The government of Honduras and some international donor agencies have made a sincere and ambitious commitment to reducing poverty in this poor country. But the villagers of Agualcaguaire probably haven't heard about it. Although Agualcaguaire is only a few kilometers away from the nearest large town, it is still about a century removed from life in the developed world, or even from life in larger cities in Honduras.

The farms and thatched-roof houses of the town's 346 inhabitants are perched on steep slopes. The village lacks basic infrastructure for water and sewage. Shallow wells supply the villagers with drinking water, but the water is often contaminated with animal waste and agricultural runoff.

Nearly all of the villagers are subsistence farmers who rely mostly on the corn, millet, beans, and livestock they raise for their meager incomes. To get their goods to market or to buy seeds or fertilizer, they must first complete a 45-minute hike over mountainous terrain. It is possible to drive the remaining seven kilometers to the municipal center of Morolica--but only if the summer rains haven't made the road impassable.

What the villagers of Agualcaguaire are missing is physical infrastructure--roads, electricity, communications technology, irrigation, and sanitation.

According to Mark Meassick, a strategic planning specialist with the Inter-American Institute for Cooperation on Agriculture (IICA), many Latin American countries like Honduras have been severely held back because of insufficient investments in infrastructure and infrastructure-related services, particularly in rural areas. "Adequate infrastructure is crucial to development," Meassick explains. "It makes no sense for isolated regions to produce more efficiently if they can't get their products to market. And without infrastructure for health, it becomes difficult for rural families to be productive when one has to constantly confront illness."

Unfortunately, like the residents of Agualcaguaire, villagers and rural people in scores of developing countries confront these hurdles every day. Kevin Cleaver, director of agriculture and rural development at the World Bank, points out, "service gaps in the developing countries are enormous, and the differences in availability of infrastructure between urban and rural areas are stark." According to the World Bank, 46 percent of households in rural areas had access to electricity, compared with 89 percent in cities; 12 percent of households in rural areas had in-house taps, compared with 59 percent of urban households; and 7 percent of households in rural areas had sewer connections, compared with 61 percent of urban households. Very few rural households had telephones--only 8 percent compared with 38 percent in urban areas. Furthermore, Cleaver notes that about 700 million rural people live more than two kilometers from an all-season road. For many, the obstacles presented by inadequate infrastructure make daily living difficult and escaping from poverty seemingly impossible.

Recognizing the enormous hurdle to equitable economic growth that inadequate infrastructure represents, some recent development agendas have given it more prominence. According to Sunday Dogonyaro, principal programmes coordinator for the New Partnership for Africa's Development (NEPAD), "Infrastructure is a pre-condition for development and as such the NEPAD Heads of State Implementation Committee, at its May 2003 meeting, reiterated agriculture, infrastructure, and health as their uppermost priorities, in that order."

"Now more than ever before," says Richard Uku, advisor to the vice president for infrastructure at the World Bank, "infrastructure is a pivotal part of the World Bank's development strategy, in part because of the dire need for infrastructure services, and the strong demand from the Bank's clients and shareholders. It is also consistent with international efforts to make the Millennium Development Goals come to fruition."

But in what ways is infrastructure so important? According to Ayo Abifarin, director of World Vision's Food Security Program in the Africa region, "Infrastructure is the backbone of rural development strategies, be it education, agriculture, health, sanitation, or enterprise." Furthermore, says Abifarin, "absence of one or more infrastructure components adversely affects the results of any rural development process." Infrastructure connects people to markets, enables equitable development, reduces prices of important shipped and transported goods such as fertilizer and high-quality seeds, and allows access to health and other services necessary for human welfare. Without it, rural areas face economic isolation and stagnation.

"At present, Sasakawa African Association farmers are caught in a double squeeze of high input costs and low output prices because of the infrastructure bottlenecks and other inefficiencies in the supply/demand chain," explains Marco Quinones, Africa program director of the association, which aims to increase small farmer productivity and access to input supplies. "Farmers respond to incentives as anyone else does. No markets, no production. Bottlenecks in infrastructure constrain the market," says Quinones.

Adequate infrastructure is especially critical for the most vulnerable, particularly during food crises. As Simeon Ehui, a senior scientist at the International Livestock Research Institute, explains,"Where rural infrastructure is well developed, the risk of famine is limited because governments, local communities, nongovernmental organizations (NGOs), and the private sector can help move food quickly from surplus areas to deficit areas."

National governments have slashed their spending on infrastructure in the past two decades. According to Shenggen Fan, a senior research fellow at IFPRI, between 1980 and 1998 spending on infrastructure as a share of total government expenditures fell from 6 to 4 percent in Africa, from 12 to 5 percent in Asia, and from 11 to 6 percent in Latin America.

