This document summarizes an analysis of transport infrastructure investment needs and economic impacts for 11 countries in the Mediterranean region (MED11). It finds that the highest need is for additional airport passenger terminals (52-56% more needed) and the lowest is for unpaved roads (7-13% more). The total cost of investments under four scenarios would be 0.9-2.4% of GDP for the region, though some countries may spend 1.4-4.5% of GDP. This investment could substantially increase trade, with regional trade balances improving by 5.4-17.2% of GDP, and increase GDP due to higher trade and productivity from better infrastructure. The economic returns are estimated to be high
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4. Robin Carruthers
Contents
Abstract .................................................................................................................. 7
1. Introduction ....................................................................................................... 8
2. Transport infrastructure benchmarking ....................................................... 11
2.1. Transport infrastructure and economic and social development .............. 11
2.2. Benchmarking ........................................................................................... 11
2.3. Transport infrastructure benchmarks for MED11 countries ..................... 14
2.4. Summary of additional transport infrastructure for each scenario ........... 20
3. Transport infrastructure investment costs and affordability ...................... 22
3.1. Quantities of transport infrastructure ........................................................ 22
3.2. Types of transport infrastructure investment ............................................ 22
3.3. Unit costs of infrastructure investment ..................................................... 26
3.4. Results of the cost analysis ....................................................................... 31
3.5. Affordability of total transport investments ............................................. 36
3.6. International comparisons of transport investment ................................... 37
3.7. Conclusions .............................................................................................. 40
4. GDP and trade growth impacts of transport investment ............................. 42
4.1. Investment in transport infrastructure and economic growth ................... 43
4.2. Infrastructure investment and international trade ..................................... 51
4.3. Economic growth and international trade impacts of the four scenarios .. 53
4.4. Conclusions .............................................................................................. 58
References............................................................................................................. 59
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5. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
List of Tables
Table 1. Methodologies available to estimate transport investment needs ............ 13
Table 2. Transport Infrastructure Benchmark values ............................................ 18
Table 3. Summary of additions to transport infrastructure for each Scenario ....... 21
Table 4. Total transport infrastructure for each Scenario ...................................... 23
Table 5. Unit costs of improvement of transport infrastructure ............................ 28
Table 6. Unit Costs of Upgrading of categories of transport infrastructure .......... 29
Table 7. Unit costs of New Infrastructure ............................................................. 29
Table 8. Unit Costs of Periodic Maintenance ........................................................ 30
Table 9. Investment total and shares by type of activity ....................................... 32
Table 10. Country shares of total investment, % ................................................... 33
Table 11. Mode shares and investment by mode for MED-11 countries for each
scenario .................................................................................................................. 34
Table 12. Transport investment as a share of GDP, % .......................................... 37
Table 13. Projected transport infrastructure investment for Sub-Saharan Africa,
% of GDP .............................................................................................................. 39
Table 14. Four stage model: Infrastructure thresholds (in km per worker) and
elasticities (in GDP per worker in US dollars) ...................................................... 49
Table 15. Paved Road and Railway densities (km per worker) ............................. 50
Table 16. Road and Rail Investment impacts on annual GDP growth .................. 54
Table 17. LPI 2009 and its component values ....................................................... 56
Table 18. Changes in LPI attributable to transport infrastructure investment, % . 57
Table 19. Increase in trade balance (Exports-Imports) as % of GDP .................... 58
5 CASE Network Reports No. 108
6. Robin Carruthers
The author
Until recently Robin Carruthers was a Lead Transport Economist in the
World Bank, responsible for the quality of its evaluation of transport projects and
its transport research, and is the principal author of its Toolkit on Transport Corri-dors
and a major contributor to its guide to Trade and Transport Facilitation. He is
now a consultant to several international lending institutions on transport, trade
and infrastructure, and their interrelationships. Before joining the World Bank
about 20 years ago he spent a decade as partner of a transport consultancy in Bue-nos
Aires and before that, ten years with a transport and civil engineering consul-tancy
in London and Australia. He started his career with the governance of urban
planning and transport in London, and the evaluation of airport development pro-posals
for the precursor of UK Civil Aviation Administration.
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7. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
Abstract
Lack of adequate infrastructure is a significant inhibitor to increased trade of
the countries of the Mediterranean region. Bringing their transport infrastructure to
standards comparable with countries of a similar per capita GDP will be costly but
worthwhile.
We compare the current quantities of six types of transport infrastructure with
international, and estimate the additional quantities needed to reach the bench-marks.
We also estimate the cost of that infrastructure and express it as a percent-age
of GDP. Finally we make tentative estimates of how much trade might be
generated and how this might impact on GDP. All the estimates are made for each
MED11 country and for each of four scenarios.
The highest need for additional infrastructure will be for airport passenger ter-minals
(between 52% and 56%), whereas the lowest need was for more unpaved
roads (between 7% and 13%). The investment (including maintenance) cost would
be between 0.9% of GDP and 2.4% of GDP, although the investments in some
countries would be between 1.4% and 4.5% of GDP.
The impact on non-oil international trade would be substantial, but with differ-ences
between imports and exports. The overall trade balance of the MED11 re-gion
would be an improvement of between 5.4% and 17.2%, although some coun-tries
would continue to have a negative balance.
A final assessment was of the benefit ratio between the increase in GDP and
the cost of transport investment. This varied between about 3 and 8, an indication
of the high return to be expected from increased investment in transport infrastruc-ture.
7 CASE Network Reports No. 108
8. Robin Carruthers
1. Introduction
The objective of the analyses described here is to provide estimates of the costs
to the MED11 countries of bringing their transport infrastructure to specified
standards, and of the macro-economic benefits of those investments. The twin
objectives of investment in transport infrastructure are to provide a basis for the
transport and logistics services that will be needed to support the projected GDP,
and volume of international trade that is associated with that growth. The infra-structure
investments and associated transport and logistics services will also con-tribute
to further increases in GDP and trade above those assumed for the base
situation.
The report is in three Parts. The first provides a description of the basic bench-marking
approach to estimate the current deficiencies in transport infrastructure of
the MED11 countries. In the second there is description of how the costs of mak-ing
good on the transport infrastructure deficiencies are estimated for each of the
four “Sessa” framework scenarios (see Ayadi and Sessa, 2011). The method and
results of estimating the macro-economic benefits of the indicted investments are
provided in the third and final part.
The Report is centered on specifications of transport infrastructure for four
scenarios based of those of the “Sessa framework”, defined below. The quantities
and qualities of transport infrastructure appropriate for each of the scenarios are
based on a benchmarking approach. In this, the current quantities of transport in-frastructure
(measured on an average of a per area, per capita and per unit of GDP
basis) were estimated from a database of current transport infrastructure and mac-roeconomic
and social data for 139 countries. Then average benchmark values
were derived for the various country combinations indicated in the specifications
of the four scenarios. These averages were then extended up to 2030 by taking
account of the population and GDP projections provided in other MED11 reports.
The first scenario is compatible with the Sessa Reference or “Business as Usu-al”
scenario. For the purposes of estimating the necessary transport infrastructure
that would be associated with this scenario, the current quantities and qualities of
transport infrastructure are compared with the global average benchmark values.
For the second scenario (compatible with the Common Development Scenario of
the Sessa Framework) the necessary transport infrastructure is related to that cur-rently
found in the countries of the EU27. For the third scenario (compatible with
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9. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
the Polarized Development Scenario) the benchmark infrastructure provisions are
the average of those of the countries that comprise the same per capita income
group as each of the MED11 countries. A different approach was used for estimat-ing
the infrastructure provision for the final scenario (compatible with the Failed
Development Scenario of the Sessa Framework). Instead of using quantity and
quality benchmarks as the standards, the average investment in transport infra-structure
(as a % of GDP) of each of the MED11 countries over the last decade
was assumed to continue for the whole of the twenty year assessment period.
Basis of Scenario Infrastructure Benchmarks
Scenario Benchmark Infrastructure Standard
Reference Global average network density
Common Development Based on EU27 network density
Polarized Development Average density of country per capita income group
Failed Development National average infrastructure investment of last decade
The estimated total investment costs described in the second part of the report
cover four transport modes:
inter-urban roads (including both paved and unpaved roads);
railways;
port berths;
airports (including runways and terminals);
and four types of investment expenditure:
improving the condition of current transport infrastructure to bring it
up to the standards compatible with the relevant scenario;
upgrading the category of existing infrastructure (such as expanding
the capacity of some two lane roads to four lanes) to achieve the
standards of the relevant scenario;
expanding the capacity of infrastructure facilities or extending the
length of transport networks so as to provide the capacities and quanti-ties
indicate by the benchmark values for each of the scenarios, and;
maintaining the improved, upgraded and expanded facilities and net-works
in the condition indicated in the scenario benchmarks.
Part of the justification for proposed transport infrastructure investments is that
they will contribute to increases in GDP and international trade. The base level
projections of GDP are based on those made in other MED11 reports. We report
here only the projected increases above these levels for each Scenario. As a check
that the proposed investments are financially feasible, they are also expressed as
9 CASE Network Reports No. 108
10. Robin Carruthers
percentages of the base level GDP projections. Similarly, estimates of additional
international trade are expressed as increases above the base levels of international
trade (also expressed as percentages of GDP) derived from other MED11 reports.
These GDP and trade projections are the subject matter of the third part of the
Report.
