Transcript Overall Quality of Infrastructure varies…

Ensuring Accountability in
Infrastructure Investments
28 February 2006
Kuala Lumpur
Rita Nangia
Director
Asian Development Bank
Manila, The Philippines
Agenda
Asian Infrastructure
─Status
─Challenges
•New Framework
─
Inclusive Development
─
Coordination
Accountability and Risk
Management
─
•Way Forward
Major Trends
Asia is growing rapidly
9
8
7
6
5
4
3
2
1
0
East Asia &
Pacific
South Asia
Source: World Development Indicators 2005
Europe &
Central Asia
Latin America
& Caribbean
Middle East &
North Africa
Sub-Saharan
Africa
Major Trends
Poverty is declining in Asia
($ 1-day poverty as % of total population 2003)
60
%
1990
2003
40
20
0
PRC
Indonesia
Source: Asian Development Bank
Philippines
Thailand
Vietnam
India
Pakistan
Asia’s Challenges
…….
Asia is urbanizing rapidly
(urban population as % of total population 2000)
Source: Connecting East Asia: A New Framework for Infrastructure
Asia’s Challenges
…….
Environmental costs are growing
8
2000 CO2 emissions (metric tons per capita)
7
6
5
4
3
2
1
0
East Asia &
Pacific
South Asia
Source: World Development Indicators 2005
Europe & Central
Asia
Latin Am erica &
Caribbean
Middle East &
North Africa
Sub-Saharan
Africa
Asia’s Challenges
…….
Environmental costs
2000 CO2 emissions (kg per US$ of GDP)
3
2
1
0
East Asia & Pacific
South Asia
Source: World Development Indicators 2005
Europe & Central
Asia
Latin Am erica &
Caribbean
Middle East &
North Africa
Sub-Saharan Africa
Asia’s Challenges
…….
Access to Infrastructure varies...
Access to Electricity
...Electricity
SIN
100
KOR
Electrification rates (%) 2000
PRC
MON
AUS
MAL
PHI
THA
75
VIE
SRI
INO
50
IND
25
CAM
0
0
10,000
20,000
GDP per capita, PPP ($), 2000
Source: World Development Indicators 2004 & World Energy Outlook 2002
30,000
Challenges and Opportunities
Access to Infrastructure varies...
...Electricity use per capita
kwh
Per capita power consumption
4000
MAL
3000
THA
2000
PRC
1000
INO
VIE
SRI
IND
0
0
1,500
PHI
3,000
4,500
6,000
7,500
GDP per capita, PPP (US$) 2000
Source: Key Energy Statistics, 2005, International Energy Agency & World Development Indicators Online
9,000
Challenges and Opportunities
Access to Infrastructure varies...
Access to Telephone Mainlines
...Telephone
Mainlines per 100 people, 2003
60
AUS
KOR
SIN
40
PRC
20
MAL
THA
VIE
MON
LAO
0
0
SRI
IND INO
CAM
PHI
10,000
20,000
GDP per capita, PPP($) 2003
Source: World Development Indicators 2004 & Connecting East Asia, 2005
30,000
Overall Infrastructure Quality
Quality of Infrastructure varies…
Vietnam
Overall
Infrastructure
Philippines
Pakistan
India
PRC
Brazil
Indonesia
Thailand
Korea, Rep. of
Taipei,China
South Africa
Malaysia
Japan
United States
Germany
Singapore
0
1
2
3
4
Source: The Global Competitiveness Report 2004-2005
5
6
7
Overall Quality of Infrastructure varies…
Air Transport
PRC
Air Transport
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Taipei,China
Singapore
Korea, Rep. of
Japan
India
Pakistan
South Africa
Brazil
United States
0
1
2
3
Source: The Global Competitiveness Report 2004-2005
4
5
6
7
Overall QualityPorts
of Infrastructure varies…
PRC
Indonesia
Ports
Malaysia
Philippines
Thailand
Vietnam
Taipei,China
Singapore
Korea, Rep. of
Japan
India
Pakistan
South Africa
Brazil
United States
0
1
2
3
4
5
Source: The Global Competitiveness Report 2004-2005
6
7
Overall Quality of Infrastructure varies…
Railroads
PRC