Fan suggests three reasons for the decline in spending on infrastructure, both public and private. First, the structural adjustment programs imposed by lenders in the 1980s and 1990s required developing-country governments to cut their budgets and thereby reduced investment in infrastructure. Second, in many regions private investment replaced government spending on infrastructure--but only partially. Because many infrastructure services are public and available to anyone without charge, private investors have no incentive to invest in those sectors or services. With less government support, certain essential services were underfunded. In some cases, the vacuum left by government withdrawal could not be filled by the private sector because of prohibitive risks, high transaction costs, lack of access to information, and the absence of contracts and property rights. Finally, Fan explains, a lack of evidence showing the connection between infrastructure investment and poverty reduction made funding difficult to secure.

Moreover, new issues, like the environment and health, emerged as the focus of development spending in the 1980s and 1990s, according to Alex McCalla, professor emeritus of agricultural economics at the University of California at Davis. "These things were seen as critical for development," says McCalla, who worked at the World Bank from 1994 to 2000. "As a result, physical infrastructure investment took a back seat."

Now, however, physical infrastructure and the necessary funding to support it seem to be gaining momentum. Key players, including governments, NGOs, and development institutions such as the World Bank and the Asian Development Bank have put rural infrastructure on their priority lists.

The World Bank recently put in place a new Infrastructure Action Plan that shifts emphasis from "bricks and mortar" investments--that is, the mere construction of infrastructure projects--to infrastructure service delivery. The plan places a stronger emphasis on improving infrastructure access by ensuring efficient, affordable and sustainable delivery of infrastructure services. According to Uku,"The big difference is that in the past our focus was more on the nuts and bolts of infrastructure, in terms of building projects like power plants or roads. We continue to invest in infrastructure projects, but in the context of the services they can provide. In the case of roads, for example, the Bank is not simply interested in financing road construction but in how the provision of rural roads will impact development and the quality of people's lives."

Uku adds that in Rajasthan, India, with better roads and transport, the proportion of pregnant women traveling more than 100 miles to give birth at Zanana Hospital almost doubled. Before the roads, many women were unable to make the arduous journey, often giving birth at home without adequate medical care. In Morocco, women and girls benefited the most from road improvements. Primary school enrollment for girls jumped from 28 percent before road improvements to 68 percent afterwards. The new roads made walking or transport to schools safer and encouraged parents to send their daughters to school. "There are many ways in which infrastructure makes a positive impact," Uku continues. "Sanitation, transport, health, education--delivering these services are critical and that's what a large part of the World Bank's focus is now."

The renewed focus on infrastructure development raises some critical questions. What exactly should governments invest in? How do priorities differ by region? What should governments do differently this time around?

According to Ehui,"The answers to these questions will depend on factors such as agricultural potential, the degree of market access, and the density of population." He describes three potential scenarios. First, in areas of high agricultural potential and good market access (like central Kenya), continued maintenance of feeder roads and transport systems, along with the development of storage facilities and market institutions, will prove to be most useful. Second, in areas with good agricultural potential but poor market access (such as the highlands of Uganda or southern and western Ethiopia), road development and improvement of marketing systems will be important. Finally, in low-potential areas such as northern Ethiopia, infrastructure development to support water harvesting will be essential. Clearly, a "one size fits all" approach to infrastructure investment will not meet the needs of every country or region.

In many areas, transportation infrastructure appears to be among the most urgent needs. In Sub-Saharan Africa, for example, high transportation costs account for 30-60 percent of private traders' operating costs and put African agricultural goods at a competitive disadvantage in global markets. Because many parts of rural Africa have a lower population density than rural Asia, per capita investments in roads and other transportation infrastructure are more expensive than in Asia. Still, rural Africans' isolation from regional and world markets leaves them more vulnerable to disturbances in the supply chain caused by drought and war that can often result in famine.

A recent study by Fan reinforces the importance of roads for rural India and China as well. Whereas a number of public investments in rural areas can help reduce poverty, stimulate agricultural growth, and improve food security, the study found that roads had a notable impact. In India, for example, government spending on road construction reduced poverty more than did agricultural R&D and education spending. In China, roads ranked third among poverty-reducing investments. In both countries, roads had a greater impact on poverty reduction and agricultural productivity than did electricity, communications, irrigation, or soil and water conservation investments.

In Latin America, road building is also key to improving market access and lowering transportation costs, says Hans Jansen, a researcher at IFPRI. When roads are built, rural household incomes improve. A simulation model developed by a Wageningen University-Centro Agronómico Tropical de Investigación y Enseñanza (Catie)-Ministry of Agriculture and Livestock project in Costa Rica demonstrated that the Limón-San José Road, a major highway, cut transportation costs by 60 percent and increased national welfare by 1.5 percent per year as a result of increased domestic trade, more specialized regional production, and growth in exports.

