Should policymakers take account of demographic factors in considering investments in infrastructure? Peter S. Heller (SAIS) Presentation to POPNET Conference on Population, Reproductive Health, and Economic Development Dublin, January 16, 2009 - PowerPoint PPT Presentation


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Should policymakers take account of demographic factors in considering investments in infrastructure? Peter S. Heller (SAIS) Presentation to POPNET Conference on Population, Reproductive Health, and Economic Development Dublin, January 16, 2009


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Title: Should policymakers take account of demographic factors in considering investments in infrastructure? Peter S. Heller (SAIS) Presentation to POPNET Conference on Population, Reproductive Health, and Economic Development Dublin, January 16, 2009

Should policymakers take account of
demographic factors in considering investments in
infrastructure?Peter S. Heller
(SAIS)Presentation to POPNET Conference on
Population, Reproductive Health, and Economic
DevelopmentDublin, January 16, 2009
Defining infrastructure a broad concept
  • Typically, an investment in basic structures (not
    machinery or equipment)
  • Spatially universal infrastructure housing,
    water, sanitation, social services
  • Economically productive infrastructure energy,
    ICT, irrigation, ports, transport (roads,
  • Spatially connective infrastructure within a
  • Regional infrastructure (whether to regional
    markets or to global markets)

  • Distinguish
  • New investment
  • vs
  • Rehabilitation investment for existing
  • vs.
  • Operations and maintenance (OM)
  • There are substitution possibilities an increase
    in the quality of infrastructure investment
    changes level of demand and periodicity of demand
    for OM, with obvious fiscal consequences

Four Issues to Examine
  • How might demographic factors influence the
    demand for infrastructure?
  • Have demographic factors played a key role in the
    past in influencing infrastructure investments?
  • What do future demographic trends suggest about
    infrastructure needs, particularly in LICs?
  • What might be the policy implications?

  • Issue 1
  • How might demographic factors influence the
    demand for infrastructure?

In principle, many demographic variables
influence the need for infrastructure
  • Population size of a country or urban
  • Population dynamics of a country what stage of
    the demographic transition? Implies age structure
  • Age structure of the population of country or
  • Share of young? Elderly?
  • Density rural smaller cities (lt100,000
    100,000--1 million, rural settlements) vs.
  • Extent of migration urban-rural international
  • Note basic econometric models typically include
    population size, density, urbanization rate

Population size and age structure
  • Population size influences the demand for
    spatially universal service infrastructure
    (though influenced by economies of scale)
  • Water and sanitation
  • Basic social services infrastructure (number of
    schools, health facilities
  • Age structure of population
  • Young population obvious bias toward demand for
    educational infrastructure
  • Working age group public infrastructure to
    provide complementary inputs for private sector
    productivity and job creation
  • Elderly population need an elderly-friendly

Dynamics of population structure
  • Stage of demographic transition determines
    appropriate composition of infrastructure
  • Not yet in transition need to scale up
    educational and health infrastructure as well as
    provide infrastructure for jobs of growing labor
  • Youth dependency rate still high--conflicting
    challenge between meeting needs of youth and
    infrastructural requirements for growth (e.g.,
    Kenya, Vision 2030)
  • As overall dependency rates decline and growing
    labor force need infrastructure to foster job
    creation slowing growth of youth population

In principle, demographic transition can allow
for higher savings and investment rate
  • Higher working age group share and lower
    dependency rate potential for increased savings
    rate and higher rate of capital formation
    (including of infrastructure), and economic
    growth rate.
  • Such investments vital to absorb growing labor
  • As with Asia, higher growth in labor force might
    prove attractive for foreign investment. Also
    financing infrastructure
  • But note difference between Latin America and
    Asia in level of investment associated with lower
    dependency rate in 80s 90s. Higher savings may
    not materialize
  • So, higher growth may not materialize
    commensurate with higher level of productive age
    work force

Contrast Asia and Latin America A lower
dependency rate not necessarily associated with
higher investment rate
Dynamics of population structure (cont)
  • Later in demographic transition, should observe
    an increased elderly share falling youth share
    (note some youth bubbles do occur) and possibly
    declining population
  • Downsizing may be necessary (too many schools?
    Infrastructure system too large uneconomic?)
  • Need infrastructure appropriate for elderly
  • Can expect this to happen in Eastern and Western
    Europe looking forward also rural China in
  • Particularly a challenge in smaller cities where
    there may be diseconomies of scale associated
    with limited client population served by
    overbuilt infrastructure

