WIR08 focuses on economic infrastructure, including electricity, telecommunications, water and sewage, airports, roads, railways and seaports (the last four collectively referred to as transport). Analyses of TNC activities, development effects and policy recommendations need to take into account the main features of these industries. First, infrastructure investments are typically very capital intensive and complex. Second, infrastructure services often involve (physical) networks, and are frequently oligopolistic or monopolistic in nature.
Third, many societies regard access to infrastructure services
as a social and political issue. Such services may
be considered public goods, in the sense that they
should be available to all users, and some, such as
water supply, are considered a human right. Fourth,
infrastructure industries are a major determinant
of the competitiveness of an economy as a whole,
and the quality of infrastructure is an important
determinant of FDI. Fifth, infrastructure is key to
economic development and integration into the world
economy.
TNC participation in infrastructure has
increased substantially, including in
developing and transition economies.
Infrastructure industries account for a
rapidly expanding share of the stock of inward FDI.
Over the period 1990-2006, the value of FDI in
infrastructure worldwide increased 31-fold, to $786
billion, and that in developing countries increased
29-fold, to an estimated $199 billion. Throughout
the period it continued to grow in most infrastructure
industries, but most significantly in electricity and
telecommunications, and much less in transport and
water. As a whole, the share of infrastructure in total
FDI stock globally currently hovers at close to 10%
compared to only 2% in 1990.
Another measure, foreign investment
commitments in private participation in infrastructure
(PPI) projects (which include FDI, but also other
investments that are an element of concessions),
also indicates that TNCs have invested significantly
in developing countries. During the period 1996-
2006 such commitments amounted to about $246
billion, with a concentration in Latin America and
the Caribbean between 1996 and 2000 (the region
accounted for 67% of commitments); but since the
turn of the century TNC participation in PPIs has
grown relatively faster in Africa and Asia.
The group of LDCs has remained by and
large marginalized in the process of globalization
of infrastructure investment, accounting for about
2% of the stock of infrastructure FDI in developing
countries in 2006. Their share in the foreign
investment commitments in infrastructure industries
of developing economies in the period 1996-2006 (of
$246 billion) was a little over 5%.
The form of TNC involvement varies
considerably by industry. Telecommunications is the
only infrastructure industry in which FDI has been
the dominant form of TNC entry in developing and
transition economies. In electricity concessions were
the most frequent modes of entry (62% of the cases),
followed by privatizations and greenfield projects
(36%). Foreign participation was also predominantly
in the form of concessions in transport infrastructure
(more than 80%), and in water (70% of the projects).
The water industry also used management and lease
contracts relatively frequently (25%).
Developing-country firms are
significant infrastructure TNCs and are
becoming prominent investors in other
developing countries.
Although developed-country TNCs still
dominate in infrastructure industries internationally,
there has been a marked rise involvement by
developing-country TNCs. In some industries,
such as telecommunications, they have emerged
as major players, and in others, such as transport,
they have even become world leaders.
Of the top 100 infrastructure TNCs in the world in 2006,
14 were from the United States, 10 from Spain,
and 8 each from France and the United Kingdom.
However, of the top 100 infrastructure TNCs, no
less than 22 were headquartered in a developing
or transition economy. The largest number of such
firms was from Hong Kong (China) with 5 firms,
and Malaysia and Singapore with 3 each.