Did you know that in Kazakhstan we live in the country with the deadliest roads? Every year, 3,000 people die on roads in Kazakhstan, and over 30,000 are injured. Imagine if an airplane crashed every month! Would you fly?
We are 11 times more likely to die in a traffic accident in Kazakhstan than in Norway. Indeed, the numbers for road deaths are high in all Central Asian countries.
Globally, road traffic injuries are the leading cause of death among people aged between 15 and 29 years. Not cancer, not heart diseases, and not wars.
Life changing injuries and deaths affect countries in terms of health care and economic costs – the annual economic loss of road deaths in Central Asian countries is estimated at around 3-4% of GDP.
But beyond this monetary value, lies a person’s life.
The Global Infrastructure Outlook is a landmark country-based online tool and report developed by the Global Infrastructure Hub with Oxford Economics, which forecasts infrastructure investment needs across 50 countries and seven sectors to 2040.
Although there are already forecasts for infrastructure investment in the market, the public and private sectors indicated their need for fresh, country-level data. Outlook was created to meet that knowledge gap.
For the first time we have data about what each country needs to spend in each sector, and importantly – the gap between what needs to be spent and current spending trends.
Harsh, a civil engineer from Surendranagar, the western State of Gujarat in India, proudly has a collection of supercars recently delivered from Germany. They are all brand new with sleek designs, glossy paint, and fully loaded with state-of-the-art features. One of them is a 600 horse-power monster, another is the first of its kind in India.
For many decades now man has been able to go to the moon. Yet down here on earth, many people are still unable to travel to nearby towns, because of the lack of decent roads. The world over, about a billion people live without access to an all-weather road. And many more have perhaps lost the access they once had because floods, heavy rains, cloudbursts, landslides and other extreme weather events have damaged the roads or they have not been maintained. Can we ever think of a world free of poverty without addressing this fundamental challenge?
Let’s look at the case of India where 500,000 km of rural roads have so far been built by the country’s flagship rural roads program (PMGSY). These roads, connecting some 120,000 settlements, have already started transforming the rural areas of the country.
These roads form part of a core network of 1.1 million that India is seeking to build through its ongoing $35 billion PMGSY program to provide about 179,000 rural settlements with road access. The project has been designed to deliver high-quality, sustainable roads in a timely and cost-effective manner. PMGSY’s main source of funding is a special tax on diesel. Since the PMGSY began, the World Bank has been working closely with the Indian government through a series of projects and knowledge initiatives, with funding of about US$1.8 billion.
This is the final blog in a three-part series on traffic risk in PPPs
As explained in the previous two blogs –Traffic Risk in Highway PPPs, Part I: Traffic Forecasting and Traffic Risk in PPPs, Part II: Bias in Traffic Forecasts– traffic risk is inevitable, given our imperfect ability to predict traffic and revenue a long way (often several decades) into the future. And what makes it harder is that there are often biases at play in the typical project environment, which can cause a skewness towards over-estimation rather under-estimation of traffic flows. This, of course, can then result in financial losses and distress for the project, as manifested in a number of high profile bankruptcies, renegotiations and bailouts in the toll road sector.
In the new PPIAF and GIF publication, Toll Road PPPs: Identifying, Mitigating and Managing Traffic Risk, we outline various ways in which governments, bidders and financiers can take important steps to reduce the amount of traffic risk in projects. But we also acknowledge that the use of, for example, industry-standard forecasting techniques, better due diligence and a more stable policy environment will only go so far in reducing traffic risk. The reality is that there will always be some risk in any project, regardless of the best endeavors taken by the project parties. So, the key question is, what should we do with traffic risk and who should be responsible for bearing that risk?
This is the second of a three-part series on traffic PPPs.
"It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so."
– “The Big Short”
Forecasting traffic accurately is a very difficult and thankless task, as I explained in my previous blog: Traffic Risk in Highway PPPs, Part I: Traffic Forecasting. As such, this gives rise to very real financial risks if these forecasts turn out to be wrong. This risk has crystallized many times as manifested in high-profile distressed projects, bankruptcies, renegotiations and bailouts.
This is the first of a three-part series on traffic risk in PPPs
"Prediction is very difficult, especially about the future."
