Institutions and Financing

Historically, infrastructure investment in developing countries has been funded largely through public funds. Transport & communications infrastructure subjects private investors to major risks because the investments are often large and their costs can often be recouped only over long periods of time.

Investments also tend to be sunk; the assets cannot easily be used elsewhere, if at all. Where these projects also provide services that are considered essential to the population, including the poor, the pricing becomes a sensitive issue in which the rate of return that is attractive to private investors is weighed against a rate that is affordable to the general population.

These factors make the returns from such projects vulnerable and uncertain.

Some of the most important sources of finance for governments in developing countries are existing multilateral organisations, such as the World Bank, African Development Bank, Asian Development Bank, or from bilateral aid agencies such as DFID.