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