Infrastructure is key to economic development and integration into the world economy (ESCAP, 2006; OECD, 2006a; World Bank, 2005).5 Good transportation and telecommunications infrastructure can contribute to an economy’s national and subnational competitiveness6 and to poverty alleviation.
The provision of efficient
and adequate electricity is vital for industrial
development and economic growth, but also for
helping countries attain the MDGs, including
poverty alleviation (IEA, 2003). The provision of
good infrastructure in turn is a major determinant
of inward FDI (Bellak, Leibrecht and Damijan,
2007; Kirkpatrick, Parker and Zhang 2006; Asiedu,
2002).
Because infrastructure is essential for
development, increasing investment in this area of
activities should be a priority for developing countries.
It is not a question of "if" but rather "what", "when",
"how much", "by whom" and "for whom" (section A.2).
At the same time, the questions surrounding
investment by private companies (including TNCs)
in infrastructure activities are more far-reaching than
in most other industries, and touch on the economic,
social and political spheres (chapter IV).
Each infrastructure industry has its own
individual characteristics. Therefore, while the abovementioned
features generally apply to all of them, it
is important to note the distinctive characteristics of
electricity generation, transmission and distribution
(box III.1), fixed line telephony, mobile telephony
and Internet telecommunications (box III.2), seaports,
airports, roads and railways (box III.3) and water and
sewage (box III.4) in the analysis.
Infrastructure, by its very nature, and due to
social and political preferences is frequently subject
to public intervention. Such intervention adds to
the risky nature of infrastructure from a corporate
perspective. Nevertheless, private sector involvement
in infrastructure has increased in recent years.
Indeed, its potential for high returns in the long term is often
sufficiently enticing to companies. Consequently,
in recent years a number of players other than
infrastructure firms have expanded their presence
in infrastructure industries, including private equity
funds.