Transport - Overview

The South Asia region (SAR) comprises eight countries with a total population of 1.45 billion. It is home to nearly 29 percent (about 400 million) of the world’s poor, who live on less than US$1 a day. The region has high growth potential and has demonstrated growth rates of 5 to 6 percent over the past decade - second only to East Asia – and 7 to 8 percent in the past couple of years in some countries. But accelerating and sustaining economic growth at 8-10 percent a year and ensuring that its benefits are shared with the poor will be an enormous challenge.

Poor infrastructure, along with protective policies, corruption and red-tape, is a major obstacle that impedes the economic growth of South Asia. Investment climate surveys have pinpointed transport as a particular problem for regional and international trade in South Asia. Bottlenecks are encountered in all modes of transport infrastructure and services: poor condition of roads, lack of intraregional connectivity between the national road networks, unreliable and overall costly road transport services, underinvestment in railways (which has led to the excessive use of road transport), unrealized high potential for rail and inland water freight transport, inadequate road and rail connectivity of ports with the hinterland, and others. Trade between India and Pakistan accounts for about US$1 billion a year, but with improved transport infrastructure and removed trade barriers it could grow substantially.

Poor access to transport infrastructure and services leaves hundreds of millions of people in South Asian countries without access to basic social and economic services. This hampers the achievement of the Millennium Development Goals (MDGs). Poor access in rural areas contributes to a sense of isolation from the economic mainstream, leading to a greater incidence of poverty among the region’s large rural populations. Only 57 percent of South Asia rural population has access to all-season roads. It is therefore critical to maintain existing transport infrastructure and services while simultaneously investing in new and improved services.

Rapid urbanization – the region has five cities with a population of over 10 million – together with the rapid increase in motorized transport leads to serious congestion and poor air quality in urban areas, creating new demands for transport infrastructure and services, over and above the existing backlog. The road safety problem in the region is also alarming: while India has the highest number of road deaths in the world after China with over 85,000 road fatalities each year, Bangladesh, with relatively low motorization, has the worst fatality rate in the region with 85.6 fatalities per 10,000 vehicles. It is followed by Nepal (24.3), India (20.3), Pakistan (18.7) and Sri Lanka (15.5). It is projected that, out of all world regions, South Asia might face the greatest percentage increase – 144 percent - in traffic deaths between 2000 and 2020 (E. Kopits, M. Cropper, World Bank, "Traffic Fatalities and Economic Growth", April 30, 2004).

South Asia is also prone to natural disasters and conflict, requiring substantial investment in the reconstruction and rehabilitation of transport infrastructure. Reconstruction in war-torn Afghanistan, the aftermath of the December 2004 Tsunami in Sri Lanka, India and the Maldives, the Earthquakes in Pakistan of October 2005, as well as the 2004 floods in Bangladesh, are typical examples of the region’s needs in disaster reconstruction and management.

Over the years, the South Asia region has accumulated a huge infrastructure "deficit". Estimates of the deficit range from US$150 billion to US$200 billion for a ten-year period. The key challenge for the World Bank is to encourage and support the efforts of regional governments to improve performance across the transport sector. This involves more than financial support and includes exposure to good practical experience from around the world, as well as pragmatic approaches to mitigating the political challenges of sector reform. Given the huge requirement for infrastructure development, the Bank recognizes the importance of leveraging its support with the private sector and other development partners.

The overarching objective of the Bank’s work in transport in South Asia is to contribute to growth and poverty alleviation by working with partner countries to facilitate improvements in the efficiency, quality and reach of transport infrastructure and services.

In recent years, the transport sector has been the core of the Bank’s engagement in infrastructure in the region. Since late 1990s, SAR transport program has responded and addressed the regional development challenges through:

The size of the Bank’s transport lending portfolio in SAR has almost tripled from US$2.2 billion in FY2000 to US$6.5 billion in FY2007. Transport now accounts for one third of the Bank’s total loan/credit net commitment to the region. However, despite the scaling up over the past 6-7 years, transport lending to the region per capita is still quite low in terms of absolute amount and more is required to support the region’s growth agenda (see Chart 1). Given the demand for World Bank support in the sector, the Bank continues to accord priority to transport in broader country dialogues.

While the South Asia Transport program continues addressing the regional needs it also supports the main thrust of the Bank-wide Transport Strategy Update and demonstrates convergence towards its main objectives through:

The Bank is also engaged in analytical and advisory work in the region. This is largely undertaken:

The IDA/IBRD lending for transport in the region averaged close to US$0.8 billion per annum over the last eight years. Lending projects of over US$3 billion are anticipated for FY2008-2010 to support the transport sector development in the region covering highways, rural roads, railways, inland water transport, urban transport, etc. If the ongoing railway sector engagement materializes, the lending volume in the sector may increase substantially. Chart 2 demonstrates the actual levels for FY2000-2006 and projected levels (subject to change) for FY2007-2010 of transport sector lending in South Asia.

Chart 2. Transport Lending for South Asia, Actual FY2000-2006 and Projection FY2007-2010

There is substantial potential for new operations in the region, but IDA financing is limited, while IBRD borrowing -- currently only to India and Pakistan -- has been and will continue to be largely demand driven. In this context, the quality of our advisory support is critical, especially our ability to expose sophisticated clients to the nuanced lessons of the global reform experience, and our ability to respond quickly to client demand. There is also the issue of constraints in the capacity of the public sector agencies to manage a rapidly expanding program, and of the private sector contractors/consultants to implement contracts effectively. These will require the Bank to adopt innovative approaches in project preparation, financing and implementation, including exploring the greater use of public-private partnerships, which in turn will require the joint involvement of other parts of the World Bank Group, including the IFC, MIGA.

Donors such as the Asian Development Bank (ADB), the Japan Bank for International Cooperation (JBIC), and the Department for International Development (DFID) as well as other bilateral agencies are also active in the transport sector in the South Asia region. Donor coordination is critical for the success of the Bank’s engagements, especially in the smaller countries. This is particularly the case in the Bank’s collaborations with the ADB and JBIC as the combined development assistance of these three accounts for about three quarters of the total Official Development Assistance to the region. The Bank has closely coordinated with these agencies in responding to the Tsunami in Sri Lanka and the Maldives, developing a joint road sector engagement strategy in Sri Lanka in November 2004, and a coordinated assistance strategy for the road sector in India.

In Bangladesh, the Bank has established a solid partnership with ADB, JBIC and DFID in support of the reform and investment program of Bangladesh Railways, and has provided the government with a DPL. The Bank is also planning a possible co-financing project with the ADB and JBIC for the proposed Padma Bridge project and a possible capacity building support with DFID for the urban transport in India. The Bank has also been developing a partnership with AusAID to support its "Infrastructure for Growth Initiative", which will focus on providing expertise on policy and other key issues as well as targeted financing in Asia.

Regional cooperation under SAARC is still in the early stages but is gradually expected to play a larger role. The Bank is in close collaboration with the ADB and JBIC to continue support to this initiative.

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