Infrastructure can be defined as all the facilities used to deliver energy and minerals, water and sanitation, telecommunication and transport services. However, this simple definition masks a wide array of investments that have varying impacts on improving household incomes and reducing poverty.
Infrastructure investments can be unbundled along a number of different criteria. Some investments focus on promoting economic growth while others target enhanced access by the poor. Infrastructure can be a single large project or hundreds of small projects; project design and implementation can be centralized or decentralized. Infrastructure can be high risk or low risk in nature. Infrastructure can provide products or services for domestic use or for exports through an enclave arrangement.
The World Bank’s acknowledgment of the complexity and risk of infrastructure projects reinforces the findings of two major multi-stakeholder reviews: the World Commission on Dams (WCD) and the Extractive Industries Review (EIR). The WCD (2000) and the EIR (2003) provide rigorous frameworks and recommendations on how dams and extractive industries should be developed and the appropriate role for the World Bank in these sectors. The strategic priorities, principles, and guidelines contained in these reports are also relevant for infrastructure more generally. In turn, these reports have benefited from the active and in-depth monitoring of infrastructure projects undertaken by civil society and academics over the past three decades.
export infrastructure vs. basic service infrastructure
An important distinction needs to be drawn between capital-intensive, commodity export projects that require large transport systems to evacuate their product (such as oil and gas pipelines), and infrastructure projects that are built to provide basic services to a variety of users. While both are labeled “infrastructure,” the central difference is that in the case of the former, the primary “development” benefits to the host country are almost entirely in the form of revenues to the government, while in the latter, the benefits may come in a variety of forms, including improved public access to transportation systems, electrification, water and sanitation services, increased industrial capacity for a variety of domestic sectors, as well as revenues to the state. The need for and potential benefits of the latter are evident in developing countries. The case for the former, however, is much more debatable, as the impact of increased revenue generation on growth and poverty reduction depends upon the will and capacity of a government to use revenues effectively for the benefit of its people.
'Smart infrastructure'
'Smart infrastructure’ is pro-poor, decentralized, and typically small in scale. Compared to high-risk, export-oriented projects, it provides more direct and immediate pathways to reducing poverty. "Smart infrastructure" is also more likely to be equitable and sustainable.
Characteristics of smart infrastructure include:
- more direct and tangible benefits to poor households and communities
- decentralized approaches for project design, implementation, operation, and maintenance
- prominent role of users in all stages of the project cycle and the role of local governments
- more amenable to greater transparency and accountability
- smaller in size and scale, compared to large national or regional projects
- ability to generate local employment and technical capacity/know-how
- less susceptible to large-scale corruption but close scrutiny still required given widespread petty corruption often associated with small civil works
Smart infrastructure also includes investments in promoting efficiency gains from existing infrastructure as opposed to building new infrastructure.
Examples of smart infrastructure include integrated watershed development; rural and urban water and sanitation; rural access roads; run-of-the river hydroelectric projects; renewable energy; off-grid electrification; traditional water harvesting and irrigations systems; community-level common property infrastructure; etc. MDBs are already supporting these types of projects but need to significantly ramp up their investments in these areas.