Manufacturers'responses to infrastructure deficiencies in Nigeria : private alternatives and policy options

As cities in developing countries grow, the need to meet increasing demand for urban infrastructure services has become an important policy problem. Failure to respond adequately affects productivity and the quality of life in those cities. In order to make the Bank's lending programs in this area more effective, greater understanding is needed of: (a) the ways inadequate services affect business and productivity in urban areas; (b) the options for more efficiently providing and maintaining the delivery of various infrastructure services; and (c) potential cost savings from improved services. Based on empirical observations, this report suggests policy options for improving the provision of infrastructure services in Nigeria, the first country for which the Bank has undertaken this type of research: (a) regulatory changes to enable greater use of existing private capacity (for example, allowing the sale of excess private electrical power); (b) participation of the private sector in the supply of infrastructure-related services; and (c) pricing policies that are more efficient in the presence of congestion, system failures, and variations in the private provision of services.Banks&Banking Reform,Private Participation in Infrastructure,Microfinance,Economic Theory&Research,Public Sector Economics&Finance

The benefits of alternative power tariffs for Nigeria and Indonesia

The authors present simulation results on the benefits of alternative power tariffs for Nigeria and Indonesia, based on several closely related models of the firm. Nigeria is representative of developing countries where the public sector is inefficient and manufacturers provide their own electricity to compensate for that inefficiency. The use of private generators by Nigerian manufacturers is virtually ubiquitous, even though the government, to protect its monopoly, did not encourage that use in the 1980s. About 89 percent of a sample of Nigerian firms produced some of their power needs internally. But many large firms underused their power plants because of the substantial quantity discounts public power offered to large manufacturers. By contrast, in Indonesia, manufacturers were offered only slight quantity discounts for public power. Indonesia has encouraged manufacturers to produce their own power. About 61 percent of Indonesian manufacturers produced some power internally. Generally, in both countries firms purchase some power from the public sector at a quantitydiscount (slight in Indonesia, considerable in Nigeria) and also produce power internally at a declining marginal cost. The reliability of public power declines as the total quantity purchased increases, because transmission gets congested. Simulations confirm that an increasing block tariff is optimal in each country and produces savings in the cost of producing public power and in firms'operating costs (including the firm's cost of producing power internally). Under increasing block tariffs, firms that purchase more public power would be charged higher marginal prices than firms that purchase less. Large firms respond to the increasing block tariff by expanding their generating capacity and reducing their reliance on public power, while smaller firms contract their capacities and buy more from the public sector. When congestion in transmission persists, cost savings are higher as the increasing block tariff reduces total use of public power which in turn improves reliability. In Nigeria, where strong quantity discounts are offered, total costs savings (for NEPA and manufacturers) under 1989 conditions are about 4 percent without congestion and increase to 9 percent when there is some congestion. In Indonesia, where quantity discounts are mild, increasing the block tariff produces only slight cost savings.Anthropology,Economic Theory&Research,Environmental Economics&Policies,Energy Technology&Transmission,Windpower,Environmental Economics&Policies,Economic Theory&Research,Energy Technology&Transmission,Power&Energy Conversion,Windpower

Infrastructure bottlenecks, private provision, and industrial productivity : a study of Indonesian and Thai cities

This research project followed an earlier similar project on Nigeria, applying the same methods. A sample of manufacturers was surveyed to document their responses to infrastructure deficiencies in electricity, water, transport, telecommunications, and waste disposal. They found the manufacturers undertook significant expenditures to offset deficiencies in publicly provided infrastructure services, and that changing public policy toward privately supplied infrastructure and changing the pricing of public infrastructure could yield significant savings in social costs. Thailand and Indonesia have made significant strides in following the policies for private sector participation in infrastructure provision. Nigeria, where public infrastructure monopolies still dominate, lags behind, yet stands to benefit most from such policy reform. Government policy toward the industrial organization and pricing of infrastructure sectors can significantly help a developing economy realize the benefits of private sector participation in the provision of infrastructure services.Banks&Banking Reform,Decentralization,Public Sector Economics&Finance,Environmental Economics&Policies,Municipal Financial Management,Banks&Banking Reform,Municipal Financial Management,Urban Services to the Poor,Urban Services to the Poor,Public Sector Economics&Finance

Costs of infrastructure deficiencies in manufacturing in Indonesia, Nigeria, and Thailand