– Professor Nils Bohr, Nobel Laureate
Professor Bohr was right: prediction is hard work. As a species, we don’t have difficulty making predictions. I, for one, frequently make doom-laden predictions on a diverse range of subjects ranging from politics to the fortunes of my beloved football team, Liverpool Football Club.
No, the problem is that humans, as a rule, are not very good at predictions. Sadly, that illusive ‘crystal ball’ still has not been invented. And the sheer complexity of living on an ever-changing and evolving planet alongside 7 billion equally complex individuals—all making unique but increasingly interdependent decisions—makes even the most straightforward predictions difficult.
Few things are more depressing than seeing the damage caused by cyclones on transport infrastructure. Especially when it is a causeway that was only formally opened less than one month before the storm. That is what I found in early 2014 when participating in the Tonga Cyclone Ian Post Disaster Needs Assessment. The cyclone was a typical example of the heavy toll that climate change is taking on transport infrastructure, particularly in the most vulnerable countries.
Engineers are taught that water is the greatest enemy of transport infrastructure, and unfortunately climate change is leading to an increase in floods and storms, especially within the South-East Asia region. For example, the figure below shows the number of floods and storms for some Asian countries between 2000 and 2008. The significant increase in the number of floods is self-evident.
In several economic infrastructure sectors, India enjoyed a strong track record of harnessing Public-Private Partnerships (PPPs). Private sector investments in infrastructure more than tripled from the 10th Plan Period (2002-07; INR 2 trillion) to the 11th Plan (2007-12; INR 7.3 trillion). Between these plan periods, private sector share in infra investments increased from 22% to 38%. For a considerable period of time, on the score of mobilizing infrastructure investments through private participation among developing countries, India ranked 1st in Energy and Transport sectors and 2nd in Telecom (behind Brazil).
This erstwhile success of India’s PPP program is attributable to well-crafted reform efforts by the government, and ably executed by the private sector, banks and other financial intermediaries. Following the economic liberalization initiated in the early 1990s, the government has created an enabling environment for private participation through several sector-specific and cross-sectoral initiatives, e.g., relaxing entry norms, tax concessions, independent regulation in telecom and power, mobilization of additional revenues through tolls and cess on fuel, establishment of a viability gap fund mechanism and India Infrastructure Financing Company Limited, etc. The financial intermediaries, too, quickly moved up on a steep learning curve to cater to this new and challenging mode of delivering infrastructure services. Private sector responded enthusiastically and seized these opportunities to develop their own capabilities and progressively build larger and complex projects. Today, private sector operators are serving more than 90% of the mobile phone users, owning ~40% of the power generation capacity, built and operating a substantive portion of arterial network of national highways, besides world-class airports in four metros and container handling facilities at many ports.
Also available in: Português
Over the past three years and a half, our team has been working on a transport project with the state of São Paulo in Brazil. The project involves a lot of traveling, including frequent commutes between the World Bank office in Brasilia and the State Department of Transport in São Paulo (DER-SP)—a journey that is estimated to take 2 hours and 40 minutes. This includes the time to drive from the World Bank office to Brasilia Airport, flight time, and commuting from São Paulo’s Congonhas Airport to the State Department of Transport.
Let’s say that, on a typical Wednesday, the team needs to attend a meeting in São Paulo. To ensure we can make it on time, we plan our day carefully, book our flights and define the right time to leave the office in Brasilia. With a plan in place, we leave the office at 10:00 am and head to Brasilia Airport. The first leg of the trip takes 35 minutes and we manage to arrive early for our 11:00 am flight, which, unfortunately, is delayed by 20 minutes. We land in São Paulo, quickly get out of the terminal, and manage to hop on a taxi at 1:20pm… not bad! We are now on the last leg of our journey, a mere 14-kilometer drive between Congonhas Airport and the meeting place, which is supposed to take only 20 minutes. However, there is a short thunderstorm that floods the city and closes off key streets. This single event leads to complete traffic chaos along the way, and our planned 20-minute transfer from the airport turns into a 1-hour-and-15-minute ordeal. These traffic disruptions have a serious impact on our meeting as well, as some Department of Transport staff cannot join and some items of the agenda cannot be discussed.
This incident may seem anecdotal, but it is a good illustration of our extreme dependency on transport systems and the weaknesses associated with it. Because transport is so critical to our social and economic lives, it is extremely important to understand, anticipate, and minimize the different types of risks that may impact transport systems.