Infrastructure and
Development
case of Transportation
Local, Regional and National Perspectives
Is the Transport Sector Important to
Development?
Value added by transport is estimated to
account for 3 to 5 percent of GDP.
Public investment in transport typically
accounts for between 2.0 and 2.5 percent
of GDP and may rise as high as 3.5
percent in countries modernizing outdated
transport infrastructure or building new
transport infrastructure
Transport likewise commonly accounts for
5 to 8 percent of total paid
employment
Public Infrastructure Investment Is Large
Proportion of Total and Public Investment in
Developing Countries
60
50
Total Investment
Public Investment
40
Percentage
30
20
10
Low Income Middle Income
Countries with Decentralized
Road Maintenance Have Better Roads
40
35
30
Unpaved Roads
Paved Roads
25
Percentage
20
15
10
Centralized Decentralized
Is Transport Sector Important to
Development?
Demand for freight and passenger transport
in most developing and transition
countries is growing faster than GDP
-the bulk of this increase is for road
transport.
Although demand for freight transport
(except air transport) in industrialized
countries grows less rapidly than GDP, in
developing and transitional countries the
growth rate is closer to that for passenger
transport
Transport Sector Issues
Globalization of trade. Advances in
international logistics (for example, multi-
modal transport technology, e-documentation,
streamlined customs procedures, etc.) have
greatly expanded the scope for international
trade in goods and services
Congestion and pollution: Growing road
congestion, particularly in cities, generates
pollution and increases road accidents
(about 500,000 persons per annum are killed
in road accidents
Transport Sector Issues
Transport sector deficits: Poorly managed
public transport services impose a
heavy burden on public finance.
Expenditure needs: Large sums of money
are required to maintain and modernize
existing transport infrastructure (for
example, road spending alone often
accounts for 10 percent to 20 percent of the
government’s development budget)
What Do We Know about
Transport and
Development?
Certain minimum level of transport is essential to
allow development
Generally accepted: necessary but not sufficient
condition for development
No general agreement about size of transport
sector and its causal relationships with other
sectors
Remain uncertain about its inducement properties
and role as catalytic agent
Investment Strategies
Supply Strategy- if we create transport
infrastructure we assume that it will create its
own demand
This strategy not always realistic because it raises
the issue of lag and lead effects
Does transport lead or lag behind development?
Best to view this as a circular, mutually
reinforcing process
Lag and Lead Effects: Circular and
Mutually Reinforcing Process
Development Time II Development Time I
Transport Investment
Transport Impacts
Economic
Allows market development
Extraction of resources
Stimulates employment
Political
Facilitates administration
Promotes national integration
Social
Information diffusion
Communication
Transport Impacts on Economic
Growth
Transport
Improvements
Commodity
Labor Market
Market
Expansion New Activities
Growth
Economic Production and
Specialization
Region A Region B
Self Reliance
Regional Trade
Trade and
Transport
Trade and
International Transport
Trade
Product A
Product B
Product C
Product D
Product E
Gateway
Possible Effects of Transport
Improvements
Positive Growth- reduction in resource
expenditure for distribution; prior dynamism
argument-growth capacity already present
transport releases tight constraint
Slowing Growth- use of scarce resources
instead of investing in alternatives-lost
opportunity costs; overinvestment in sector
Negative Growth- access encourages new
competition and new products enter market
from outside; depress local industries
Inequalities and Transport Costs
Improvements in transport and reduction in
costs imply two major consequences: 1/
exploitation of comparative advantage and 2/
development of economies of scale
High transport costs and relatively low level of
inequalities
As transport costs are reduced, inequalities are
likely to increase since economies of scale are
the first to benefit
Further improvements in transport
infrastructures favor a more efficient use of
comparative advantages, a relocation of
economic activities in the periphery and a wider
access to the markets of the center. The
likely outcome is a decline in inequalities
Process Model of Transport’s Role in
Regional Development
Stage I- Road development-often simple-
plays role in administration, political
cohesion, and extracting natural resources
Stage II- Road transport important but rail
begins to compete- more stable system
with intent to link and secure regions more
broadly
Stage III- Road again is dominant as links
penetrate often remote rural areas to allow
delivery of health services and marketing
Ideal Typical Sequence of
Transport Development
A B C
D E F
Challenges and Trends in Rural
Transport
Lack of Rural Transport Policy and Strategy
Weak Management Capacity at Local Levels after Decentralized
Decision-making
Inadequate Financing and Standards
Planning and Selection Processes have Withered Away
Promoting Private Provision of Rural Transport Services
Promoting Non-motorized Transport
Issues of Transportation in Pakistan
Inadequate Public Transport System
Road Safety Issues
Poor Road Infrastructure
Poor railway system
Overloading and Poor Vehicle Maintenance
Lack of Integration in Transport Systems
Limited Investment in Infrastructure Development
Poor Condition of Freight Transport
Urban Sprawl and Land Use Issues
Consequences of Poor Infrastructure
Economic Costs
Social Impacts
Health and Safety Risks
Long-Term Development Challenges
