&DPw /7/ Public Disclosure Authorized 1 71 1z1 World Bank Discussion Papers Issues for Public Disclosure Authorized Infrastructure Management in the 1990s Public Disclosure Authorized Arturo Israel Public Disclosure Authorized Recent World Bank Discussion Papers No. 112 StrengtheningProtection of IntelleaualProperty in DevelopingCountries: A Surveyof the Literature.Wolfgang Siebeck, editor,with Robert E. Evenson,William Lesser, and CaslosA. Primo Braga No. 113 World Bank Lending for Small and Medium Enterprises. Leila Webster No. 114 UsingKnowledgefrom Social Science in DevelopmentProjects. Michael M. Cemea No. 115 DesigningMajor Policy Reforn: Lessonsfromthe TransportSector. Ian G. Heggie No. 116 Women's Work, Education,and Family We!farein Peru.Barbara K. Herz and Shahidur R. Khandker, editors No. 117 DevelopingFinancial Institutionsfor the Poorand ReducingBarriers to AccessforWomen. Sharon L. Holt and Helena Ribe No. 118 Improvingthe Pe!formanceof Soviet Enterprises.John Nellis No. 119 PublicEnterprise Reform: Lessonsfrom the Past and Issuesforthe Future.Ahmed Galal No. 120 The InformationTechnology Revolution and EconomicDevelopment. Nagy K. Hanna No. 121 PromotingRural Cooperativesin DevelopingCountries: The Case of Sub-SaharanAfrica. Avishay Braverman, J. Luis Guasch, Monika Huppi, and Lorenz Pohlrneier No. 122 Pe!formanceEvaluationfor Public Enterprises. Leroy P. Jones No. 123 UrbanHousing Reform in China: An EconomicAnalysis. George S. Tolley No. 124 The New FiscalFederalism in Brazil. Anwar Shah No. 125 HousingReform in SocialistEconomies. Bertrand Renaud No. 126 AgriculturalTechnology in Sub-SaharanAfrica: A Workshopon ResearchIssues. Suzanne Gnaegy andJock R. Anderson, editors No. 127 UsingIndigenous Knowledge in AgriculturalDevelopment. D. Michael Warren No. 128 Researchon Irigation and DrainageTechnologies: Fifteen Years of WorldBank Experience.Raed Safadi and Herve Plusquellec No. 129 Rent Controlin DevelopingCountries. Stephen Malpezzi and Gwendolyn Ball No. 130 Patters of DirectForeign Investment in China. Zafar Shah Khan No. 131 A New View ofEconomicGrowth: Four Lectures. Maurice FG. Scott No. 132 Adjusting EducationalPolicies: Conserving Resources While RaisingSchool Quality. Bruce Fuller and Akhliu Habte, editors No. 133 Letting GirlsLeam: PromisingApproaches in Primaryand SecondaryEducation. Barbara Herz, K. Subbarao, Masooma Habib, and Laura Raney No. 134 ForestEconomics and PolicyAnalysis: An Overview.William F. Hyde and David H. Newman, with a contribution by Roger A. Sedjo No. 135 A StrategyforFisheries Development. Eduardo Loayza, in collaboration with Lucian M. Sprague No. 136 StrengtheningPublic Service Accountability: A ConceptualFramework. Samuel Paul No. 137 DeferredCost Recoveryfor Higher Education: Student Loan Programsin DevelopingCountries. Douglas Albrecht and Adrian Zidermnan No. 138 Coal Pricingin China: Issuesand ReformStrategy. Yves Albouy No. 139 PortfolioPerformance of SelectedSocial Security Institutes in LatinAmerica. Carmelo Mesa-Lago (Continued on the inside back cover.) 1 71~u World Baik Discussion Papers Issues for Infrastructure Management in the 1990s Arturo Israel The World Bank Washington, D.C. Copyright C 1992 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing August 1992 Second printing February 1994 Discussion Papers present results of country analysisor research that are circulated to encourage discussion and comment within the development community. 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The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabeticaltitle list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is availablefree of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'1ena, 75116 Paris, France. ISSN: 0259-210X Arturo Israel is seriior adviser in the World Bank's Infrastructure and Urban Development Department.. Library of Congress Cataloging-in-Publication Data Israel, Arturo. Issues for infrastructure management in the 1990s / Arturo Israel. p. cm.-(World Bank discussionpapers; 171) Includes bibliographical references. ISBN 0-8213-2193-5 1. Infrastructure (Economnics)-Developing countries. I. Tide. II. Series. HC59.72.C3187 1992 363'.09172'4-dc2O 92-24118 CIP - iii - Foreword Infrastructure- broadlydefined as electricpower, irrigation,transport, teleconications, water supply, and sanitation- will play a key role in facilitatingthe resumptionand acceleration of growth in developingcountries. Well-performing infrastructure services are crucial for enabling countriesto participatein and benefitfrom such developmentsas the globalizadonof trade. They are equallyimportant to effectiveimpl6mentation of povertyreducdon programs. The closelinks between infrastructureservices and the environmentare also well recognized. Expectationsabout the role of infrastructurein developmenthave changedover dme. While infrastructure'simportance to developmenthas long been understood,its impacthas been blunted by other constraintsthat blocked or deflectedits effects throughoutthe economy. Over the last decade,policy reform, especially in the contextof structuraladjustment, has broughtmany countries to the point where they are now able to use the resourcesdevoted to infrastructureservices more effectivelyfor development. The studyanalyzes a nmber of issuesthat are commonto all infrastructuresectors. Some, such as the reliabilityof infrastructureservices, emerge from the need to adaptthose servicesto the stricter requirementsof an open economyand to improvetheir performance.But most of the issues emergefrom exploringthe specificimplications for infrastructureof the changingrole of the private sectorand competitivemarkets in the provisionand regulationof infrastructureservices. A dominant theme arising fromthis analysisis the need to reorientthinking about infrastructureaway from the traditional emphasison supply and toward demand considerationsand the quantitativebut also qualitativeneeds of users, clients, and beneficiaries. The studysummarizes much of the backgroundwork undertakenfor a sectoralpolicy review of infrastructure.It makes several operationalrecommendation and proposesresearch priorities. Follow up work to this study constitutesan importantcomponent of the Deparment's researchand policy activities. V. (LN' Louis Y. Pouliquen Director Inrastuctu and UrbanDevelopment Department - iv - Acknowledgements A numberof Bank staffand consultantscontributed to the preparationof this report. In particular,Hans Adler contributedsignificantly to the preparationof the chapterson the statusof infrastructureand reliability;Frannie Humplick(MMI) conducted the major backgroundwork on reliability;Elliott Berg and AnnMcDermott are the principalauthors of the chapteron privatesector fmancing;Richard Moore (AmericanUniversity) contributed to the analysisof institutionalissues; Alan Krupnickand WinstonHarington (Resourcesfor the Future)advised on environmentalissues and WilliamFox (Universityof Tennessee)on economicaspects; Jennie Wishart (from the Hiclding Corporation)helped prepare the statisticalbasis for the analysisof the conditionof infrastructure; and BavaniKrishnamurthi conducted research in severalareas. The paper has also benefitedfrom the commentsof a large numberof Bank staff and outsiders,of whichwe wish to highlightWarren Baum,Philip Blackshaw, Ralph Gakenheimer (MIT), AliceGalenson, Jeffrey Gutman, Ian Heggie, Rita Hilton, ChristineKessides, Ayse Kudat, Louis Pouliquen,Louis