensures equal access to work in the sector for men and women. In Mali, an energy project supported by the Bank engages local communities in the management of forests and community energy systems.

The World Bank has supported Water Utilities Partnership projects in other parts of Africa that have enabled local utility managers to engage with small scale service providers to deliver services to low-income communities. Using the services of small scale, independent service providers works well because it is the approach preferred by low-income households. And the scheme also supports local entrepreneurs.

Lack of availability and the unreliability of infrastructure services are a major constraint to businesses, both in rural and urban areas. Remoteness from markets and being in a landlocked or mountainous area may make it difficult to develop domestic markets. Yet these barriers can be overcome, as in Peru, where a Bank-financed rural roads project is helping 2.7 million people in the poor region of la Sierra by connecting remote towns to market centers. The project has generated 32,300 seasonal unskilled jobs through the rural road rehabilitation program and created 4,700 permanent jobs in road maintenance.

Expanding access to telephone services and involving local people in getting connected helps to reduce poverty and foster development. The introduction of telephones in rural Thailand allowed farmers to regularly check prices in Bangkok, which significantly increased profits -- as much as doubling incomes. In Botswana and Zimbabwe, rural surveys suggest that areas with telephone access are significantly more entrepreneurial than those without access.

Better health and a chance to learn

Lack of access to adequate water or safe sanitation and the absence of lighting or clean cooking fuel at home can mean ill health, little time to read and learn, and a vicious cycle of poverty. An estimated 500,000 women and children die in India each year due to indoor air pollution-related diseases because of the use of traditional biomass fuels. Bank supported projects to distribute improved stoves in rural areas -- from India, to Mali to Madagascar -- have reduced the use of dirty fuel.

In remote areas, girls can face daunting obstacles to learning. Even where there are classrooms, teachers and some books, many children are unable to attend school because they must spend many hours each day collecting water, or because when they reach school there is no safe and private sanitation facility. At home also, the absence of electricity can make studying next to impossible. Electricity, connectivity through communications networks and rural and urban transportation enable many poor children to stay in school. A World Bank study in the rural Philippines, for example, finds a clear link between electricity [in homes] and time spent reading and attending school, and a survey of a World Bank financed rural roads projects in Morocco found that provision of all-weather road access doubled primary school enrollment in the project areas compared to the control areas. Girls enrollment more than trebled.

Extending aid on the basis of tangible results

The World Bank and its donor partners are exploring the use of output-based aid, which ties the disbursement of public funding to the services or results actually delivered. Output-based aid strategies are not new, and have been successfully applied to a range of infrastructure and other basic services. Done well, the approach can also help to ensure that even the poorest members of society are seen as desirable customers for private service providers.

"The primary challenge now is to ensure that aid- and tax-funded spending reaches the poor, that the services this money finances respond to their needs, that delivery is efficient, and that public funds are used in a way that leverages private financing of service delivery," explains Shafik.

When the goal is to expand connections to new customers, disbursement of public funding can be tied to the number of new connections made and served. A scheme of this kind has helped expand rural electrification in Guatemala, for example.

The Bank is undertaking a program to test these approaches more fully, and pilot projects are being designed or are underway in most regions and sectors. They include water concessions in Cambodia, electricity concessions in Mozambique and rural telecommunications in Nepal.

For more information about the World Bank's work on infrastructure, visit http://www.worldbank.org/infrastructure

For more information about the Cities Alliance initiative, visit http://www.citiesalliance.org/

For more information about the Water and Sanitation Program, visit http://www.wsp.org/

For more information about the Energy Sector Management Assistance Programme, visit http://www.worldbank.org/html/fpd/esmap

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(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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