1. Contribution of Infrastructure to Growth and Poverty
and Poverty Reduction
Bali, June 28th 2004
Stephen Jones
Contribution of Infrastructure to Growth and Poverty

2. Contribution of Infrastructure to Growth and Poverty
Outline of Presentation
Poverty and Infrastructure in East Asia and the Pacific
Conceptual Framework
Evidence on Infrastructure-Poverty Linkages
Issues
Contribution of Infrastructure to Growth and Poverty

3. Contribution of Infrastructure to Growth and Poverty
Three Broad Poverty Definitions
Poverty (1): income/expenditure, including international
US$1 per day. Simplest measure is incidence (% below poverty line)
Allows international comparisons where data exists. International
Poverty Line may not be main focus of national policy concern.
Poverty (2): MDG related, encompassing health, education
access to water and sanitation, some elements of gender equality
Allows international comparison and tied to international agreements.
Direct links to infrastructure in some cases
Poverty (3): based on wider concepts of enhancing human
capabilities, freedoms and social inclusion
Captures socially and politically important elements neglected in
(1) and (2) but difficult to measure and lack of consensus on elements
Contribution of Infrastructure to Growth and Poverty

4. Poverty in East Asia – International Measure
1990
2000
Poverty Incidence (%)
Number of Poor (m)
PRC
30.8
16.1
371.5
215.9
Cambodia
48.3
35.5
4.4
4.3
Indonesia
20.6
16.3
36.7
33.6
Lao, PDR
53.0
34.6
2.2
1.8
Malaysia
0.5
0.0
0.1
Philippines
19.1
13.2
11.7
10.1
Thailand
12.5
5.2
7.0
3.2
Vietnam
50.8
23.6
18.5
PNG
23.7
1.4
1.3
Contribution of Infrastructure to Growth and Poverty

5. Contribution of Infrastructure to Growth and Poverty
Main Features of Poverty in EAP Region
Extent and speed of poverty reduction unmatched in world history
Apparent trend is economic growth with increasing inequality – may
imply improvements on Poverty (1) but concerns on Poverty (3).
Data patchy and incomplete in important ways even for Poverty (1)
(e.g. data on urban China, Myanmar,Pacific Islands).
Poverty (1) remains concentrated in rural areas, but number of
poor people in urban areas may be increasing, number in
rural areas falling (SE Asia: 17% poor urban 1990, 22% 2000).
PRC dominates in absolute numbers (c. 70% total in region 2000).
Poverty increasingly a problem of (a) lagging rural areas (inland,
highland, remote island) and (b) urban/peri-urban slums.
Contribution of Infrastructure to Growth and Poverty

6. Access to Improved Water and Sanitation
Contribution of Infrastructure to Growth and Poverty

7. Transport and Communications Indicators
Contribution of Infrastructure to Growth and Poverty

8. Contribution of Infrastructure to Growth and Poverty
Infrastructure Availability and Access
Comparative data on infrastructure stock and service
provision is limited except in certain sectors.
Access to improved water supply especially limited Cambodia,
Lao, PNG (rural). Sanitation access poorest Cambodia, Lao,
Mongolia, PRC (rural), Solomon Islands.
Road density and quality measures weakest in Mongolia,
Myanmar, PNG, Solomon Islands,Cambodia.
Telephone access especially weak in Cambodia, Lao, Myanmar,
PNG.
Group of poorest countries have markedly worse infrastructure,
but national level data hides large sub-national inequalities
Contribution of Infrastructure to Growth and Poverty

9. Contribution of Infrastructure to Growth and Poverty
Defining Infrastructure
Capital good: produces services (ultimately performance of
service market impacts on users, not provision of capital alone)
Lumpy not incremental (difficult to match supply and demand)
Long-lasting (implications for finance and maintenance)
Space-specific and use-specific in services provided (sunk costs)
Source of services for final consumption and as input to
enterprises
Infrastructure is characteristic of goods, not services and
depends on technology – e.g. mobile telephony
Contribution of Infrastructure to Growth and Poverty

