# 1. Introduction

By one estimate, governments in low and middle income countries around the world are investing around US$ 1 trillion (or between 3.4% to 5% of GDP) in infrastructure every year (Fay et al., 2019). Still, the quality and adequacy of infrastructure services varies widely across countries. Millions of people – especially in the fast-growing cities in developing countries – are facing the challenging consequences of substandard infrastructure, and often at a significant cost. Underfunding and poor maintenance are some of the key factors resulting in unreliable electricity grids, water and sanitation systems, and overstrained transport networks. Natural hazards are often a leading cause of disruptions in these already fragile systems.

Yet, in principle, infrastructure providers have a wide range of options at their disposal to increase the quality and resilience of infrastructure services. Strengthening the physical quality of assets, incorporating redundancy in infrastructure networks, using nature-based solutions, or increasing the funding for asset management and maintenance – these are readily available and often cost-effective measures to increase the quality of infrastructure services and users. This raises the question of why these options are not always implemented and why infrastructure systems so often are prone to frequent disruptions and unable to cope with natural hazards – not rarely despite significant spending.

A government’s ability to implement resilience-building options depends on whether it has effective systems in place to implement, finance, manage, and maintain infrastructure assets. Strong institutions, clear assignment of responsibilities, and transparent and reliable financing mechanisms are all crucial to ensuring the effective provision of public services. Using a range of infrastructure spending and performance data, this study explores the role of governance in determining the efficiency of infrastructure spending.

The remainder of this study is structured as follows. Section 2 describes major empirical patterns and introduces the literature on governance and infrastructure quality. Section 3 presents empirical evidence on the importance of governance in determining the provision of high quality infrastructure. Section 4 concludes.

# 2. Governance and infrastructure quality: A review of the evidence

## Measures of governance and infrastructure quality suggest a close relationship

Rentschler et al. (2019) have shown that the quality of public infrastructure has wide-ranging implications for the competitiveness of firms. Households that rely on firms for income, goods, and services, thus rely on infrastructure indirectly – as well as directly for their own use. Unsurprisingly, governments spend significant resources on providing and maintaining public infrastructure. OECD member countries spend on average 0.79% of GDP on transport infrastructure investment and maintenance (OECD, 2019).<sup>1</sup> In Fiji – which is exposed to considerable natural hazards from coastal erosion, storm surges, landslides, and cyclones – this public spending on roads is as high as 30% of GDP (Government of Fiji & World Bank, 2017).

> 1 Estimates of all inland transport infrastructure investments in 2016 in 21 OECD countries. Inland transport infrastructure includes road, rail, inland waterways, maritime ports and airports and takes account of all sources of financing.

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