| In the past, if you mentioned the word "infrastructure", | | | | infrastructure in all the aforementioned categories. That |
| the verbal reflex would be: "physical". Infrastructure | | | | this is a tautology, no one seems to notice. If the |
| was roads, telephone lines, ports, airports and other | | | | infrastructure is already developed - an investment is |
| very tangible country spanning things. Many things | | | | not needed. When it is needed, the private sector will |
| were added to this category as time went by, but | | | | not supply it, unless it is already developed. The result is |
| they all preserved the tangibility requirements - even | | | | that proper investments of the private sector - not |
| electricity and means of communication were | | | | subsidized, not partial, not correlated by international |
| measured by their physical manifestations: lines, poles, | | | | funding - is limited to the developed, industrial |
| distances.Today, we distinguish three additional | | | | world.Research discovered four disadvantages of |
| categories of infrastructure which were unbeknownst | | | | countries with under-developed infrastructure:Such |
| to our forefathers:Social infrastructure - laws, social | | | | countries suffer from interminable bottlenecks in all the |
| institutions and agencies, social stratification, | | | | levels of economic activity, especially in the production |
| demographic elements and other social structures, | | | | phase and in the transportation of raw materials to the |
| formal and informal.It is amazing to think that previously | | | | factories and of finished products from them to the |
| no one thought of the legal codex as infrastructure. It | | | | marketplace.This adversely affects the availability of |
| has all the hallmarks of infrastructure: it spans all the | | | | the domestic product both in the domestic and in the |
| country, it dynamically develops on the basis of a | | | | foreign markets. Agricultural produce is most affected |
| previous strata, without it no goal oriented human | | | | but, to a lesser extent, so are industrial goods. If the |
| activity (such as the conduct of business) is possible. A | | | | infrastructural problem is with lines of communication, |
| foreign investors is more interested in the answer to | | | | the service sector is harmed and cannot provide its |
| the question whether his property rights are protected | | | | products (the services) to its customers.A second |
| under the law - than in the availability and accessibility | | | | issue is the distortion of the price mechanism. Prices |
| of electricity lines.He can always buy a generator and | | | | are heightened due to the resources wasted on trying |
| produce his own electricity - but he can never enact | | | | to overcome problems in infrastructure. Prices are |
| his own laws unilaterally. A local citizen is bound to | | | | supposed to reflect inputs and values and thus to |
| encounter the law (or resort to it) sometime in his life - | | | | assist the markets to optimally allocate its resources. If |
| even if he never travels a road or uses a | | | | the prices reflect other, unrelated, issues - then they |
| telephone.The second category of infrastructure is the | | | | are distorted and they distort the economic activity.The |
| human infrastructure. What is the mentality of the | | | | third problem is that a disadvantage of a country - is |
| people? Are they lazy, industrious, submissive, used to | | | | an advantage to its competitors, rivals, neighbours and |
| improvise, work in groups, individuals, rebellious, inventive | | | | enemies. Other countries, with better infrastructure |
| or stifled and so on? Are they conservative, open to | | | | benefit : they attract more foreign investment, they |
| the world, xenophobic, ethnically radicalized, likely to use | | | | conduct more business, they export more, they have |
| brute force to settle disputes? Are they ignorant, | | | | lower inflation (cheaper prices) and their economy is |
| educated, technologically oriented, consume information | | | | not distorted by irrelevant, ulterior, non business |
| or reject it, trustful and trustworthy or suspicious and | | | | considerations.The fourth - and maybe largest and |
| resentful?An educated workforce is as much an | | | | longest term - handicap is when the country's image is |
| infrastructure as any phone line.The last category of | | | | affected. Infrastructure is much easier to fix than a |
| infrastructure is the information infrastructure. It is all the | | | | country's image. If the country acquires a reputation of |
| infrastructure which tackles the manipulation of | | | | a mere transit area, an underdeveloped, inefficient, non |
| symbols of all kinds : the accumulation of data, it | | | | productive, hopeless case - it will suffer greatly until this |
| processing and its dissemination. Words are symbols - | | | | is amended. This - the image - has the gravest |
| but so is money and computer bytes. So banks, | | | | possible consequences: repelled investors, reluctant |
| computers, Internet linkups, WANs and LANs (Wide | | | | financiers, frightened bankers, disgusted foreign |
| and local area computer networks), standardized | | | | investors. All this amounts to an ex communication of |
| accounting, other standards for gods and services - all | | | | the country.There are eight known solution to the |
| these are examples of the information | | | | problems of a country with underdeveloped |
| infrastructure.The development of all these | | | | infrastructure:It can start by privatizing its infrastructure |
| infrastructures is intimately linked. They usually develop | | | | (commencing with its energy and telecommunications |
| almost concurrently. They form feedback loops. The | | | | sectors, which are the most attractive to foreign and |
| slow or hindered development of one of them will | | | | domestic private investors alike).Then, it can allow the |
| disturb all the others.This is really quite easy to | | | | business sector to operate parts of the national |
| understand. If the workforce is not educated, it will not | | | | infrastructure. The usual arrangement is that the |
| be keen on the manipulation of data and symbols. It will | | | | business sector invests in creating the infrastructure |
| buy less computers, use the Internet less, bank less | | | | and then collects a fee for operating and maintaining it. |