Urbanization Mixed evidence for its implications
for infrastructure
  • Economies of scale and benefits of higher density
    in reducing per capita costs for water,
    sanitation, power, transport infrastructure, and
    possibly social services.
  • But demand for higher quality and quantity of
    services increases overall costs per capita in
    urban areas for spatially universal services.
    This is particularly the case for larger cities.
  • Differential in infrastructure costs per capita
    with rural areas may be less in smaller cities.
  • But lack of financial resources may prevent
    necessary infrastructure investments from
  • Note the significant disparities within urban
    areas between urban poor and other groups slums

Evidence relative costs in urban and rural areas
of water
  • Two offsetting forces
  • Capital costs and salaries in urban areas are
    much higher
  • But lower population densities and longer
    distances can imply a higher cost of providing
    rural populations with access to water.
  • Millennium Project assumed that rural capital
    costs for boreholes, rainwater collection, and
    dug wells are about 40 percent of urban cost
  • But household connections and public stand posts
    in rural areas are assumed to be twice as
    expensive as in dense urban areas!

Recognition that urbanization will require
infrastructure is only first step
  • As noted, two critical types of infrastructure
  • Universal services infrastructure--water,
    sanitation Also need for housing as
  • Economically productive infrastructure (related
    to job creation--ICT, transport links for export,
  • But how to approach the creation of urban
  • Many possible choices--very different cost
  • Upgrading slums--upgrading housing, retrofitting
    infrastructure for water supply, sanitation,
    transport and energy services
  • Requires strong focus on networked
    technologies--sewers, piped water and electricity
    grids, storm drainage
  • Also, water storage
  • New urban developments as alternatives to
    formation of new slums
  • In Transport large scale road and rail-based
    transport infrastructure vs bus-based mass
    transit approaches

With urbanization, there is potential for
  • Example Sewerage
  • For large urban areas, unbundling a service area
    into parallel independent service zones, each
    with its own sewerage network leads to lower
    average diameter and average depth for the entire
  • Leads thus to lower capital costs, stretching
    funds also leads to management of smaller areas
    of service--thus, easier to manage
  • Example Bangkok a megacity where unbundling of
    sewerage has been successfully applied

Again, note the cost differentials cited by
Millennium Project
  • Slum Upgrading Average investment per person ()
    over 15 years (including. physical improvements
    to housing stock, basic physical
    infrastructure--water, sanitation, drainage, road
    paving, and electricity)
  • Upgrading slums 670 or about 42 per
    beneficiary per year
  • Providing alternatives to formation of new slums
    400 (26 p.b.p.a)
  • Implication new settlements can be build for one
    third to one half lower than the cost of
    comprehensive upgrading.
  • Source Millennium Project
  • Cost of water storage infrastructure to reach
    South African standards, need roughly 15-70 per
    capita per year!

Urbanization by design?
  • Some countries have tried to proactively
    influence where urbanization occurs by
    investments in infrastructure
  • Sometimes successful, e.g., Korea and China
  • But also note failed cases often around EPZs
    (e.g., Kenya)
  • May result in costly and inefficient
    infrastructure provision
  • Most countries have less proactive policies
    urbanization governments imply respond to forces
    in growing economy agglomeration economies job
    opportunities that pull in labor and/or weak
    agricultural sector that pushes labor out

Other infrastructural consequences of urbanization
  • The need to feed an urban population creates
    pressure for
  • infrastructure in rural areas to support domestic
    agricultural production and to facilitate
    transport of commodities from the rural areas to
  • Need the capacity to both supply a city
    (railways, roads)
  • As city grows, existing infrastructure may become
    inadequate and may need to be upgraded or
  • Creates opportunity for investments in new
    approaches for supplying water or sanitation
  • Need to reconsider urban transport infrastructure

Other infrastructural consequences of
urbanization (cont)
  • Increased urbanization, particularly coastal
    cities, puts pressure on ground water
  • Forces consideration of alternative sources of
    water requires better urban water demand
  • With ground subsidence, infrastructure needed to
    limit risks posed from storms, wind damage, storm
  • Higher likelihood of residual damage from the
    occasional extreme storm event.
  • Coastal protection infrastructure will be a key
    element in reducing risk. Climate change will
    exacerbate these forces (as will be discussed

