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Better Infrastructure Brings Africa Economic Growth

         Date: 2012-05-25

           Tag: Africa Economic, Africa Economic growth

Summary: As developing countries aim to boost economic growth, infrastructure investment plays an important role in stimulating commerce, according to business experts.

As developing countries aim to boost economic growth, infrastructure investment plays an important role in stimulating commerce, according to business experts.

"In completely underdeveloped countries, infrastructure investments have enormously important returns over time," said Martin Wachs, professor emeritus of transportation planning and policy at the University of California, Berkeley, and senior principal researcher at the Rand Corporation.

"Those of us who study infrastructure see the returns coming from longer-term reductions in the cost of doing business and of traversing space."

In modern-day areas of the world marked by unpaved roads, no electrical grid, limited sewage and an unsafe water supply, an improvement in any of those areas holds the potential to boost economic growth and begin to create an environment that attracts business investment and supports local firms.

"Infrastructure is probably the single most important need for Africa to develop," said Stephen Hayes, president of the Corporate Council on Africa, the major U.S. business organization linking the United States and Africa.

The council represents 180 countries and 85 percent of private investment in Africa. "There's not a single country in Africa that's meeting its current power needs," Hayes said.

For business to thrive among African countries, the variety of road and rail systems, not to mention inconsistent customs and regulations, must be addressed. The reason the AGOA (African Growth and Opportunity Act) trade agreement hasn't been as successful as hoped, Hayes said, is that you can't bring products to international markets if you can't even get them to the port in your region easily.

In general, roads would be the first thing one would turn to in order to help, according to Rand's Wachs. "They're so flexible. They provide access to so many things: education, health care, jobs and markets."

One solution is for African governments to work together to harmonize everything from railway gauges to tax and regulatory treatment of imports and exports. "The whole concept of regionalization is absolutely essential," Wachs said, because it allows local businesses and foreign investors to easily reach larger markets.

The proposed Inga Dam project in the Democratic Republic of the Congo has the potential to supply much of sub-Saharan Africa with reliable power, one of the primary ingredients in a solid infrastructure for the continent.

To be sure, not all infrastructure investment is equal. Projects should be prioritized and undertaken only if they would remove an obvious roadblock to business or appreciably improve access along trade, labor and economic routes, said Joseph L. Schofer, a professor of civil and environmental engineering at Northwestern University in Evanston, Illinois.

"Transportation investment is going to have an effect on economic development to the extent that it adds accessibility," Schofer said. "In underdeveloped and undeveloped areas, the difference between no accessibility and some modest increase in accessibility could be huge and could make a real difference."

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