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World Bank: Infrastructure Key to Alleviating Poverty - 2002-02-19

World Bank officials say without better roads, electricity and sanitation, poverty will remain widespread in many parts of Africa, South Asia and Latin America. They are appealing for billions of dollars in new infrastructure investment from both the private sector and aid donors. The appeal comes ahead of the U.N.-sponsored International Conference on Financing for Development which will take place next month in Monterrey, Mexico.

The numbers are staggering. In sub-Saharan Africa, less than 10 percent of the population is connected to a power grid. Worldwide, more than one billion people lack access to clean water.

Despite these needs, World Bank officials say foreign infrastructure investment in developing countries has dropped by nearly half over the past five years.

Joseph O'Keefe is manager of corporate relations at the International Finance Corporation, the private sector arm of the World Bank group. He says one way to make infrastructure projects more effective is to only give loan money once a project is successfully completed.

"Rather than delivering the money to a government upon the completion of a water system being built," said Mr. O'Keefe, "we will deliver the money to a private sector company and or government working in partnership when the water begins to flow and so there is a guarantee that the person at the end of the pipe is actually benefiting at the end of the day."

World Bank officials say it is often more important to subsidize a connection to infrastructure rather than the service itself. They say poor people already pay more in candles than they would pay for electricity or in transportation costs to get to a public telephone than for the phone call.

Nemat Shafik is the World Bank's vice president for private sector development and infrastructure. She explains it takes close and careful cooperation between donors and the private sector to bring effective infrastructure to the world's poor.

"Now some developing countries have reformed their environment and they sometimes feel like we're all dressed up with nowhere to go," said Ms. Shafik. "And that's where I think the donors can give the private sector a little bit of a nudge through guarantees, through enhancements, through subsidies to poor consumers to give them the reassurance to go that extra step."

One such step was taken by the Spanish company Union Fenosa, which recently invested in the privatization of electricity distribution in the Eastern European country of Moldova.

Two years ago, many residents were living without electricity, heat or water for up to 20 hours a day. Now everyone in Moldova, from the capital to the countryside, has electricity 24 hours a day.