Migration will also shape demand for
  • Will migration be to smaller cities? To mega
    cities? To peripheral exurbs?
  • Sources of internal migration and effects on
    infrastructure needs in exporting areas
  • Endogeneity factor provision of infrastructure
    may induce in-migration! But not strong evidence
    of this
  • Is immigration likely from neighboring countries?
    Conversely, will out-migration dampen domestic
    demographic pressures and influence population
    size and age structure?
  • All questions for policy maker to consider

Technological factors also shape level and
character of demand for infrastructure
  • Technological change can induce or create demand
    for new kinds of infrastructure or substitutions,
    particularly for big ticket items energy,
    transport, ICT
  • Dedicated urban bus lanes vs auto-driven
    transport network in urban areas
  • ICT role of land lines vs. cable optic fibre vs
    cell phone towers do conventional technologies
    become outmoded? Cell phone technologies
    leapfrogging over demands for landlines
  • Energy sector Is there a shift towards
  • Is there a potential for economies of scale for a
    given type of infrastructure?
  • For certain types of infrastructure (power,
    transport), demographic variables (e.g.,
    population size) may be dominant consideration)
    relative to technological factors

Policy makers should consider choices among
existing technologies
  • Avoid adopting technical design standards from
    industrial countries.
  • Consider adaptation to local circumstances
    (e.g.,Brazil and Australia)
  • Millennium Project examples
  • Pour-flush systems (the Sulabh program in India)
    vs. flush toilets pour-flush systems reduce
    quantity of water demanded and quantity of
    wastewater produced low-volume-flush toilets are
    water-saving devices
  • Consider potential for labor-intensive roads to
    create employment and minimize adverse
    environmental impact
  • Water supply choose infrastructure that matches
    occurrence and sources of water, treatment needs
    socioeconomic status of intended users and
    location and size

Example choosing among alternative water supply
technologies what size of city?
  • Large cities rely on surface water Construct
  • For large scale systems, institutions, and
    domestic and small scale agricultural uses can
    also rely on ground water Dig boreholes and
    tube wells
  • For village or community or household uses
    large diameter wells dug wells or mechanically
  • For rural areas rely on ground water spring
    water protected spring box

Example selected technological options for
sustainable access to sanitation
  • On-site sanitation (function of how much water
    usage, permeability of soil, depth of water
    table, density of housing)
  • Excreta Disposal
  • Simple unventilated double pit toilet
  • Pour-flush toilet with twin soak-away pits
  • Pour-flush toilet plus septic tank with twin-pit
    soak-away pits
  • Wastewater disposal
  • Separate twin-pit soak-away system for sewage
  • Off-site sanitation function of amount of water
    usage, soil permeability, housing density, depth
    of water table
  • Wastewater conveyance simple sewer system
  • Primary treatment sludge drying beds and Imhoff
  • Secondary treatment trickling filters , sludge
    digesters, co-composting of sludge with garbage
  • Alternative treatment options constructed
    wetlands, in-stream wetlands and
    waste-stabilization ponds
  • Source UN Millennium Project Task Force

  • Millennium Project illustrates case of Brazil,
    where significant effort to move away from
    biomass production of energy through use of
    across-the-board and targeted subsidies to the
    poor for natural gas including in rural areas.
  • Implies a shifting of infrastructure strategy
    from existing technology to an alternative
  • Infrastructure requirements? Actually, principal
    upfront cost is the purchase of LPG cylinder and

Level of development and growth imperatives
  • Infrastructure can facilitate/stimulate growth
  • Provide complementary inputs to private sector
  • Key policy issue what infrastructure appropriate
    at different phases of development?
  • Role of FDI
  • But reverse causality may apply growth and
    rising PCI will stimulate demand for
  • Need to upgrade infrastructure to meet pressures
    and demands for energy ICT water transport
    networks, etc
  • Demand for higher standards of infrastructure

Stage of development itself fosters demand
  • In LICs and MICs, major differential between
    infrastructure in urban and rural areas. Often, a
    major backlog owing to previous lack of
  • In industrial countries, observe a convergence in
    quality of spatially universal infrastructure
    (WSS, medical, roads, education) per capita in
    urban and rural areas.
  • Also, what is defined as spatially universal
    evolves. In MDCs, electricity becomes necessity!
  • WEO (2008) notes rapid growth of demand for car
    ownership as PCI approaches a given threshold
    intensifies demand for associated infrastructure
    urban and interurban