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11. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
2. Transport infrastructure
benchmarking
2.1. Transport infrastructure and economic and social development
Roads, railways, ports, and airports deliver economic and social benefits by
connecting agricultural, mining and manufacturing producers to international and
regional markets. Without reliable and competitively priced freight transport infra-structure
and services to connect to international markets, nations have little hope
of trading their goods on the most advantageous terms. If they cannot transport
products to domestic markets, growth of GDP will be difficult if not impossible.
Adequate transport infrastructure and services are needed to make both interna-tional
and domestic markets work.
When infrastructure is absent or degraded, it no longer fulfills its connective
functions, and the economy suffers. As essential transactions and movements are
delayed or disrupted, transport costs rise, individuals lose time in unremunerated
commuting, and firms must fight harder to compete. To restore the connections,
new infrastructure must be built, and existing infrastructure restored or improved.
Transport infrastructure is expensive. The huge investments required to build
highways, railways, airports and ports must be well planned. If regularly main-tained,
transport infrastructure can be long-lived. But without maintenance, these
valuable assets can deteriorate in a matter of a few years. Too often, the same
roads end up being rebuilt over and over again, at a cost several times higher than
if the appropriate maintenance measures had been taken on time.
2.2. Benchmarking
Comparisons of current transport infrastructure
Country transport infrastructure comparisons are used to assess whether the
quantity and quality of provision of transport infrastructure are compatible with
those of similar countries. If the comparison values show that the quantity and
11 CASE Network Reports No. 108
12. Robin Carruthers
quality are less than the benchmark standards, a second stage of analysis is to es-timate
how great is the deficiency and how much additional infrastructure (and/or
upgrading and improvement of already existing infrastructure) would be needed to
bring the quantity and quality up to the benchmark levels. The third stage of the
analysis is to see what public expenditure (or combination of public and private
investment) is needed to finance this expansion, upgrading and improvement, and
whether that amount is compatible with the funding likely to be available. To fa-cilitate
these analyses the investments are expressed in absolute amounts and as
percentages of GDP. The last stage is to look at the social and economic impacts
of these investments to see if they are worthwhile, that is, whether the value of the
additional GDP and international trade is greater than the cost of the investments.
Benchmarking compared to other infrastructure comparison methods
Several factors complicate the estimation of transport investment needs, includ-ing
the geographical specificity of the transport network and the existence of mul-tiple
modes of transport that both substitute for and complement one another. The
literature contains several methodological approaches, including macroeconomic
models, benchmarking, demand models, and planning-based models that empha-size
concepts of connectivity. The various approaches differ substantially in their
strengths and weaknesses, as well as in their data requirements (Table 1). As might
be expected, those that are least data-intensive also tend to give very general or
aggregated conclusions. A more disaggregated estimation of the composition of
investment requirements generally demands detailed modeling to reflect the geo-graphical
specificities of a given country’s transport network.
Macroeconomic models typically exploit cross-country panel datasets to esti-mate
the relationship between infrastructure stocks and a handful of basic social
and economic parameters, such as population and GDP. This approach is exempli-fied
by the work of Kohli, Walton and Mody (1994), which estimated the transport
investment requirements of the larger East Asian economies at 2–3 percent of
GDP. Canning’s (1999) seminal paper linked this approach to a Cobb-Douglas
production function framework and became the basis for a series of adaptations
that were applied by the World Bank (Fay and Yepes, 2003; Calderon and Serven,
2004; and Chatterton and Puerto, 2005). The average transport spending require-ment
for the MED11 countries that emerged from a review of this literature is 3.2
percent of GDP, including both investment and maintenance. This is higher than
the shares of GDP that are indicated by our analyses (see Table 12).
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13. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
Table 1. Methodologies available to estimate transport investment needs
Strengths Weaknesses
Macro-econometric
models
Econometrically grounded
Exploits variation across countries
and time
High level of aggregation
Limited explanatory factors
Not location specific
Benchmarking Relative simplicity No clear theoretical foundation
Choice of benchmark is arbitrary
and may affect results signifi-cantly
Not location specific
Demand models Explicitly models demand–supply
relationship in a framework that
reflects specificities of country’s
transport network
Can be location specific
Data intensive
Planning models Based on detailed geographical
model reflecting specificities of
country’s transport network
Can be location specific
Driven by planning goals rather
than by economic trade-offs
Source: Carruthers et al. (2008).
A further refinement of the macroeconomic approach incorporated threshold
effects (Hurlin, 2006). This study found that in the early stages of infrastructure
network development, the marginal impact of more investment had productivity
effects similar to those of investments elsewhere in the economy, but once the
network had passed its “threshold size,” additional investment in the network be-came
much more productive. Then, once the network passed a second threshold,
the impact of further investment fell back to the level of other investments.
The benchmarking approach, is methodologically much simpler than the mac-roeconomic
approach, and devises normalized indicators of infrastructure perfor-mance
(such as road density or road condition) and compares them across coun-tries,
with countries divided into groups having broadly similar characteristics
(Bogetic and Fedderke, 2006), or simply compares infrastructure spending across
countries. Benchmarking imposes fewer data requirements than macroeconomic
models, other than requiring data for many countries to establish comparable
benchmarks. The choice of indicators and normalizations is somewhat arbitrary
and can significantly affect the results.
Transport demand models have been used by sector specialists for more than
40 years. A detailed microeconomic model of an individual country’s transport
sector is created and used to project aggregate demand for transport based on an-ticipated
economic growth. The model allocates that demand across transport
modes, compares demand with the capacity of each segment of the network, and,
13 CASE Network Reports No. 108
14. Robin Carruthers
on that basis, estimates the additional transport infrastructure needed. Successful
recent applications include the World Bank’s assistance to the government of Chi-na
for the development of its transport strategy and the European Union’s devel-opment
of the trans-European transport network. The main drawback of the ap-proach
is that it is very data-intensive.
In addition to the three economic approaches just described, it is also possible
to estimate transport investment needs using a planning-based approach that sets
targets for geographical connectivity and estimates the cost of reaching them. The
approach, applied in World Bank advisory work in Argentina, China and Africa,
has the advantage of reflecting the specificity of each individual country’s
transport network. However, unlike the previous methodology, the planning ap-proach
is very subjective, driven by political choices, and the targets are rarely
grounded in an economic balancing of costs and benefits.
Given the lack of data needed for a macroeconomic, transport demand of plan-ning
based approach, the analyses presented here are based on a benchmarking
approach.
2.3. Transport infrastructure benchmarks for MED11 countries
There are two methods of deriving benchmark standards for quantities of
transport infrastructure. The first compares densities of infrastructure with those of
comparable countries, while the second uses international best practice infrastructure
provision or performance standards. The first method is preferable as it is less sub-jective,
the second method being subject to interpretation as to what is best practice.
Data was available to use the first method for only four of the infrastructure
types, albeit those with the highest expected investment costs (paved roads, unpaved
roads, railways and airport runways). For two other types of infrastructure (airport
passenger terminals and port berths) we used the second method as there is no data-base
of global infrastructure densities that includes these types of infrastructure.
Using the first method, we have estimated benchmark values for paved roads,
unpaved roads, railways and airport runway infrastructure, and applied those val-ues
to the MED11 region and to each of the countries of the region. The data for
the benchmarks comes from a new transport and macroeconomic database of 139
countries using data for 2008. Most of the data comes from the World Bank Data
Development Platform time series database. The database excludes all small island
states and some small land based and island states (such as Qatar and Singapore)
that were considered sufficiently atypical not be used in the estimation of bench-
CASE Network Reports No. 108 14
15. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
marks. It also excludes Zimbabwe and Somalia for which macro-economic data
was not available.
First benchmarking method
Using the first benchmarking method, the infrastructure measures used were:
Km of paved road;
Km of unpaved road;
Km of railway in operation;
Number of runways at airports that have regular passenger services.
Base parameters
Three parameters were used for the compilation of the final benchmarks:
land area;
population; and
total GDP.
So benchmark values were calculated per km2 of land area, per million popula-tion1
and per US$ of GDP.
Normalized benchmark values
Previous applications of the benchmarking method have used only one of the
three parameters for defining infrastructure density (as per km2 of area, per capita
or per unit of GDP), so have not dealt with the issue of combining multiple
benchmarks into a single measure. Using different parameters to define infrastruc-ture
density gives significantly different outcomes. Countries that perform well
using one parameter can perform much less well using one or both of the others.
There are few if any conceptual indications to prefer one parameter over another.
One of the few indications that can be applied is that area, being non-time de-pendent,
gives more consistent results than either population or GDP. Using area it
is not so important to determine a base year for its measurement, and for a given
quantity of infrastructure the benchmark is constant over time. For either popula-tion
or GDP, the choice of base year influences the measure of the benchmark and
for a given quantity of infrastructure the measure changes over time as the value of
the parameter changes. Despite this advantage of area as a parameter for estimat-
1 A different population parameter (number of cities) was used for the airport runway
benchmark.
15 CASE Network Reports No. 108
16. Robin Carruthers
ing benchmarks, some types of infrastructure (such as airport runways or port
berths) are not dependent on area, so it is not necessarily the most appropriate
parameter to use.
To overcome problems associated with the choice of a single benchmark,
which implies that, the density of a particular type of infrastructure in dependent
only (or principally) on that single parameter, we have estimated benchmarks for
each of the three parameters, then combined them into a single index of infrastruc-ture
density. Since the dimensions of the three parameters are different, simply
adding the benchmarks for each of them give more weight in the total to those
with a higher value than those with a lower value. So each of the three benchmark
values was normalized to a value of 100 (based on the global average density for
that type of transport infrastructure) before they were added together to give a total
(and by dividing by three, an average based on an index value of 100). A normal-ized
index value greater than 100 indicates a higher than global average density
over all three parameters, a value less than 100 indicating a lower than global av-erage
density over all parameters.
