ASSESSING THE ROLE OF ECONOMIC INFRASTRUCTURE ON THE ECONOMIC GROWTH OF CAMEROON

ABSTRACT

The study examines the role of economic infrastructure on the economic growth of Cameroon. The model specifies economic growth measured by gross domestic product as dependent on economic infrastructure proxy to electricity, road development, health and education and telephone. Annual time series data from 1985-2017 was the sourced using secondary data and analyzed using Ordinary Least Squared (OLS) estimation technique.

It was evidenced that economic infrastructure has a significant positive role on economic growth. Road development and health and education have a significant role on the economy where as electricity and telephones have no significant role on economic growth of the country. The study demonstrates that increasing economic infrastructures reaps the static and dynamic benefits, stimulating rapid national economic growth.

Thus recommendations that economic expenditure taken or incurred by the government should be used for income generating projects so that expen ditures should be easily covered. Also the government should encourage domestic investments by subsidizing local industries.

KEYWORDS: electricity (energy), road development (transport), health and education, telephone (communication) and gross domestic product

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background of Study

The role of infrastructure in economic growth and development can be hardly overstated (World Bank, 1994). This was first emphasized and highlighted in a ground-breaking seminal contribution by Aschauer (1989), who finds that the stock of public infrastructure capital is a significant driver of aggregate total factor productivity and increase growth.

As noted by the U.K. Department for International Development (DFID, 2002), the channels through  which  infrastructure  influences  sustainable growth  and  development  range  from  reducing  transaction costs and facilitating trade flows within and across borders; enabling economic actors to respond to new types of demand in different places; lowering the costs of inputs for entrepreneurs, or making existing businesses more profitable; creating employment of all sorts, enhancing human capital, and, improving environmental conditions, which link to improved livelihoods, better health and reduced vulnerability of the poor (Olatunji, 2013).

In Africa, infrastructure contributed about 99% points to per capita economic growth over the period 1990 to 2005, compared with 68% points attributable to structural and stabilization policies (Africa Infrastructure Knowledge Program, (AIKP) 2011).

In Sub-Saharan African context, infrastructure development led to faster growth per capita in Sudan (1.76%), Botswana (1.66%), Mauritius (1.67%), Benin (1.63%), and Uganda (1.54%) (Williams et al;1999). However, the lack of modern infrastructure is an impediment to Africa’s economic development and a major constraint on poverty reduction, economic growth as well as the attainment of the Millennium Development Goals  (MDGs)  in  general  (United  Nations Human  Settlements  Programme  (UN-HABITAT), 2011). 

Given the inadequacy in basic infrastructures, the Africa Infrastructure Country Diagnostic Study (AICD) (2011) estimates the cost of addressing Africa’s infrastructure at about USD 93 billion a year, about 15% of GDP, one third of which is for maintenance. Unfortunately, however over the last decade, infrastructure investment in Africa and most developing countries has fallen significantly, driven by declining public and private investment. 

As a result of this, African leaders  have  adopted  the  Programme  for  Infrastructure  Development  in  Africa (PIDA) as the integrated continent-wide vision, strategic framework and agenda for infrastructure development PIDA  is  a  follow  up  to  various  initiatives  including  the  African  Union  (AU)  Master  Plan  for  Infrastructure.

Others include the  New Partnership  for  Africa’s  Development  (NEPAD)  Short-Term  Action  Plan  (STAP), Infrastructure Project Preparation Facility (IPPF) housed at the African Development Bank (AfDB); and the AUNEPAD African Action Plan. However, UN-HABITAT (2011) estimates show that if all African countries had infrastructure as good as that of Mauritius, the leading infrastructure provider in terms of access and quality, per capita economic growth in the region could increase by 2.2% points annually. 

In Cameroon the period of economic boom was characterized by high growth with the average annual growth rate of the GDP being 8% permitting the country to maintain a high level of per capita income despite the high population growth rate of 3% (Amin, 1998) as well as devote more resources to infrastructural development in order to sustain this growth.  Between 2000 and 2005, improvements in information and communication technologies boosted Cameroon’s growth performance by 1.26% points per capita, while deficient power infrastructure held growth back by 0.28% points (Mitchell, 2000).

The overall contribution of telecommunications, electricity, and roads to Cameroon’s per capita growth between 2000 and 2005 was 1.05% points (AICD, 2011), mostly attributed to a faster accumulation of infrastructure assets than to improvements in infrastructure quality. On its part, the information and Communication Technology (ICT) sector was responsible for most of the contribution, adding 1.26 percentage points to the per capita growth rate while the power sector held back per capita growth by –0.28 percentage points (AICD, 2011).

More recently, Cameroon considers infrastructural development as a major priority not just of the state but of many other stakeholders of the development process especially the private  sector  and  it  constitutes  a  major  emphasis  in  the  Growth  and  Employment  Strategy  Paper  (GESP)  aimed  at  driving  the country  towards emergence  by  2035. 

This is due to  the  enormous  contribution  all  the  various  strands  of  infrastructure  are expected to make in the country. According to AICD (2011), Cameroon already spends around $930 million per year on infrastructure, equivalent to 5.6% of its GDP and about half this expenditure goes towards operation and maintenance spending ($490 million) (Romney & Steinbart, 2000).

1.2 Statement of the problem