If infrastructure projects are approached the right way, the positive impacts can be enormous, creating both direct and indirect advantages for rural and urban people. Ensuring these benefits means involving local communities in planning, implementing, and maintaining infrastructure projects.

Take, for example, a building project completed in Lutzville West in the Western Cape province of South Africa in the late 1990s. According to Michelle Adato, a research fellow at IFPRI, a community-based public works program provided jobs and skills training during construction, built a community hall that was needed as a meeting space for a range of social and economic activities, and developed capacity in that community to run future development projects. As one committee member expressed, "We are still shaken up about this. [We] can't believe that we did this," adding that they were "waiting anxiously for the next" project to manage. And when the project was complete, some workers were able to use their training to get permanent construction jobs elsewhere.

Careful planning is crucial. "In order to reap multiple benefits from infrastructure projects," says Adato, "you need a number of ingredients: You need to have community participation in a real sense at all stages of the project, and training to enable this to work. You need to use labor-intensive designs and construction methods in order to create jobs. And in the process of deciding what to build, you should think about not only the benefits that the project will provide in the short term, but also the possibilities for generating future economic activity. All these things need to be considered up front."

In order to keep the benefits of infrastructure flowing, maintenance is also a must. "Nothing is worse than starting a fancy project that a given country cannot afford to sustain and then watching the whole thing deteriorate," says McCalla. "If you want infrastructure to persist after the development agency leaves, there has to be ownership. You need the participation of the people with whom you're working and adequate revenue, whether public or private, to maintain the infrastructure."

Development of infrastructure has two basic objectives, according to Jennifer Sara, lead infrastructure specialist in the Latin America and Caribbean region for the World Bank. "Step one is poverty alleviation and improving the quality of life. Step two is improving economic growth and opportunity," explains Sara. If people don't have an income base, then they cannot pay for services and therefore infrastructure projects are not sustainable or maintainable.

Although financing strategies differ by infrastructure type, notes Sara, ideally users should be able to pay for services. Governments also play a critical role by providing initial capital costs when necessary. And private companies should be selected to build and operate infrastructure based on a competitive bidding process. Finally, says Sara, "You need a regulatory framework to ensure that consumers get the best-quality service at a good price."

In some cases, particularly with small-scale, localized projects, infrastructure initiatives function best when communities contribute directly. Local people can supply labor, or households can pay for the use of the services. Either way, it allows the community to participate in supporting and maintaining infrastructure and to exercise some degree of control over proposed projects.

The mix of public, private, and local financing will depend on the population density of an area. "In Sub-Saharan Africa, where population density is low," says Peter Hazell, director of IFPRI's Development Strategy and Governance Division, "central governments have to take on a larger funding role than in Asia or Latin America. In the very poor African countries, donors have to co-finance on a relatively larger scale than in other regions. Otherwise infrastructure investments in Sub-Saharan Africa that are crucial for long-term development will not be economically viable."

Under the right economic conditions, the community and the private sector can be important players in infrastructure's financial equation. In Latin America, for example, legislative changes that allowed increased private sector participation generated infrastructure investments totaling about US$290 billion for energy, water and sanitation, and telecommunications between 1990 and 1999, according to the World Bank. Still, government support and oversight is essential. In their efforts to reduce public spending, many governments have neglected the social responsibility of ensuring that the needs of the poor are addressed in the context of ongoing reforms.

Although the challenge of securing and maintaining funding for infrastructure projects is a task in itself, widespread corruption further complicates the issue. Tunku Aziz of Transparency International explains that infrastructure development decisions are too often made to serve private interests instead of the public good. He notes that high-cost projects are often favored over cost-effective projects for the simple reason that higher-cost projects allow for larger kickbacks to corrupt officials. "Systems of checks and balances must be put in place and institutionalized. This will help increase transparency and accountability by putting official policies and decisions in the public domain and under public scrutiny," says Aziz.

Targeted physical infrastructure development, coupled with a focus on access and maintenance, has the potential to greatly reduce worldwide hunger and poverty. So why isn't more being done about it? To be sure, an impressive sum of money is required to make adequate infrastructure a reality, and borders, both international and local, need to be "breached" so that useful infrastructure can be shared across communities and countries. That requires coordination, cost sharing, and capacity to plan well. A good measure of government commitment, private-sector participation, and citizen support is necessary to achieve these goals. Despite the financial costs and institutional demands, however, infrastructure is a public good developing countries cannot do without.

As IFPRI Director General Joachim von Braun explains, "In order to reduce hunger and poverty and improve quality of life and economic opportunity, it is essential for countries to design and implement successful strategies for key rural infrastructure sectors. But this will not become a reality without international finance; certainly not in Africa, where the problem is most critical."