How Poor Infrastructure Can Slow Down Economic Growth

Infrastructure is a key element in all economies. It is made up of roads, bridges, electricity, water supply, railways, airports, communication networks, schools, hospitals and other facilities which enable people and businesses to go about their daily affairs. When that infrastructure is in place and is in good repair, it makes life better and supports business growth. But when it is of poor quality, in a state of disrepair, or we do not have enough of it, it can put a brake on economic growth.

Economic growth is seen when a country produces an increase in its goods and services over time. For that to occur, businesses must have a good environment in which to operate, workers should have free movement, and goods must access markets without too much issue. Poor infrastructure plays a role in all of these.

Poor Roads and Transportation

One large way in which poor infrastructure impacts economic growth is via bad roads. Roads are a key element which sees farmers, businesses, workers and consumers connected. In many places, we see that poor roads cause slow and difficult transport. Farmers may have issues getting their crops from rural to urban areas. Also, some products may be put off due to long distances and poor road quality.

In business terms, poor roads increase what a company pays for moving in raw materials as well as out their finished products. We see that firms are put to the task of spending more on fuel, vehicle repairs, and transport. Also, it is that which raises the price of products. As the goods’ prices go up, some consumers will, in turn, reduce what they spend. In that case, it plays a role in making sales go down and also in making it hard for businesses to achieve growth.

Unreliable Electricity Supply

Electricity is a key element of infrastructure. Businesses use electricity to run machines, preserve products, light their workspaces and provide services. When we see that the electricity supply is poor or unreliable, companies tend to find other sources of power, which, in turn, increases their operating costs.

Small businesses bear the brunt, which is because they do not have the resources to deal with high energy costs. A company which puts out a great deal of its income into power may have less to give workers, equipment, expansion or other key areas. Also, some businesses may go out of business when they can’t any longer manage their expenses. When many businesses are struggling or go out of business, we see fewer job options and economic activity goes down.

Reduced Productivity

Poor quality infrastructure also sees a drop in productivity. By productivity, we mean what out of the available time and resources is used up productively. When workers are tied up in traffic, which is a result of bad roads or lack of public transport, they have less time for actual work. Also, businesses may see delays in getting their staff to work, materials to the site, or products to the customer.

In some cases, a factory will have all the workers and equipment it requires, but if raw materials do not make it in time due to bad transport, then production will come to a standstill. This, in turn, means the factory produces below what it is capable of. When this is an issue in many businesses, the total economic output is affected.

Weak Communication Networks

Communication infrastructure is a key element in today’s economies. Businesses use mobile networks, the Internet and other communication tools to connect with customers, suppliers and employees. Breakdown of these networks will impede business’ performance.

Today, what we see is that many companies are using the Internet to market their products, talk to customers, get orders and provide services. If the Internet service is slow, expensive or not available at all, companies may lose customers and revenue. Also, young people who wish to work or run online businesses report issues. This, in turn, reduces digital economy growth.

Poor Water and Sanitation Facilities

Poor quality water and sanitation infrastructure also plays a role in economic terms. Access to clean water is required by homes, farms, schools, hospitals and businesses. When people do not have easy access to clean water, what they may do is spend more time and effort in obtaining it. This, in turn, reduces the time which could be used for work and other productive activities.

Poor health from poor sanitation is also an issue. In many communities which do not have access to proper waste management and drainage, we see the environment become a health risk. Also, this may put a strain on public services. For economic growth, a healthy population is key, which, in turn, means that workers must be of good health to do their jobs well.

Effects on Education and Healthcare

Education and health care infrastructure is very much a part of economic development. Schools, which are the base for future workforce development, provide what is required in terms of knowledge and skills. Health care facilities like hospitals and health centres play a role in the health of the population. When people are sick, they get care. Also, when health and education infrastructure is of poor quality, we see that individuals do not get the health and educational care they require.

A country that has weak education systems may see it hard to produce sufficient skilled workers for key industries. Also, at the same time, we see that in health care, poor performance may put workers’ health at risk, which, in turn, may reduce their productivity. This, in the long run, may also play a role in businesses’ struggle to get and keep a good workforce.

Discouraging Investment and Business Growth

Poor quality infrastructure also deters investment. When it comes to the choice of location for a business, investors look at what the country has to offer. This may include road networks, power supply, communication systems, transport and other facilities. If we have poor infrastructure in that regard, running a business may become a challenge and, more so, a cost. Also, some investors may choose to go to other countries which have better infrastructure.

This, we see, plays out in job creation. When we have a low business start-up rate, that is an issue. Young people may have a harder time getting into the workforce at all, and present businesses may have a hard time growing. High unemployment then also plays a role in creating other social and economic issues.

Increasing the Rural-Urban Gap

Poor quality infrastructure also plays a role in the divide between rural and urban areas. In the cities, you may find better roads, electricity, schools, hospitals and communication systems. At the same time, some rural areas may be left with very few. This, in turn, makes it hard for rural areas to grow.

People migrate to cities for better opportunities, which, in turn, puts stress on urban infrastructure. At the same time, rural areas may see young and productive workers leave, which, in turn, hampers local development.

The Importance of Maintaining Infrastructure

Improved infrastructure is of value to economic growth in many areas. We see that good quality roads, which, in turn, may bring down transportation time and cost. Reliable electricity will also see production of goods and services go up. Also, we note that better Internet and communication networks, which, in turn, will open up new markets for businesses. Also, good schools will produce a skilled labour force, and improved health care will produce a healthy workforce.

Also, what we see is that building infrastructure is a start, but also, that which is put in place must be maintained. We see that a new road which isn’t taken care of will fall into disrepair, which, in the same breath, applies to electrical grids, water structures, health and education facilities. Proper maintenance is the key for this infrastructure to stand the test of time and continuously serve the people that use them.

Conclusion

Poor quality infrastructure is a brake on economic growth, which it does to business activities. We see bad roads which delay transport, poor power which, in turn, affects production, weak communication networks which, in turn, limit business activities, and also poor schools and health facilities which, in turn, affect the quality of the workforce.

In order for an economy to grow well, infrastructure must be put in the forefront. Governments, businesses and communities all play a part in the maintenance and enhancement of public works. When people have access to dependable transportation, energy, water, communication, education and health services, they are better able to work, produce goods and create opportunities.

Good infrastructure is a piece of the economic puzzle, but in no way does it solve all of the issues out there. What it does do is present a solid base for businesses, workers, and communities to build upon. Countries which put into practice useful and sound infrastructure solutions will see more success in their job markets, will do better by the business community, will improve quality of life, and will experience large-scale economic growth in the long term.