September 2006 · Number 93 37786 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region. Infrastructure for Improved Rural Livelihoods Stephen Brushett and Indu John-Abraham What role can innovative strategies for infrastructure The State of Rural Infrastructure in Latin America and the provision play in better meeting the needs of rural Caribbean populations? This article highlights some of the findings The coverage and quality of infrastructure in Latin from recent analytical work that has been carried out in America and the Caribbean has generally not kept the Latin America and Caribbean (LAC) region, notably a number of promising practices that are being developed pace with that found in middle income countries in to effectively address the infrastructure provision other regions. LAC countries have been spending an challenge, and in particular to ensure that infrastructure average of less than two percent of gross domestic increases rural competitiveness and incomes. product (GDP) on infrastructure, substantially less than the four to six percent, found in countries such as A series of regional studies and country assessments, China and Korea2. The economic impact of investment undertaken since 2003 have analyzed the linkages in infrastructure has been weakened by a variety of between rural infrastructure, poverty reduction and factors such as inadequate resources for maintenance, improved livelihoods. These have produced several poor targeting of subsidies, lack of transparency recommendations to promote the increased impact and competition in private concessions, and lags in of infrastructure investment.1 Specifically, the series the achievement of service coverage goals. These sought to develop holistic, cost-effective and sustainable shortcomings are further magnified in the rural context, approaches to rural infrastructure service delivery where infrastructure services coverage is still typically and to promote increased access to improved services low (see Table 1). Provision generally lags that found in and the productive use of these services by the rural urban areas. In Latin America, nearly 95 percent of those poor. The results of this work have not only increased living in cities have access to potable water, and over the knowledge base, but are also already having an 80 percent access to sanitation facilities. This compares operational impact through specific Bank lending activities. poorly to rural areas with less than 50 percent coverage for water and sanitation3. Table 1: Rural Infrastructure Coverage Rates4 ICT Public Cellular Water Sanitation Rural Roadse Electricity Telephonesf Telephones Chile 66%a 51%c 71% 86% 98% 41% Guatemala 34%a <50%c 70% 65% 80% 3% Honduras 70%b 68%d 62% 37% n.a. n.a. Peru 62%b 49%b 59% 30% n.a. n.a. aIndoorconnections bTypeofconnection/facilitiesnotspecified cHouseswithimprovedfacilities dAlsoincludesbasiclatrines 4- See footnote 1 eRural/communalroadsasapercentageoftotalroadnetwork fPercentageofcommunities/householdswithaccesstopublictelephone(within6km) Reaching the Underserved Box 1 - Reaching the Unserved in Chile The rural setting poses additional and specific challenges for InChile,infrastructureneedsforthebulkofthepopulation,87 infrastructure provision, notably the need to serve dispersed and, percentofwhomarelivinginurbanareas,havelargelybeenmet. at times, isolated communities. Economically speaking, reduced Infact,eveninconcentratedruralareas,mostpeoplehaveaccess economies of scale and other factors result in higher unit costs tobasicinfrastructure.Thegreatestneedremainstheprovisionof of infrastructure service delivery. The investment conditions in servicestotheremoteandisolatedcommunitiesofruralChile. rural areas taken together with the generally prevailing lower incomes found in these areas create particular challenges related TheRuralInfrastructureinChilereporthasofferedsomealternative to the pricing of services and willingness of the private sector strategiestoovercometheobstaclesChilehasfacedinaddressing to participate. Extension of networked services, to remote rural itsrelativelysmall,yetisolatedunservedpopulation,whichthe locales is often costly and complex (See Box 1). Government GovernmentiscurrentlyimplementingthroughtheWorldBank- has commonly been called upon in these cases to fill the gap supported"InfrastructureforTerritorialDevelopment"project. on service provision, although this has rarely been sufficient to Chile'straditionalcentralized,single-sectorfocusforinfrastructure offset the disadvantages faced in the rural areas. investmentwouldbenefitfromgreaterlocallevelparticipationand cross-sectoralinfrastructureservicebundling.Thetypicallyhigh Improving Sustainability, Efficiency and Quality quality,yetpossiblyover-designedtechnicalstandardscommon While substantial investments have been made in the toChile'ssectorministriesshouldbeadjustedaccordingtothe development of new infrastructure services in rural areas, needs,demandsandpaymentcapacityofthesecommunities. the rising coverage rates often hide weaknesses in the Off-gridandrenewabletechnologiesforelectricitygenerationand quality of those services. In Honduras, for example, while theuseoflocalserviceprovidersforruralroadmaintenance,for 70 percent of rural households have access to potable example,offermoreviablesolutionstomeetthedemandsoflow water, less than 15 percent of that water is treated, and densitypopulations. service is intermittent. Poor budgeting, use of centralized service providers, and the lack of adequate benchmarks for financial and social capital, including access to education, monitoring maintenance have all contributed to failures in land tenure and financial services. Consequently, there the serviceability of these investments. is an opportunity to identify the economic opportunities specific to geographic areas, and to build and maintain The process of administrative and fiscal decentralization is ad- complementary infrastructure assets to maximize this vancing in much of the region, and is creating new opportunities potential. In responding to the multiplicity of challenges for local initiatives to address infrastructure provision (See Box that face the drive towards improved rural livelihoods, two 2). However, given that the roles and responsibilities may be rel- emerging approaches have come to light that foster the atively new to local officials, these demands have often exceeded appropriate conditions for more concerted and coordinated human, financial, technical and physical capacity. In addition, investments in rural infrastructure in order to maximize institutional complexity has increased, and there remains a need social and economic impact. to create more effective ways of coordinating agencies involved at both the national and local level. A. InfRASTRUCTURE BUndLIng Recent evidence from Peru has revealed that the bundling II. Maximizing Impact of infrastructure can increase impact on rural household Most of the investment made in rural infrastructure incomes. Cooperative interactions across multiple has been focused on sector-specific interventions infrastructure services can result in a substantially greater consistent with national goals. This investment may impact as compared to the sum effect of each service taken well have produced some benefits--such as increased individually. Productive opportunities have a better chance coverage rates--but may not have had a significant of being exploited with access to various infrastructure impact on broader economic development goals. services. Each service builds on the other to produce a Central to addressing this perceived shortcoming is "multiplier effect". the need for a broader vision of rural development that seeks to exploit complementarities across sectors, not Greater cross-sectoral collaboration will be required, only among infrastructure services, but also in other and can largely be achieved through improved planning areas linked to the development of human, physical, strategies, beginning at the local level through consultation 2 · September 2006 · Number 93 Box 2 - User Committees and Cooperatives in Bolivia VariousmunicipalitiesinBoliviahavecometodelegatemanagementforwaterandsanitationprojectsaswellasoff-gridelectricitytousercom- mitteesorusercooperatives.Theseentities,generallycomprisedofcommunitymemberswheretheserviceisbeingprovided,essentiallyserveas localadministratorsoftheservice.Theyareresponsibleforreceivingregularpaymentsfromfellowcommunitymembers,aswellasmonitoring andmaintainingthesystems.Usersexpressedthehighestlevelofsatisfactionwiththismodelofmanagement,particularlythoseadministeredby cooperatives,intermsofprovidingadequateservicedeliverywithlimitedinterruptionsinservice.66percentofprojectsadministeredbyusercom- mittees,and80percentofthoseadministeredbyusercooperativeswereidentifiedasofferingahighqualityofservice,asopposedto44percentof thosemanagedbypublicentitiesandonly10percentofprivately-managedprojects.Source (SUR, p.7) with key stakeholders, and bolstered by financial and technical plans serve as the basis for investment decision-making commitments at the central level. Under the Regional Transport and coordination. It should be noted that the efficacy of Infrastructure Decentralization Project in Peru, the concept of Chile's institutional framework is virtually unparalleled in infrastructure bundling is being put into practice through the the region - contributing greatly to its success. Guatemala close interaction of rural road investments with the Participatory has started to promote the idea of a territorial development Regional Development Plans, which identify and prioritize model that will support broad-based improvement in public investment. rural competitiveness. In a first phase, eight selected departments, which have economic potential but high B. TERRIToRIAL dEvELoPMEnT rates of poverty and of indigenous poor, will have the Infrastructure bundling is an idea that has inherent attractions opportunity to compete for funding for a bundle of and should perhaps be pursued more widely, provided the technical, financial, and infrastructure support services. In institutional coordination and capacity requirements can a subsequent phase, the reform of the planning system will be put in place. In and of itself, however, bundling may be completed to ensure a territorial, participatory focus not be sufficient to realize all the potential gains from with better alignment with the public investment program. increased, coordinated infrastructure services. The idea of The objective is to increase rural incomes, rather than to territorial development offers an approach that emphasizes increase infrastructure provision per se. multi-sectoriality that extends beyond infrastructure towards a broader vision for enhancing productive growth Recognizing the need to complement the investments in road re- opportunities. In contrast to most political/administrative habilitation and maintenance, Peru has sought to promote greater or sectoral approaches, the territorial development strategy benefits to rural households through the incorporation of an in- seeks to define a space based on its endogenous linkages for economic development. The territorial approach offers: novative strategy to support broader rural development through the Local Development Window (LDW). The LDW serves as a 1. Long-term participatory planning based on the identi- coordinating mechanism to bring together supply and demand fication of strategic productive opportunities by identifying areas of productive growth, building the capacity 2. Consolidated strategy to facilitate coordination among of local service providers, and facilitating access to financial re- sectors sources. Local development plans are prepared through a partici- 3. Linkages among geographical areas based on produc- patory process with local stakeholders to define priorities for both tive connections that often extend beyond traditional income-generating and social welfare projects. Management of administrative units the program is carried out by a non-government organization. 