Benchmarks for four Scenarios
An important choice in benchmarking is what to use as the standard of compar-ison.
In our analysis this is the choice of what other countries to use for compari-son
with the MED11 countries. We have analyzed four Scenarios and assessed the
transport investment outcomes for each of them in terms of the affordability meas-ured
in terms of the required share of GDP to achieve them over the period of
analysis (up to 2030).
Each of the four Scenarios has different benchmark standards and costs of
achieving them. The different standards will also have different impacts on the
GDP and international trade of each of the MED-11 countries. Each Scenario is
defined in terms of the density of its transport infrastructure and the standards to
which it is maintained.
The first Scenario (compatible with the Sessa Reference scenario) uses a single
set of standards, the global averages for each of the types of infrastructure. The
premise of this scenario is that the influence of the integration between the MED-
11 countries and the EU would not influence their development, and that the
MED-11 countries would continue their integration with the rest of the world.
The second Scenario (compatible with the Sessa Common Development sce-nario
in which the MED11 and EU27 countries become more economically and
socially integrated) was designed to bring the transport infrastructure of the MED-
11 countries to the same as the average of the EURO-27 in 2008. These are very
high standards and have been achieved in the EU-27 after more than a century of
CASE Network Reports No. 108 16
17. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
investment in modern transport infrastructure and several decades of implementa-tion
of the EU Transport Strategy and policy of development of the TEN transport
networks. In working through the costs of this scenario we determined that it was
unaffordable within the twenty year horizon to 2030 of the MED11 study.
In these circumstances there are two choices (which in practice have a similar
effect). The first is simply to extend the time period beyond 2030 for achievement
of the scenario benchmarks, the second is to lower the benchmark values that can
be achieved by 2030. We chose the second alternative as this would at least define
the benchmark values that could be achieved by 2030, whereas the first alternative
would only provide an estimate of the future year in which the original benchmark
values could be reached. After reviewing several versions of this alternative, we
determined that it would be feasible to reduce the difference between the current
infrastructure standards and the EU benchmark values by one third by 2030. So
this is how the benchmark standards for the second scenario (Common Develop-ment)
have been defined. This standard is still significantly higher than those of
any of the other scenarios.
The third Scenario (compatible with the Sessa Polarized scenario is in which
the MED11 countries become polarized in terms of the economic and social de-velopment)
was based on rather lower standards, those of the average of the coun-tries
that are in the same per capita income range as each of the MED-11 coun-tries.
Under this Scenario, the MED-11 countries with higher incomes are set ra-ther
higher standards to achieve than those with lower per capita incomes. The
income groups are based on the World Bank classification of countries by per
capita income into four groups: Low Income, Low Middle Income, High Middle
Income and High Income.
Table 2 shows the benchmark values for each type of transport infrastructure
and based on each of the three denominator parameters. First are the densities of
transport infrastructure per unit of area, second are the densities per capita and
third the densities per unit of GDP. The last set of values (“Normalized values”) is
a weighted average of the first three sets of values. The last column of Table 2
shows the current benchmark values for the MED11 countries taken as a whole,
giving an indication of the deficiencies compared to each of the benchmarks and
each Scenario.
Second benchmarking method used for port container berths and airport
passenger terminals
This method involves estimating the demand for the type of infrastructure, and
then the quantities of infrastructure needed to satisfy this demand, assuming that
17 CASE Network Reports No. 108
18. Robin Carruthers
such infrastructure utilizes best practice design and/or operating efficiency stand-ards
appropriate to the specific scenario (Table3).
Table 2. Transport Infrastructure Benchmark values
Scenario 1 Scenario 2 Scenario 3
All
Countries EU-27 Low
Income
Lower
Middle
Income
Upper
Middle
Income
High
Income
MED11
Countries
Per unit of land area (1,000 km2)
Paved
roads 170 1,054 20 182 66 363 61
Unpaved
roads 75 195 76 100 58 77 58
Railways 8 50 3 7 6 15 4
Runways 0.05 0.18 0.02 0.04 0.03 0.10 0.02
Per unit of population (million)
Paved
roads 3,261 8,928 336 1,451 2,941 11,636 1,494
Unpaved
roads 1,440 1,650 1,294 799 2,609 2,466 1,419
Railways 76 425 44 54 270 487 86
Runways 0.97 3.81 0.29 0.31 1.46 3.15 1.56
Per unit of GDP (US$ million)
Paved
roads 352 243 589 655 368 293 260
Unpaved
roads 156 45 2,271 361 326 62 247
Railways 17 12 77 24 34 12 15
Runways 0.11 0.04 0.51 0.14 0.18 0.08 0.10
Normalized value
Paved
roads 100 301 60 107 75 209 49
Unpaved
roads 100 132 540 138 155 104 110
Railways 100 311 169 85 145 183 61
Runways 100 234 185 81 127 199 48
Note. Paved roads, unpaved roads and railways are measured in kms, and runways in number.
Source: Author’s estimates based on Author’s database.
Port berths
Port berths are conventionally classified as being for general, containerized, dry
bulk and liquid bulk freight. We have only estimated the demand for container
berths and assumed that no additional general freight berths will be required. Dry
CASE Network Reports No. 108 18
19. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
and liquid bulk berths are usually provided to complement specific agricultural,
mining or industrial projects. Since we have not looked at specific investments
outside of the transport sector, we did not have a basis on which to project the
needs for additional bulk solid and bulk liquid berths, so in that respect the pro-jected
overall investment requirements are underestimated.
While there are many efficiency parameters for the use of container berths, one
of the simplest and most applicable to our analytical method is the number of con-tainers
moved per year per berth. Port efficiencies measured by this parameter
have improved significantly in the last decade, but this has mostly been through
inefficient ports coming closer to the best practice efficiency than there being in-creases
in the best practice efficiency. Using the standard measure of a TEU2, the
efficient capacity of a standard berth of 300 meters length varies between about
175,000 TEU per year and 400,000 TEU per year depending on the scenario.
We have no reliable and consistent data on the current number of container
berths in the ports of the MED11 countries, and even less data on the proportion of
this capacity that is taken up by transshipment movements (the transfer of a con-tainer
from one ship to another via intermediate land storage). So we have as-sumed
that existing container berth capacity is equivalent to the current demand,
and have only estimated the additional capacity to deal with increases in demand
over the analysis period.
The number of additional container berths needed for each scenario is based on
the number of import and export containers. This is in turn is based on the total
share of trade that is for imports and exports, the share of that trade between land
transport, ro-ro shipping (that does not use containers) and bulk solid and bulk
liquid freight (also that do not use containers), the average value of the contents of
a container, and the balance between import and export containers (as an estimate
of the number of empty containers to be returned). While the projections of GDP
do not yet take account of the differences between the scenarios, the estimates of
the share of trade between imports and exports, and the share of ro-ro and land
transport all have minor differences for some of the scenarios.
Although Scenario 4 has a lower demand for container movements than the
other scenarios, its lower efficiency of use of its container terminals is more than
enough to offset this apparent advantage in the number of additional berths need-
2 TEU is an acronym signifying a twenty foot equivalent unit. It is an inexact unit of cargo
based on the volume of a 20-foot-long (6.1 m) container. While 20ft long containers were
until recently the most frequently used (although their other dimensions were less
standardized) they have now been superseded by 40ft long containers, sometimes referred
to as FEUs. However, the TEU is still the standard measure of capacity used in maritime
transport.
19 CASE Network Reports No. 108
20. Robin Carruthers
ed. The Reference Scenario has a need for more container terminals than either the
Common Development or Failed Development scenarios, but not as many as the
Polarized Development. The Polarized Development scenario needs more berths
because of the higher share of intra-Arab country trade and this needs a large
number of berths for feeder vessels.
Airport passenger terminals
For many airports the critical capacity constraint is no longer the number of
runways but the capacity of the passenger terminals. We have projected the num-ber
of air passenger movements in each of the MED11 countries, (taking account
of projections of GDP and FDI (Foreign Direct Investment) as the basis for busi-ness
passenger growth and where available, national projections of increases in
tourism as the basis for non-business passenger growth) and translated that de-mand
into that for airport passenger terminals. A commonly used design parameter
for airports is that the terminal space for each peak period air passenger. With an
estimate of the number of peak period air passengers, we have used this design
parameter to estimate the area of air passenger terminals that are needed for each
country.
Since we have no reliable and consistent data on the area of passenger termi-nals
in each country, we have adopted a similar analytical method to that for con-tainer
berths – assuming that the current terminal space exactly matches the cur-rent
demand. We then apply the design benchmark parameters only to the project-ed
increase in demand.
The quantities of new air passenger terminals are more consistent between
countries than for most other types of infrastructure. While business passengers
to/from lower income countries tend look for the same standards in air passenger
terminals as in developed countries, non-business passengers tend to tolerate a
slightly lower quality of terminal infrastructure. So in our Scenario analysis, the
parameter for the provision of area of air passenger terminals is the same for all
Scenarios, but the unit cost per m2 is slightly lower than the global standards to
take account of the slightly lower infrastructure quality tolerated by non-business
passengers to MED11 countries.
2.4. Summary of additional transport infrastructure for each scenario
The quantities of all types of additional infrastructure are summarized in Table
3. These are the infrastructure needs that are taken forward into Part Two of this
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21. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
report where we estimate the costs of improving, upgrading, expanding and main-taining
the infrastructure networks.
