Investing In Infrastructure.

• Author: FAHRHOLZ, BERND
• Position: Role of development and commercial banks - Statistical Data Included

Private funding of infrastructure projects can make everybody a winner.

Great and enduring civilizations have always had great infrastructure. Take the Romans. In 312 BC, they started to pave the Via Appia from Rome to Southern Italy to improve links with Greece. Three centuries later, there was a 3,700-kilometer long highway network spanning throughout the Roman Empire. And the Romans also learned first hand that a good infrastructure at home is necessary for economic growth. When traffic in the city of Rome became too chaotic, Julius Caesar felt obliged to impose a daytime driving ban. Whole classes of economic activity--such as deliveries--had to be carried out at night because of the limited capacity of Rome's streets.

Yet despite its obvious importance throughout history, infrastructure as a concept has always given economists and social philosophers trouble because of the complex mixture between public interest and private entrepreneurship it entails. To find the line where the public interest ends and the private begins has occupied many a great mind over the centuries. No matter on which side of this debate you come down, there's one indisputable reality: The infrastructure financing needs of developing countries alone are going to run into the trillions of dollars over the next few decades--and public institutions alone simply will not be able to pick up the tab.

Today's infrastructure needs do look different than that of the Romans' time. Technological advances, such as the globe-spanning communication networks that have heralded the information revolution, mean that commerce is literally done at the speed of light, and distance is shrinking. These trends have had a dramatic impact on infrastructure. Countries must find the money to spend on the information revolution or risk being left behind on the wrong side of the "digital divide." Getting the infrastructure right is the key to full participation in global economic progress.

The IT revolution has a huge impact on traditional infrastructure. Although Internet-based businesses and the so-called "New Economy" may be virtual in many ways, they rely entirely on things that exist in the real world. Products may be ordered on-line, but have to be delivered by real airplanes, ships, trains, trucks, oil and gas pipelines or power transmission lines. Just-in-time decisions need just-in-time availability of efficient infrastructure--both real and virtual.

If millions of potential working...