1 Islamic Development Bank Funding priority road transport projects for economic prosperity IDB...

1Islamic Development Bank

Funding priority road transport projects for economic prosperity

IDB Vision and Programmes for Asia, Africa and Europe

Salim RefasTransport Economist

Islamic Development Bank

November 28, 2012


Agenda

• Introduction• Roles of IDB • Drivers of change in the road

transport sector• The way forward


Introduction (i) Roads lead to prosperity Roads are expected to spur economic

growth through three main channels

More infrastructure capital leads to more production

Better infrastructure improves the productivity of

other factors

Quality infrastructure attracts investments


Introduction (ii) but not all roads lead to prosperity • Need to understand demand patterns and better prioritize

road investments (from accessibility paradigm to mobility paradigm)

• Need to systematically complement physical investments by trade and transport facilitation activities to tackle non-physical barriers especially at border crossings

• Need to adapt the evaluation of road projects to better assess the spatial impacts, network effects and indirect economic benefits (understand the economic geography of transport)


Roles of IDB (i) IDB at the crossroads of Africa, Asia and

LAS regions

• 22 countries in 1975 → 56 countries in 2009• 22 countries in 1975 → 56 countries in 2009

• A Unique Model of South-South Cooperation• 56 members spreading over 4 continents

Africa: 27

Asia: 26Europe: 2

Latin America: 1


Roles of IDB (ii)

Infrastructure financing by IDB Group in US$ Mn

• funding priority road projects

– More than $4bn of financing for the road transport sector since inception

– Significant scale-up since IDB Group reform

– Scale-up with other development banks and private sector participation through PPPs

– Identification of 107 priority transport corridors in Asia, League of Arab States and Sub-Saharan Africa (Study on Transport Corridors in OIC Member Countries, 2011)

Infrastructure for Growth & Sustainable Development,

2nd pillar of IDB Group new Mid-term business strategy


Roles of IDB (iii)•facilitating regional integration

– Funding of priority regional corridors in Africa, Asia and LAS, such as the CAREC corridors in Central Asia, the Trans-Saharan route in Africa, etc.

– Intra-OIC trade promotion and Trade and Transport facilitation activities

– Development of cross-border infrastructure and SEZs

ECOWASEconomic

Community of West African States

ECOWASEconomic

Community of West African States

UEMOAWest African

Economic and Monetary Union

UEMOAWest African

Economic and Monetary Union

AMUArab Maghreb

Union

AMUArab Maghreb

Union

LAS League of

Arab States

LAS League of

Arab States

GCCGulf Cooperation

Council

GCCGulf Cooperation

CouncilECO

Economic Cooperation Organization

ECOEconomic

Cooperation Organization

ASEANAssociation of

Southeast Asian Nations

ASEANAssociation of

Southeast Asian Nations

COMESACommon Market for

Eastern and Southern Africa

COMESACommon Market for

Eastern and Southern Africa

And more (SAARC, IGAD, CEN-SAD, etc.)

And more (SAARC, IGAD, CEN-SAD, etc.)


Roles of IDB (iv)• generating knowledge

Knowledge products financed in part by IDB in 2011-12 in road transport sector–ECO Priority Road and Rail Routes and Infrastructure Projects Study–Road Transport and border crossing facilitation in the LAS region–League of Arab States Truck Accident Causation Feasibility Study–Program for Infrastructure Development in Africa–Sub-Saharan Africa Transport Policy Program…

• promoting cooperation

Landmark developments in 2012-Creation of the Cooperation and Capacity Development Vice-Presidency-Expert Group Meeting on inter-regional cooperation to enhance trade-Scale-up of the reverse linkages activities


Drivers of change in the road transport sector (i)

Fin. MechanismsPPP

Economic growthGlobal trade

ICTTransport equipment

Energy availabilityClimate change

Pop. growthUrbanization

GovernanceRegulation

Source: adapted from ICF International (2008), Long Range Strategic Issues Facing the Transportation Industry