The Common Development scenario is the most demanding for paved roads,
railways, runways and to a lesser extent, for air passenger terminals. For unpaved
roads and container terminals, the Polarized Development scenario is the most
demanding.
Table 3. Summary of additions to transport infrastructure for each Scenario
Type of
Units Reference
Common
Polarized
infrastructure Scenario
Development
Development
Failed
Development
Paved roads km 174,436 307,145 301,234 118,918
Unpaved roads km 32,296 58,995 88,313 30,152
Railways km 4,274 16,452 4,709 2,246
Runways km 11 92 17 7
Passenger terminals m2 888,062 976,869 888,062 732,652
Container berths number 45 42 64 38
Source: Previous Tables in this report.
21 CASE Network Reports No. 108
22. Robin Carruthers
3. Transport infrastructure
investment costs and
affordability
In this Part of the report we describe the method of estimating the four princi-pal
costs of operating transport infrastructure networks – bringing their condition
to a standard that minimizes total investment costs, upgrading their category to
provide sufficient capacity and minimizes operating costs, expanding the net-works,
and maintaining the improved, upgraded and expanded networks in good
condition. We express the investment costs for each of the four scenarios as abso-lute
amounts and as a percentage of projected GDP, as this indicates whether the
investment needed will be affordable or not.
3.1. Quantities of transport infrastructure
At the end of Part 1 of this Report we indicated the additional quantities of
transport infrastructure required to meet the benchmark standards for four different
scenarios and for six types of transport infrastructure. When added to the data or
estimates of currently existing transport infrastructure, the totals give the quantities
that are used in this Part of the report to estimate the investment needs. In Table 4
we show the total quantities of each type of transport infrastructure for each Sce-nario,
these totals being the sum of existing infrastructure and the additions needed
for each scenario.
3.2. Types of transport infrastructure investment
For each of the Scenarios we estimated four different types of infrastructure
cost:
CASE Network Reports No. 108 22
23. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
i. Improving the condition of infrastructure
First are the costs of improving the condition of current transport infrastructure,
so as to minimize maintenance costs of the infrastructure itself and the operating
costs of the vehicles using it. We obtained estimates of, or made assumptions
about, the quantity of current infrastructure in each country that is in good, fair,
and poor condition. To estimate the cost of bringing infrastructure in fair or poor
condition up to good condition, we multiplied the quantities of such infrastructure
by the unit costs of improvement – a one-time cost that can be incurred at any time
but preferably as soon as possible and before other types of investment.
ii. Upgrading categories of infrastructure
Second are the costs of upgrading the category of existing transport infrastruc-ture
to a level adequate to the demands made upon it. Representative activities are
widening existing roads or upgrading their surface, lengthening airport runways and
expanding port berths, and increasing the permissible axle load of railways. We
categorize infrastructure by its capacity or level of development. The essential ques-tion
is whether a piece of infrastructure has the capacity to meet the demands made
upon it. Some infrastructure is already adequate. For example, many of the roads
already have at least two lanes and hard shoulders giving them adequate capacity.
For other roads, the capacity of existing infrastructure is insufficient, such as: roads
connecting large cities that have enough traffic to justify four or more lanes but
presently have only two; railway networks that have not been fully updated to sup-port
25 ton axle loads, and; airports in some medium-size cities have runways that
are too short for mid-size aircraft such as the Airbus A320 or Boeing 737. Such
deficiencies are found with respect to all transport modes and markets.
Table 4. Total transport infrastructure for each Scenario
Type of Infra-structure
Units Reference
Scenario
Common
Development
Polarized
Development
Failed
Development
Paved roads Km 590,442 723,151 717,240 534,924
Unpaved roads Km 428,495 455,194 484,512 426,351
Railways Km 28,895 41,073 29,330 26,867
Runways Km 164 245 170 160
Passenger termi-nals
m2 1,575,407 1,664,214 1,575,407 1,419,997
Container berths Number 126 123 145 119
Source: Author’s estimates.
23 CASE Network Reports No. 108
24. Robin Carruthers
We made our own specifications of the desirable categories of infrastructure
that are appropriate for each mode and market, based on best practice international
standards. Where the total transport investment costs turn out to be unacceptably
high, it might be possible to relax some of the standards to give lower investment
costs, but this would result in higher operating costs.
We have used engineering estimates of the costs of upgrading each category of
infrastructure to the next highest level, but such estimates assume that the infra-structure
being upgraded is already in good condition. For that reason, we estimat-ed
the cost of upgrading infrastructure in two stages – first improving its condition
to good in its present category, and then upgrading it to the next category. In prac-tice,
these operations often occur together, but we believe that our two-stage ap-proach
accurately reflects the higher cost of upgrading infrastructure that is in less-than-
good condition.
The current condition of transport infrastructure can be assessed in several
ways. The simplest is for the engineers responsible for maintaining the infrastruc-ture
to make a subjective assessment, usually into some combination of the cate-gories
very good, good regular or fair, poor and very poor. The second is to use a
more objective method, such as the use of the international roughness index for
roads. The IRI defines the method and equipment to be used to measure the
roughness of the road surface, and then these measurements are used to calculate a
roughness index for the road, with the index being scaled between one and ten.
Sometimes equivalence between the subjective measures and the IRI is used, so
that particular values subjective assessments are considered to be comparable to
particular value ranges of the IRI.
A third method, sometimes used for rail track, is to equate particular combina-tions
of speed and axle load restrictions to subjective assessments. For example, a
rail track with no such restrictions would be assessed to be in excellent condition,
whereas one where a 20% speed restriction on the design speed (whether that de-sign
speed were 150km/hr or 60km hr) would be assessed to be in good condition,
a higher speed restriction would relegate the conditions to fair or regular, whereas
an axle load restriction would relegate the condition to poor or very poor. So far as
we are aware, there are no formal objective categorizations of the condition of
airport runways, but the subjective method is sometimes used. By some subjective
methods, runways in anything other less than fair or regular condition are unsafe
and should not be used.
CASE Network Reports No. 108 24
25. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
iii. Extending the length of networks or increasing the number of facilities
Third are the costs of extending existing networks and increasing the number of
infrastructure assets. The method of estimating the expansion of transport net-works
to meet global intensity is described in Part 1 of this Report. The costs of
expansion were estimated by multiplying the quantities of additional infrastructure
indicated by this method by the unit costs of providing new infrastructure. The
unit costs were derived from recent projects and studies in countries of the region,
including recent EUROMED studies.
iv. Maintaining infrastructure
Fourth, we estimated the costs of maintaining networks and assets in their im-proved,
upgraded, or expanded form. The poor condition of transport infrastruc-ture
in the MED-11 countries reflects insufficient investment in maintenance. Un-less
sufficient investment is allocated to maintenance, the benefits of improving
the condition, upgrading the category, or expanding the quantity of transport infra-structure
will be temporary. The belated realization of the importance of mainte-nance
is the driving force behind the creation in some countries of road funds that
enjoy dedicated, protected sources of funding.
Most previous assessments of transport infrastructure investment needs made
some attempt to include maintenance costs. The most common method is to add a
fixed amount (often 3 percent) of the replacement cost of the infrastructure. How-ever,
very few countries invest anywhere near this amount to keep their transport
infrastructure in good condition, although many at least maintain it in safe condi-tion.
The most common consequences of lower standards of maintenance are low-er
operating speeds and higher costs of maintaining the vehicles that use the infra-structure.
If rail track is not maintained in good condition, for example, with regular re-placement
of ballast, sleepers, fastenings, and worn rail (broken rails that impair
operational safety are usually replaced as necessary), the first consequence is a
reduction in operating speeds, followed by a reduction in axle loads and possibly
further reductions in speed. The railway company incurs higher operating and
capital costs as well. For example, because trains take more time to cover the same
distance, crew costs are higher. Lower axle loads mean that more cars are needed
to transport the same quantity of freight. These higher costs may quickly come to
exceed the savings realized by reducing investment in maintenance.
25 CASE Network Reports No. 108
26. Robin Carruthers
For most transport infrastructure we considered two types of maintenance –
annual and periodic. Annual maintenance is done to avoid or minimize the deterio-ration
of infrastructure related to climate and weather. For example, annual
maintenance includes the clearing of drains to ensure that water does not accumu-late
on and eventually seep into the surface of the infrastructure, thus accelerating
its deterioration. For a railway, annual maintenance includes the replacement of
broken fastenings, so sleepers can continue to withstand the pressure of trains and
maintain the correct distance between the rails.
Periodic maintenance is usually related to the effects of infrastructure use. For
example, the constant passage of vehicles will in time wear away the surface of a
road. If the surface is not replaced, the subsurface will become worn and require
rehabilitation or replacement. The passage of trains similarly causes the rails to
wear. Worn rails increase the risk of derailments.
We take the costs of both types of maintenance into account but convert peri-odic
costs to annual equivalents by dividing their cost by their estimated frequen-cy.
We estimate the frequency of periodic maintenance based on average volumes
of traffic using the infrastructure. Although similar considerations apply to port
berths, the time between periodic maintenance interventions is usually much long-er
than for other transport modes and thus depends less on use than on elapsed
time.
3.3. Unit costs of infrastructure investment
The total cost of each of the four types of infrastructure investment is estimated
by multiplying the quantities of infrastructure of each type by the unit costs of
improvement, upgrading, expansion and maintenance. The final overall total cost
is derived by adding together the totals for each type of activity.
