Investments in modern infrastructure lay the foundations for economic development and growth. Building roads, bridges, power transmission lines, and making other improvements create jobs. When completed, these projects help a society increase its wealth and its citizens’ standard of living.
INFRASTRUCTURE FOR PROSPERITY
Efficient infrastructure underpins American economic strength. The construction of canals and transcontinental railroads in the 19th century and of national highways in the 20th sparked growth and prosperity. More recently, investments in telecommunication and Internet networks have provided a launching pad for a 21st century economy.
Infrastructure must be maintained and modernized as new needs and technologies emerge. The Political Economy Research Institute estimates that the United States must invest at least $87 billion per year to maintain, or improve, the efficiency and productivity of its economy. But U.S. infrastructure investments earn a fine return: each $1billion potentially creates some 18,000 jobs.
Infrastructure investments can similarly accelerate economic development in less developed nations and emerging markets. Nations that invest in infrastructure are better positioned to attract direct foreign investment, stimulate commerce and support local businesses. Their citizens are more likely to enjoy better health care, sanitation and other markings of well-being, according to the African Development Bank (AfDB). China, South Korea and Taiwan owe their economic successes to a large degree to infrastructure investments. India plans $1 trillion investments over the next five years to modernize its economy.
CHALLENGES
Because infrastructure projects are expensive, governments often seek co-financing through public-private partnerships and multilateral institutions. These partners also can supply valuable oversight and technical expertise — an important ingredient in avoiding corruption, cost overruns and failed projects.
Supportive regulations, strong project management, transparent procurement procedures, and careful consideration of environmental and social impacts all are essential to a project’s success, experts say. The Maputo Development Corridor in Mozambique, Lesotho Highlands Water Project and South American Regional Infrastructure Integration roads are all examples of successful infrastructure projects.
AFRICA AND INFRASTRUCTURE
Sub-Saharan Africa is one region where infrastructure improvements can spark greater economic development. Many countries there suffer from underdeveloped road and rail systems, rudimentary and unstable electric grids, bare-bones water-supply and sanitation systems and congested ports and airports.
“Infrastructure is … probably the single most important need for Africa to develop,” said Stephen Hayes, president of the Corporate Council on Africa, a group that promotes U.S.-Africa commercial ties. AfDB calculates that deficient infrastructure reduces sub-Saharan Africa’s output by about 40 percent. Transport costs, for example, are more than twice as high as in South and East Asia.
AfDB believes that, to attain middle-income levels, Africa must double its investment in infrastructure. African nations at present invest about 2-3 percent of gross domestic product (GDP). By contrast, China invests about 9 percent of its GDP in infrastructure projects. As large infrastructure projects can strain finances of a single country, experts say sub-Saharan nations should jointly finance projects that can spur regional development.
The United States encourages African countries to invest in infrastructure and offers support. The 2012 African Growth and Opportunity Act (AGOA) Forum focused on infrastructure development that supports and promotes trade.