Boosting infrastructure in developing countries
Geneva - Meeting the huge needs of developing countries for
infrastructure such as roads, ports and electricity supply is a major
challenge and requires better use of private-sector resources, including
those of Transnational Corporations (TNCs), this year's World Investment
Report1 contends. It adds that low-income countries are often too poorly
equipped to attract or maximise the benefits of TNC involvement in
infrastructure development, and hence a concerted effort by host
countries, the international community and investors is needed to
address the challenge.
UNCTAD's 2008 annual global investment review is subtitled
"Transnational Corporations and the Infrastructure Challenge."
The report was released last week.
UNCTAD Secretary-General Supachai Panitchpakdi said, "Investment in
infrastructure is part of the unfinished agenda of development: this is
apparent in the daily power outages that stifle economic growth in
Africa and in the lack of access to drinking water for millions in
Africa and Asia.
TNC investment in infrastructure could therefore help meet some
urgent development goals." Supachai said that TNCs from the North and
South could support government infrastructure strategies by providing
finance, technology and expertise. Governments and the international
community, he said, must help create political, economic and
institutional conditions so that developing nations can maximise the
benefits of infrastructure investment, whatever the source.
Important role
Infrastructure plays an increasingly important role in international
trade and investment. Developing countries cannot link into the global
economy and export products at competitive prices without sufficient and
good quality electricity, telecommunications and transport networks and
without other basics such as widespread access to drinking water.
The report said that because massive infrastructure improvements are
required in such countries, it is important to enhance the contributions
of TNCs, but in a way that fits in with national development plans.
Foreign Direct Investment (FDI) in infrastructure has increased
rapidly. From 1990-2006, global FDI committed to infrastructure
increased 31-fold to US$ 786 billion.
The amount directed to developing countries increased 29-fold to an
estimated $199 billion. Apart from FDI, TNC involvement also increased
in concessions such as "build-own-operate" activities or management
contracts.
During the 1990s, the growth of FDI in this sector among developing
countries was the fastest in Latin America and the Caribbean, reflecting
the large-scale privatisation of utilities in many countries of that
region.
Since the turn of the century, however, FDI aimed at infrastructure
has grown relatively faster in Africa and Asia. From 1996-2006, about
four-fifths of all foreign investment commitments (including FDI, but
also concessions) in infrastructure in developing and transition
economies was undertaken in two industries: telecommunications and
energy (primarily electricity), according to World Bank data. Less went
into transportation (17%) andwater and sewage (4%).
Huge needs
Despite their huge needs for infrastructure improvements, Least
Developed Countries (LDCs) remain marginal recipients of such TNC
participation. Among all developing economies, their share of foreign
investment commitments for infrastructure was a little over 5% for the
period 1996-2006, with less than 0.5% of that intended for water
projects.
The universe of the largest TNCs investing in infrastructure
industries is evolving.
Although developed-country TNCs still dominate, there has been a
marked rise in international activities by TNCs from the South.
As many as 22 from developing countries featured in UNCTAD's list of
the world's top 100 infrastructure TNCs in 2006. Most were headquartered
in Hong Kong (China), Malaysia and Singapore.
Some have emerged as major players in telecommunications; and others
have become world leaders in port infrastructure.
Moreover, new types of international investors in infrastructure have
appeared, including private equity funds (mainly from developed
countries) and government-owned sovereign wealth funds (mainly from
developing economies).
These newcomers have enlarged the range of sources developing-country
governments can tap into when seeking investment in infrastructure. |