Sources of unit cost information
The unit costs are derived from various sources, and for all of them the costs
have been adjusted to end-2010 values and expressed in US$. Where possible, unit
costs from one source have been checked against those from another. The first
source is the various studies undertaken between 2004 and 2006 for the EuroMed
project. Most of these had a base year of 2004 for their costs and were pre-feasibility
studies, for which the costs are typically about 20% to 30% lower than
CASE Network Reports No. 108 26
27. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
those that will be incurred when (and if) the project is implemented. So for unit
costs from these studies we have, in addition to updating the base year from 2004
to 2010, further adjusted the costs upwards by 20% to bring them closer those that
might actually be incurred. A second source is the World Bank ROCKS (Road
Costs Knowledge System) database.3 This only includes costs for road projects,
but the data is the costs actually incurred in the implementation of World Bank
road projects. The base year for the data is 2002, so their reliability, even when
updated to a 2010 base, is questionable.
Unit costs of improvement of transport infrastructure
Three other sources derive from the recent World Bank Africa Infrastructure
Country Diagnostic (AICD). First is Background Paper 11 (BP11), Unit Costs of
Infrastructure Projects in Sub-Saharan Africa. This provides a range of unit costs
for some rather general activities, including new construction of paved roads (the
category of the roads is not distinguished, but the length of the project was found
to influence the cost with longer projects having higher unit costs). As with the
ROCKS database, the average costs in BP11 are those actually incurred in imple-menting
projects, so no adjustment for being pre-feasibility estimates was neces-sary,
and since the base year was 2006, the updating to 2010 prices is more relia-ble
than that for the ROCKS data. Background Paper 14 from AICD (The Burden
of Maintenance: Roads in Sub-Saharan Africa) also relates only to roads, but
gives the overall cost of different types of road maintenance for each of the 44
countries included in the Diagnostic and from these and other data provided, it is
possible to estimate the unit costs of various maintenance activities. Unfortunately
these average costs are for the whole road network and not just for those sections
for which the total costs were estimated. The third and most comprehensive from
this source is Carruthers et al. (2008). This source provides unit costs for four
transport modes (roads, railways, ports and airports) and for each of the four in-vestment
activities used here.
Most of the unit costs shown in Tables 5 through 8 are based on those of the
EuroMed studies and Carruthers et al. (2008), adjusted to take account of slightly
different rates for some activities, for inflation and for the difference between es-timated
and actual costs.
3 http://www.worldbank.org/transport/roads/rd_tools/rocks_main.htm
27 CASE Network Reports No. 108
28. Robin Carruthers
Table 5. Unit costs of improvement of transport infrastructure
Type of infrastructure
Improvement categories
Good to very
good
Fair to very
good
Poor to very
good
US$ per km or per unit
4-lane road 25,000 150,000 350,000
2-lane road 10,000 70,000 150,000
1-lane 7,500 50,000 100,000
Unpaved road 5,000 10,000 25,000
Single track railway 50,000 500,000 500,000
Double track railway 75,000 750,000 1,00,000
Single track electric railway 125,000 750,000 1,250,000
1500m runway 150,000 750,000 3,000,000
3000m runway 250,000 1,500,000 6,000,000
Container berth 2,500,000 12,000,000 12,000,000
Bulk berth 2,000,000 10,000,000 10,000,000
General berth 1,500,000 8,000,000 8,000,000
Air passenger terminal (m2) 100 250 500
Source: Author’s estimates.
Unit costs of upgrading the categories of transport infrastructure
The only source of information on the categories of transport infrastructure in
the MED-11 countries is the EuroMed studies. Unfortunately, this data relates to
2004 and significant upgrading of much of the infrastructure has taken place since
then. We have used our own knowledge of specific recent upgrading projects to
update Carruthers et al. (2008) data using that from the EuroMed studies.
The categories used for each type of transport infrastructure are specific to that
mode and related to the different types of infrastructure available. The categories
usually relate to capacity but sometimes to method of construction. For example,
for Scenario 1 at the end of the period, 10% all paved roads should be 4-lane di-vided
highways, 20% should be 4-lane highways but without limited access, 60%
should be 2-lane and the balance (10%) could remain as single lane highways. For
countries in which the percentages are already met for specific types of infrastruc-ture,
no additional investment is assumed to be needed for upgrading categories.
There will be many instances where new investment will be needed to reduce con-gestion
(for example, 6-lane or more divided highways in urban areas) but without
undertaking specific demand analyses we cannot assess the needs for this addi-tional
investment.
CASE Network Reports No. 108 28
29. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
Table 6. Unit Costs of Upgrading of categories of transport infrastructure
Upgrade Unit Unit cost (US$)
2- lane to 4-lane divided limited access US$/km 1,500,000
2- lane to 4-lane divided US$/km 1,200,000
1-lane to 2-lane US$/km 200,000
1-lane gravel to 1-lane paved US$/km 100,000
1-lane gravel to 2-lane SST US$/km 100,000
Railways axle load to 25 tons US$/track km 120,000
Non-electrified to electrified railway US$/ track km 750,000
Single track to double track diesel US$/ track km 750,000
Gravel runway to paved runway US$ per linear m 5,000
1524m paved runway to 3000m runway US$ per runway 12,000,000
1000m paved runway to 1524m runway US$ per runway 4,800,000
Source: Author’s estimates.
The unit costs of upgrading existing infrastructure to the higher categories is
less than that of constructing new infrastructure to that standard, but it is more
than the difference between constructing new to the higher and lower standards.
Table 6 shows the unit costs of upgrading infrastructure from its current category
to the specified higher categories. For railways, some of the upgrading requires a
combination of unit costs, such as for electrification and increasing axle loads.
Unit costs of new infrastructure
The future lengths or quantities of transport infrastructure were based on the
benchmarking method described in Part 1. The unit costs of new construction
shown in Table 7 were applied to the difference between the benchmark
lengths/quantities and those currently available to estimate the costs of expanding
the networks to meet the benchmark standards.
Table 7. Unit costs of New Infrastructure
Type of infrastructure Unit Unit cost (US$)
4-lane divided paved road US$/km 3,500,000
2-lane paved road US$/km 1,000,000
1-lane paved road US$/km 150,000
Railway single track, 25t axle load, diesel US$/km 750,000
Railway single track, 25t axle load, electric US$/km 1,000,000
Railway signaling US$/km 350,000
Airport runway, 3000m US$/m 30,000,000
Airport passenger terminal US$/m2 500
Container berth US$/berth of 300m 16,000,000
Source: Author’s estimate.
29 CASE Network Reports No. 108
30. Robin Carruthers
Unit costs of maintaining transport infrastructure
Most countries, and almost all developing countries, do not invest enough in
maintenance of their transport infrastructure to prevent its condition deteriorating
over time. The standards to which infrastructure should be upgraded are the same
for the first three Scenarios, but since Scenario 4 is resource constrained (to the
recent % of GDP that has been invested in transport infrastructure) the standards to
which infrastructure can be maintained are less than the “very good” of the other
Scenarios and are different for each country.
Unit costs of routine and periodic maintenance
There are two types of maintenance needed for most types of transport infra-structure,
annual and periodic. The periodicity of the latter depends on the particu-lar
infrastructure and the intensity of its use.
For example, road pavements are usually designed for a life measured in
equivalent axle loads (EQAs), since it is the frequency of these axle loads that
determine when a road needs a new surface. We have derived an average frequen-cy
measured in years based on the average traffic density and composition and
EQAs per vehicle.
Given a twenty year analysis period, there would on average be two and a half
periodic maintenance activities for each paved road, three for each unpaved road,
four reballastings for each rail track and two resurfacings for each runway. We
have not included the cost of re-railing or re-sleepering of rail track because of
their long periodicity and the fact that we have already included these unit costs in
those of improving and upgrading. These costs have been applied to all transport
infrastructure – current that will have been improved and upgraded as well as new.
Table 8. Unit Costs of Periodic Maintenance
Periodic activity Unit Total cost in
US$ Periodicity Annual cost
in US$
Resurfacing 4-lane road US$/km 1,000,000 8 125,000
Resurfacing 2-lane road US$/km 50,000 8 6,250
Reballasting railway US$/track
km 15,000 5 3,000
Resurfacing runway US$/runway 5,000,000 10 500,000
Rehabilitating container berth US$/berth 10,000,000 10 1,000,000
Refurbishing air passenger
terminal US$/m2 200 5 40
Source: Author’s estimates.
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31. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
3.4. Results of the cost analysis
The results of the analysis are shown in two parts. The first part reviews the to-tal
expected investment by country and type of investment and the share of total
investments by country. The second part reviews the investment by country and
mode of investment, both parts covering all four scenarios. The following section
addresses the affordability of these investments.
Total investment costs and of types of investment
In Table 9 we compare the total investments by type of expenditure for each
scenario. Total investment in the Reference Scenario is almost US$675 billion
over the twenty year analysis period, with an average of nearly US$34 billion per
year. The Failed Development Scenario not surprisingly has the lowest total in-vestment,
just over US$500 billion over the twenty years, or just over US$26 bil-lion
per year, about three quarters that of the Reference Scenario. In Part 1 of this
Report we saw that the investment demands of Common Development Scenario
would be very high and this is confirmed in Table 9 which shows that even with
the reduced objective (reducing the difference between current and EU27 bench-mark
values by one third) it would need more than US1, 200 billion for the MED-
11 countries to achieve the benchmark standards. Spread over a period of twenty
years this would require an annual investment of more thanUS$60 billion, about
double that of the Reference Scenario. The Polarized Development Scenario
would require a total of more than US$900 million, equivalent to US$45 billion
per year, about one third more than for the Reference Scenario.
