Development and Growth Constraints -… | tutor2u Economics
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Development and Growth Constraints - Infrastructure

  • Levels: A Level, IB, BTEC Level 3
  • Exam boards: 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.

  • Evidence shows that there is a strong positive correlation between a country's development stage and the quality of its road network
  • Poor infrastructure causes higher supply costs and delays for businesses. It reduces labour mobility and hurts the ability of exporters to get products to global markets.
  • According to the World Bank, transport costs are 25-30% of product costs in developing countries partly because of deficiencies in infrastructure

Examples of infrastructure deficiencies

  • India: India's irrigation system is deficient and not properly managed and this has made it difficult to sustain food grain production when rainfall is less than expected – as was the case in 2012. This has led to a surge in food prices which hits the poorest communities hardest. For a few days in the summer of 2012, much of northern India was plunged into darkness. About 700 million people were left without power, a situation that affected transport, communication, healthcare, industries and farming. India needs an estimated $400bn investment in the power sector if it is to meet their development goals. About half of India's roads are not paved.
  • Brazil: Host for the 2014 World Cup and the 2016 Olympics. Brazil's growth is constrained by infrastructure weaknesses: In 2011, only 14% of her roads were paved. The World Economic Forum ranks Brazil's quality of infrastructure 104th out of 142 countries surveyed, behind China (69th), India (86th) and Russia (100th).
  • Sub-Saharan Africa: The combined power generation capacity of the 48 countries of Sub-Saharan Africa is 68 gig watts – no more than Spain's. Excluding South Africa, this figure falls to 28 GW, equivalent to the capacity of Argentina (except Argentina has a population of 40 million and Africa has 770 million!) Poor road, rail and harbour infrastructure adds 30-40% to the costs of goods traded among African countries. A chronic shortage of energy - with firms and people facing acute shortages of power – is a major barrier to growth and development. According to the Asian Development Bank Report for 2013, Africa currently invests just 4% of its GDP in infrastructure, compared with China's 14%

Statistic: India: Real gross domestic product (GDP) growth rate from 2008 to 2018 (compared to the previous year) |<img src=
Find more statistics at Statista

Many countries will need to increase their spending on infrastructure in the years ahead to deal with the consequences of climate change.

Exam tip: Examiners report that students are not good at explaining exactly how improved infrastructure can boost development. Take a step-by-step approach, using good applied examples.

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