Strategic Options for Urban Infrastructure Management

THIS PAPER IS intended as a comprehensive review of the issues and questions that policy makers must examine and answer when deciding upon infrastructural investments in urban areas. It develops a framework that shows where to make and how to finance such investments, and advocates solutions that involve using resources more effectively. The document provides general guidelines aimed at policy makers in the South with an approach that focuses on service and demand rather than on capital or physical facility. Boxes throughout the text provide case examples from around the world, and specify actions and objectives that managers may use as part of a step-by-step procedure. In chapter one, a definition of infrastructure is given which focuses on its role in both production and consumption, and which counters the existing tendency to focus on the physical facility in infrastructure provision. Chapter two explains how demand can be defined, measured and managed so that infrastructure delivery systems may be designed to focus on the user. The author discusses the factors which need to be considered in making optimal infrastructure investments such as the preparation of an inventory of current infrastructure levels, the relation between infrastructure and economic activity, institutional capacity and required rates of return.
The third chapter deals with the finance of infrastructure services. Three main sources of funding are described - government, international donors and private equity. The advantages and disadvantages of user fees are also discussed along with the finance of operations and maintenance, and approaches to pricing. Chapter four considers the institutional issues of the different types of decentralization and privatization, and discusses some of the practicalities. The author believes that telecommunications, electricity generation, urban transportation and solid waste disposal have the greatest scope for privatization. The author also discusses the regulation of privatized services. Many infrastructure services mitigate the environmental degradation caused by production and consumption, while others are themselves environmentally damaging. Ways in which negative environmental consequences of infrastructure may be minimized are discussed in chapter five. The second part of the chapter is concerned with “distributional objectives” - namely the equitable provision across different groups. Different regions, income groups and industries have different requirements and the cost of infrastructure for each group may vary accordingly. The final chapter explores themes arising from the recent literature evaluating infrastructure policy in the South. The author recommends that governments relinquish their control over the delivery of infrastructure services and that competition should be introduced so as to lower costs and ensure that the services are demand oriented. The importance of pricing for indicating demand and rationing consumption, as well as for finance, is emphasized as is the need for increased efficiency. The paper ends by identifying some next steps to improve infrastructure delivery. The “key actors” who would undertake these tasks are national and urban governments, donors, CBOs, NGOs and the users themselves. Two annexes to the paper provide a glossary and a summary of the actions and objectives that appear in the text boxes.