10. Contribution of Infrastructure to Growth and Poverty
Implications of Definition
Markets for infrastructure goods prone to market failures –
political and demand risk
Markets for infrastructure services also prone to (related but
different) failures – natural monopolies, externalities,
public goods
These characteristics imply likelihood of significant public
role in supply and regulation of markets for services, though
not necessarily state provision of the capital or service
Viability of options depends on how private investors recover cost
and how protection from non-market risks can be provided. Cost
recovery mechanism important in determining distribution of
benefits from investment as well as viability
Contribution of Infrastructure to Growth and Poverty

11. Contribution of Infrastructure to Growth and Poverty
Characteristics of Framework
Provide comprehensive coverage of potential channels
of impact
Begins with definition of infrastructure based on economic
characteristics, not sectoral scope
Emphasis on service provision as main channel by which
impact occurs
Allows consideration of alternative definitions of poverty
Distinguishes direct impact on poor as users of infrastructure
services from indirect impact through induced investment
and public finances.
Contribution of Infrastructure to Growth and Poverty

12. Contribution of Infrastructure to Growth and Poverty
Investment
Enterprises
Government:
Regulation
Finances
Infrastructure
Service
Poor People
Contribution of Infrastructure to Growth and Poverty

13. Contribution of Infrastructure to Growth and Poverty
Elements of Conceptual Framework
Direct impacts of infrastructure investment: environmental,
employment
Direct impacts of infrastructure service provision: poor as
users or suppliers of competing services
Indirect impacts are mediated through other markets:
Investment by enterprises (creating employment)
Impact on public finances (and service provision for the poor)
Focus is on how markets work: terms of access for the poor and
implications of market failures – influence of interests of poor on
mode of regulation
Contribution of Infrastructure to Growth and Poverty

14. Contribution of Infrastructure to Growth and Poverty
Evidence on Poverty-Infrastructure Links
Growth requires infrastructure, and infrastructure makes
growth more pro-poor
Water and sanitation strong positive impact on health
Rural roads (all year) most effective infrastructure investment for
rural poverty, but not the most poverty-effective form of
public expenditure (education, agriculture R&D)
Poorest may not be equipped to benefit from opportunities
created by improved infrastructure
Importance of operation of service markets (e.g. regulation or
= cartels can prevent improved roads lowering transport costs)
Some positive evidence of poverty impact of reforms (though
mainly telecommunications)
Contribution of Infrastructure to Growth and Poverty

15. Contribution of Infrastructure to Growth and Poverty
Main Scenarios for Poverty-Infrastructure Link
Mass poverty: infrastructure investment will be important part
of broader strategy for poverty reduction and economic growth:
Priorities will vary depending on context.
Poverty location-specific (e.g urban slums, remote highland
or island areas): targeted strategy of improving
infrastructure provision to areas of high poverty concentration
may be core of poverty reduction strategy.
Poverty limited in incidence and not directly related to geographical
location (e.g. disability, household characteristics, discrimination,
cultural factors): infrastructure unlikely to be core of poverty
reduction strategy but may play role.
Contribution of Infrastructure to Growth and Poverty

16. Contribution of Infrastructure to Growth and Poverty
Conclusions and Issues
Cannot expect universal empirical conclusions but can inform choices:
Place of infrastructure in a poverty reduction strategy (where to
put public money)
For a given sectoral policy or investment decision, how to
maximise poverty reduction impact
Role of Infrastructure Investment as a strategy for poverty reduction
varies between countries within the region: but increasing concentration
of poverty in “remote” rural areas, and rapid urbanisation.
Most countries in region are moving out of “Mass Poverty” so that
there may be role for more poverty-targeted infrastructure investments.
Sharp choices for use of public funds remain
Contribution of Infrastructure to Growth and Poverty