In all the scenarios the maintenance share is high, more than 45% of the total
for the Reference and Failed scenarios, about 40% for the Polarized Development
Scenario and more than 30% for the Common Development Scenario. Although
the Common Development Scenario has the lowest share of investment in Mainte-nance,
it has the highest actual investment. Despite the benchmark standards for
the Common Development scenario having been reduced, this scenario still re-quires
almost 50% of investment in new infrastructure. In contrast, the Failed and
Reference scenarios need only 29% of their investment in new facilities. The
Failed Development scenario compensates by having a high investment shares in
upgrading (11%) the existing infrastructure.
31 CASE Network Reports No. 108
32. Robin Carruthers
Table 9. Investment total and shares by type of activity
Scenario Maintenance Upgrading Improvement Expansion Total
Total investment US$ billion
Reference 306 61 112 195 674
Common Development 381 111 133 588 1,213
Polarized Development 362 61 137 343 903
Failed Development 238 56 69 147 510
Annual investment US$ billion
Reference 15.3 3.0 5.6 9.8 33.7
Common Development 19.0 5.5 6.7 29.4 60.6
Polarized Development 18.1 3.0 6.9 17.1 45.1
Failed Development 11.9 2.8 3.4 7.4 25.5
Share of total investment (%)
Reference 45 9 17 29 100
Common Development 31 9 11 48 100
Polarized Development 40 7 15 38 100
Failed Development 47 11 13 29 100
Source: Author’s estimates.
Investments by country
When the investments by country are considered, Scenario 2 (Common Devel-opment)
is significantly different to the other three. In Scenario 2 there is little
variation in the shares of investment allocated to Expansion, the lowest share be
49% (Palestine) and the highest being 70% (Algeria). Given that the Expansion
shares do not show much variation and are relatively high, the country shares of
the other types of expenditure also show little variation.
In the Reference Scenario and Polarized Development Scenario the ranges of
expansion investment vary from 42% (Egypt) to 0.5% (Palestine) and from 31%
(also Egypt) to 0% (also Palestine) respectively. Palestine has no need for invest-ment
in Expansion for Scenarios 1, 3 and 4 as its paved and unpaved road densi-ties
already exceed the benchmarks for those scenarios, and as it currently has no
ports, railways or airports we do not allocate any expansion investment to those
infrastructures. However, Palestine is currently planning to build a rail network,
and until the second Intifada (2000 to 2005) was well advanced on plans to build
both a port and an airport. None of these developments are included in our Scenar-ios,
as their economic and financial viability has not been assessed.
In the Reference Scenario, three countries (Algeria, Egypt and Turkey) would
account for about 70% of the total investment, leaving the remaining 30% for the
other eight countries. Turkey alone would account for one third of the total. At the
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33. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
other end of the scale, Lebanon and Palestine would each require only about 1% of
the total, with Israel and Jordan requiring only 2% each.
Turkey accounts for the highest share of investment in all four scenarios, con-sistently
with more than one third of the total. Algeria and Egypt have the next
highest shares of between 10% and 20% but show more variation between scenar-ios
and Egypt has a higher share in Scenarios 1, 3 and 4 and Algeria having a
slightly higher share in Scenario 2. Palestine has consistently the lowest share,
ranging only between one third and one half of one per cent of the total. Libya has
the highest range of its investment share, from a low of just over 5% in the Refer-ence
Scenario to more than 12% in the Polarization Development scenario.
Table 10. Country shares of total investment, %
Reference
Scenario
Common
Development
Polarized
Development
Failed
Development
Algeria 16.7 16.5 9.8 14.6
Egypt 20.0 15.9 19.5 16.8
Israel 2.1 2.4 1.6 2.7
Jordan 2.3 2.0 2.2 2.0
Lebanon 0.8 1.1 0.6 1.0
Libya 5.5 8.9 12.6 9.7
Morocco 9.3 8.6 8.8 8.5
Syria 5.8 5.0 5.9 5.6
Tunisia 4.1 3.6 2.6 3.4
Turkey 33.0 35.7 36.0 34.9
Palestine 0.5 0.3 0.4 0.7
MED 11 100.0 100.0 100.0 100.0
Source: Author’s estimates.
In the Common Development Scenario, the total investment of more than
US$3,500 billion would have a similar distribution, but Turkey would account for
a slightly larger share and Egypt a slightly smaller share than in the Reference
Scenario. Palestine’s share would reduce to a little more than half of the 0.5% of
the Reference Scenario. Investment would remain heavily concentrated in Turkey,
Algeria and Egypt, these three countries accounting for about 68% of the total.
Israel, Jordan, Lebanon and Palestine would account for the smallest share of the
total, only about 6% of the total between them.
The Polarization Scenario gives Egypt and Libya their largest share of the four
scenarios, nearly 20% for Egypt and nearly 13% for Libya. Syria and Jordan also
have their largest shares in this Scenario, but not by with such large differences to
the other scenarios. Part of the reason for the larger shares of these countries in the
33 CASE Network Reports No. 108
34. Robin Carruthers
Polarization Scenario is their role as transit countries for higher trade between the
MED-11 countries rather than with the EU-27.
Despite having the lowest total investment, the shares of that total between
counties in the Failed Development Scenario are not very different from those in
the Reference Scenario. Algeria and Egypt have slightly lower shares while Libya
has a rather higher share and Turkey a slightly higher share. The shares of all the
other countries differ from those of the Reference Scenario by less than one per
cent.
Investment by mode
There are two ways of looking at mode shares. The first is to see the total in-vestment
for each mode, and this is shown in first part of Table 11 for the four
scenarios. The second way is based on the share of investment for each mode, and
this is shown in the second part of Table 11. Although there are significant differ-ences
in the total investments for each mode, the shares of investment going to
each mode are remarkably similar between scenarios with there being a 3% or
difference in modal shares.
Table 11. Mode shares and investment by mode for MED-11 countries for each
scenario
Scenario Roads Railways Airports Ports Total
Total investment, US$m
Reference 600,018 37,111 24,585 11,859 673,574
Common Development 1,097,044 67,509 36,398 11,585 1,212,537
Polarized Development 826,171 37,146 25,440 13,759 902,515
Failed Development 600,018 37,111 24,585 11,859 510,343
Share of investment, % of total
Reference 89 6 4 2 100
Common Development 90 6 3 1 100
Polarized Development 92 4 3 2 100
Failed Development 89 6 4 2 100
Source: Author’s estimates.
Paved and unpaved roads
Roads account for the highest modal investment share for all scenarios, with
the lowest share being 89% for the References and Failed Development Scenarios
and the highest being for the Polarized Development Scenario at 92%. With this
very high share, there is little opportunity for the shares of the other modes to
show much variation.
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35. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
Railways
While the railways share only varies between 4% and 6% of the total, the actu-al
investment varies between US$37billion in the Reference, Polarized and Failed
Development Scenarios and more than US$ 67 billion in the Common Develop-ment
Scenario. Although the rail investment is highest in the Common Develop-ment
Scenario, its share of investment is similar to those of the Reference and
Failed Development Scenarios.
Airports
The pattern for airport runways and passenger terminals is similar to that of
railways, that is a very high investment in the Common Development Scenario
(more than US$37 billion for runways and terminals taken together) and lower but
similar investments levels in the other scenarios (about US$25 billion).
Port berths
The investment needed in port berths (expansion only for container berths but
improvement, upgrading, improvement and maintenance also for general freight
berths) is similar for all four scenarios at about US$12 billion although the Polar-ized
development has about US$2 billion more. The Common Development Sce-nario
does not have much higher investments that the other scenarios, as we have
assumed that the Scenario will include a large increase in the ro-ro share of MED-
11 to E-27 trade and this will detract from the container share. This scenario also
has the highest efficiency of use of container berths, also contributing to a lower
need for investment.
Modal investments by country
The only three modes that display significant differences between the scenarios
in terms the share of modal investments between countries are paved roads, un-paved
roads and railways. For these three modes, Turkey would require more than
one third of the total investments, except for unpaved roads and railways in the
Polarized Development Scenario where the shares would fall to about 21% and
26% respectively.
For paved roads, Algeria’s share would be about 17% except for the Polarized
Development Scenario where it would fall to about 7%. Egypt’s share would fall
from about 20% in the Reference Scenario to 15% in the Common Development
Scenario. Libya’s share of paved road investment is the most variable between
scenarios, with 6% in the Reference Scenario, rising to 10% in the Common De-velopment
Scenario and to 14% for Polarized Development, but falling to 11% in
35 CASE Network Reports No. 108
36. Robin Carruthers
the Failed Development Scenario. Israel, Jordan and Lebanon would have consist-ently
low shares of paved road investment, at 3%, 2% and 1% respectively. Mo-rocco
would take about 10% of the paved road investment in all scenarios, while
Syria would require a consistent 5% and Tunisia a consistent share of between 2%
and 4%.
Algeria’s share of unpaved road investment would increase from an average of
about 22% in the Reference Scenario to more than 29% in the Polarized Develop-ment
Scenario. Egypt’s share would be about 20% in the first three Scenarios,
reducing slightly to 16% in the Failed Development Scenario. Israel, Lebanon,
Jordan and Palestine require little or no investment in unpaved roads, Libya and
Tunisia about 5%, Morocco about 10% (other than in the Reference Scenario
where it would only require 4% of the total.
