Infrastructure

Last updated

Infrastructure is the fundamental facilities and systems serving a country, city, or other area, [1] including the services and facilities necessary for its economy to function. [2] Infrastructure is composed of public and private physical improvements such as roads, railways, bridges, tunnels, water supply, sewers, electrical grids, and telecommunications (including Internet connectivity and broadband speeds). In general, it has also been defined as "the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions". [3]

Contents

San Francisco Ferry Building at night Ferry Building at night.jpg
San Francisco Ferry Building at night

There are two general types of ways to view infrastructure, hard or soft. Hard infrastructure refers to the physical networks necessary for the functioning of a modern industry. [4] This includes roads, bridges, railways, etc. Soft infrastructure refers to all the institutions that maintain the economic, health, social, and cultural standards of a country. [4] This includes educational programs, official statistics, parks and recreational facilities, law enforcement agencies, and emergency services.

The word infrastructure has been used in French since 1875 and in English since 1887, originally meaning "The installations that form the basis for any operation or system". [5] [6] The word was imported from French, where it was already used for establishing a roadbed of substrate material, required before railroad tracks or constructed pavement could be laid on top of it. The word is a combination of the Latin prefix "infra", meaning "below" as many of these constructions are underground, for example, tunnels, water and gas systems, and railways and the French word "structure" (derived from the Latin word "structure"). The army use of the term achieved currency in the United States after the formation of NATO in the 1940s, and by 1970 was adopted by urban planners in its modern civilian sense. [7]

Classifications

A 1987 US National Research Council panel adopted the term "public works infrastructure", referring to:

"... both specific functional modes – highways, streets, roads, and bridges; mass transit; airports and airways; water supply and water resources; wastewater management; solid-waste treatment and disposal; electric power generation and transmission; telecommunications; and hazardous waste management – and the combined system these modal elements comprise. A comprehension of infrastructure spans not only these public works facilities, but also the operating procedures, management practices, and development policies that interact together with societal demand and the physical world to facilitate the transport of people and goods, provision of water for drinking and a variety of other uses, safe disposal of society's waste products, provision of energy where it is needed, and transmission of information within and between communities." [8]

The American Society of Civil Engineers publishes a "Infrastructure Report Card" which represents the organizations opinion on the condition of various infrastructure every 2–4 years. [9] As of 2017 they grade 16 categories, namely aviation, bridges, dams, drinking water, energy, hazardous waste, inland waterways, levees, parks and recreation, ports, rail, roads, schools, solid waste, transit and wastewater. [9] :4

Personal

A way to embody personal infrastructure is to think of it in term of human capital. [10] Human capital is defined by the Encyclopædia Britannica as “intangible collective resources possessed by individuals and groups within a given population". [11] The goal of personal infrastructure is to determine the quality of the economic agents’ values. This results in three major tasks: the task of economic proxies in the economic process (teachers, unskilled and qualified labor, etc.); the importance of personal infrastructure for an individual (short and long-term consumption of education); and the social relevance of personal infrastructure. [10]

Institutional

Institutional infrastructure branches from the term "economic constitution". According to Gianpiero Torrisi, Institutional infrastructure is the object of economic and legal policy. It compromises the grown and sets norms. [10] It refers to the degree of actual equal treatment of equal economic data and determines the framework within which economic agents may formulate their own economic plans and carry them out in co-operation with others.

Material

Material infrastructure is defined as “those immobile, non-circulating capital goods that essentially contribute to the production of infrastructure goods and services needed to satisfy basic physical and social requirements of economic agents". [10] There are two distinct qualities of material infrastructures: 1) Fulfillment of social needs and 2) Mass production. The first characteristic deals with the basic needs of human life. The second characteristic is the non-availability of infrastructure goods and services. [10]

Economic

According to the business dictionary, economic infrastructure can be defined as "internal facilities of a country that make business activity possible, such as communication, transportation and distribution networks, financial institutions and markets, and energy supply systems". [12] Economic infrastructure support productive activities and events. This includes roads, highways, bridges, airports, cycling infrastructure, water distribution networks, sewer systems, irrigation plants, etc. [10]

Social

Social infrastructure can be broadly defined as the construction and maintenance of facilities that support social services. [13] Social infrastructures are created to increase social comfort and act on economic activity. These being schools, parks and playgrounds, structures for public safety, waste disposal plants, hospitals, sports area, etc. [10]

Core

Core assets provide essential services and have monopolistic characteristics. [14] Investors seeking core infrastructure look for five different characteristics: Income, Low volatility of returns, Diversification, Inflation Protection, and Long-term liability matching. [14] Core Infrastructure incorporates all the main types of infrastructure. For instance; roads, highways, railways, public transportation, water and gas supply, etc.

