At a Glance
- Transport is crucial for economic growth and trade, both of which are highly dependent on the conveyance of people and goods. Virtually no production can take place unless inputs such as raw materials, labor, and fuel can be moved from different locations; neither can manufactured products be delivered to consumers, nor a wide variety of services carried out. Approximately 1 billion people living in rural areas, however, still do not have access to reliable (all-weather) roads.
- During the next 35 years, 2.5 billion people will be added to the current world population of more than 6.5 billion. In developing countries, much of this growth will be in urban areas; the number of cities exceeding 1 million inhabitants is on track to surge from 268 in 2000 to 358 by 2015. This expansion, coupled with continuing globalization and trade liberalization, is expected to significantly accelerate the demand for the transportation of both people and goods.
- The Transport Sector constitutes a significant part of the World Bank’s portfolio, with lending of US$36.7 billion (more than 15 percent of the International Bank for Reconstruction and Development and International Development Association commitments) since 2000. FY 2009 lending reached US$6.3 billion, totaling more than 13 percent of the Bank’s commitments for the year.
Trends and Issues As a sector providing intermediate goods, transport has to meet a variety of individual and collective expectations, which together offer a broad picture of the transport sector’s role and influence in the development agenda:
- Facilitating economic growth and regional integration through national and international trade;
- Making cities work better for their citizens, the environment, and economic growth;
- Creating economic opportunity and growth in rural areas;
- Providing access to health and education facilities; and
- In all these functions, becoming safer, cleaner, and affordable for all users and the community.
Simultaneously, the context in which transport operates is marked by significant global evolutions. Rapid urbanization. Already half of the world population lives in cities, with the urban poor a growing proportion of urban dwellers. Motorization expansion. During the next 20 years, more cars may be built than in the entire 110-year industry history, with an immediate impact in terms of congestion, road deaths and injuries, and environmental consequences. Increased sensitivity of trade flows to transport costs and reliability. With the removal of barriers to trade, international transport costs are increasingly a significant impediment to economic integration. Even for industrialized countries, transport costs can amount to the equivalent of a 21 percent tariff, with 9 percentage points being time costs in transit. Transport costs are as high as 55 percent for the extreme cases of small landlocked economies. The economic importance of these numbers is amplified by the increasing share of intermediate goods in international trade. With a 70 percent import share of an intermediate good, a 5 percent increase in transport costs leads to the trade friction of a 49 percent tariff equivalent. Changes in product markets and logistics systems have drastically increased the time value of freight transport. The increasing time cost of international transport determines not only trade but also location decisions of multinational firms and flows of foreign direct investment. Enhanced awareness of the collective costs of insufficient transport safety. Just more than a century after the first motor vehicle-related traffic death in 1896, more than 1.2 million people are killed and up to 50 million are injured on world roads annually. Every day, more than 3,200 people die from road traffic injuries; low- and middle-income countries account for 90 percent of the deaths. This costs those countries between 1 percent and 2 percent of their GNP—often more than the total development aid they receive. Road traffic deaths and injuries are predicted to become the third-largest contributor to the global burden of disease by 2020. Recognition of the transport impact on climate change. Road transport alone accounts for nearly a quarter of the man-made gases that accelerate climate change. For transport as a whole, the 2006 Stern review pointed out that the sector contributes up to 14 percent of the world’s greenhouse gas emissions, second only to power generation. At the country level, effective delivery mechanisms, for both infrastructure and services, are facing severe constraints. · Budget constraints limit investments, and lead to under-maintenance, hurting growth. There is a general concurrence that, for developing countries, infrastructure investments globally should be around 7 percent to 9 percent of GDP, but it is reported that only 3.5 percent is being realized—roughly what would be needed for the transport sector alone.
· Limited institutional capacity constrains the implementation of effective governance arrangements for private sector investments, in particular within the framework of public-private partnerships (PPPs). Still, a combination of public and private financing will, in most cases, be required to meet expanding demand for transport infrastructure and services.
· Weak regulatory systems often impede the implementation of adequate performance incentives in cases of limited competition or local monopolies, or they deter private sector investment when they are unable to establish a reasonably level playing field to foster balanced competition and provide for sufficient legal comfort and contractual integrity. Strategic Directions Transport is entering a new and different paradigm. Consequently, the updated World Bank Transport Strategy, Safe, Clean and Affordable… Transport for Development, proposes a consolidated approach to address this set of issues. · Safe transport. Acknowledging the importance of transport to achieve public health outcomes within the Millennium Development Goals (MDGs), the strategy stresses the need to mitigate the spread of HIV/AIDS, and to address safety in all transport modes, especially road transport. Air transport, which is globally much safer, still shows a safety record significantly affecting growth and investment prospects in some regions, in particular Sub-Saharan Africa. Transport and supply-chain security has also become a major issue in ensuring fair access of developing country exports to developed markets, and needs to be addressed as a new global public good.
· Clean transport. Reflecting the contribution of transport to the wider environmental aims of the MDGs, the strategy encompasses the transport-energy-environment nexus, from energy consumption to the emissions and climate change impact perspectives.
· Affordable transport. Affordability concerns not only the rural and urban poor but also the whole freight economy, aiming at improving competitiveness to foster stronger economic growth. The Bank strategy stresses the need for better knowledge and control of transport costs, for both passengers and freight, in domestic and regional, urban, and rural settings. The implementation of an effective urban transport strategy, reaching out to the growing urban poor population, is a key element of this approach. On the freight side, the cooperative work on trade and transport facilitation with the Poverty Reduction and Economic Management agenda—in particular on customs and transit issues—must be strengthened. Beyond this categorization, the transport and social responsibility agenda cuts across all of these themes, focusing on inclusion, gender, vulnerable populations, access, health (75 percent of maternal deaths might be prevented through timely access to essential emergency childbirth care), prevention of HIV/AIDS, and environment linkages. Lending
FY09 transport lending amounted to US$6.3 billion, a 30 percent increase from FY08. While the roads and highways sector accounted for 83 percent of the total transport lending in the period FY97-FY07, lending in FY08 for this sector decreased by 38 percent, accounting for 57 percent of new commitments, illustrating a rebalancing of the Bank’s transport portfolio in line with the objectives of the strategy.
At the same time, lending for railways and air transport increased to 14 percent and 2 percent of new commitments, respectively. FY09, however, again saw strong growth in road and highway projects, in good part due to the prominence of road investments in many national economic stimulus plans. In this context, the Transport sector has been an important component of the Infrastructure Recovery and Assets (INFRA) platform launched by the World Bank Group to help support infrastructure programs in developing countries. Today, the Transport Sector supervises 172 projects with total net commitments of US$26 billion, representing 21 percent of the Bank’s portfolio. Two regions, East Asia and Pacific, and Europe and Central Asia, account for the largest shares of net commitments (23 percent and 21 percent, respectively). Key Indicators for Transport Portfolio Performance
A recent review carried out by the World Bank’s Independent Evaluation Group showed improved performance indicators for the transport sector. Moreover, quality assessments of transport projects done by the Quality Assurance Group (QAG) have shown that the transport sector is maintaining its good performance in terms of quality at entry and quality of supervision; 100 percent and 90 percent of projects are rated moderately satisfactory or better in QAG’s latest assessment. For more information, please see:www.worldbank.org/transport. Media Contacts: Roger Morier, (202) 473-5675, rmorier@worldbank.org Robert Bisset, (202) 458-5191, rbisset@worldbank.org Karolina Ordon, (202) 458-5971, kordon@worldbank.org Updated September 2009 |
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