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Build and Prosper
ADB Review [ July - August 2004 ]

Infrastructure development not only attracts foreign investment, but also has the additional benefits of boosting education and health services, say experts

By Xianbin Yao (xyao@adb.org)
Assistant Chief Economist
Economics and Research Department

JEJU, REPUBLIC OF KOREA

With significant forces at work in the region, infrastructure development must play a greater role in ensuring inclusive growth in the future, ADB President Tadao Chino told a seminar in Jeju.

Speaking at the start of the Governors’ Seminar on Investing in Infrastructure for Poverty Reduction, held on the sidelines of the 37th Annual Meeting of ADB’s Board of Governors, Mr. Chino said national infrastructure systems must be connected through global and regional links if countries are to benefit from the expansion of markets and trade through globalization.

“Experiences across the region show that FDI [foreign direct investment] and new technologies are most likely to bypass countries with inadequate and poor investment climates,” he said.

"No meaningful poverty reduction can be achieved without growth"

Shaukat Aziz
Minister of Finance and Economic Affairs, Pakistan

“Infrastructure development offers the foundation on which a country can seize and capitalize on the opportunities ushered in by globalization and regional integration.”

He adds that infrastructure development has multisector impacts towards achieving the Millennium Development Goals. Access to education and health services, for example, can be vastly improved through better roads, electricity, telecommunications, water supply, and sanitation services.

The seminar offered a chance for ADB governors to share their perspectives on, and visions of, the link between infrastructure investment and poverty reduction.

ADB Governor for Pakistan Shaukat Aziz, who is Minister of Finance and Economic Affairs, said that as “no meaningful poverty reduction can be achieved without growth,” critical bottlenecks to growth such as physical infrastructure and social infrastructure have to be removed.

He called for broadening the concept of infrastructure and, in particular, emphasized that social sector expenditures are to be viewed as investment. With development of infrastructure so broadly defined, government provides an enabling environment for private sector to thrive.

Mr. Aziz also highlighted the importance of prudence and prioritization in infrastructure investment planning, the need to strike a right balance between physical infrastructure and social infrastructure, and to ensure greater transparency and accountability in investment development and operations.

Another speaker, ADB Alternate Governor for the People’s Republic of China, Li Yong, who is Vice-Minister of Finance, highlighted the need to balance large-scale infrastructure investments as well as small-scale rural infrastructure development.

He pointed out that infrastructure played an important role in “empowering the poor,” enabling them to participate in the growth process. Large infrastructure investments may not have immediate effects on poverty reduction, but they are critical to enable a country to achieve long-term growth and sustainable poverty reduction, he said.

Mr. Aziz and Mr. Li emphasized the need to broaden the concept of poverty to include any forms of deprivation. With the broadened concept of poverty, the means of addressing poverty reduction is also enlarged. This way, one gets better appreciation of the multisectoral implications of infrastructure development, they said.

Both also stressed that infrastructure development should be formulated within each country’s overall development strategy and must be supported by conducive policy framework at the macro and sector levels.

The seminar was followed by a panel discussion by representatives of ADB, World Bank, United Nations Development Programme (UNDP), and Japan Bank for International Cooperation (JBIC).

ADB Chief Economist Ifzal Ali said that good infrastructure services would attract domestic private and foreign direct investments. In Asia, there is significant need for modernizing the agriculture sector, revitalizing rural economies, and creating jobs. Infrastructure development, through enlarged markets and increased factor mobility, will contribute to job generation, which is a key to ensuring inclusive growth.

UNDP Assistant Administrator Shoji Nishimoto emphasized the importance of good governance in infrastructure planning, design, and implementation, and that small-scale infrastructure projects must be developed with strong community ownership and active participation. Infrastructure services need to be brought down to the doorsteps of the poor through their participation in formulating, mobilizing resources, and implementing small-scale infrastructure to which they can relate and can call their own, and by making them responsible for the operation and maintenance of such infrastructure.

JBIC Director General for Development Assistance Hiroto Arakawa said the continuing challenges include huge financing needs for infrastructure development and the need to pay greater attention to service delivery.

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