TNC participation has mobilized significant financing for the expansion and improvement of infrastructure industries in developing countries, and the consequent impact on investment varies by industry, region and especially country. The impact on the level of investment is appreciable, with a 29 fold increase in FDI stock between 1990 and 2006, and considerable investment linked to concession agreements.
The importance of TNC participation varies among countries; for example, of the countries receiving the highest amount of foreign investment commitments during 1996-2006, China and South 128 World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge Africa had low TNC shares in total PPI commitments, but others, such as Egypt and Pakistan, had high shares.
Significantly, of the developing countries for which the TNCs share in PPI commitments exceeded 75%, over half (13 out of 20) were LDCs. Although LDCs do not receive much investment from TNCs, such investment nevertheless constitutes a very significant proportion of private investment in their infrastructure industries.
B. Impact on industry performance and the provision
of infrastructure services
TNCs affect the performance of those industries and the provision of those services in which they participate, not only through their impact on investment, and thereby the capital stock for production (section A), but also through other channels.
This section examines the impact of TNC participation on host country infrastructure industries through its technological effects (section B.1) and its effects on competition and efficiency of service provision (section B.2).
It then considers the overall impact of TNC participation on the provision of services in the various industries in terms of total supply, price and quality, and access (section B.3). A key question is whether, and to what extent, TNCs help improve the provision of infrastructure services relative to other options available. In attempting to answer this, the analysis considers a number of counterfactuals and their implications.