Railroads
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Taipei,China
Singapore
Korea, Rep. of
Japan
India
Pakistan
South Africa
Brazil
United States
0
1
2
3
4
Source: The Global Competitiveness Report 2004-2005
5
6
7
Overall Quality
of Infrastructure varies…
Quality of Electric Supply
PRC
Indonesia
Electricity
Malaysia
Philippines
Thailand
Vietnam
Taipei,China
Singapore
Korea, Rep. of
Japan
India
Pakistan
South Africa
Brazil
United States
0
1
2
3
4
5
Source: The Global Competitiveness Report 2004-2005
6
7
Overall Quality of Infrastructure varies…
Telephones
PRC
Telephones
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Taipei,China
Singapore
Korea, Rep. of
Japan
India
Pakistan
South Africa
Brazil
United States
0
1
2
3
4
5
Source: The Global Competitiveness Report 2004-2005
6
7
Average savings and investment
(% of GDP 1990-2004)
East Asia &
Pacific
South Asia
Europe & Central
Asia
Latin America &
Caribbean
Middle East &
North Africa
Savings
Sub-Saharan
Africa
0
5
10
15
Source: World Development indicators 2005
20
25
30
Investment
35
40
Average savings and investment
(% of GDP 1990-2004)
Brazil
PRC
India
Savings
Investment
Indonesia
Japan
Korea, Rep.
Malaysia
Pakistan
Philippines
Singapore
South Africa
Thailand
United States
Vietnam
0
10
Source: World Development indicators 2005
20
30
40
50
Infrastructure requires funding globally
Country Income
Category
Expenditure Financing Gaps
Needs (% of (% of GDP)
GDP)
Least Developed
Countries
6.5-7.7%
3.1-4.3%
Lower Income Countries
1.5-9.0%
3.5-5.0%
Middle Income Countries
5.7-7.0%
2.9-4.3%
Source: World Bank
East Asia alone requires more than US$200 billion per annum for
Estimated
annual infrastructure need, East Asia, 2006-2010
infrastructure
USD (billion)
Water and
Sanitation
180
160
140
Percent GDP
Maintenance
All excl.
China
Rail
8
6.9 %
7
Telecoms
6
Roads
5
120
6.3 %
3.6 %
100
4
80
60
Investment
China
Electricity
3
2
40
1
20
0
by economic
classification
Source: Yeppes, 2004
by country
by sector
China
Low income
Middle income
The private sector bubble has burst…
… but sentiment is
positive
140
88%
120
$ billion
firm expectations on
future investment in
the region is strongly
positive
67%
100
80
60
$11.5 billion private
sector investment in
EAP infrastructure
40
24%
8%
20
10%
4%
EAP
Total
Investment in Projects with Private Participation
Source: Connecting East Asia: A New Framework for Infrastructure
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
increase
sustain
Global firms
decrease
East Asian firms
Attitudes towards infrastructure
investment levels
Private finance is selective
Sectors
Regions
Water and
Sanitation
SAR
MNA
Transport
LCR
ECA
Telecoms
EAP
Energy
AFR
0
100
200
300
400
500
0
100
$ billion
Infrastructure Projects with Private Sector Commitments: 1990-2003
Source: PPI Database
200
300
$ billion
400
500
Role of official financing varies by country
Aid dependency in selected countries, East Asia, 2003
Aid as percentage of -Per capita income
Aid per capita ($)
($)
GNI
Gross Fixed
Investment
Malaysia
3,880
4
0.1
0.5
Thailand
2,190
-16
-0.7
-2.7
China
1,100
1
0.1
0.2
Philippines
1,080
9
0.9
4.9
Indonesia
810
8
0.9
5.2
Vietnam
480
22
4.5
12.9
Mongolia
480
100
19.7
51.0
Lao PDR
340
53
14.3
69.2
Cambodia
300
38
12.5
54.1
1,070
4
0.4
0.9
East Asia Average
Source: Connecting East Asia: A New Framework for Infrastructure
Who pays for infrastructure?
Who pays for infrastructure?
