Domestic resource mobilization. Infrastructure
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The document discusses infrastructure patterns in emerging markets, highlighting significant gaps in Latin America compared to Asia and emerging Europe. It emphasizes the importance of better institutions and improved regulatory frameworks for addressing these gaps in transport, energy, and telecommunications. The analysis shows correlations between lower public debt ratios, better quality of bureaucracy, and reduced infrastructure deficits.
Domestic resource mobilization. Infrastructure
- 1. Domestic resource mobilization. Infrastructure Setting the scene: Infrastructure patterns in emerging markets Christian Daude and Ángel Melguizo Americas Desk OECD Development Centre Development Finance Network (DeFiNe) Annual Meeting Paris, 10-12 October 2010
- 2. Main messages • Infrastructures are key for potential growth, development and stabilization policies (e.g. G20 agenda) Growth and inequality gaps Asia-Latin America explained by infrastructure gaps – less spending, lower quality (Calderón and Servén, 2004b) • Emerging economies: significant infrastructure gaps • Latin America lags behind Asia and emerging Europe • Significant differences across infrastructure types (basic, transport, energy and telecommunications) and countries • Fundamentals-observed levels (Balmaseda, Daude, Melguizo and Taft, 2010) • Policy response • Building better institutions (quality of bureaucracy, fiscal position) • Improving regulation (in particular around public-private financing) 2
- 3. Setting priorities: infrastructure levels Per capita telephone lines and Kilowatts pc and Urbanization Income level, 2007 rate, 2006 14 10 9 Developed 13 8 Developed Eastern Europe Log lines/pop Log Kws/pop 7 Eastern Europe 12 Asia LatAm LatAm 6 Asia 5 11 4 10 3 0 1 2 3 4 5 20 40 60 80 100 120 Log GDP pc Urbanization ratio Source: Balmaseda et al. (2010) Source: Balmaseda et al. (2010) Income and population matter – but so do demographic (age profile), social (urbanization) and economic (sector mix) variables. 3
- 4. Empirical model (Balmaseda et al., 2010) Explanatory variables - Per capita income (level and squared) - Socio- demographics (urbanization, density) Predicted infrastructure - Productive structure patterns (Km/area, KW pc, (services and industry vs. pc lines) agriculture) ‘Degree of achievement’ (Observed levels/ Patterns) Observed levels (Km/area, KW pc, pc lines) Predicted infrastructure patterns (for country i, in time t) can be compared to actual levels, to estimate gaps and identify priorities. 4
- 5. Results (observed vs. predicted): Priorities Observed / Predicted (%) Paved roads Electricity Capacity Generation 280% 160% Eastern Europe Eastern Europe 240% 140% 120% 200% 100% 160% 80% LatAm MAX-MIN LatAm 120% Asia 60% 80% Asia 40% 40% LatAm MAX-min LatAm 20% 0% 0% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Source: Balmaseda et al. (2010) Source: Balmaseda et al. (2010) Asian and Lat. Am. challenges concentrated in Transport and Energy infrastructure. In LAC, even the regional leader is below predicted levels. 5
- 6. Results (observed vs. predicted): Priorities Observed / Predicted (%) Telephone lines Access to improved water 450% 150% 400% 350% 130% 300% LatAm MAX-min LatAm 250% LatAm MAX-min 110% 200% LatAm 150% Eastern Europe Eastern Europe 90% 100% 50% Asia Asia 70% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: Balmaseda et al. (2010) Source: Balmaseda et al. (2010) The situation in telecommunication and basic infrastructure is more balanced. Some good practices may stem from LAC. 6
- 7. Results (gaps and fiscal balances): Domestic financing Railways Electricity 6 6 4 4 e( ecg | X ) 2 2 0 0 -2 -2 -.5 0 .5 1 1.5 -.5 0 .5 1 1.5 e( debtgdp | X ) e( debtgdp | X ) coef = -.52702326, (robust) se = .18359908, t = -2.87 coef = -.70912416, (robust) se = .09684161, t = -7.32 Source: Balmaseda et al. (2010) Source: Balmaseda et al. (2010) Lower public debt ratios are correlated with lower infrastructure gaps • Fiscal consolidation have been traditionally based on investment cuts (Calderón and Serven, 2004a, Martner and Tromben, 2005 for LAC) • Public borrowing costs reflect (perceptions of) debt sustainability 7
- 8. Results (gaps and bureaucracy): Public administration Paved roads Electricity 4 6 4 2 e( ecg | X ) 2 0 0 -2 -2 -3 -2 -1 0 1 -3 -2 -1 0 1 e( bqual | X ) e( bqual | X ) coef = .45977591, (robust) se = .03161675, t = 14.54 coef = .57518505, (robust) se = .03843958, t = 14.96 Source: Balmaseda et al. (2010) Source: Balmaseda et al. (2010) Better institutions (quality of bureaucracy) are correlated with lower infrastructure gaps • Need to have domestic resources and management capacity • Governance, control of corruption, adequate regulation 8
- 9. Domestic resource mobilization. Infrastructure Setting the scene: Infrastructure patterns in emerging markets Christian Daude and Ángel Melguizo Americas Desk OECD Development Centre www.oecd.org/dev/americas Development Finance Network (DeFiNe) Annual Meeting Paris, 10-12 October 2010