The Infrastructure-Environment Nexus and the Future of Development

Infrastructure plays a crucial role in the drive for achieving development by providing energy, transportation, and water. There have been ups and downs in the degree of emphasis placed on infrastructure, but infrastructure has remained the largest component of the public investment programs in developing countries-two to six percent of gross domestic product (GDP). Nearly half of the international financial institutions’ project lending to developing countries goes to infrastructure. Going forward, the Organisation for Economic Co-operation and Development (OECD) estimates that developing countries might have to invest over $700 billion a year in infrastructure in the coming decade-rising to $1 trillion a year by 2030-in order to sustain rapid growth rates. Well-designed infrastructure can have positive impacts on the environment, which also is crucial for development. However, there is a dark side to infrastructural investments: they often lead to environmental degradation. Fossil fuel energy generation and transportation create emissions that contribute to acid rain locally and global warming. Hydropower and irrigation can lead to flooding, water pollution, and disruption of communities. Roads can lead to erosion, deforestation, and biodiversity loss. These environmental costs have been estimated to reach four to eight percent of GDP for some developing countries, with most of the effects falling on the poor.

“The link between infrastructure and economic development is not a once and for all affair. It is a continuous process; and progress in development has to be preceded, accompanied, and followed by progress in infrastructure, if we are to fulfill our declared objectives of generating a self-accelerating process of economic development.”

— Dr. V. K. R. V. Rao (noted Indian economist, early 1980s)