Convergence of demand for spatially universal
Another factor to consider the MDGs!
  • MDG 7 relates to ensuring environmental
  • Target 7c Reduce by half the proportion of
    people without sustainable access to safe
    drinking water and basic sanitation
  • 7.8 Proportion of population using an improved
    drinking water source
  • 7.9 Proportion of population using an improved
    sanitation facility
  • Arguably Target 7d Achieve significant
    improvement in lives of at least 100 million slum
    dwellers, by 2020
  • 7.10 Proportion of urban population living in
  • Simply to meet MDGs, particularly with rapidly
    growing urban populations, need to invest
    significant sums in infrastructure
  • Millennium Project estimates it would cost
    roughly 293.5 billion over the period 2005-2020,
    or roughly 20 billion annually (of which 11
    billion from ODA). Averages 70-80 per capita to
    meet all MDGs

Millennium Project estimates of annual investment
costs per capita to meet MDGs (as opposed to
universal provision!)
  • For Bangladesh, Cambodia, Ghana, Tanzania, and
  • WSS 5 - 7 per capita annually more generally,
    2-6, rising to 6-12
  • Improve lives of slum dwellers 2 - 4
  • Energy 11-19 more generally 6-20 rising to
  • Roads 21
  • Note these are rough averages lower in
    beginning years, higher later on. Countries of
    course differ
  • Source Millennium Project Overview chapter 17

Cost of just meeting water and sanitation MDGs
  • Global ?nance costs range from 51 billion to
    102 billion for water supply and from 24
    billion to 42 billion for sanitation for the
    period 2001-15 average 68 billion for water and
    33 billion for sanitation aver annually 6.7
  • No absolute cost ?gure--would depend upon the
    technologies adopted and country-speci?c
    preferences and conditions.
  • Estimates are for a minimum package of services,
    in which low service levels (in terms of
    technologies and costs) were applied for rural
    populations and intermediate service levels were
    applied for urban populations. The vast majority
    of need was assumed to be in periurban areas and

Another factor influencing demand for
infrastructure in future Climate Change
  • Future climate change may significantly
    exacerbate pressures from urbanization.
  • Undercut viability of some areas for settlement
  • Increased risk of flooding, major disruption of
  • Looking forward, may engender migration or
    resettlement, creating new demands for
  • May influence the viability of existing
  • Difficult to separate out the pressures from
    demographic change from the associated
    developments that can accompany such demographic
  • viz., subsidence socioeconomic development etc

A further consideration do demographic
considerations have adequate voice?
  • An important political economy question in low
    income countries particularly, is whether
  • The fact of demographic needs for infrastructure
    are articulated and responded to by policy
    decision-makers. If decisions on demography are
    made on technocratic or political grounds,
    demographic-related needs may not be taken into
  • Also, in many societies, there may be various
    sociological factors that ignore the needs or
    demands of important segments of the population.
  • Women, for example, may be effectively supplying
    infrastructural services (water, energy) and
    their needs may not be adequately considered by
    the political forces that shape infrastructural
    investment decisions
  • Women may also want preference given to
    technologies for infrastructure for which they
    can have some control, rather than large
    infrastructure projects

Finally fiscal constraints limit whether
infrastructure investments respond to demographic
needs !
  • Infrastructure usually a public goodsubject to
    economies of scale externalities spillover of
    benefits (and costs)
  • Externalities often large and capacity for
    excludability may be limited--- such
    infrastructure may not be viable on commercial
    terms for much of the population
  • Observe only limited private investment in dams,
    power, highways, reservoirs water and sanitation
  • Some exceptions some infrastructure, e.g.,
    satellites, telecommunications, can be undertaken
    privately private willingness to pay
    significant private investment developing (e.g.,
    East Africa)

Fiscal constraints (continued)
  • At all PCI levels, fiscal constraints dictate
    adequacy, quality, and magnitude of the
    infrastructure to be provided
  • These constraints are more binding for LICs with
    low tax ratios, limited capacity for debt
    absorption, and heavy reliance on external
  • Even where public-private-partnerships (PPPs) are
    used, fiscal contingent liabilities engendered
  • Public policy thus critical in influencing what
    infrastructure choices are made where? how
    much? what technology? what policy issues

  • Issue 2
  • Have demographic factors played a key role in the
    past in influencing infrastructure investments?

