Thursday, July 11, 2013

New Report Suggests Spending on Multi Modal Freight Infrastructure Sacrificed for Budget Concerns

OECD International Transport Forum Data Gives Insight on Investment Levels
Shipping News Feature

WORLDWIDE – Freight and other transport lobbies are pressing for more multi modal facilities and the latest report from the OECD, Spending on Transport Infrastructure 1995-2011, has just been published giving an insight into how investment by the developed nations which comprise the organisations thirty four strong membership, has levelled out generally, whilst the transition economies are rising to meet the needs, particularly of the road capital network, by spending more of their gross domestic product (GDP) every year and some key nations are underspending due to budgetary constraints.

The report comes from the International Transport Forum (ITF) at the OECD and the 2013 edition of the Forum’s annual statistics update presents aggregate trends in inland transport infrastructure investment and maintenance since 1995 and provides data on road, rail, inland waterway, sea port and airport spending for the International Transport Forum member countries for the period in question.

The report can be downloaded in its entirety HERE but the latest data on investment in road, rail and inland waterway infrastructure shows: Investment as a percentage of GDP has remained at around 1% since 1995 in the OECD; the investment share of GDP has remained relatively constant in Western European countries (0.8% - 0.9%). There are only few exceptions from this trend, notably Greece, Spain, Switzerland and Portugal which show significantly higher GDP shares over the period (reaching 1.6% – 2.0%). Since 2007, however, Greece and Portugal have converged closer to the WEC average, investments declining to around 1.0% of GDP; North American investment has remained consistently below the OECD average at around 0.6%; Central and Eastern European countries, formerly at around 1% has grown sharply since 2002, reaching 2.0% in 2009 – the highest figure ever reported by these countries. Investment share of GDP fell to 1.7% in 2010, likely affected by the economic crisis. Data for 2011 show again increase, with investment share reaching 1.8%.

The fact that the share of GDP dedicated to transport infrastructure has remained constant in many countries suggests that investment levels may be affected by factors other than real investment needs. That is presumably the conservative OECD’s way of saying that, as the economic situation in many of the countries concerned deteriorated, spending on infrastructure has simply been one of the first things cut. Panel data of over 600 observations gives support to the conclusion that the level of road spending generally declines with the level of GDP per capita. Jari Kauppila from the ITF, explains:

“Level of transport spending may be guided by historical budget levels, institutional budget allocation procedures or budgetary constraints taking also into account needs in other sectors of the economy. As efficiency and productivity increase, production becomes less transport intensive, potentially weakening the link between the GDP growth and transport demand and therefore infrastructure investments.”

In many countries observers have raised concerns about underfunding of road assets and the state of existing road infrastructure, and its impacts on the competitiveness of the economy. Funding for road maintenance, particularly, may be postponed on the expectation that a lack of maintenance will not result in imminent asset failure. The available data on public road spending suggest that the balance between road maintenance and investment has been relatively constant over time in many regions. However, data does suggest an overall declining share of maintenance on total road spending especially over the last few years.

The report also presents broad conclusions on transport policies in member countries, as well as on performance, funding and strategic plans. Countries surveyed in the report emphasise the importance of an efficient and reliable transportation system. Governments formulate their strategic transport plans generally around three main themes: economic performance, environment and safety.