Basic

Basic infrastructure refers to main railways, roads, canals, harbors and docks, the electromagnetic telegraph, drainage, dikes, and land reclamation. [10] It consist of the more well-known features of infrastructure. The things in the world we come across every day (buildings, roads, docks, etc.).

Complementary

Complementary infrastructure refers to things like light railways, tramways, gas/electricity/water supply, etc. [10] To complement something, means to bring to perfection or complete it. So, complementary infrastructure deals with the little parts of the engineering world the bring more life. The lights on the sidewalks, the landscaping around buildings, the benches for pedestrians to rest, etc.

The term infrastructure may be confused with the following overlapping or related concepts.

Land improvement and land development are general terms that in some contexts may include infrastructure, but in the context of a discussion of infrastructure would refer only to smaller-scale systems or works that are not included in infrastructure, because they are typically limited to a single parcel of land, and are owned and operated by the landowner. For example, an irrigation canal that serves a region or district would be included with infrastructure, but the private irrigation systems on individual land parcels would be considered land improvements, not infrastructure. Service connections to municipal service and public utility networks would also be considered land improvements, not infrastructure. [15] [16]

The term public works includes government-owned and operated infrastructure as well as public buildings, such as schools and court houses. Public works generally refers to physical assets needed to deliver public services. Public services include both infrastructure and services generally provided by government.

Ownership and financing

Infrastructure may be owned and managed by governments or by private companies, such as sole public utility or railway companies. Generally, most roads, major airports and other ports, water distribution systems, and sewage networks are publicly owned, whereas most energy and telecommunications networks are privately owned.[ citation needed ] Publicly owned infrastructure may be paid for from taxes, tolls, or metered user fees, whereas private infrastructure is generally paid for by metered user fees.[ citation needed ] Major investment projects are generally financed by the issuance of long-term bonds.[ citation needed ]

Government-owned and operated infrastructure may be developed and operated in the private sector or in public-private partnerships, in addition to in the public sector. As of 2008 in the United States for example, public spending on infrastructure has varied between 2.3% and 3.6% of GDP since 1950. [17] Many financial institutions invest in infrastructure.

Types

Engineering and construction

Engineers generally limit the term "infrastructure" to describe fixed assets that are in the form of a large network; in other words, hard infrastructure.[ citation needed ] Efforts to devise more generic definitions of infrastructures have typically referred to the network aspects of most of the structures, and to the accumulated value of investments in the networks as assets.[ citation needed ] One such definition from 1998 defined infrastructure as the network of assets "where the system as a whole is intended to be maintained indefinitely at a specified standard of service by the continuing replacement and refurbishment of its components". [18]

Civil defense and economic development

Civil defense planners and developmental economists generally refer to both hard and soft infrastructure, including public services such as schools and hospitals, emergency services such as police and fire fighting, and basic financial services. The notion of infrastructure-based development combining long-term infrastructure investments by government agencies at central and regional levels with public private partnerships has proven popular among economists in Asia (notably Singapore and China), mainland Europe, and Latin America.

Military

Military infrastructure is the buildings and permanent installations necessary for the support of military forces, whether they are stationed in bases, being deployed or engaged in operations. For example, barracks, headquarters, airfields, communications facilities, stores of military equipment, port installations, and maintenance stations. [19]

Communications

Communications infrastructure is the informal and formal channels of communication, political and social networks, or beliefs held by members of particular groups, as well as information technology, software development tools. Still underlying these more conceptual uses is the idea that infrastructure provides organizing structure and support for the system or organization it serves, whether it is a city, a nation, a corporation, or a collection of people with common interests. Examples include IT infrastructure, research infrastructure, terrorist infrastructure, employment infrastructure and tourism infrastructure.[ citation needed ]

In the developing world

According to researchers at the Overseas Development Institute, the lack of infrastructure in many developing countries represents one of the most significant limitations to economic growth and achievement of the Millennium Development Goals (MDGs). Infrastructure investments and maintenance can be very expensive, especially in such areas as landlocked, rural and sparsely populated countries in Africa. It has been argued that infrastructure investments contributed to more than half of Africa's improved growth performance between 1990 and 2005, and increased investment is necessary to maintain growth and tackle poverty. The returns to investment in infrastructure are very significant, with on average thirty to forty percent returns for telecommunications (ICT) investments, over forty percent for electricity generation, and eighty percent for roads. [20]

