A. A complex challenge
The significant investment needed for
infrastructure development in developing
countries (chapter III) necessitates greater
involvement of the private sector, in
many instances that of TNCs. It is
therefore important for host countries
and their governments to determine
when it is appropriate to bring TNCs into
the development and management of
infrastructure projects and how to attract
TNC participation that leads to the expected
development outcomes.
Throughout the world - in developed as well as developing
countries - policymakers are faced with the
challenge of developing adequate, efficient
and equitable infrastructure industries and
services. This involves a number of complex
issues.
First, the perspectives of many
different stakeholders have to be considered
when deciding on whether and how to
involve TNCs. At least four different
stakeholders can be distinguished: the
government (at different levels), the various
companies and financiers involved, the
users of the infrastructure services and the
society at large (Scott, 2007). To avoid the
risk of failure, the varying objectives of
these groups need to be adequately taken
into account.
Secondly, there are no one size fitsall
solutions. Policy priorities and options
differ considerably between countries at
different levels of economic development
and with different characteristics.
For example, for landlocked countries it may be
important to give special attention to crossborder
infrastructure that can improve their
access to global transport networks; and the
infrastructure solutions for countries with
small economies may differ considerably
from those with large national markets. As
a result, the right mix of public and private
(including TNC) investment will continue
to vary greatly by project, industry and
country.
Thirdly, designing and implementing
appropriate policies to harness the potential
role of TNCs in infrastructure require
adequate skills and capabilities. Many
infrastructure investments are socially
sensitive and technically challenging, and
need to be regulated by means of longterm
contracts within an appropriate legal
framework.
Governments have to prioritize
among competing demands for different
projects (keeping in mind the dual needs
to maintain existing physical infrastructure
and develop new projects), establish clear
and realistic objectives for the projects
chosen, and integrate them into broader
development strategies. This means that
the ministries and implementing agencies
concerned have to possess the necessary
institutional capacity and skills to guide,
negotiate and regulate the projects.
As many infrastructure projects are handled
at the subnational level, development
of capabilities is warranted not only at
the central level, but also at provincial
and municipal government levels. Thus,
for leveraging TNCs for infrastructure
development, adequate human and
institutional resources are needed.
Added to these challenges is the rise
in global demand for investment in existing
and new infrastructure.
Since many developing
countries are seeking foreign investment to develop
their physical infrastructure, competition for such
investment is becoming more intense. Moreover,
growing demand in the developed world and in large
emerging economies is leading potential investors
to expect higher returns for a given level of risk.
At the same time, failures and investment disputes
associated with infrastructure projects, notably in
Latin America, have contributed to a more cautious
attitude among some governments as well as overseas
investors.
Even very large TNCs today think twice
before committing managerial and financial resources
to projects in developing countries that they perceive
as presenting a relatively high level of risk. And with
fewer potential investors, governments may face a
greater risk that bidding processes for specific projects
will be less competitive.