Infrastructure Development Policy and Sustainable, Inclusive Growth In Cameroon

By Dr Jean Cédric Kouam (Download pdf version)

Infrastructure Development Policy and Sustainable, Inclusive Growth In Cameroon

According to the work of Barro (1995), there is a positive correlation between infrastructure development and economic growth. According to the author, the provision of public services in terms of infrastructure contributes to the improvement of private sector productivity. In addition to generating jobs and economic activities, infrastructure provides services through which economic agents can be productive. These services include transport systems, energy production facilities, water supply, and sanitation networks.

Infrastructure is critical to the achievement of the African Union’s Agenda 2063, which refers to a set of key programs and initiatives identified as essential to accelerate Africa’s economic growth and development. Similarly, they are central to the achievement of the Sustainable Development Goals (SDGs) adopted by the United Nations in 2015. Thus, to promote sustained economic growth by 2030, the Cameroon government has implemented its new national development strategy 2020-2030 and has committed to improving people’s access to basic social services such as housing, water, and electricity, which require massive investment in infrastructure.

This article analyses the role of infrastructure in promoting sustainable and inclusive economic growth in Cameroon.

The Importance of Infrastructure Development

In his analysis of the determinants of infrastructure, Porter (1995) distinguishes between logistics infrastructure, communications infrastructure, administrative infrastructure, financial market infrastructure, and innovation infrastructure. With globalization and the development of trade, each type of infrastructure plays a central role in the development of companies and the strengthening of their competitiveness. Indeed, logistics infrastructure (quality of ports, roads, airports, railways) and communication infrastructure (telephone network, internet access) have become indispensable due to the increase in trade flows between economies (Calderon and Serven 2004). Similarly, the competitiveness of private and public sector firms also depends on the quality of the financial market infrastructure (Aghion and al, 2007).

This type of infrastructure that ensures the processing of financial flows exchanged between the different actors in the financial systems refers to the availability of financial services, facilitating access to loans, stock market financing, the soundness of banks, the protection of minority shareholders, etc. As regards the innovation infrastructure (quality of scientific, technological, and research institutions; quality of education; availability of engineers, patents, etc.), its contribution would be decisive in stimulating the quality of training and higher education (research and development) and, by ricochet, the growth of business productivity(Barro, 2002).

As for the administrative infrastructure, its contribution to economic growth results from the simplification of procedures, the cumbersomeness of which reduces the overall productivity and competitiveness of enterprises (Ciccone and Papaioannou, 2007).

The Challenge of Infrastructure Development in Cameroon

In Cameroon, infrastructure is one of the main levers for the emergence hoped for by 2035. It is indeed a determining factor in boosting certain sectors of activity, particularly the building and public works sector, but also the development of transport services, the factor costs of which affect the competitiveness of companies.

According to the World Bank (2006), poor quality infrastructure hinders the economic growth of countries as well as international competitiveness. Although the government has defined a plan for the development of trade facilitation infrastructure (roads, motorways, railways, bridges, etc.), it should be remembered that any delay in the implementation of this infrastructure could have significant consequences on the dynamics of certain branches of activity and even on overall economic performance (paragraph 559 of the NDS30).

According to estimates made by the Ministry of the Economy, Planning and Regional Development of Cameroon (MINEPAT) in the National Development Strategy, any delay in the implementation of infrastructure projects would lead to a 0.7 point drop in the average annual growth rate expected in the primary sector over the period 2020-2030, and a 1.7 point and 0.9 point drop in the average annual growth rate in the secondary and tertiary sectors respectively over the same period. Consequently, according to MINEPAT, the average growth rate of the economy expected by 2030 would be around 6.9% compared to 8%, that is, a decline of 1.1 percentage points. Hence the need to develop mechanisms to avoid a possible delay in the realization of major infrastructure projects selected by the government to achieve a level of economic growth close to double digits and reach the threshold of 25% as the share of manufacturing production in the Gross Domestic Product (GDP) by 2035.

Constraints to Infrastructural Development in Cameroon

The COVID-19 pandemic and the resulting slowdown in economic activity could be the cause of a possible delay in the implementation of infrastructure projects (roads, motorways, railways, engineering structures, etc.) in Cameroon. Indeed, the tax revenues needed to cover public spending on infrastructure have become insufficient to cover all planned public spending, and recourse to debt has become critical for the sustainability of public finances.

According to the International Monetary Fund, 2019, the two thresholds for external debt service (debt service/GDP ratio and debt service/revenue ratio) remain exceeded, although the government has managed to refinance the Eurobond contracted in 2015 at a satisfactory rate. Despite this context, which is becoming more difficult with the socio-political and security crises that the country is experiencing, the government must find ways to finance its various infrastructure projects without compromising the pace of growth and the financial solvency of the state.

Among the strategies to be put in place to develop infrastructure in Cameroon, the government should reconsider public-private partnerships (PPPs) in the implementation of economic policy. By encouraging the mobilization of new sources of finance, PPPs provide the means for the private sector to deliver infrastructure services to the public sector. They also address a number of

challenges such as the underperformance of public companies, opaque financing structures, procurement methods, insufficient technical and managerial resources, and the high level of investment needs compared to available public resources. In addition, for the implementation of public sector projects, private sector involvement would ensure the smooth delivery of services, whether through construction contracts, service delivery agreements, product supply, or joint ventures.

Conclusion

The development of infrastructure is crucial for the economic emergence of Cameroon. In this context, PPPs appear to be the best way to mobilize new or additional sources of financing for infrastructure in Cameroon without compromising the sustainability of public finances or the financial solvency of the state. Moreover, they have the advantage of ensuring transparency, equal treatment, and respect for competition.