In this document you will get to know how the growth of the economy depends on effective infrastructure

1. Dr Geoffrey Clements
Chairman, Commonwealth Infrastructure Partners
2019
The interdependence of economy
and infrastructure

2. The interdependence of economy and infrastructure
Economy & infrastructure – reciprocal engines
for growth
• Countries with an underdeveloped economy
• And poor infrastructure
• Are faced with a dual, related challenge
• The growth of the economy depends on effective infrastructure
• Effective infrastructure can be created only when the economy is
thriving

3. The interdependence of economy and infrastructure

4. The interdependence of economy and infrastructure
The infrastructure/economy relationship is
crucial for all nations
• Developed economies
• Emerging economies
• Underdeveloped nations

5. The interdependence of economy and infrastructure
Categories of infrastructure
Infrastructure
Economic Social

6. The interdependence of economy and infrastructure
Economic infrastructure
• Energy
• Transport
• Communications
• Irrigation
• Agriculture
• Construction
• Industry
• Finance sector
• Etc.

7. The interdependence of economy and infrastructure

8. The interdependence of economy and infrastructure
Social infrastructure
• Education
• Healthcare
• Social welfare
• Legal system
• Etc.

9. The interdependence of economy and infrastructure
Developed economies
Governments of developed economies must ensure that
• There is continued investment
o To maintain infrastructure
o To modernise infrastructure
When infrastructure begins to crumble
• It is difficult to restore
• The economy suffers

10. The interdependence of economy and infrastructure
Developed economies – case studies
• USA
• Infrastructure was neglected in the USA
• This has led to significant social & economic challenges
oUrban infrastructure
oRoad and rail transport
oManufacturing
• Are amongst sectors that have suffered

11. The interdependence of economy and infrastructure
The virtuous circle of economic growth
• Western Europe
• Most western European countries have focused more
oon infrastructure maintenance and modernisation
• Although there is some variation
• The countries that have been more consistent in maintaining
infrastructure
oExperience fewer challenges
• E.g. Germany, Scandinavia, the Netherlands

12. The interdependence of economy and infrastructure
Emerging economies
• Emerging economies have discovered a catalyst for growth
• This may be
o Exploiting natural resources
o Developing a unique industry or human resource, e.g.
service industry sectors
tourism
• A “virtuous circle” then develops:
o Revenues boost the economy
o The economy finances infrastructure development
o Better infrastructure assists further economic growth

13. The interdependence of economy and infrastructure
The virtuous circle of
economic growth
Key
sectors
thrive
Economy
grows
Increased
infrastructure
finance

14. The interdependence of economy and infrastructure
Emerging economies – further factors
• The economy and infrastructure can be further boosted by
o International investment
o Foreign companies
o Export revenues
• At some stage, growth is self-sustaining
• The nation can be redefined as a developed economy

15. The interdependence of economy and infrastructure
Underdeveloped nations
• Underdeveloped countries face the biggest challenges
• The economy is too weak to fund infrastructure development
o Or the growth of new business or industry
• Education is often inadequate to provide the human resources
o For economic growth
o Or new infrastructure

16. The interdependence of economy and infrastructure
International aid for less-developed nations
• These nations often depend on international aid
• Which creates the risk of dependence
o Economic (e.g. foreign companies dominate)
o Financial
o Political

17. The interdependence of economy and infrastructure
Economy and infrastructure – Case study India
Pre-economic liberalisation
• During the pre-economic liberalisation era
o Economic growth
o And infrastructure development
• Were severely challenged
• Government and private sector resources were limited
• There were few incentives for growth
• International investors and partners were reluctant to be involved
• This vicious circle was difficult to break

18. The interdependence of economy and infrastructure
Case study India
Post-economic liberalisation
• The virtuous circle of economic growth and infrastructure development
o Has been displayed, with
Consistency
Strength
• There is now a reliable pattern of growth
• Government and the private sector have confidence
o To invest in business growth
o And infrastructure development

19. The interdependence of economy and infrastructure
Innovative solutions
Severe infrastructure challenges have seen innovative solutions
• Telecoms
o The old landline infrastructure has been overtaken
o By a mobile network covering the whole country
• Transport
o Air travel for business is affordable and plentiful
o Overcoming the limitations in road and rail transport
• The media
o The population have access to multiple sources of news and information
o Through:
Satellite and cable TV
Online news and media

20. The interdependence of economy and infrastructure
Leapfrogging challenges to create solutions
• In these examples and others
• Innovative solutions
oHave bypassed the earlier problems
oAnd created solutions from challenges
• The earlier deficiencies in infrastructure
oNo longer create obstacles to progress

21. The interdependence of economy and infrastructure
The outcomes
• The upper tiers of the Indian economy and society
onow function as a developed country
oand in fact have more opportunities
• The lower tiers of the urban economy
• And the rural economy
• Require substantial development
• Full economic and social progress
o Will only be experienced
o When there is integrated progress amongst all these levels

22. The interdependence of economy and infrastructure
Social infrastructure and economic growth
• The development of social infrastructure
o Including education & healthcare
• Is vital in the overall economic development
o And in the development of a healthy quality of life index for
the nation

23. The interdependence of economy and infrastructure
Case studies of economic & social integration
• Corporate Social Responsibility (CSR) aims to create social benefit
ofrom successful economic activity
• The Companies Act of 2013 made Corporate Social Responsibility
mandatory
o For companies with revenues > 10 bn INR (USD 150m)
o Must give 2% of their profit to charitable causes
• India was the first country to make CSR compulsory

24. The interdependence of economy and infrastructure
The history of CSR in India
• In fact, CSR had been practised for over a century in India
oBy companies including
Tata
Godrej
• Apart from the philanthropic motives
• They realised that a happy, healthy and educated community
oLeads to a productive workforce

25. The interdependence of economy and infrastructure
Integrated growth
• The integrated growth of
o Infrastructure
o Economic prosperity
o An educated population
o Social cohesion & good health
• Is the basis for sustainable national development

26. The interdependence of economy and infrastructure
© 2019, Commonwealth Infrastructure Partners
Thank you
geoffrey.clements@commip.org
www.commip.org