The provision of good quality infrastructure services is a prerequisite for economic and social development. In terms of both the quantity and quality of key infrastructure services and utilities, such as electricity, telecommunications, transport and water supply, there are significant gaps between developing and developed countries and among developing countries at different stages of development.
Indeed, in developing countries, insufficient provision
of infrastructure and related services is one
of the main obstacles to accelerating or
maintaining the pace of development and
to achieving the Millennium Development
Goals (MDGs) set by the United Nations in
2000. One way of addressing the shortfalls
in infrastructure and related services in
developing countries is to mobilize FDI
and other forms of TNC participation to
supplement and complement the activities
of domestic public and private infrastructure
enterprises.
This chapter examines the involvement
of TNCs in the establishment and
operation of infrastructure facilities and
related services, especially in developing
countries. It begins with a review of
developments in infrastructure industries,
examining their distinctive features and the
scale and scope of infrastructure investment
and operations worldwide.
Section A analyses various factors that influence FDI
and TNC activity, including the impact of
globalization and technological changes, the
changing role of the State, the prevalence of
investment gaps and the rise of new players
to help bridge these gaps. Section B identifies
trends in FDI and other types of TNC
involvement in infrastructure industries,
especially in developing countries. Section
C reviews the main TNC players involved,
and section D discusses the determinants of
TNC investment and activities.
A. Main features of infrastructure industries and emerging issues.
1. Characteristics of infrastructure industries.
There is no commonly agreed
usage of the term infrastructure, but the
concept, in its broadest sense, comprises
the physical facilities, institutions and
organizational structures, or the social and
economic foundations, for the operation of
a society. Within this broad concept, social
infrastructure (e.g. health and education)
can be distinguished from economic
infrastructure.
The latter directly supports
production activities of enterprises at
various points of the value chain, and is
thus directly relevant to the competitiveness
of firms and to economic development.
WIR08 focuses on economic infrastructure,
which is a homogeneous group in the sense
that it underpins the functioning of other
economic activities, and is hence directly
relevant to the competitiveness of firms and
to economic development.
Infrastructure consists of a group of industries, including
electricity, gas, telecommunications, water
and sewage, airports, roads, railways and
seaports (the last four collectively referred to as
transport infrastructure).3 Nevertheless, the definition
is fluid, especially with the advent of advanced
information and communication technologies (ICT)
that have affected the nature of telecommunications
facilities and services.
The activities of the infrastructure industries
can be considered as including the establishment,
operation and maintenance of fixed infrastructure.
This report focuses on the infrastructure industries
themselves, as presented in table III. (listing different
categories based on Standard Industrial Classification
(SIC) codes), which include both "infrastructure
facility operation and maintenance" (e.g. power
stations) and "infrastructure services" (e.g. electricity
distribution services).
It distinguishes between the
infrastructure industries per se ("infrastructure") and
broader, related activities, which include services
directly relying on the provision of infrastructure
(table III.). For example, airports and seaports -
and the services they provide to vehicle and aircraft
operators - are included as infrastructure, but not the
actual air transport or shipping activities that utilize
these infrastructure facilities and services.