Regional differences

The demand for infrastructure, both by consumers and by companies is much higher than the amount invested. [20] There are severe constraints on the supply side of the provision of infrastructure in Asia. [21] The infrastructure financing gap between what is invested in Asia-Pacific (around US$48 billion) and what is needed (US$228 billion) is around US$180 billion every year. [20]

In Latin America, three percent of GDP (around US$71 billion) would need to be invested in infrastructure in order to satisfy demand, yet in 2005, for example, only around two percent was invested leaving a financing gap of approximately US$24 billion. [20]

In Africa, in order to reach the seven percent annual growth calculated to be required to meet the MDGs by 2015 would require infrastructure investments of about fifteen percent of GDP, or around US$93 billion a year. In fragile states, over thirty-seven percent of GDP would be required. [20]

Sources of funding

The source of financing varies significantly across sectors. Some sectors are dominated by government spending, others by overseas development aid (ODA), and yet others by private investors. [20] In California, infrastructure financing districts are established by local governments to pay for physical facilities and services within a specified area by using property tax increases. [22] In order to facilitate investment of the private sector in developing countries' infrastructure markets, it is necessary to design risk-allocation mechanisms more carefully, given the higher risks of their markets. [23]

The spending money that comes from the government is less than it used to be. Compared to the global GDP percentages, The United States is tied for second-to-last place, with an average percentage of 2.4%. This means that the government spends less money on repairing old infrastructure and or on infrastructure as a whole. [24]

In Sub-Saharan Africa, governments spend around US$9.4 billion out of a total of US$24.9 billion. In irrigation, governments represent almost all spending. In transport and energy a majority of investment is government spending. In ICT and water supply and sanitation, the private sector represents the majority of capital expenditure. Overall, between them aid, the private sector, and non-OECD financiers exceed government spending. The private sector spending alone equals state capital expenditure, though the majority is focused on ICT infrastructure investments. External financing increased in the 2000s (decade) and in Africa alone external infrastructure investments increased from US$7 billion in 2002 to US$27 billion in 2009. China, in particular, has emerged as an important investor. [20]

See also

Related Research Articles

Public capital is the aggregate body of government-owned assets that are used as a means for productivity. Such assets span a wide range including: large components such as highways, airports, roads, transit systems, and railways; local, municipal components such as public education, public hospitals, police and fire protection, prisons, and courts; and critical components including water and sewer systems, public electric and gas utilities, and telecommunications. Often, public capital is defined as government outlay, in terms of money, and as physical stock, in terms of infrastructure.

Overseas Private Investment Corporation government agency

The Overseas Private Investment Corporation (OPIC) was the United States government's development finance institution until it merged with the Development Credit Authority (DCA) of the United States Agency for International Development to form the U.S. International Development Finance Corporation (DFC). OPIC mobilized private capital to help solve critical development challenges and, in doing so, advanced the foreign policy of the United States and national security objectives.

Public works Broad category of infrastructure projects, financed and constructed by the government

Public works are a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community. They include public buildings, transport infrastructure, public spaces, public services, and other, usually long-term, physical assets and facilities. Though often interchangeable with public infrastructure and public capital, public works does not necessarily carry an economic component, thereby being a broader term.

Financial services economic service provided by the finance industry

Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises. Financial services companies are present in all economically developed geographic locations and tend to cluster in local, national, regional and international financial centers such as London, New York City, and Tokyo.

Public–private partnership government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies

A public–private partnership is a cooperative arrangement between two or more public and private sectors, typically of a long-term nature. It involves an arrangement between a unit of government and a business that brings better services or improves the city's capacity to operate effectively. Public–private partnerships are primarily used for infrastructure provision, such as the building and equipping of schools, hospitals, transport systems, and water and sewerage systems. PPPs have been highly controversial as funding tools, largely over concerns that public return on investment is lower than returns for the private funder. PPPs are closely related to concepts such as privatization and the contracting out of government services. The lack of a shared understanding of what a PPP is makes the process of evaluating whether PPPs have been successful complex. Evidence of PPP performance in terms of value for money and efficiency, for example, is mixed and often unavailable. Common themes of PPPs are the sharing of risk and the development of innovation.

