Infrastructure Development (Research Paper Sample)

Infrastructure Development
Name:
Institution:
Infrastructure Development
Introduction
Global economy has to a larger extend depended on infrastructure development. Countries that have good infrastructure is known to be stable economically such as China, countries from Europe and America. Infrastructure development is very crucial in growing the world’s economy. Reports given by World Bank indicate that an additional 10% infrastructure development leads to a 1% growth in the global economy. Developing countries especially from Sub-Saharan Africa have experienced increased growth due to investing in infrastructure. The increased economic growth being experienced by countries from the Sub-Saharan is as a result of massive investment in infrastructure development.
Infrastructure development in various countries and their impact
Infrastructure development is very crucial in growing the world’s economy. Reports given by World Bank indicate that an additional 10% infrastructure development leads to a 1% growth in the global economy. Developing countries especially from Sub-Saharan Africa have experienced increased growth due to investing in infrastructure. The increased economic growth being experienced by countries from the Sub-Saharan is as a result of massive investment in infrastructure development. China has invested over 600 billion dollars in their infrastructure to improve their road systems and connect them with all the big cities in the country, since 1990 to date. Reports indicate that China have recorded an increased economic growth by almost 6%; a scenario that could not have occurred if they failed to invest in infrastructure (Soto, 2012).
India, on the other hand, is planning to invest over one trillion U.S dollars in Infrastructure for the next five years. While responding to the ‘financial and economic crisis’ in the world in 2008, many economic experts believed that if developed countries increased public spending to boost their infrastructure, they would experience economic growth, with a similar response in developing countries. There is a need for development of infrastructure in middle and low-income countries. Low-income countries require infrastructure development to improve access to basic needs such as good roads, access to electricity, telecommunication and improved water and sanitation programs. Middle-income countries also require more infrastructure development despite the current efforts being made. (Soto 2012)
Nurkze asserts that, there is an increased aspiration for infrastructure growth across the globe, with many countries looking for investors all over. A well-established infrastructure in a country can grow the private sector and lead to increased competition between the domestic and international investors. It is sad to know that almost ¼ of the population cannot access water, good sanitation, and better housing. In order to develop infrastructures, second-generation variables play a key role (2011). When there is social stability, job creation, gender equality, accountability is encouraged calling upon investors from all parts of the world. The world operates like a global village due to globalization, making issues such as lack of water, insecurity, poor roads and lack of food to have a global relevance. Urbanization has continued to grow both in Asia and Africa leading to an increased demand for good infrastructure (Stiglitz, 2011)
China’s Infrastructure development
The most notable infrastructure developments have occurred in China since 1990 to date. China has been reported to be the fastest growing state in the entire globe, with nearly one-fifth of the world population coming from the country. The country has reported positive growth I the economy since 1970 to date. China reported an improved economic growth from 1970- 1999 of 7.5% and even a better growth of 10% between 1999 and 2005. (Nurkze 2011)
Stiglitz (2011) agrees with Nurkze (2011) that as early as 1978, China embarked on a journey to change their infrastructure policy from centrally structured to a market-oriented economy. The policy for the market-oriented economy encouraged open door policy liberalizing China to open doors for international trade and investment opportunities. The strategy has increased China’s GDP to increase by 3.4 million dollars per capita. The economy has encouraged domestic savings and increased international trade.
China has continued to invest in infrastructure using money from domestic savings and foreign ‘direct investment’. China’s development of infrastructure has been sustained by a ‘direct budget investment from fiscal resources’ finance through borrowing and market-based financing. The Government has spent billions of shillings on the urban infrastructure at the local, provincial and national levels from the country’s fiscal resources.
In 1990, the China Government began to connect the entire country through expressways using the ‘National Trunk Highway System’ and so far a 97,000km distance was covered in 2012. China has also improved their ports, waterways and airports to ensure the existence of a well structured transport system that will make the export and import business free flowing. The country has built industries in construction, engineering, electronics, safety devices and container security that have contributed to improving the economy through job creation (Hansen, 2010).
China has expanded the growth in infrastructure to other countries especially in Sub-Saharan Africa. China is the major financier of economic projects in Africa including Kenya, Uganda, Rwanda, Malawi and Tanzania. In Kenya, China has improved their infrastructure through the construction of the Thika- the superhighway that connects the country’s Capital City Nairobi with other cities. The highway has reduced congestion experienced due to traffic jams, allowing people to reach their place of work in time. China is also involved in the renovation of the country’s biggest airport, JKIA.
Global Growth in the Banking Sector
Infrastructure development in Africa has also been experienced in the banking sector. In the last decade, Africa has experienced rapid growth in Sub-Saharan Africa being the largest emerging-market banking with Assets worth $669 billion in 2008. Countries in North Africa also reported a substantial growth of $497 billion. The growth almost matches the Russian banking economy that is at $ 995 billion (Nurkze, 2011). Rao & Srinivas support that Portfolio momentum in Africa is a major contribution to the infrastructure growth in the banking sector. 83% of the growth was as a result of the natural increase in the market with inorganic sources taking only 17%. Portfolio momentum has been supported by an increased market expansion, with most financial sectors in the continent outgrowing the GDP. A good example is Kenya, which witnessed a 4.4% growth in its GDP and an 8.5% growth in the financial sector. It is only Egypt that has a high GDP compared to the financial sector due to the strict regulations imposed on the sector (2013).
Major financial reforms have taken place in the world during the last decade with major reforms coming from Africa. Nigeria, for example, reformed its financial sector by consolidating over 89 banks to just 29 between 2004 and 2006, unlocking the potential of the industry. Bigger and well-organized banks were developed, and they spend less allowing the banks to reach the huge non-banking population in the country. It led to the assets substantial growth of around 59% within a period of four years from 2004 to 2008.
Mergers and Acquisitions’ have also contributed to the growth in the banking sector, leading to the absorption of the less- efficient organizations by huge financial institutions. A total of 430 Mergers and Acquisitions’ took place in Africa alone with 40% involving foreign firms from other continents. South Africa led the pack of spreading their wings outside their local country by acquiring banks in Kenya, Malawi, and Nigeria. Governments have also boosted their infrastructure by allowing new entrants in the financial sector. Algeria, for example, has allowed private investors in their country, with over 12 private banking institutions opening up in the country since 1990 (Hansen, 2010).
The financial sector has increased the infrastructure levels of countries due to the development of technology like the Chip Pin Technology on all ATMS worldwide to curb fraud and theft cases. In addition, infrastructure development has led to the world being able to operate as one in the financial world through international withdrawals and deposits using a Local ATM (Nurkze, 2011).
Growth in the banking sector has however, slowed up with fewer activities expected in the future. Opportunities, however, remain in terms of expanding bank products, growing product penetration and attracting more people that have no bank accounts to own one. Innovation and creativity in the sector are very crucial. There is a need to develop new strategies to ensure that the banking sector promotes the global economy and reduces poverty levels especially in developing countries.
Consumer Goods Industry
Valan believes that, the consumer goods industry has played a key role in infrastructural development across the globe. The rise in the global consumer is a key driver in the economy. The growth has been experienced mostly in developing countries in Asia and Africa. For example, Africa recorded an increase in spending of about 16% from 2005 to 2008, figures that doubled the growth in GDP. Many people across the globe have moved from the lower level of destitute income of less than a dollar per day to the basic-needs level of ab...