Drivers of change in the road transport sector (ii) Some drivers of change in OIC countries- Huge demographic pressure 1.51 billion total (22.8% of global

population), growing 5 times faster than OECD (2% AGR)- Fast-paced urbanization (42.3% in 2000, 47.4% in 2010)- Increasing reliance on imports (6.1% of total world imports in

1999, 9.2% in 2008)- Sustained economic growth (5.3% in 2010)- Fast-growing car ownership rates- Slow adoption and harmonization of transport regulations

(e.g. only 19 MCs ratified TIR convention and 18 ratified Convention on Road Signs and Signals)

- Low participation of private sector in road financing and O&M

- Slow professionalization of the freight transport sector and slow development of modern logistics (with some exceptions)

Growing demand

Policy challenges


Drivers of change in the road transport sector (iii)but change with the same fundamentals

- With around 80% of passenger-km and over 50% of freight-ton km. roads will remain the backbone of the transport sector in OIC regions

- Road transport remains capital-intensive sector with long-term financing needs

- Closing the infrastructure gap and sustaining quality and safety of roads is still the main challenge for most developing countries

► Need to scale-up and adapt


The way forward (i)

Scale-up investment in the road sector

• Network expansionRoad density in OIC MCs is much lower

than global averages. Investment don’t keep pace with demand growth

• Network upgrading and maintenanceOut of a total road network length of

3.6 million km, only 43% is paved. Financing road Maintenance is a major challenge

• Network interconnectionOIC MCs take advantage of their geography

to develop air and maritime transport hubsbut they are poorly connected to their hinterland

Source: SESRIC, 2011

Source: Rodrigue, 2010


The way forward (ii)Adapt to changing context(i) adapt to socio-economic priorities

*with a view on enhancing human capital productivity and innovation capacity

Employment Generation

Sustainability & Inclusiveness

Enhancing “Software”* for Economic Growth

Value-Adding Productivity

Co

nn

ectivity: Ph

ysical & K

no

wled

ge

Arab states

SSA

Asia+Surinam

CIT & Albania

IDB Differentiated regional approaches


The way forward (iii)

(ii) adapt to changing patterns of global trade

Focus on projects and activities to improve logistics performance of member countriesand integrate global supply chains

The supply chain of hard drive assembly in Thailand, Source: Chen, 2009

Source: SESRIC, 2011


The way forward (iv)(iii) adapt to local challenges using international best practices and experience of other member countriesEx1: Bus Rapid Transit

Curitiba, Brazil

Istanbul, Turkey (2007)

?

Ex2: Trade and transport facilitation

• Experience of Turkey in the management of modern border posts• Experience of Malaysia and Senegal in Single-Windows

Curitiba, Brazil (1974)


The way forward (v)(iv) Integrate !!

► integration within and between different modes of transport for optimal efficiency

port-hinterland connections and rail-road intermodal transport

► integration with the environment for optimal sustainability green transport and land-use planning

► integration with industrial/trade strategies for optimal impactnational logistics strategies

► integration between all stakeholders for optimal synergiesrole of the private sector in financing roads and providing

trucking and logistics services, role of regional and international institutions


The way forward (v)Insights on IDB strategy

Effective delivery

Knowledge generation and Innovation

Connectivity

Scale-up

Sustainability

• Growth of activities at 10-15% p.a.• Scale-up financing through partnerships and

resource mobilization (e.g. from private sector)

• Operational excellence and results-based management

• Development of a new IDB transport policy

• Mainstreaming of innovation in IDB activities• Development of knowledge-based services• Strengthening of partnerships with expert

institutions and global initiatives (e.g. road safety)

• Institutionalization of Capacity Development and Reverse Linkages

• Enhanced dialogue with regional institutions and promotion of inter-regional cooperation

• Strategic focus on sustainability issues


ConclusionThe two-way road-Roads spur production, increase productivity and attract investments

-But roads also kill, pollute and crowd-out resources

-Successfully developing and maintaining road infrastructure is a major socioeconomic development challenge that requires sound strategic planning and economic evaluation, efficient resource mobilization, effective delivery and adaptation to international best practices and changing context.

IDB at the service of its member countries to face together these challenges


Thank youشكرا

Salim [email protected]

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