Better Infrastructure Essential to Inclusive Growth and Poverty Reduction, Governors' Seminar Hears

JEJU, REPUBLIC OF KOREA (16 May 2004) - 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 yesterday.

Speaking at the start of the Governors' Seminar on Investing in Infrastructure for Poverty Reduction, held on the sidelines of ADB's 37th Annual Meeting of the 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.

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

He added that infrastructure also contributes to inclusive growth. Access to education and health services, for example, can be vastly improved through better roads, electricity, communications, 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's 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 had 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, Governor for the People's of 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.

Both 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 also enlarge. 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 macro and sector level.

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

• ADB's Chief Economist Ifzal Ali made the point that good infrastructure services would attract domestic private and foreign direct investment. In Asia, there is significant need for modernizing agriculture sector, revitalizing rural economies, and creating jobs. Infrastructure development by enlarging markets and increasing 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 the formulation, resource mobilization and implementation of small-scale infrastructures to which they can relate and which they can call their own and by making them responsible for the operations and maintenance of such infrastructures.
• JBIC Director General for Development Assistance Strategy Hiroto Arakawa pointed out the continuing challenges of huge financing needs for infrastructure development, the need to better understand the results-chain of infrastructure to poverty reduction through empirical studies, the need to pay greater attention to service delivery, and the need to take active consideration of fiscal and political decentralization in infrastructure planning and development.
• World Bank Director for East Asia Infrastructure Sector Christian Delvoie indicated that a key reason for rediscovering the role of infrastructure for poverty reduction is the emphasis on inclusive growth and also the focus on quality of service delivery. The right balance needs to struck between large and small-scale infrastructure, public sector and community involvement, and public and private sectors, he said.

The Moderator, ADB Vice-President Liqun Jin observed that there is a greater appreciation that infrastructure development has to take a broader approach, addressing not only the quantity of investment requirements but also the quality of service delivery. All this will require a sound strategy and conducive policy framework, he said.