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Economics

Study Notes

Development and Growth Constraints - Infrastructure

Level:
A Level, IB, BTEC Level 3
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Closing the infrastructure gap is now crucial in nearly all countries but especially developing/emerging countries who want to make progress towards meeting the SDGs, bring down extreme poverty, improve their export capacity and address numerous environmental challenge. Infrastructure is critical for economic and social development the world over.

Consider for example two specific sustainable development goals:

  • SDG 6: “Ensure availability and sustainable management of water and sanitation for all”
  • SDG 7.1: “Ensure access to affordable, reliable, sustainable and modern energy for all”

We can see below just how much needs to be done in many developing countries, many of them in sub Saharan Africa and East Asia.

Proportion of population with access to a piped on-premises water supply and improved sanitation, 2015

  • Egypt 95%
  • Ethiopia 12%
  • Rwanda 20%

Source: WHO/ UNICEF

Proportion of population with electricity access, 2014

  • Egypt 99%
  • Ethiopia 22%
  • Rwanda 9%

Source: World Bank World Development Indicators

For many countries there is insufficient investment in infrastructure. In part this is because of the enormous up-front financial commitment and the many years before the full benefits of new projects show fruit. The savings gap in many lower and middle-income nations makes financing big capital projects problematic and full of risk and the result can be a lack of investment which ultimately hampers growth and affects people’s everyday lives. Attracting foreign direct investment to help fund and build infrastructure has become a common feature for many developing countries.

The Chinese One Belt One Road Initiative is an example of a hugely ambitious project stretching across many countries that could have a transforming impact but there are risks involved in relying too heavily on overseas capital.

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