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5 Infrastructure World Bank Diego J. Rodriguez and Anna Delgado 5.1 Infrastructure and development Between 2013 and 2015, annual economic growth is estimated to be around 6% in developing countries and around 2% in higher-income countries (World Bank, 2013a). As economies grow and diversify, they experience competing demands for water to meet the needs of more municipal and industrial uses, as well as agriculture. However, many people in the world still lack access to basic water and energy services (Section 1.1). Closing the energy gap could generate additional pressures on water resources given that water is needed for fuel extraction, for cooling and other processes in thermal power plants, and for turning turbines in hydropower plants (Chapter 3). Moreover, climate change can exacerbate already stressed energy and water scenarios through events such as extreme weather conditions and prolonged drought periods (Section 12.3). A lack of adequate infrastructure undermines living standards and limits the growth potential of developing countries (Rodriguez et al., 2012), yet infrastructure expansion often comes at the expense of the local environment and has complicated responses to long- term challenges, including climate change (Toman et al., 2011). Planning, building and maintaining infrastructure is a real challenge, as it requires lump-sum up-front outlays with a high risk of lock-in effects. However, much research indicates a clear positive linkage between infrastructure services (including water and energy) and economic development, poverty reduction and improvement of broader development goals, such as the MDGs (Figure 5.1) (World Bank, 2004). The relationship between infrastructure and development is complex, as more infrastructure does not necessarily entail more growth. Growth and development are also influenced by factors such as the nature of regulatory standards and economic incentives for reducing environmental degradation, availability and affordability of technologies, and availability of complementary knowledge and skills, as well as broader issues of institutional capacity and governance (Toman et al., 2011). Large infrastructure investments in Africa have catalysed growth, helping many African countries catch up to middle income countries in terms of development (World Bank, 2012a). However, many countries still have a serious shortage of key infrastructure services and the existing ones are often of poor quality or under-maintained. To improve access and quality of infrastructure services and to meet fast-growing future demand, a substantial amount 5.1 Infrastructure investment and economic development 1 400 1 200 1 000 800 600 400 200 0 10 20 30 40 50 GDP per capita (US$ thousands) Source: World Bank (2012a, fig. 4, p. 6). © World Bank, Washington, DC. 5.2 Needs versus actual investment in infrastructure 14 12 10 8 6 4 2 0 Source: Qureshi (2011, and source cited therein). © World Bank, Washington, DC. Low income countries Lower middle income countries Upper middle income countries Needs Actuals 48 CHAPTER 5 THEMATIC FOCUS l a n o i t a m r o f s n a r T Infrastructure investment per capita (US$) Percent of GDP FIGURE FIGURE CHAPTERPDF Image | Water and Energy
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