Build–operate–transfer (BOT) or build–own–operate–transfer (BOOT) is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, own, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project.

Government spending Government consumptions, investments, and transfer payments

Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment. These two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product.

Gross fixed capital formation

Gross fixed capital formation (GFCF) is a macroeconomic concept used in official national accounts such as the United Nations System of National Accounts (UNSNA), National Income and Product Accounts (NIPA) and the European System of Accounts (ESA). The concept dates back to the National Bureau of Economic Research (NBER) studies of Simon Kuznets of capital formation in the 1930s, and standard measures for it were adopted in the 1950s. Statistically it measures the value of acquisitions of new or existing fixed assets by the business sector, governments and "pure" households less disposals of fixed assets. GFCF is a component of the expenditure on gross domestic product (GDP), and thus shows something about how much of the new value added in the economy is invested rather than consumed.

Asset management refers to systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets and to intangible assets. Asset management is a systematic process of developing, operating, maintaining, upgrading, and disposing of assets in the most cost-effective manner.

Water supply and sanitation in Indonesia is characterized by poor levels of access and service quality. Over 40 million people lack access to an improved water source and more than 110 million of the country's 240 million population has no access to improved sanitation. Only about 2% of people have access to sewerage in urban areas; this is one of the lowest in the world among middle-income countries. Water pollution is widespread on Bali and Java. Women in Jakarta report spending US$11 per month on boiling water, implying a significant burden for the poor.

The most important difference between non-banking financial companies and banks is that NBFCs don't take demand deposits. A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFI facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment which act as backup facilities should the primary form of intermediation fail."

Conservation Finance is the practice of raising and managing capital to support land, water, and resource conservation. Conservation financing options vary by source from public, private, and nonprofit funders; by type from loans, to grants, to tax incentives, to market mechanisms; and by scale ranging from federal to state, national to local.

Water supply and sanitation in Senegal

Water supply and sanitation in Senegal is characterized by a relatively high level of access compared to the average of Sub-Saharan Africa. One of the interesting features is a public-private partnership (PPP) that has been operating in Senegal since 1996, with Senegalaise des Eaux (SDE), a subsidiary of Saur International, as the private partner. It does not own the water system but manages it on a 10-year lease contract with the Senegalese government. Between 1996 and 2014, water sales doubled to 131 million cubic meters per year and the number of household connections increased by 165% to more than 638,000. According to the World Bank, "the Senegal case is regarded as a model of public-private partnership in sub-Saharan Africa". Another interesting feature is the existence of a national sanitation company in charge of sewerage, wastewater treatment and stormwater drainage, which has been modeled on the example of the national sanitation company of Tunisia and is unique in Sub-Saharan Africa.

Infrastructure asset management

Infrastructure asset management is the integrated, multidisciplinary set of strategies in sustaining public infrastructure assets such as water treatment facilities, sewer lines, roads, utility grids, bridges, and railways. Generally, the process focuses on the later stages of a facility's life cycle, specifically maintenance, rehabilitation, and replacement. Asset management specifically uses software tools to organize and implement these strategies with the fundamental goal to preserve and extend the service life of long-term infrastructure assets which are vital underlying components in maintaining the quality of life in society and efficiency in the economy. In the 21st century, climate change adaptation has become an important part of infrastructure asset management competence.

Water supply and sanitation in Sub-Saharan Africa

Although access to water supply and sanitation in Sub-Saharan Africa has been steadily improving over the past two decades, the region still lags behind all other developing regions. Access to improved water supply has increased from 49% in 1990 to 60% in 2008, while access to improved sanitation has only risen from 28% to 31%. Sub-Saharan Africa is unlikely to meet the Millennium Development Goals of halving the share of the population without access to safe drinking water and sanitation between 1990 and 2015. There are, however, large disparities among Sub-Saharan countries, and between the urban and rural areas.

The public–private partnership is a commercial legal relationship defined by the Government of India in 2011 as "an arrangement between a government / statutory entity / government owned entity on one side and a private sector entity on the other, for the provision of public assets and/or public services, through investments being made and/or management being undertaken by the private sector entity, for a specified period of time, where there is well defined allocation of risk between the private sector and the public entity and the private entity receives performance linked payments that conform to specified and pre-determined performance standards, measurable by the public entity or its representative".