Raw facts suggest otherwise. Look at Africas
infrastructure deficit relative to other low
income countries (Foster, 2008, p.2)
Recent World Bank Africa Infrastructure
Diagnostic studies reveal that
  • Power consumption in Africa only 10 that in
    developing world and falling (124 kwh per capita
    per year)
  • Since 1990, little change in share of population
    with access to land-line telephones, flush
    toilets or piped water. Little improvement in
    population share with access to electricity (from
    22 to 28)
  • Rapid urban growth leaving infrastructure
    service providers severely stretched,resulting
    gap in water and sanitation filled by lower
    cost alternatives such as boreholes and pit
  • Source Foster 2008

  • Issue 3
  • What do projected demographic trends suggest
    about infrastructure needs, particularly in LICs?

A few key demographic factors to consider
  • Growth of population
  • Projected urbanization rates
  • Projected growth in the size of school age and
    working age populations
  • Projected growth of elderly--in LICs and MICs in
    industrial countries

Africa Seeking to catch up Asia moving to the
next level
  • Compare two recent estimates of infrastructure
    needs over next 5 -10 years in Asia (Yepes, 2008)
    and Africa (Foster (2008)

In considering linkage between demographic
projections and infrastructure needs, policy
makers should differentiate need for
  • Spatially universal infrastructure WSS and
    infrastructure for basic social services
    (education and health)
  • Influenced by overall pop. growth age structure
    ( of youth)
  • Recognize need and effective demand are
  • Economically productive infrastructure
    complementing workforce in manufacturing and
    services facilitating growth and employment in
    urban areas
  • Influenced more by urban growth demographic
  • Examples power, transport, ITC, ports
  • Spatially connective infrastructure WDR2009
    emphasizes need to facilitate growth in
    non-urban areas through transport connections
    rural-urban links

What do demographic projections portend about the
overall need for infrastructure?
  • First, start with absolute growth of population
    between 2005-2025 Africa 482 million Asia 841
  • Whether in absolute population increase, level
    per capita of infrastructure, and even in terms
    of capital complementing increased workers, the
    major focus Asia through 2025
  • But, after 2025, Africa will be focus for the
    major increase in infrastructure required for
    economic growth
  • Minimal increase in working age group in Asia
    after 2025 and large increase in the number of

  • Let us define three categories of
  • 1. Early in demographic transition
  • 2. Mid-demographic transition
  • 3. Late demographic transition

  • First category of countries those now
    experiencing fastest rates of population growth
    still early in demographic transition
  • Niger, Burundi, Liberia, Guinea-Bissau, Uganda,
    Mali, DR Congo, Chad, Afghanistan, Timor Leste,
    Yemen, Nigeria, Ethiopia, Kenya, Tanzania.
  • For these, a need for spatially universal
    services infrastructure, particularly in
  • UN Population projections (med variant) assume
    gradual reduction in fertility rate over time.
  • If this holds, countries will observe classic
    early phase of the demographic transition
  • falling dependency rates,
  • rising shares of the population in the 15-59
    working age group.
  • Higher fertility assumption would imply need for
    additional infrastructure for schooling and less
    domestic resource availability with higher
    dependency burden!

Category 1 countries
  • 2005-2025 Still substantial rapid growth in
    population much still in rural areas, including
    many in working age groups
  • 2025-2050 with fertility reduction population
    growth rate falling and urbanization accelerating
  • See that growth in urban population largely
    concentrated in 15-59 age group

  • These are also countries where a significant
    percentage of the increased population will be in
    urban areas, particularly during 2025-2050, as
    the demographic transition takes hold
  • In some countries, particularly in 2025-50 the
    increased urban population will be dominated by
    the working age group,
  • Suggests relatively greater importance in later
    period of economically productive infrastructure
    power, telecommunication, transportthat
    facilitates increased investments for services
    and manufacturing, relative to basic services
  • But there will still be demand for such
    infrastructure in earlier period--rising L force!

