IDB urges infrastructure investment, adoption of digital technology

Date: 
Friday, July 31, 2020 - 20:00

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A report by the Inter-American Development Bank (IDB) charts a course for a massive infrastructure transformation in Latin America and the Caribbean through gains in efficiency, use of digital technologies, and a focus on quality and affordability of consumer services rather than structures.

The IDB has also advised that to close its infrastructure gap, Latin America and the Caribbean needs more than investment in hard assets.

It needs simultaneous and decisive policy action to improve efficiency of the infrastructure investment process and regulation of services—referred as software, the IDB said.

It added that even small improvements in service efficiency by increasing digitalisation and other actions can boost growth by 5.7 per cent over a 10-year period.

For Latin America and the Caribbean, this represents approximately US$325 billion in additional income over ten years.

Infrastructure improvements will reduce inequality and help vulnerable populations, especially hard hit by the COVID-19 pandemic, the IDB said.

It added the region performs well in basic measures of access but poorly in terms of the quality of services. For instance, 97 per cent of Latin American urban households have access to water but less than 40 percent of sewage in cities is treated, the IDB noted.

It said the average commuting time in the region’s big cities is 90 minutes, adding that the region also lags in Internet penetration and download speeds in Latin America and the Caribbean are ten times slower than in OECD countries.

The report found that as service efficiency increases and prices drop, the incomes of the poorest people would increase 28 per cent on average over ten years than the incomes of the rich.

“Infrastructure will be a critical component as we build our post-pandemic economies and aim to reduce inequality.

“Budgets will be tight, so we must invest wisely and sustainably. Our report recommends areas where government policies can promote innovations and bring a service-oriented vision to infrastructure,” IDB Chief Economist Eric Parrado said.

The IDB explained the study provides an in-depth diagnostic of access, quality, and affordability of infrastructure services in the region as well as examples of regulatory policies that have achieved tangible progress in service provision.

The organisation said digitalisation will disrupt the provision of infrastructure services and increase efficiencies.

“Our study develops scenarios of market organisation for the energy, transport and water and sanitation sectors based on the extent of adoption of digital technologies.

“For the promise to become a reality a supportive regulatory framework is needed to improve infrastructure in sustainable ways through adaptation, mitigation and the use of natural infrastructure,” the IDB said.

Agustín Aguerre, the IDB’s Manager for the Infrastructure Department said for too long there has been focus on bricks, pipes and other hard assets, adding that digital technology allows to better understand how people use roads, consume electricity and water.

“Our future infrastructure will be cheaper, more sustainable and better serve our citizens,” Aguerre added.