| and so on. This, in turn, will reduce the need for phone | | | | The fees collected are large enough to cover both the |
| lines, office buildings and so on. There seems to be an | | | | investment and the maintenance costs. The most |
| "infrastructure multiplier".This multiplier is a two way | | | | famous example are toll roads which are constructed |
| street: an increase or decrease in each type of | | | | by private sector firms.Another way is to |
| infrastructure adversely or positively influences the | | | | commercialize the infrastructure (to collect fees for |
| others.The West is in dire need of infrastructure itself. | | | | using the telephony network, or highways) and to |
| Its infrastructure is either old and crumbling - or | | | | ploughback the proceeds exclusively into projects of |
| overloaded and crumbling. Roads in large parts of the | | | | infrastructure. Thus, all the income generated by cars |
| USA are in poorer condition than roads in many | | | | passing in a highway will be dedicated to the |
| countries in Africa. America-On-Line, a major Internet | | | | construction of additional highways and not be |
| provider was unable to provide services to its | | | | funnelled to the general budget.The fourth method is to |
| customers in the last few weeks because | | | | adapt the prices of using the infrastructure to the real |
| communication lines in the USA were totally blocked. | | | | costs of constructing and of operating it. In most |
| Certain places in Israel could receive television signals | | | | developing countries, consumers pay only a fraction of |
| only in the last few years, as infrastructure reached | | | | these real costs. Prices are heavily subsidized and the |
| them. Infrastructure is a universal problem.No surprise | | | | infrastructure is left to decay and rot away. This, |
| that the West invests in the infrastructure in developing | | | | obviously, is a political decision to be taken by the |
| countries in two venues only:Through international | | | | political echelons. In many countries it could create |
| finance organizations (such as the World Bank and the | | | | social unrest and have severe political ramifications.The |
| European Bank for Reconstruction and Development). | | | | country could condition investments in multilateral |
| The terms and conditions of this kind of financing are | | | | infrastructure projects upon investments in its own, |
| very lenient. Those are really grants more than | | | | local infrastructure. A multinational firm wishing to invest |
| credits.The implementation of these infrastructural | | | | in a highway (thus reaping considerable cash rewards) |
| projects is awarded to contractors through | | | | - should invest a portion of the future profits in local |
| international tenders, wherein bids are submitted from | | | | roads and other forms of infrastructure. A multinational |
| the world over.Rarely, a local firm outbids its better | | | | fund which is interested to invest in a |
| financed, better equipped and better motivated first | | | | telecommunications project connecting three countries, |
| world rivals. Local firms usually have the lower | | | | must oblige itself to a "local investment" clause, a "local |
| hand.The other possibility is that multinational firms get | | | | content purchase" clause or an "offset" (the purchase |
| involved. But this kind of financing comes with a lot of | | | | of local goods against any import of goods connected |
| strings attached. The multinationals expect to get back | | | | to the project to the country) clause.The country must |
| both their investment and a reasonable return on it. | | | | open its markets to domestic and foreign competition |
| They come heavily subsidized by the governments of | | | | by de-regulating itself. It must dismantle trade barriers : |
| their countries. Their contribution to the local economy, | | | | tariffs, quotas, restrictions, anti-investment regulations, |
| during the construction of the infrastructure, is fleeting, | | | | restrictive standardization and so on. Competition will |
| at best. They prefer to employ their own crews and | | | | both lower the costs of the infrastructure and improve |
| equipment. They do not trust the locals too much or | | | | its quality, as rival firms will strive to supply more value |
| too often.But whichever way the infrastructure is | | | | at less price.An important condition is that the country |
| created, problems arise to the host country.International, | | | | does not promote one kind of infrastructure over |
| multilateral, finance organizations inevitably think on a | | | | another. All categories of infrastructure should be |
| global scale.They invest in infrastructure only if and | | | | simultaneously and similarly stimulated. This will carry |
| when it services - or has the potential to service in the | | | | favour with the international business community and is |
| larger scheme of things - a cluster of neighbouring | | | | bound to alter the image of the country for the better. |
| countries.Clear benefits to regional groupings of | | | | It will also create a positive feedback loop whereby an |
| countries has to be unequivocally demonstrated. Such | | | | improvement in one category of infrastructure will yield |
| finance organizations will forever prefer to invest in a | | | | improvements in all the others.Last - but far from being |
| cross-border highway. They will neglect, overlook, or | | | | least - the country must promote international |
| outrightly reject an investment in a much needed local | | | | agreements which will facilitate reductions in the costs |
| road, for instance. The benefit to the domestic | | | | of cross-boundary transport of goods, services and |
| economy of the local road could be appreciatively | | | | information, packaged no matter in which form. Less |
| more sizeable. Still, the international fund would | | | | documentation, less one sided fees, less bureaucracy - |
| encourage the cross border highway. This is its charter | | | | will reduce the costs of businesses and the total |
| - to promote multilateral investments - and this is what | | | | damage to the national economy. The less |
| it does best. The interests of the host country are a | | | | encumbered by red tape - the more a country tends |
| secondary consideration.On the other hand, the private | | | | to prosper. |
| sector invests only in countries with well developed | | | | |