Rapid urbanization dominated by working age group
Despite urbanization, for many countries, also a
growing number living in the rural areas needing
basic infrastructure
  • Particularly for next 20 years, before
    urbanization process in these countries picks up
  • Rural infrastructure needed both to address
    dramatic existing deficiencies to respond to
    rural pop. growth
  • For rapidly growing population countriesNiger,
    Burundi, Guinea-Bissau, Uganda, Ethiopia, Kenya
    and to lesser extent Tanzania, DRCongo, and
    Afghanistan, spatially connective transport
    infrastructure will also be important to
    facilitate demand for agricultural production
    from rural areas--supplied to urban areas
  • Numbers may be even larger if one accepts that
    median population variant probably too optimistic

Countries in early phase of demographic
transition rapid urbanization but rural areas
still important
A second category of high population growth
countries but with fertility declining
  • Further along the demographic transition India,
    Pakistan, Bangladesh, Philippines, and Egypt.
  • Significant absolute increases in population
    through 2050.
  • Share of working age population will remain
    roughly unchanged (as will the dependency rate),
  • But significant shift in population structure
    towards elderly and away from youth populations.
  • Also a dramatic shift, particularly after 2025,
    in urbanization rate, with sharp fall in rural
  • Higher urbanization in these more lower-middle
    and middle income countries may entail higher per
    capita infrastructure costs

Countries where urbanization starts to deplete
rural areas and include all age groups
  • For 2000-2025, growth of rural population will
    still be substantial, particularly for India,
    Pakistan and Egypt, even though dwarfed by growth
    in urban areas. Spatially universal
    infrastructure required as well as spatially
    connective transport infrastructure
  • However, dramatic decline in rural sector
    post-2025 suggests limits on quantity and quality
    of infrastructure needed for next decade or so

Third category of country low fertility rates
and well advanced in demographic transition.
  • Project increase in overall population in coming
  • But sharp decrease in share of young, increase in
  • Large drop in working age population share ?an
    increase in overall dependency rate
  • Substantial increase in urbanization rate
  • Absolute population decline in rural areas, even
    in next decade or so
  • Category includes China, Vietnam, Mexico,
    Brazil, Indonesia

Third category of country (cont)
  • Expect, over time, deceleration in the growth in
    demand for productive infrastructure
  • Demand for more basic infrastructure services may
    be greater, reflecting higher level of
  • With rising incomes, demands for upgraded quality
    of infrastructure in rural areas convergence

Advanced demographic transition rural areas
losing population and shift of urban population
towards the elderly
Footnote issue the elderly and infrastructure
  • In many industrial and middle income countries,
    will see a large increase in the both the share
    and absolute numbers of elderly, relative to
    other segments of the population.
  • Many retired, many working part-time
  • How would this population transition be reflected
    in demands for infrastructure?
  • Singapore one of the few countries that have
    actively considered this issue and asked what
    policy/spatial/infrastructural changes would be
    needed to cope with an aged society (Committee on
    Ageing Issues Report on the Ageing Population

Example Recommendations of Singapores
Commission on Aging
  • Guidelines needed on providing accessibility and
    safety features in the homes for seniors,
  • Make all new public buses low floor step-free and
    wheelchair-accessible to allow everyone to use
    the public transport system.
  • Expand and accelerate the upgrading and
    improvement of existing barrier-free measures on
    road facilities to enhance accessibility between
  • Establish a new intermediate government
    residential care facility to address the current
    service gap in intermediate residential care for
  • Develop integrated models of day care and day
    rehabilitation centres, based on market driven
    needs, to provide more client-centric and
    efficient services.

But fiscal constraints will determine whether
infrastructure needs can be met
  • How to finance higher urban infrastructure
  • Many high population growth, rapidly urbanizing
    countries, have economic growth rates less than
    rate of urbanization.
  • Raises the question of whether revenue growth
    will be sufficient to create the fiscal space for
    investments in necessary urban infrastructure--bot
    h for basic services and economic infrastructure
  • (Issue projections of urbanization presumed not
    to be a function of an assumed higher rate of
    economic growth)

Will growth be sufficient to meet the needs of
rapidly urbanizing population 2005-10?
Will growth be sufficient to meet the needs of
rapidly urbanizing population 2025-30?
Links of demography with climate change and
urbanization will influence infrastructure
  • Significant concentration of major urban areas in
    coastal or river ports or in deltaic regions.
  • Combination of socioeconomic development,
    population growth, and possibility of
    human-induced subsidence in these urban centres
    will dramatically increase the risk of their
    exposure--both in terms of population numbers and
    value of assets--to the impact of flooding, storm
    surges and wind damage even in the absence of the
    higher sea level and increased storm intensity
    associated with climate change (Source OCED

