Better Infrastructure Brings Economic Growth
By Katherine Lewis
Special Correspondent
Washington - As developing countries aim to boost economic growth,
infrastructure investment plays an important role in stimulating commerce,
according to business experts.
"In completely underdeveloped countries, infrastructure investments have
enormously important returns over time," said Martin Wachs, professor emeritus
of transportation planning and policy at the University of California, Berkeley,
and senior principal researcher at the Rand Corporation. "Those of us who study
infrastructure see the returns coming from longer-term reductions in the cost of
doing business and of traversing space."
In the history of the United States, the key transportation infrastructure
projects include an era of canal building in the early 1800s, transcontinental
railroads in the late 1800s and the national highway system in the 1900s. Every
move reduced the cost and time for shipping goods and people around the country,
from horse-drawn vehicles to inland waterways, then railroads and finally trucks
and cars. While no single project can be responsible for America's success, each
new technology stimulated growth that cumulatively turned a nearly 10
million-square-kilometer rural expanse into the world's dominant economy.
In modern-day areas of the world marked by unpaved roads, no electrical
grid, limited sewage and an unsafe water supply, an improvement in any of those
areas holds the potential to boost economic growth and begin to create an
environment that attracts business investment and supports local firms.
"Infrastructure is ... probably the single most important need for Africa
to develop," said Stephen Hayes, president of the Corporate Council on Africa,
the major U.S. business organization linking the United States and Africa. The
council represents 180 countries and 85 percent of private investment in Africa.
"There's not a single country in Africa that's meeting its current power needs,"
Hayes said.
For business to thrive among African countries, the variety of road and
rail systems, not to mention inconsistent customs and regulations, must be
addressed. The reason the AGOA (African Growth and Opportunity Act) trade
agreement hasn't been as successful as hoped, Hayes said, is that you can't
bring products to international markets if you can't even get them to the port
in your region easily.
In general, roads would be the first thing one would turn to in order to
help, according to Rand's Wachs. "They're so flexible. They provide access to so
many things: education, health care, jobs and markets."
One solution is for African governments to work together to harmonize
everything from railway gauges to tax and regulatory treatment of imports and
exports. "The whole concept of regionalization is absolutely essential," Wachs
said, because it allows local businesses and foreign investors to easily reach
larger markets.
The proposed Inga Dam project in the Democratic Republic of the Congo has
the potential to supply much of sub-Saharan Africa with reliable power, one of
the primary ingredients in a solid infrastructure for the continent.
To be sure, not all infrastructure investment is equal. Projects should be
prioritized and undertaken only if they would remove an obvious roadblock to
business or appreciably improve access along trade, labor and economic routes,
said Joseph L. Schofer, a professor of civil and environmental engineering at
Northwestern University in Evanston, Illinois.
"Transportation investment is going to have an effect on economic
development to the extent that it adds accessibility," Schofer said. "In
underdeveloped and undeveloped areas, the difference between no accessibility
and some modest increase in accessibility could be huge and could make a real
difference."
(This is a product of the Bureau of International Information Programs,
U.S. Department of State.)
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