From pipes to prosperity: The resilient infrastructure opportunity
By Stéphane Hallegatte
You don’t care about the size of the drain on the side of roads? About the type of joints used in water pipes? Or the type of electric poles in front of your home? You’re not alone. These are not favorite topics for conversations. Still, the quality of infrastructure is in fact fundamental to ensuring our safety and prosperity. What does this connection look like?
It is the connection between the size of road drains and flooding that makes roads impassable. For one third of the population of Kampala, for instance, even just moderate floods roads make getting to urgent healthcare impossible during a critical medical emergency.
It is the connection between the strength of electric poles and the factory that must divert resources to deal with the cost of power outages, going bankrupt in the process. In 21 African countries, living in a community with frequent electricity outages reduces the probability of being employed by more than 35 percent.
It is the connection between weak water pipes and health or gender outcomes. More than 20 million people who get sick every year because of intermittent water supplies and in Sub-Saharan Africa, women are responsible for 72 percent of the water collected for their families.
Even where infrastructure services are usually reliable, they may collapse during a strong natural disaster. Japan is one of the countries that are best prepared to manage disasters but still its road network lost 86 percent of its capacity after the 1995 earthquake in Kobe, with immediate implications for businesses, trade, and workers.
Our recent flagship report, Lifelines: The Resilient Infrastructure Opportunity, aims to make these impacts more visible to decisionmakers to boost actions that improve infrastructure systems and people’s lives. It does so by showing that the main impact of the lack of resilience in infrastructure systems is not through the repair costs that are the most visible (and discussed) consequence of disasters, but through the effects of service disruptions on the users, from families to global supply chains.
Every year, infrastructure disruptions cost more than $300 billion to firms and $90 billion to households in low- and middle-income countries. And while natural hazards are not responsible for all these disruptions, they still explain between 10 and 70 percent of them, depending on the sectors and the countries. In Tanzania for instance, infrastructure disruptions cost local businesses 1.8 percent of GDP, or $670 million per year. Around 40 percent of these losses are only due to heavy rainfall and floods. And in the US, Croatia or Slovenia, more than half of the power outages are due to storms.
The report focuses on solutions for the different sectors and finds that overwhelmingly these are doable and highly profitable. Some are simple and obvious, like building larger drains around roads, sturdier electric poles, or stronger water pipes. Some solutions become apparent only when looking beyond each individual asset and considering infrastructure as systems and networks. For instance, in many countries like Peru, it can be cheaper and easier to create new roads and increase redundancy in the road network than to reinforce existing ones. New distributed power generation – built with solar panels and batteries close to consumers – can provide more resilience than large electric grids which can be more vulnerable.
Some solutions are not about making infrastructure stronger and disruptions less frequent, but about making users better able to manage those disruptions. Japan aims at having all big firms develop a business continuity plan by 2020. This is important because a diversity of suppliers and bigger inventories can protect firms against transport disruptions. And many countries support programs that encourage households to stock emergency supplies in their home, because the consequences of a water outage can go from catastrophic to benign if everybody has 3 days of drinking water supply.
Altogether, implementing these solutions would only increase the cost of new infrastructure by around 3 percent, and the net benefits – in the forms of less repairs and fewer disruptions for firms and people – would be around $4.2 trillion in low- and middle-income countries. With $4 in benefit per $1 invested in resilience, this is a very attractive opportunity!
With climate change increasing the frequency and intensity of natural disasters, and technological change making us ever more dependent on infrastructure systems, the value of resilience will only increase with time. And a decade of inaction would cost a further $1 trillion which means we have no time to waste.
What will it take to capture these benefits? There is no silver bullet, but we have a roadmap. It includes starting with basic things like properly maintaining infrastructure, for instance ensuring that drains around roads are not clogged by garbage or that electric transmission lines are not too close to trees that can be blown over during storms.
In addition to maintenance, building resilient infrastructure requires assessing risks and designing infrastructure assets and systems better, which requires data, skills, and resources available for regulations and at the very early stages of infrastructure design. It is striking that even multi-billion-dollar infrastructure projects often struggle to fund a basic risk assessment at the feasibility stage. Or that a masterplan that is supposed to coordinate investments of tens of billions of dollars do not conduct studies on the implications of future climate change impacts. This is where the largest returns lie. By investing in good regulations, having access to natural hazard data, developing good masterplans, and ensuring proper asset design, fewer financial resources can save billions in repair costs as well as wider economic impacts later.
To capture these benefits, every country needs systems and policies to make sure infrastructure systems are well designed and consider natural hazards and climate change. By investing in these systems, governments, local authorities, and the international community can make infrastructure more resilient, so that you don’t need to care about it and can talk about something else.