Developing countries are facing a massive infrastructure deficit. Despite robust growth over the last decade, many people in emerging markets and developing economies still do not have access to reliable and safe basic services. The lack of infrastructure comes at an economic and social cost. Today 1.2 billion people live without electricity; 2.8 billion still cook their food with solid fuels (such as wood); 1 billion people live more than two kilometers from an all-weather road; 60 percent of the world’s population lack internet access; and at least 748 million people lack access to safe drinking water.
Developing countries now spend about US$1 trillion a year on infrastructure. Many countries already face large gaps in the stock and quality of existing infrastructure, along with rising demand for services. Just to illustrate one source of rising demand: in emerging economies, the number of people living in cities is expected to double in 30 years to 2030, adding 2 billion more people. With this mass urban migration comes rising demand for basic services such as water, power and transport.
It’s estimated that an additional US$1 trillion to US$1.5 trillion of annual investment in low and middle income countries will be required through 2020 to meet the infrastructure demand from industry and households. Electricity, water, and transport are expected to account for the bulk of future spending needs.
So developing countries need to double spending on infrastructure every year until 2020 to bridge the infrastructure gap. The price tag goes up further by approximately $200 billion a year when you factor in the spending required to reduce greenhouse gas emissions and to adapt assets to the challenges of increasingly volatile climates.
With the research showing that a 10 percent increase in infrastructure investment contributes to one percent growth in GDP, helping countries bridge the infrastructure gap is critical for boosting growth, creating jobs, and delivering on the World Bank Group’s twin goals of ending extreme poverty and boosting shared prosperity.