Using fresh results from a sample survey of manufacturing establishments in Indonesia and Thailand, the authors contrast and compare with data from an earlier study on Nigeria. They compare especially: the extent and incidence of public infrastructure deficiencies; the extent of manufacturers'private provision of infrastructure in response to such deficiencies; the capital shares of various private infrastructure investments, including electric power, water, telecommunications, transport, and waste disposal; and the firms'costs for producing their own electricity and water. The extent of public infrastructure deficiencies and private provision of infrastructure services varies across countries and by firm size. The total share of capital investment in private infrastructure was similar among Nigerian and Indonesian firms (14 - 16 percent) which is twice that in Thai firms. The private costs of infrastructure deficiencies are substantial and the burdens are much greater on small firms than on large firms.Public Sector Economics&Finance,Decentralization,Environmental Economics&Policies,Banks&Banking Reform,Water and Industry,Environmental Economics&Policies,Agricultural Research,Urban Services to the Poor,Public Sector Economics&Finance,Banks&Banking Reform

Why manufacturing firms produce some electricity internally

Many manufacturers in developing countries produce their own electricity because the public supply is unavailable or unreliable. The authors develop a model of the firm in which electricity is produced internally, with scale economies. The model explains the observed behavior (prevalent in Nigeria, common in Indonesia, and rare in Thailand) that firms supplement their purchases of publicly produced electricity with electricity produced internally. To prepare an econometric estimate, they specify a translog model. In Nigeria, where firms exhibit excess capacity, generators are treated as a fixed input, whereas in Indonesia, where firms are expanding, they are variable. They confirm strong scale economies in internal power production in both Nigeria and Indonesia. Shadow price analysis for both countries shows that smaller firms would pay much more for public power than larger firms would. Instead of giving quantity discounts, public monopolies should charge the larger firms more and the smaller firms less than they presently charge. In Nigeria, the large firms would make intensive use of their idle generating capacity, while in Indonesia their would expand their facilities. In both countries, small users would realize savings by having to rely less on expensive endogenous power.Public Sector Economics&Finance,Environmental Economics&Policies,Economic Theory&Research,Energy Technology&Transmission,Markets and Market Access,Energy Technology&Transmission,Public Sector Economics&Finance,Carbon Policy and Trading,Environmental Economics&Policies,Economic Theory&Research

The Macroeconomic Perspective of Urban and Regional Development Policies : Enhancing the Productivity of Secondary Cities

Confronted with increasing concentration of population and economic activity in a few large cities, polcymakers in many developing countries have sought to implement spatial policies to decentralize the population and employment from the large urban centers. Most decentralization policy instruments used in developing countries have aimed at influencing the location and relocation of manufacturing firms. In Korea as in other developing countries, spatial policies have taken various forms: strict zoning regulations, outright prohibitions of manufacturing activities by laws, and various financial incentive schemes to relocate industries to outlying areas. The Korean government has used both carrot and stick to disperse industry. The 1977 Industrial Location Act, for example, prevented new factories from locating in Seoul and empowered the government to issue relocation orders to existing establishments. Tax breaks, loan guarantees, relocation grants, and other incentives were offered to industries that moved. Large public investments were made in infrastructure in new industrial towns

Pedigree reconstruction and spatial analysis for genetic testing and selection in a Larix kaempferi (Lamb.) Carrière plantation

Larix kaempferi is one of the major timber species in Northeast Asia. Demand for the reforestation of the species is rising in South Korea due to an increase in large timber production and utilization. However, progeny trials for the species have not been explored, making it challenging to foster advanced generations of tree improvement. In the present study, genetic testing and selection for diameter growth were conducted using pedigree reconstruction and phenotypic spatial distribution analysis in a plantation of L. kaempferi. The aim of the present study was to select the superior larch individuals using the pedigree reconstruction and phenotypic spatial distribution to substitute progeny trials. The plantation of seed orchard crops was established in 1990 and one-hundred and eighty-eight trees were selected as the study material. Genetic variation was investigated first to validate its adequacy as breeding material. Genetic testing was carried out using a model considering pedigree information and spatial autoregression of the phenotypes. The expected heterozygosity of the mother trees and offspring were 0.672 and 0.681 presenting the corresponding level of genetic variation between two groups. The pedigree reconstruction using maternity analysis assigned one to six progenies to ninety-two candidate mothers. The accuracy of genetic testing was exceedingly increased with the animal model considering AR1 ⊗ AR1 structure compared to the animal model only. The estimated genetic variance of the former was 9.086 whereas that of the latter was 4.9E-5 for DBH. The predicted breeding values of the offspring for DBH were ranged from -5.937cm to 5.655cm and the estimated heritability of diameter growth was 0.344. The genetic testing approach based on pedigree reconstruction and phenotypic spatial distribution analysis was considered a useful analytical scheme that could replace or supplement progeny trials.K L and I-S K have a grant from the National Institute of Forest Science (NIFoS), Korea and K-S has a fnancial support (2020182B10-2022-BB01) from the Korea Forest Service