Policy Relevance: at the center of public debate

The World Bank’s Development Economics Vice Presidency (DEC) and Sustainable Development Network (SDN) and Institut d'Économie Industrielle (IDEI, Toulouse) have organized—jointly with the Agence Française de Développement (AFD) and the Public Private Infrastructure Advisory Facility (PPIAF)—the first annual International Conference on Infrastructure Economics and Development to stimulate economic research on infrastructure in developing countries.

1 - Climate change and infrastructure.

Jean Tirole (IDEI and TSE) gave the opening keynote lecture, in which he discussed the diverse incentive issues involved in the process of reaching an international agreement to curve greenhouse gases emissions. He insisted on the need to put in place an international transfer mechanism to secure multilateral support to an agreement, and signaled that historically, successful compensation schemes between countries took the form of permit allocation. Marianne Fay (World Bank) then presented the 2010 World Bank’s World Development Report on climate change. Her message was clearly that developing countries will bear the brunt of climate change consequences, because of their geographical and climatic conditions, of their higher share of exposed and vulnerable population and their lower access to insurance mechanisms, and because of their inability to face adaptation costs. In particular, in a context in which a large share of the developing world population is still lacking access to some basic public services such as water, electricity or transportation, she insisted on the need to make quick progress on the understanding of how to design new ways to extend and regulate such services while taking into account the changing types of risks that result from the process of climate change. Finally, Franck Lecocq (INRA and Agro Paris) presented an analysis of the impact of long lived capital goods, among which infrastructure equipments, on the path of future carbon emissions, stressing the fact that contemporary decisions have a strong lock-in effect that may last over several decades.

2 - Public-private partnerships

In the second keynote address, Eduardo Engel (Yale University) discussed how and when PPPs may be a better way to deliver infrastructure investments than conventional public provision or regulated privatization. Focusing specifically on the case of roads, he started by highlighting the characteristics of PPPs, namely the bundling of construction and operation, the private temporary ownership of assets and intertemporal risk sharing with the public sector. Eduardo Engel stressed the institutional requirements for a successful PPP program, emphasizing among others the need for an independent supervisor and for independent mechanisms to mediate in conflicts or when renegotiations are needed. In the context of developing countries, weak rule of law and institutional quality was shown to alter the choice between conventional provision and PPPs in favor of the former, since this option is less subject to the risk of regulatory or government opportunism. In the final panel, Timo Välilä (European Investment Bank), Sanghoon Ahn (Korea Development Institute) and Eduardo Engel reflected on how the financial crisis affected infrastructure delivery around the world. In particular, Timo Välilä presented figures of the stimulus packages across Europe, highlighting that infrastructure delivery has not suffered too much of the reduction in available finance. However, it is unclear how things would evolve beyond 2011.