After Turkey, Algeria and Egypt would need the next greatest share of railway
investment with about 20% each. Algeria’s share would increase to over 30% in
the Polarized Development Scenario. Syria and Tunisia would each require about
6% to 7% for all scenarios, the other countries sharing the remainder with between
0% (Palestine and Libya as they currently do not have railways) and 2% (Jordan)
For container berths we have only included the costs of the infrastructure and
not the superstructure. The latter includes all the container handling equipment and
is usually provided by the terminal operator, now invariably under a concession
agreement. Superstructure is not included for any transport infrastructure. The port
share is small as it is only container berths. We have not had opportunity to ana-lyze
all the data for bulk solid and bulk liquid berths, but most of investment in
these is provided by the private sector.
3.5. Affordability of total transport investments
While total investment in transport is an important indicator of how much in-vestment
is needed, it does not reflect how affordable that investment would be.
For that we look at the investment as a share of GDP. This is reflected in Table 12.
While being an import concept, affordability in terms of investment as a share
of income does not have any objective specification – what could be affordable to
one country might not be to another that has different economic and social objec-tives.
One criterion that is often used to assess affordability is to compare the in-vestment
with what share of investment is actually incurred in other countries, and
this comparison is made in the next Section of this Part of the Report. Anticipating
the conclusions from this Section, investment of more than 2% of GDP has not
CASE Network Reports No. 108 36
37. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
been maintained consistently by any country, although about one third of the re-porting
countries have invested more than 1% for at least a decade.
Table 12. Transport investment as a share of GDP, %
Reference Common Polarized Failed
Algeria 2.1 4.5 1.7 1.4
Egypt 1.6 2.3 2.1 1.0
Israel 0.2 0.6 0.2 0.2
Jordan 1.5 2.6 2.0 1.0
Lebanon 0.4 1.2 0.4 0.4
Libya 1.3 4.3 4.0 1.7
Morocco 2.0 3.8 2.6 1.3
Syria 1.9 2.5 2.7 1.4
Tunisia 1.8 3.1 1.5 1.1
Turkey 0.9 2.1 1.3 0.7
Palestine 1.5 3.0 1.5 1.4
MED 11 1.2 2.4 1.6 0.9
Source: Author’s estimates.
The Common Development Scenario would require all countries other than Is-rael
to invest 2% of GDP or more in transport infrastructure, while in the Refer-ence
Scenario this level of investment would only be needed by Algeria and Mo-rocco.
Egypt, Jordan, Libya, Morocco and Syria would need at least this level of
investment for the Polarized Development Scenario, while none of the countries
would need it for the Failed Development Scenario.
The only country/Scenario combinations that would need more than 4% of
GDP (and therefore perhaps be financially infeasible) would be Algeria and Libya
in the Common Development Scenario and Libya in the Polarized Development
Scenario.
3.6. International comparisons of transport investment
The International Transport Forum (ITF) produces an annual report on
transport investment as a share of GDP by those of its member countries that pro-vided
data. About 41 countries have provided more or less complete data for at
least three of the last ten years.
These reports show that Western European Countries (WECs) reduced their
transport investment share of GDP from about 1.5% of GDP in the 1970s to about
37 CASE Network Reports No. 108
38. Robin Carruthers
1% of GDP in the 1980s and had reduced the share to about 0.8% by this decade.
By 2009, Denmark has the lowest share at about 0.5 % and Spain the highest at
about 1.1%.
Interpolating the available data for the last ten years, it appears that three coun-tries
invested more than 2% of GDP in transport – Japan, Albania and Croatia.
Japan’s high average conceals a rapid decline, from more than 3.7% in 2000 to
less than 0.6% in 2009. A further three countries (Latvia, Italy and the Czech Re-public)
invested between 1.5 and 2.0% of GDP. Thirteen more countries invested
more than 1% of GDP and twenty two more countries between 0.5% and 1% of
GDP. The average of these 41 countries was 1.0% of GDP. The only MED-11
country included in the ITF dataset is Turkey, which invested only between 0.3%
and 0.5% of its GDP in transport in each reported year between 2000 and 2009.
Although the ITF data does distinguish between new investment and mainte-nance,
within new investment it does not distinguish between investment in new
facilities (in our terminology network expansion), improving condition and up-grading
categories. Even for maintenance, its data is very incomplete.
Also, most of the ITF members that do report data are developed countries that
have been investing in their transport infrastructure for centuries, whereas most of
the MED-11 countries are still developing and have only been investing seriously
in transport infrastructure since their independence or since the collapse of the
Ottoman Empire by the end of the First World War. So the ITF members do not
have the same need to invest in basic transport infrastructure. This difference is
reflected in the Normalized infrastructure densities for the MED-11 and EU-27
countries.
Mode shares
In the Western European countries, the share of investment in road infrastruc-ture
has declined slowly with a gradual increase in rail investment. While the share
of road investment amounted to close to 80% in Western Europe in 1975, figures
for 2009 put it at 66% of total investment in transport infrastructure. The share of
inland waterways has remained at a constant 2% in recent years. The rail share of
investment is particularly high in Austria (65%), the United Kingdom (55%), Lux-embourg
(52%), Sweden 45% and Belgium (41%). The trend observed in our data
for Western Europe is partly a reflection of the political commitment to the rail-ways.
Transport investment in other regions
The transport investment shares of GDP for the MED11 countries are compa-rable
to those of the lower middle income countries of Sub-Sahara Africa (SSA)
CASE Network Reports No. 108 38
39. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
(Carruthers et al., 2008). The recent World Bank study on transport infrastructure
produced broadly similar results for the 44 countries included in its study as our
analysis of the MED-11 countries. Table 13 shows the investment shares of GDP
projected in the AICD study for the SSA countries. The study used two scenarios.
The standards in the Base Scenario (compatible with those used in our study but
based on a Connectivity approach) were considered unaffordable for the lowest
income countries, so alternative lower standards were assessed in what was called
a Pragmatic Scenario. These lower standards are not relevant to our analyses as
none of the MED-11 countries are low income or economically and socially frag-ile
as defined in the AICD study.
For the Base Scenario, the average share of GDP for the Resource-rich and
Middle-income (all of which are low Middle-income countries) were 1.7% and
0.7% respectively.
Unlike the ITF countries that already have well developed transport networks,
those of the MED-11 and SSA countries are still in the stage of development and
so need investment particularly in upgrading and expansion.
Table 13. Projected transport infrastructure investment for Sub-Saharan Africa,
% of GDP
Country group Base scenario Pragmatic scenario
Low-income (fragile) 8.2 4.8
Low-income (not fragile) 2.9 1.7
Resource-rich 1.7 1.0
Middle-income 0.7 0.4
Average for all Sub-Saharan Africa 2.0 1.2
Source: Carruthers et al. (2008).
For the MED-11 countries, the share of total investment allocated to expansion
of the transport networks is relatively small (between 20% and 40% of the total,
overlooking the Common Development Scenario where network expansion would
require almost 70% of the total investment, despite the quite extensive additional
infrastructure needed to reach the benchmark targets as shown in Table 3 in the
Part 1 Report.
Routine and periodic maintenance expenditure would account for the largest
share by type of activity, at 40% to 50% share However, closer examination of the
ITF results shows that much of the maintenance expenditure is missing whereas
that for new investment appears to be complete, so the maintenance share is under-reported.
39 CASE Network Reports No. 108
40. Robin Carruthers
When the improvement share (about 20%) which is really deferred mainte-nance,
is added to that of routine and periodic maintenance, the share comes to
about 60%. This is closer to the share estimated for 44 Sub-Saharan African coun-tries
in a recent World Bank study.
Maintenance share of transport investment in developed countries
The balance between road maintenance and investment has remained relatively
constant over time in many regions, with maintenance making up 30% of total
road expenditure on average.
The volume of maintenance for road infrastructure in WECs has increased
slightly more rapidly than the volume of investment; the former grew by 25%,
while the latter by around 21% from 1995 to 2008. This has resulted in an in-creased
share of maintenance in total road expenditure; from 26% in 1997 to 30%
in 2009.
Similar to the growth in volume of investment, the volume of maintenance has
grown strongly in Central and East European Countries (CEECs). The share of
maintenance in total road expenditure has declined slightly, from 30% in 1997 to
27% in 2009. The increase in maintenance volumes in 2006 and 2007 (Figure 4)
was partly due to a major increase in road maintenance in Hungary during those
years.
In North America, the volume of maintenance has been relatively constant over
time. The share of maintenance has declined from 33% in 1997 to 31% in 2009,
according to preliminary estimates. As with investment data, data on maintenance
is also prone to limitations and uncertainties (such as the allocation of spending
between maintenance and renewals).
3.7. Conclusions
We have assessed the costs and affordability of providing the transport infra-structure
necessary for the MED-11 countries to achieve their benchmark quanti-ties,
and maintaining that infrastructure in a condition that is most likely to opti-mize
the combination of infrastructure maintenance and vehicle (including road
and rail vehicles) and in the case of airports and container berths, to avoid severe
congestion.
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41. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
The costs of providing this infrastructure expressed as a % of GDP have been
found to be comparable to other developing countries that have reported investing
or are expected to invest. The shares of GDP foreseen for transport investment in
the MED11 countries are higher than in the EU27 countries over the last decade
and comparable with those projected for 44 Sub-Saharan African countries for the
next two decades to achieve broadly similar infrastructure quantities and qualities.
41 CASE Network Reports No. 108
42. Robin Carruthers
4. GDP and trade growth impacts
of transport investment
In Part three of the report we deal with the impact of investment in transport in-frastructure
on GDP and international trade. These two impacts are linked through
the standard definition of GDP being the total market value of all final goods and
services produced in a country in a given year, equal to total consumer, investment
and government spending, plus the value of exports, minus the value of imports.
