Poverty reduction through investment in transport and energy

Although investment in energy and transport infrastructure is considered crucial to poverty reduction, there is little direct evidence for this link. Energy and transport services are intermediate goods: they enable other activities that may reduce poverty. Studying how they actually affect poverty could lead to more pro-poor approaches to providing infrastructure.

A report from the Asian Development Bank’s Regional Technical Assistance project examines the links between investment in energy and transport infrastructure and poverty reduction. The report follows events from energy and transport investment to their impacts on poor people, using case studies in China, India and Thailand.

Despite the lack of direct evidence, it is often assumed that investing in energy and transport infrastructure will always improve the lives of poor people. While it seems obvious that infrastructure will bring benefits, it is important to consider just who will benefit and what kind of investment brings the most benefits to poor people.

The report lists potential outcomes following the provision of energy or transport services. These are tested against the experiences of poor people. Important issues include the impact of energy and transport services (such as road networks, rail networks and electricity) on income and consumption levels, access to services and the security of local people. Key findings include:

• Transport and energy infrastructure improvements have benefited poor as well as wealthier people, though they are less likely to benefit the poorest groups in the short term.
• Better-off families may be able to take greater advantage of infrastructure improvements: therefore it may seem as if inequality is increasing, even if a whole village benefits.
• Infrastructure improvements create income-generating opportunities, but this depends on having the necessary assets (for example, a vehicle to access markets on a new road), as well as the quality and reliability of the services provided.
• Time saved through energy and transport services is very important to poor people, who may be able to take part in other income-generating activities.
• Infrastructure that increases security, such as access to emergency services, is important.
• Some of the poorest people may be negatively affected by energy and transport services, for example if their goods cannot compete with products available from newly accessible markets.

The report calls on policymakers and development organisations to:

• Target poor regions that lack energy and transport infrastructure, while making sure that the poorest people actually benefit from access
• use cheaper, labour-intensive construction methods for infrastructure projects. This will increase the benefits to local people by providing employment, and also consider alternative technologies such as solar energy
• take account of local conditions in adopting a pro-poor approach to infrastructure design and delivery.

Investment in transport and energy infrastructure should continue until national networks guarantee that all people have access to quality services. However, policymakers should not neglect services such as health, education and credit, which allow poor people to take the opportunities offered by infrastructure.

Source(s):
‘Assessing the Impact of Transport and Energy Infrastructure on Poverty Reduction’, regional technical assistance (RETA) project, Asian Development Bank: Manila, by ADB, DFID, JBIC, and World Bank, 2005. Full document.

Funded by: Asian Development Bank, Department for International Development, Japanese Bank for International Cooperation and World Bank

id21 Research Highlight: 15 December 2006

Further Information:
Tyrrell Duncan
Asian Development Bank
PO Box 789
0980 Manila
Philippines

Tel: +632 (0) 632 4444
Fax: +632 (0) 636 2444
Contact the contributor: tduncan@adb.org

Asian Development Bank

Other related links:
'Transport, the missing link? A catalyst for achieving the MDGs'

'High transport costs affect trade in east Africa'

'Infrastructure is the key to poverty reduction in Africa'

'Stopping poverty in its tracks: road building in China'

'Energy Services for the Millennium Development Goals'