  • Population increases alone would see a 150
    increase in number of population exposed to risk
    of 1100 year storm, even with no other factors
    involved (40 million in 2000 to 95 million in
  • Including storm enhancement, sea level rise,
    human-induced subsidence, population at risk
    rises to 140 million
  • Assets at risk rise from 3 trillion to 35
    trillion over the period

The largest increase in exposure to such risks
will be in LICs in Asia and Africa
  • Significantly exposed in terms of population at
    risk if not value of assets Reflecting minimal
    existing flood/coastal protection infrastructure
    sharp increases in population centres limited
    urban land-settlement programs and rapid
    socioeconomic development
  • In terms of magnitude of exposure, Asian cities
    will be among the greatest at risk
  • But a number of African countries as well will be

Among top 30 cities with maximum exposure in
terms of population at risk
  • Asian non-MDC cities at risk (population)
  • Kolkata
  • Mumbai
  • Dhaka
  • Guangzhou
  • Ho Chi Minh City
  • Shanghai
  • Bangkok
  • Rangoon
  • Haiphong
  • Tianjin
  • Khulna (Bangladesh)
  • Ningbo
  • Chittagong (Bangladesh)
  • Jakarta
  • Shenzen
  • Qingdao
  • Africa
  • Alexandria
  • Lagos
  • Abidjan
  • South America
  • Guayaquil
  • NOTE 13-17 deltaic cities found in top 20
  • Source OECD (2008)

Among top 20 world cities with highest
proportional increase in exposed assets at risk
by 2070 relative to current situation, 19 are in
  • Jakarta
  • Zhanjiang
  • Haiphong
  • Bangkok
  • Shanghai
  • Ho Chi Minh City
  • Shenzen
  • Guayaquil
  • Africa
  • Alexandria
  • Source OECD (2008)
  • Asia
  • Ningbao
  • Dhaka
  • Kolkata
  • Fuzhou
  • Tianjin
  • Surat
  • Xiamen
  • Guangzhou
  • Mumbai
  • Hong Kong

  • Issue 4
  • Policy Implications

What are the implications for policy makers in
considering infrastructure investments?
  • Projecting infrastructure needs yes, consider
    demographics but.
  • Cannot simply project growth of population and
    apply existing per capita infrastructure to the
    growth in the population backlogs may be
  • Need to examine the nature of demographic
    change--dynamics of age structure aging
    population or young population urbanization
    profile and trends migration--all will influence
    infrastructure priorities
  • And, infrastructure may influence demographic
    trends--fertility rates as well as migration

Demographics only takes you so far in considering
  • Fiscal constraints force choices--may require a
    balancing in responsiveness to demographic
    factors vs other factors, such as
  • Providing preconditions for growth
  • Responding to new technological developments
  • Climate change impacts
  • Choosing among alternative technologies and
    standards in providing basic infrastructure
  • And no easy out on fiscal constraints PPPs
    typically entail significant contingent

Indeed, economics and policy literature
predominantly focus on how infrastructure can
contribute to growth!
  • What are good choices? Bad choices? WDR 2009
    would say
  • In considering whether to invest in
    infrastructure, follow the market, dont lead it!
  • In LICs, issues of equalization /convergence
    assumes much less prominence than arguments that
    offer prospect of higher economic growth.
  • Equalizing infrastructure per capita only assumes
    importance when countries become sufficiently
    developed that it becomes politically
    unacceptable to have significant inequalities

Prioritizing for the MDGs
  • Absent fiscal space, Sachs emphasizes importance
    of some quick-wins-- providing access to
    electricity, water, sanitation and the internet
    for all hospitals, schools, and other social
    service institutions
  • Use off-grid diesel generators, solar panels, or
    other appropriate technologies (Millennium
    Project Main Report, Ch. 5 (MPMR5)
  • Combine a growth focus with broader MDG
    objectives Green Revolution in rural
    areas--would require improved rural
    infrastructure services in the form of
  • Roads and means of transport-- construction and
    rehabilitation of footpaths, feeder, district,
    and national roads
  • Modern energy services
  • Communication technologies

Other policy considerations
  • What infrastructure is needed to become or
    maintain competitiveness? To attract FDI?
  • Evidence is clear need reliable electricity and
    water, adequate for globalized communications,
    and efficient and low-cost transport connections
    to global and regional markets.
  • What infrastructure required to restructure modes
    of energy generation? To adjust to higher future
    carbon prices? Geo engineering? Clean coal? etc
  • What is required to achieve greater efficiency in
    use of water resources?
  • What may be required to adapt to climate change
    (to maintain economic viability)?

