Transport potential

Transport is not only a fundamental driver of economic activity, it is a major sector in its own right. But while transport has suffered from the economic crisis, as echoed in downturns in trade and activity generally, it could be a source of recovery too. We asked José Viegas, head of International Transport Forum, to explain. 

How has transport suffered from the economic crisis?

José Viegas: The initial impact of the crisis was particularly severe in the transport sector. Trade fell much more than overall economic activity and transport fell more than trade. The result was a sharp decline in freight transport volumes–international sea containers, international air freight, road freight in Europe, rail freight, and so on. The same was true for discretionary passenger trips–effectively those trips that are neither work or school related. In contrast, commuter traffic, passenger rail traffic and public transport were not hit as hard – or not so far at least.

Freight and air passenger volumes had bounced back to near pre-crisis levels by 2011, but then stagnated again, particularly where economic activity weakened. Indeed, the up and down pattern in the transport sector reflects the performance of national economies, so it should be no surprise that freight traffic to fast growing Asian markets recovered fastest. But in general the outlook is not bright. Take air freight volumes, which are a useful leading indicator of economic performance, not least because their data is available six months ahead of GDP figures. Well, I am afraid that the latest figures suggest more economic stagnation ahead. The financial crisis has also proved difficult for public-private-partnerships involved in developing transport infrastructure. A number of toll road programmes have become financially distressed as traffic volumes fell below projections, and some projects have either gone bankrupt or been bailed out by government. In Portugal, for example, the scale of the motorway liabilities makes up a significant part of the overall fiscal deficit.

What role can transport policy play in helping to boost economic growth?

An end to the economic and financial crisis requires growth even more than fiscal responsibility. Growth in turn requires investment, including in transport infrastructure, especially where it cuts costs and increases productivity. Investment to relieve recurrent bottlenecks has to be the priority, and projects that can advance quickly are particularly relevant now. Fortunately, there is a rather long list of modest scale transport infrastructure projects already in the planning pipeline–approved but not financed–which are ready to go. Here, transport is a good place to look for stimulus spending. And policymakers should avoid the trap of postponing maintenance of public infrastructure to meet austerity targets. After all, the quality of roads, railways and bridges is directly linked to productivity, and nuisances such as potholes and reduced travelling speeds impose costs on everyone.

What are the three things that policymakers should do?

First, increase public spending on productive infrastructure investment, with a focus on small scale projects that can stimulate employment in the short term. Second, improve programmes for attracting private finance to infrastructure through public-private partnerships–or PPPs–to make them more fiscally responsible. This requires limiting the overall financial volume of such partnerships to contain contingent liabilities. It also means ensuring that budgeting and accounting rules treat PPPs and publicly financed investment in the same way. This will focus attention on the right kind of project types for them, rather than trying to use financial engineering to jump the queue, regardless of the risks. In addition, more use could be made of financial instruments such as project bonds to encourage private sector involvement in financing transport infrastructure.

Third, think of the longer term, and the financial sustainability of transport infrastructure spending. This needs careful examination. Policymakers should focus on asset management over the entire life-cycle of the investment. This means you first have to develop a good understanding of what your transport assets are worth and what needs to be spent to keep them up to expected standards over, say, several decades. And because you cannot rely on taxation, you must give serious thought to how users and indirect beneficiaries can contribute more through the likes of tolls, kilometre charges and ticket prices, –and less via taxpayers.

Leipzig summit

“Funding Transport” will be the theme for discussion at this year’s annual summit of Ministers of Transport, organised by the International Transport Forum (ITF) in Leipzig, Germany on 22-24 May 2013. The ITF is an intergovernmental organisation housed at the OECD in Paris and is the only global transport organisation that covers all transport modes. It acts as a policy think tank for 54 member countries, providing evidence based analysis and advice on a comprehensive range of issues, from road safety to airline regulation.

Visit www.internationaltransportforum.org 

©OECD Observer No 296 Q1 2013




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly


Online edition
Previous editions

Don't miss

  • Do you know what type of economy is also known as collaborative consumption? Can you name a landlocked African country? Try our latest OECD Observer crossword. It’s full of fun facts, simple in style, and gives you the solution at the tip of a button. You can time yourself too.
  • Once migrants reach Europe, countries face integration challenge: OECD's Thomas Liebig speaks to NPR's Audie Cornish.
  • “Un Automne à Paris”: listen (and read) this sad yet uplifting new song by jazzman Ibrahim Maalouf and pop singer Louane that will be launched on 11 January in honour of the victims of the murderous attacks on the French capital in 2015 and as a tribute to love and liberty in this City of Light.

