Transportation and Development

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Transportation and Development

• Local, Regional and National Perspectives

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Is the Transport Sector Important to Development?

• Value added by transport is estimated to account
  for 3 to 5 percent of GDP.
• Public investment in transport typically
  accounts for between 2.0 and 2.5 percent of GDP
  and may rise as high as 3.5 percent in countries
  modernizing outdated transport infrastructure or
  building new transport infrastructure
• Transport likewise commonly accounts for
  5 to 8 percent of total paid employment

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Public Infrastructure Investment Is Large
Proportion of Total and Public Investment in
Developing Countries
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Countries with Decentralized Road Maintenance
Have Better Roads
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Is Transport Sector Important to Development?

• Demand for freight and passenger transport
  in most developing and transition countries
  is growing 1.5 to 2.0 times faster than GDP
  -the bulk of this increase is for road
  transport.
• Although demand for freight transport (except air
  transport) in industrialized countries grows less
  rapidly than GDP, in developing and transitional
  countries the growth rate is closer to that for
  passenger transport
• In 1996 private sector lending to emerging
  markets peaked at 196 billion. Since then
  it has fallen sharply and estimates for 1999
  are just over 17 billion.

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Transport Sector Issues

• Globalization of trade. Advances in
  international logistics (for example, multi-
  modal transport technology,
  e-documentation, streamlined customs procedures,
  etc.) have greatly expanded the scope for
  international trade in goods and
  services
• Congestion and pollution Growing road
  congestion, particularly in cities, generates
  pollution and increases road accidents
  (about 500,000 persons per annum are
  killed in road accidents

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Transport Sector Issues

• Transport sector deficits Poorly managed
  public transport services impose a heavy
  burden on public finance (for example, until
  recently, the transport sector deficit in Zambia
  absorbed 12 percent of the governments total
  current revenues)
• Expenditure needs Large sums of money are
  required to maintain and modernize
  existing transport infrastructure (for example,
  road spending alone often accounts for 10 percent
  to 20 percent of the governments development
  budget)

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What Do We Know about Transport and Development?

• Certain minimum level of transport is essential
  to allow development
• Generally accepted necessary but not sufficient
  condition for development
• No general agreement about size of transport
  sector and its causal relationships with other
  sectors
• Remain uncertain about its inducement properties
  and role as catalytic agent

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Investment Strategies

• Supply Strategy- if we create transport
  infrastructure we assume that it will create its
  own demand
• This strategy not always realistic because it
  raises the issue of lag and lead effects
• Does transport lead or lag behind development?
• Best to view this as a circular, mutually
  reinforcing process

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Lag and Lead Effects Circular and Mutually
Reinforcing Process
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Transport Impacts

• Economic
• Allows market development
• Extraction of resources
• Stimulates employment
• Political
• Facilitates administration
• Promotes national integration
• Social
• Information diffusion
• Communication

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Transport Impacts on Economic Growth
Transport Improvements
Commodity Market
Labor Market
Expansion
New Activities
Growth
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Economic Production and Specialization
Region B
Region A
Self Reliance
Regional Trade
Trade and Transport
Trade and Transport
International Trade
Product A
Product B
Product C
Product D
Gateway
Product E
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Possible Effects of Transport Improvements

• Positive Growth- reduction in resource
  expenditure for distribution prior dynamism
  argument-growth capacity already present
  transport releases tight constraint
• Slowing Growth- use of scarce resources
  instead of investing in alternatives-lost
  opportunity costs overinvestment in sector
• Negative Growth- access encourages new
  competition and new products enter market
  from outside depress local industries

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Impact of Transport Cost Reductions on Inequality
Center
Periphery
A
B
C
Inequalities
Globalization
Transport Costs
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Inequalities and Transport Costs

• Improvements in transport and reduction in
  costs imply two major consequences 1/
  exploitation of comparative advantage and 2/
  development of economies of scale
• Diagram A- High transport costs and
  relatively low level of inequalities
• Diagram B- As transport costs are reduced,
  inequalities are likely to increase since
  economies of scale are the first to benefit
• Diagram C- further improvements in transport
  infrastructures favor a more efficient use of
  comparative advantages, a relocation of
  economic activities in the periphery and a
  wider access to the markets of the center.
  The likely outcome is a decline in inequalities

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Process Model of Transports Role in Regional
Development

• Stage I- Road development-often simple- plays
  role in administration, political
  cohesion, and extracting natural resources
• Stage II- Road transport important but rail
  begins to compete- more stable system with intent
  to link and secure regions more broadly
• Stage III- Road again is dominant as links
  penetrate often remote rural areas to allow
  delivery of health services and marketing

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Ideal Typical Sequence of Transport Development
A
B
C
D
E
F
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Challenges and Trends in Rural Transport

• Lack of Rural Transport Policy and Strategy
• Weak Management Capacity at Local Levels after
  Decentralized Decision-making
• Inadequate Financing and Standards
• Planning and Selection Processes have Withered
  Away
• Promoting Private Provision of Rural Transport
  Services
• Promoting Non-motorized Transport

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