GDP = Consumption goods and services (C) + Gross Investments (I) +
Government Purchases (G) + (Exports (X) - Imports (M))
Transport investment contributes directly to GDP through I (gross investments)
and possibly through G (government purchases) and less directly through C by
facilitating the consumption of goods and services. Although a significant part of
those goods and services are related to transport, most of them are for other sectors
of the economy. Transport activities typically account for between 6% and 10% of
GDP, although this does not include transport activities undertaken on their own
behalf by enterprises in other economic sectors. Few reliable estimates are availa-ble
of these own account transport activities, and to a large degree their size de-pends
on the efficiency of enterprises in the transport sector itself – the less effi-cient
they are the greater the incentive for enterprises in other sectors to undertake
transport activities themselves.
In addition to these impacts of investment in transport infrastructure on the val-ue
of final goods produced within a country, there is a secondary impact via any
net increase in international trade (X-M). We deal first with the impact on the val-ue
of domestic goods and services and public and private investment (I +G), and
then separately on changes in imports and exports (X-M), and only bring them
together at the end of the analysis. This separation follows conventional analyses
where the two sets of impacts are treated independently of each other – the im-pacts
on the value of output being measured quite differently to the impact on
exports and imports.
In respect of the impact on trade, if this increase is skewed in favor of imports
over exports, the impact on GDP will be negative. So if the objective of the
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43. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
transport investment is to bring about higher GDP (or higher GDP growth) then it
is important to distinguish between impacts on exports and imports.
The Part 3 of the Report has three sections. In the first we summarize previous
studies of the impact of investment in transport infrastructure on economic
growth; in the second we summarize previous studies of the impact of transport
infrastructure investment on international trade; the third part comprises an appli-cation
of the overall conclusions from these previous studies to the investments
implied in each of the four scenarios.
Provision and maintenance of transport infrastructure does not of itself contrib-ute
anything to economic and social development other than through its direct
employment and the multiplier effects of that employment. What the provision and
maintenance of more and better infrastructure can do is to facilitate the provision
of transport and logistics services that will have more direct economic and social
impacts. But even better transport and logistics services are only intermediate
products that contribute to the achievement of economic and social objectives. So
trying to assess the impact of investment in transport infrastructure on economic
and social outcomes requires a long and complex analysis
The difficulties in establishing the links between transport investment and eco-nomic
and social outcomes are part of the explanation as to why until the last dec-ade
there had been few attempts to measure these impacts, and even fewer even
partially successful attempts.
4.1. Investment in transport infrastructure and economic growth
Most of the attempts to assess the impact of transport infrastructure on econom-ic
wealth (or of changes in transport infrastructure on changes in economic wealth)
make use of a version of the Cobb-Douglas production function. Application of
the function consists in estimating the parameters of an infrastructure augmented
production function.
If we consider countries i = 1…n at a time t = 1… t, the model is of the form:
ఉܺ௧
ఈܪ௧
ܻ௧ ൌ ܣܭ௧
ఊ ܸ௧,
where Yit is the aggregate added value, Kit is a measure of physical capital, and Hit
of human capital, Xit is infrastructure capital and Vit is an error term.
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44. Robin Carruthers
Since it is the infrastructure services that impact on value added and this is dif-ficult
to measure directly, the application of the model assumes that the quantity of
infrastructure services is proportional to the quantity of infrastructure capital. The
basic model also assumes constant returns to scale, so that the sum of exponents is
one. Dividing through by Lit and taking logs, the following expression results:
ݕ௧ ୀ ାఈାఉାఊ௫ା௩
where yit = log (Yit) and capital stocks and outputs are in log per worker terms.
The fixed effects ai capture all the timeless components of the total factor
productivity. It is also possible to include in this linear specification some time
effects to capture the common factors in the total factor productivity. This is the
form of the model most used in assessments of the relationship between transport
infrastructure and economic output.
It is difficult to interpret directly the parameters of equation, since infrastruc-ture
capital appears twice, once its own but also as a part of aggregate capital Kit.
Consequently, the parameter cannot be interpreted as the infrastructure elasticity.
So the elasticity of output with respect to infrastructure is not constant and de-pends
on the ratio of capital stocks. However, infrastructure stocks typically ac-count
for relatively small portions of overall capital stock, so the difference be-tween
the genuine elasticity evaluated around the sample mean and the naïve esti-mate
should be small.
There are two related but different approaches to estimating the impact of in-frastructure
on economic growth – the first uses a constant elasticity model while
the second allows for variation in elasticity, usually through a threshold approach.
Constant elasticity models
Canning and Bennathan approach
While several previous studies had considered the impact on transport invest-ment
on the economic growth of a single country (for example Aschauer, 1989),
one of the first analyses using the constant elasticity approach and covering a large
number of countries looked at the social rate of return on transport investment by
estimating the effect on aggregate output (Canning and Bennathan, 2004).
The approach to finding the benefits of infrastructure was to estimate an aggre-gate
production function for a panel of 97 countries over a period of 40 years
(1960 to 2000), including as explanatory variables physical capital and human
capital as well as one transport infrastructure variable – paved roads, but also for
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45. TRANSPORT INFRASTRUCTURE FOR MED11 COUNTRIES
electricity generating capacity. The marginal product of infrastructure was meas-ured
by its contribution to aggregate output. In contrast to an earlier analysis of the
same data (Canning, 1999) this analysis used a translog transformation of the
standard Cobb-Douglas production function to avoid the imposition of a declining
marginal productivity of capital as the capital output ratio rises. This declining
marginal product was believed by the authors to almost guarantee a high rate of
return on physical and human capital in low income countries, which they consid-ered
to be in conflict with observed rates of return to private capital investment.
The authors concluded that there were diminishing rates of return to paved
roads, and that this implied “little support for a policy of purely infrastructure led
growth.” However, they also concluded that “infrastructure (paved roads and elec-tricity
generation) is found to be strongly complementary with both physical and
human capital, giving it an important role in a process of balanced growth. The
possibility of acute infrastructure shortages if investment in other types of capital
takes off but infrastructure investment lags behind”.
Considering only the results for paved roads, the authors found that the rates of
return were similar to or even lower than, those for other forms of capital. For a
few middle income countries with an acute shortage of paved roads, there were
very high returns on investment in this infrastructure. The authors also observed
that these high rates of return followed a period of sustained economic growth
during which road building stocks had lagged behind investments in other types of
capital, and that this effect was accentuated by the low costs of road construction
in middle income countries relative to both poorer and richer countries.
An examination of the study results for paved roads in developing countries
produced results that conflicted with the authors’ conclusion about the lower rate
of return on paved roads compared to other investments. The authors only provide
paved roads results for 41 countries and of these only 26 are developing countries.
For these 26 countries, the average rate of return on investment in paved roads is
27.6% while that on other capital is only 5.0%.
Calderon and Serven approach
One of the most authoritative and comprehensive analyses of the effects of
transport infrastructure on economic growth is provided in Calderon and Serven
(2004). Their panel analyses used data from 121 countries over a forty year time
period (1960 to 2000) for four different types of infrastructure (telephone lines,
electricity generating capacity, roads and railways and access to safe water) and
found that the volume of infrastructure stocks has a significant positive effect on
long-run economic growth. This conclusion is robust to changes in the infrastruc-ture
measure used as well as the estimation technique applied. They also found a
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46. Robin Carruthers
positive but less robust relationship between infrastructure quality and growth,
although they observed that this might reflect limitations of the quality measures
available or also the fact that quantity and quality are strongly correlated, so that
quality effects on growth are already captured by the quantity measures. The au-thors
also investigated the impact of infrastructure (including transport) on income
inequality (measured by the Gini coefficient) and found a statistically significant
negative correlation, that is increasing the quantity and quality of transport infra-structure
would reduce income inequality. Both conclusions were applicable to all
types of infrastructure, including roads and railways.
The authors concluded that these results were obtained in a framework that
controlled for reverse causation (one of the greatest sources of doubt in assess-ments
of the relationship between infrastructure and growth), and that they sur-vived
a variety of statistical tests that failed to show any evidence of misspecifica-tion.
From this they concluded that the results reflect causal, and not merely coin-cidental,
effects of infrastructure on growth and inequality.
The measures of the quantities of road and railways used in the analyses were
not absolute measures, but were similar to one of the benchmark measures in our
analysis of transport infrastructure demand described in Part 1 of this Report. For
transport infrastructure the measures were length in kms per unit of total land area.
In Part 1 of this Report we observed that using different indicators of transport
infrastructure density (by area, per capita or per unit of GDP) produce very differ-ent
results as the three measures are vey weakly correlated and in some cases neg-atively
correlated. We also observed that for many countries, especially those that
have large areas of desert or otherwise unproductive areas using total land area (as
used by Calderon and Serven, 2004) is a less appropriate parameter to assess
transport density than agricultural or arable land area. So if Calderon and Serven
(2004) had used a different measure of transport intensity (using population, GDP
or agricultural or arable land area to derive the parameter) they would have pro-duced
different regression parameters.
For the quality measure of transport infrastructure, the authors used the % of all
roads that are paved. The measure of unpaved roads in the database used by Calde-ron
and Serven (2004) is inconsistent between countries. The specification of an
unpaved road is imprecise, with some countries including even minor paths and
tracks while others only include those for which one the three principal levels of
administration (national, regional and local) has a specific responsibility. So if the
quantity of unpaved roads is unreliable, then so is the % of unpaved roads as a
measure of road quality.
Notwithstanding these reservations, their analysis did provide a robust conclu-sion
of a positive relationship between economic growth and quantity of transport
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