In the first instance, users:
In a virtuous
cycle, of
growth and
infrastructure
funds itself
Infrastructure
USERS
growth
Who pays for infrastructure?
In the second instance, users are subsidized by tax payers…
SUBSIDIES
Infrastructure
TAX
PAYERS
USERS
growth
Who pays for infrastructure?
Two institutional mechanisms channel the flows - the state budget, and
service providers
All government
expenditure is a claim
on tax payments – now,
or in the future
STATE
BUDGET
Services may be
provided by the
government, a state
entity, or the private
sector
PROVIDERS
Infrastructure
TAX
PAYERS
USERS
growth
Who pays for infrastructure?
Financiers have a key facilitating role…
Financing makes it
possible to mobilize
the current value of
future tax payments…
FINANCIERS
STATE
BUDGET
… and flattens the
cost profile for users
over time
PROVIDERS
Infrastructure
TAX
PAYERS
USERS
growth
Who pays for infrastructure?
Financiers have a key facilitating role…
This is the case when
finance is concessional,
or takes the form of
grants
FINANCIERS
STATE
BUDGET
PROVIDERS
Infrastructure
FOREIGN
TAX
PAYERS
TAX
PAYERS
USERS
growth
Who pays for infrastructure?
FINANCIERS
The public and private
sectors are
complementary
STATE
BUDGET
PROVIDERS
INFRASTRUCTURE
TAX
PAYERS
USERS
growth
New Framework
Three Broad Approaches to Poverty
• Income or expenditure
Coordination
Inclusive
Development
Accountability
and
Risk Management
• MDG
• Human Capabilities
Inclusive development is
about improving the
incomes and lives of all
members of the society,
especially poor
Inclusive Infrastructure
Poverty
Reduction
Growth
Growth
Determinants
Service
Access
Infrastructure
Access
Determinants
Coordination challenges for developing countries
1. Getting infrastructure spending right
• Coordinating investment and financing functions
• Coordinating fiscal space
2. Coordinating through decentralized agencies
• Horizontal coordination
• Vertical coordination
• Developing the missing middle
3. The special challenge of urban management
Accountability and risk management
…and how they’re related
Accountability
rewarding organizations that
consistently perform well for their
stakeholders (and penalizing those that
perform badly)
Risk management
making risks and rewards
commensurate with each other, in
order to drive good performance
Mechanisms to strengthen accountability
Community participation
• From project selection to ongoing operations
• But likely to be limited to the last mile
Competition
• Most effective way of bringing accountability
• But East Asia not in the forefront, for a number of reasons
Regulation
• The problem of holding regulators accountable
• Independence is evolutionary
Does ownership matter for accountability?
A poorly-regulated private monopoly performs as badly
as a poorly-regulated public monopoly
But the private sector responds better than the public
sector to good regulation or competition
THE WAY FORWARD
Study provides a way of thinking about infrastructure
issues in different situations
• Not a blueprint or toolkit
Policy messages reflect concerns raised during our
consultations
• To improve infrastructure development and service
delivery
Policy Messages
•
The center matters – infrastructure demands strong planning
and coordination functions
•
Decentralization is important – but raises host of coordination
challenges
•
Subsidy is not a dirty word – subsidies can be important, but
are always risky, and should be handled with care
•
Competition is hard to achieve in infrastructure – but it’s the
best way to bring accountability
•
Regulatory independence matters more in the long run than
the short run
•
Civil society has a key role to play in ensuring accountability
in service provision
•
Infrastructure has to clean up its act – addressing corruption
is a priority
Funding Messages
•
•
Fiscal space for infrastructure is critical
•
•
•
Public sector reform matters – but be realistic
The private sector will come back – if the right policies are in
place
Local capital markets matter – but are not a panacea
Infrastructure needs reliable and responsive development
partners
Holding Executive Accountable
…….
Electorates
•
Service commissions
•
•
•
•
•
Regulators
Final Investment
Choices
Supreme audit body
Process
Judiciary
Ombudsman
Legislature
•
Interest Groups
•
•
•
•
•
•
•
Civil Society Organizations
Think tanks
Political Parties
Media
External Groups
Donors
CPA