4. Definition of appropriate tariff schemes to promote productive opportunities. ISSUES APPLICATIonS There remains some uncertainty about the conditions A number of countries in the region are currently necessary for effective application of the territorial exploring various models of territorial development approach, as well as the structures and management in pursuit of greater development gains to rural mechanisms that will best fit the specific local context. investment. In Chile, territorial development has meant Two key consideration concern (i) the criteria for an increased level of inter-institutional coordination selecting territories--should these always be the areas with among sector agencies, as well as local stakeholders, greatest potential or not and, (ii) the determination of the in the preparation of territorial framework plans. These geographical definition of the territory. While the latter September 2006 · Number 93 · 3 need not coincide with one or more sets of administrative 2. Decentralization has facilitated the movement boundaries, in practice so far, this is what tends to happen. towards increased local participatory planning and In addition, some of the specific issues that are likely to implementation, as municipal officials are able to engage arise are as follows: more easily with communities, while still being able to Decentralization,andmorespecifically,theneed to maintain oversight of their activities. The degree and strengthen human and financial resources at the local quality of participation of the various stakeholders, level is critical to the effectiveness of this multi-sectoral particularly the users, is critical to ensure that rural approach. infrastructure investments are aligned with rural Thesusceptibility oflocallevelmanagementtoelite development strategies, while at the same time increasing capture should be managed by fostering popular partici- the level of commitment on the part of local beneficiaries pation--and putting in place a grievance mechanism. to their successful implementation. Thesustainability ofabroad-basedapproach, to which infrastructure service provision is to contribute, must be 3. An adequate legal and regulatory framework for private assured through adequate funding for maintenance and sector participation is critical to promoting commercial appropriate policies to the relevant infrastructure sector. opportunities and managing risks. Governments must Equityissues,giventhatregardlessofthebasisupon identify the appropriate balance of incentives to encourage which territories are selected, there will be areas that private sector participation, particularly by the local private might be left out of any pilot approach. In such cases sector, while maintaining sufficient oversight to ensure the there may need to be explicit criteria and timeframes desired development outcomes. established for "mainstreaming" the concept and/or sector specific strategies that will assure improvements in basic 4. Affordability must be clearly addressed to ensure infrastructure provision go ahead in other areas as well. adequate cost recovery for the operational viability and Standards-atwhatlevelandtowhatextentshould self-sufficiency of services, while meeting the needs of the infrastructure standards be modified to fit local contexts, unserved populations. Tariff regimes must accurately reflect especially as part of a territorial development approach. costs to ensure financial and operational sustainability. Inflexible and inappropriately high standards have, in the past, constrained adequate rural infrastructure provision. notes and References 1 Bolivia ­ Consultora SUR. 2003. "Anlisis de la Demanda, Gestión e Impacto III. Conclusions de los Servicios de Infraestructura en el Desarrollo Económico Local de lo Muni- "Bundling", whether by combining multiple infrastructure cipios Rurales de Bolivia ­ Informe Sectorial". Chile ­ World Bank. 2004. Rural Infrastructure in Chile: Enhancing Efficiency and Sustainability. Washington, services, or by linking various productive, social and DC: The World Bank. Guatemala ­ World Bank. 2004. Guatemala Policy Notes: location-specific assets through the territorial approach, Rural Infrastructure for Rural Development. Washington, DC: The World Bank. offers the potential for higher returns to rural households. Honduras ­ World Bank. 2004. Peru ­ World Bank. 2004. Rural Infrastructure in Peru. Washington, DC: The World Bank. These will be reflected both in terms of higher incomes as World Bank. (2004) "Drivers of Sustainable Rural Growth and Poverty Reduction well as reduced opportunity costs, through time savings, in Central America: Nicaragua Case Study". Washington, DC: World Bank. allowing for increased productive opportunities. It is World Bank. (2004) "Drivers of Sustainable Rural Growth and Poverty Reduc- an attractive concept and one that should bring benefits tion in Central America: Guatemala Case Study". Gray Cover Report No. 31191- GT (Volumes I & II). Wash ington, DC. World Bank. from the associated complementarities provided that the World Bank. (2004) "Drivers of Sustainable Rural Growth and Poverty Reduc- obstacles to its practical and cost effective application can tion in Central America: Honduras Case Study". be effectively addressed, in four specific areas as follows: Gray Cover Report No. 31192-HN (Volumes I & II). Washington, DC. World Bank. 2 World Bank. 2005. Infrastructure in Latin America: Recent Development and Key Challenges. Washington, DC: The World Bank. 1. The need for capacity-building on the part of virtually 3 World Bank. 2004. World Development Report 2004. Washington, DC: The all stakeholders, from municipal infrastructure providers World Bank, p. 160. to users, has been a recurring theme in much of the region. As local authorities assume more responsibility About the Authors for infrastructure services, these responsibilities must be StephenBrushettisaLeadTransportSpecialistintheLatinAmerica complemented with additional technical assistance and andtheCaribbeanRegion(LCR)oftheWorldBank.InduJohn-Abra- training from sectoral agencies. hamisaconsultantworkingwiththeLCRKnowledgeTeam "en breve" is produced by the Knowledge Team of the Operations Services Department of the Latin America and the Caribbean Region of the World Bank - http://www.worldbank.org/lac · September 2006 · Number 93