The strong positive link between infrastructure investment and the rate of economic growth is empirically well-established. The contribution of infrastructure investment to making growth patterns more pro-poor is also increasingly well understood.
However, infrastructure poses significant challenges for policy makers. The natural monopoly characteristics of infrastructure limit the scope for competition in its supply, especially in small economies, while necessitating effective regulation, particularly to protect the interests of the poor. From the financial perspective, the capital requirements for investment are difficult for the public sector alone to mobilise, while the sunk cost features of infrastructure expose private investors to political risk. Infrastructure investment can result in the displacement of communities who may lack an effective political voice.
OPM has been closely engaged in reviewing and advising on important recent international initiatives to encourage infrastructure investment in Africa, including the following recent assignments:
- An evaluation of the Infrastructure Consortium for Africa (ICA) followed by support to the development of a new ICA Strategic Plan.
- A strategic review of the AU-NEPAD Infrastructure Project Preparation Facility (IPPF) and assisting in the development of a business plan for IPPF.
- A study for the Emerging Africa Infrastructure Fund (EAIF) on the constraints to private sector investment in infrastructure in Africa.
- Finalisation of the concept note and terms of reference for the Programme for Infrastructure Development in Africa (PIDA).
An understanding of the ways in which infrastructure investment and the provision of infrastructure services affects poverty and growth, and the political economy of infrastructure investment decisions, is crucial for the design of effective infrastructure policies. OPM has undertaken studies of the political economy context affecting investment decisions, of constraints on the effective use of investment funds and of the relationship between investment, growth and poverty. These include the following:
- A study of political economy constraints on hydropower sector development in Nepal.
- A review of infrastructure progress and policy issues in South Asia.
- A study of the links between poverty, growth and infrastructure in East Asia and the Pacific.
- A study for WaterAid on financing and constraints on the effective use of investment funds for the Water, Sanitation and Hygiene sector.
- Analysis of gender issues related to road investments for the European Bank of Reconstruction and Development (EBRD).
- A paper for the OECD DAC’s InfraPoor task team on the role of regional and cross-border infrastructure in promoting trade.
Completion Date: December 2014
Client: Government of Tanzania
Completion Date: November 2011
Client: African Development Bank(AfDB)
Completion Date: April 2011
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