Infrastructural Investments unaccompanied by good
policies--likely to be, inefficient prone to
  • Also, installing infrastructure without
    responding to user preferences or user capacity
    to pay for acquisition, operation, and
    maintenance operations likely to be unsuccessful
  • Underscore also importance of sustainability of
  • Is technology choice responsive to demand?
  • Is there proper design of chosen technology?
  • Consistency of installed infrastructure with
    chosen design?
  • Use of installed facility as intended in the
  • Is there maintenance of facility for proper
  • Is there available competent technical staff or
  • Is there a reliable flow of revenue to pay for
    all of these requirements?

And policy choices on infrastructure can be made
for the wrong reasons
  • In LICs, large scale of infrastructure spending
    contracts can lead to
  • Rent-seeking
  • Inappropriate absorption by the public sector of
    contingent fiscal risks in negotiation of PPP
  • Corruption inducing
  • Collusion between donors (seeking export
    promotion favoring industrial interests) and
    politicians seeking graft
  • Prestige projects (politicians donors)-ribbon

What countries have been more successful in
thinking about infrastructural implications of
demographic change?
  • Bombay
  • Bangkok
  • Korea--particularly re decentralization
    urbanization through transportation linkages
  • Shanghai
  • Singapore re elderly issues

  • Mumbai example where 3 local associations
    --SPARC formed an alliance to raise the political
    visibility of issues affecting the poor and to
    promote creative solutions, particularly re land
    tenure, adequate housing, an access to
    electricity, transport, sanitation and related
    services--used precedent setting pilot projects
    to show feasible low cost designs for affordable
    hosing an sanitation
  • Bangkok illustrates regional governance approach
    in which both central and local government play a
    role in the administration of a region
  • Korea better transport links within and outside
    the capital region greatly facilitated
  • Shanghai a city that took steps early to address
    risks associated with sea level rise also CT
    suggests it as example of a large city
    confronting its service and infrastructure
    challenges in an energetic and innovative
    fashion. Central Gov gave city more autonomy in
    revenue collection and expenditure. Also the city
    established a foundation to mobilize funds for
    urban construction (Shanghai Urban construction
    investment and Development Company

  • Shanghai (cont)
  • Company has displayed an impressive record of
    achievement in infrastructure financing since its
    creation. CGT 366 quoting Wu
  • Most spectacular outcome is development of Pudong
    New Area, virtually new district from the old
    commercial center
  • Has employed wide range of financing mechanisms
    through state and non state channels as
    international capital, bank loans and credits,
    construction bonds, stock market and service
    concessions. Entered into concessions with
    profit-making enterprises to operate three
    bridges and a tunnel across Huanpu River
    established subordinate entities in charge of
    water supply.
  • But still severe backlogs on the housing side for
    low income groups, despite impressive delivery or
    urban services and urban infrastructure

Two final questions? Is there a link from
infrastructure to demography? Should it motivate
policy on infrastructure spending?
  • Might the availability of infrastructure
    influence the extent, focus, and direction of
    migration (e.g., Chinas strategy for employment
    creation in eastern regions?)
  • Absence of infrastructure clean water,
    sanitation, medical care infrastructure, and
    transport (to facilitate access to health
    facilities)may increase mortality and morbidity
    rates. Might it delay decline in fertility
    associated with demographic transition?
  • Provision of infrastructure, e.g., facilitating
    girls education (separate toilets), may
    indirectly influence fertility decisions

The cost of infrastructure may influence policies
towards fertility
  • Awareness of cost of infrastructure--and need to
    meet basic needs and provide basic
    infrastructural services---may sensitize policy
    makers to the importance of policies shaping
    demographic situation
  • Failure to limit population growth, resources
    will be preempted by need to respond in terms of
    more infrastructure for schools, etc