  • Secretary-General Angel Gurria on CNBC: Developed vs developing nations at COP21

  • Message from the International Space Station to COP21

  • COP21 Will Get Agreement With Teeth: OECD Secretary-General Angel Gurría on Bloomberg

  • The carbon clock is ticking: OECD’s Gurría on CNBC

  • If we want to reach zero net emissions by the end of the century, we must align our policies for a low-carbon economy, put a price on carbon everywhere, spend less subsidising fossil fuels and invest more in clean energy. OECD at #COP21 – OECD statement for #COP21
  • IMF Finance and Development Magazine, December 2015

    Powering the Planet: The Quest for Sustainable Energy

    Read the magazine here
    Visit their website
  • In Iceland, geothermal power is being used for almost everything. Scientists and engineers from around the world are participating in a course at the United Nations University (UNU) to learn how to use geothermal energy in their own countries.
  • They are green and local--It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa. blogs.worldbank.org
  • Pole to Paris Project
  • Send a message from #EarthToParis.
  • From the World Bank: Managing the Impacts of Climate Change on Poverty
  • Black carbon causes millions of deaths every year and contributes to the warming of the planet. The United Nations Environment Programme explains how reducing black carbon can save lives and help combat climate change.
  • In order to face global warming, Asia needs at least $40 billion per year, derived from both the public and private sector. Read how to bridge the climate financing gap on the Asian Bank of Development's website.
  • How can cities fight climate change?
    Discover projects in Denmark, Canada, Australia, Japan and Mexico.
  • 10 climate-friendly habits everyone should adopt: Although the main aim of COP21 is to reach an international agreement on climate change between government stakeholders, it is also the perfect opportunity to remind citizens of how everyone can help to reduce greenhouse gas emissions in their day-to-day lives.
  • Climate: What's changed, what hasn't, what we can do about it.
    Lecture by OECD Secretary-General Angel Gurría, hosted by the London School of Economics and Aviva Investors in association with ClimateWise, London, UK, 3 July 2015.
  • French Economy Minister Emmanuel Macron came to the OECD on 18 September for a webcast discussion on economic reforms, inequality and the outlook, with OECD Secretary-General Angel Gurría. You can watch the event by clicking on the photo.

  • Climate change: “We should not disagree when scientists tell us we have a window of opportunity–10-15 years–to turn this thing around” argues Senator Bernie Sanders.

  • In the long-run, the EU benefits from migration, says OECD Head of International Migration Division Jean-Christophe Dumont.
  • Is technological progress slowing down? Is it speeding up? At the OECD, we believe the research from our Future of ‪Productivity‬ project helps to resolve this paradox.
  • An employee prepares breakfast in front of the Eiffel tower at the Parisian luxury hotel Le Plaza Athenee. Nowhere in the world has more accommodation available on Airbnb than Paris. Now the home-sharing website that has transformed budget travel is giving super-deluxe hotels a fright too.
    ©REUTERS/Stephane Mahe
  • Is inequality bad for growth? That redistribution boosts economies is not established by the evidence says FT economics editor Chris Giles. Read more on www.ft.com.
  • Low interest rates here to stay for half a century, says OECD director Adrian Blundell-Wignall.
  • Bill Gates visited the OECD on 26 June. He met with the Secretary-General Angel Gurría to discuss areas of collaboration with his foundation and participated at a briefing session on official development assistance modernisation with OECD experts.
  • The People’s Republic of China decided to enhance longstanding collaboration with the OECD and to join the OECD Development Centre, in a historic visit by Chinese Premier Li Keqiang on 1 July to the OECD in Paris.
    Read about it on OECD.org
  • Catherine Mann, OECD Chief Economist, explains on Bloomberg why "too much bank lending can slow economic growth".
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .
  • Come va la vita in Italia? How's life in Italy? The OECD Better Life Index is an interactive online platform in seven languages that goes beyond GDP by offering important insights into measuring well-being and quality of life. Try it for yourself!

Most Popular Articles

Poll

What issue are you most concerned about in 2015?

Euro crisis
Unemployment
Global warming
International conflict
Other

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2016