Infrastructure-based economic development, also called infrastructure-driven development, combines key policy characteristics inherited from the Rooseveltian progressivist tradition and Neo-Keynesian economics in the United States, France's Gaullist and Neo-Colbertist centralized economic planning, Scandinavian social democracy as well as Singaporean and Chinese state capitalism: it holds that a substantial proportion of a nation’s resources must be systematically directed towards long term assets such as transportation, energy and social infrastructure in the name of long term economic efficiency and social equity.

Hard infrastructure

Hard infrastructure is the physical infrastructure of roads, bridges etc., as opposed to the soft infrastructure of human capital and the institutions that cultivate infrastructure. This article delineates both the fixed assets, and the control systems, software required to operate, manage and monitor the systems, as well as any accessory buildings, plants, or vehicles that are an essential part of the system. Also included are fleets of vehicles operating according to schedules such as public transit buses and garbage collection, as well as basic energy or communications facilities that are not usually part of a physical network, such as oil refineries, radio, and television broadcasting facilities.

This article delineates the relationship between infrastructure and various economic issues.

Infrastructure Concession Regulatory Commission (ICRC)

The Infrastructure Concession Regulatory Commission (ICRC) is an agency of the Federal Government of Nigeria responsible for the development and implementation of Public Private Partnership (PPP) framework for the provision of infrastructure services.

References

  1. . Infrastructure | Define Infrastructure at Dictionary.com
  2. O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, NJ: Pearson Prentice Hall. p. 474. ISBN   978-0-13-063085-8.
  3. Fulmer, Jeffrey (2009). "What in the world is infrastructure?". PEI Infrastructure Investor (July/August): 30–32.
  4. 1 2 Hamutak, Luta. "Civil Society Comments on Infrastructure Strategic Sector" (PDF).
  5. Online Etymology Dictionary. Douglas Harper, Historian. http://dictionary.reference.com/browse/infrastructure (accessed: April 24, 2008)
  6. "Soft Infrastructure – Definition". Archived from the original on 2011-07-23. Retrieved 2015-03-21.
  7. Stephen Lewis The Ecology of Infrastructure and the Infrastructure of the Internet, blog Hag Pak Sak, posted September 22, 2008.
  8. Infrastructure for the 21st Century, Washington, D.C.: National Academy Press, 1987.
  9. 1 2 2017 Infrastructure Report, 112pp, American Society of Civil Engineers, 2017
  10. 1 2 3 4 5 6 7 8 9 Torrisi, Gianpiero (January 2009). "Public infrastructure: definition, classification and measurement issues" (PDF).
  11. "Human capital | economics". Encyclopedia Britannica. Retrieved 2018-04-25.
  12. "What is economic infrastructure? definition and meaning". BusinessDictionary.com. Retrieved 2018-04-25.
  13. Cohen, Gershon (20 July 2017). "What is social infrastructure?". Aberdeen Standard Investments.
  14. 1 2 Pease, Bob (October 28, 2014). "Infrastructure Investment Opportunities for Public Safety Plans" (PDF).
  15. Land improvement, Online BusinessDictionary.com, http://www.businessdictionary.com/definition/land-development.html (accessed January 31, 2009)
  16. Land development, Online BusinessDictionary.com, http://www.businessdictionary.com/definition/land-development.html (accessed January 31, 2009)
  17. The New York Times, "Money for Public Projects", November 19, 2008 (accessed January 26, 2009)
  18. Association of Local Government Engineers New Zealand: "Infrastructure Asset Management Manual", June 1998. Edition 1.1
  19. D.O.D. Dictionary of Military and Associated Terms, 2001 (rev. 2005)
  20. 1 2 3 4 5 6 7 Christian K.M. Kingombe 2011. Mapping the new infrastructure financing landscape. London: Overseas Development Institute
  21. Peter McCawley (2010), 'Infrastructure Policy in Developing countries' Archived 2015-10-17 at the Wayback Machine , Asian-Pacific Economic Literature, 24(1), May. See also Asian-Pacific Economic Literature Policy Brief No 19, May 2010, on 'Infrastructure policy in developing countries in Asia' [ permanent dead link ].
  22. Barclay, Cecily; Gray, Matthew (2016). California Land Use and Planning Law (35 ed.). California: Solano Press. p. 585. ISBN   978-1-938166-11-2.
  23. Koh, Jae Myong (2018) Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects, Palgrave Macmillan.
  24. "Large economic gains can come from mundane improvements in policy". The Economist. Retrieved 2018-10-25.

Bibliography