Road Engineering Association Of Asia & Australasia
ISSN: 1394 - 1054
December 2008
PP7021/8/2008
VOL.15 NOs.1 & 2
JOURNAL THE GOVERNING COUNCIL
CONTENTS
2006 - 2009 President Dr. Kyong-Soo Yoo Immediate Past President Salvador A. Pleyto Past President Prof Ian Johnston
ARRB Group Ltd, Australia Mr. Gerard Waldron Honorary Secretary General Ir. Dr. Safry Kamal bin Ahmad Honorary Treasurer General Mr. Brent Johnston Council Members Australian Chapter Public Works Department, Brunei Brunei Chapter Indonesian Road Development Association Express Highway Research Foundation of Japan Japan Road Association Korea Expressway Corporation Korean Chapter Malaysian Highway Authority Road Engineering Association of Malaysia Transit New Zealand New Zealand Chapter Road Engineering Association of the Philippines Philippine Chapter Land Transport Authority, Singapore China Road Federation, Taiwan RSEA Engineering Corporation, Taiwan Roads Association of Thailand Co-opted Council Members Mr. Han Joke Kwang Mr. Kieran Sharp Dato’ Dr. Dennis Ganendra Mr. Keon-Chang Cho Road Bureau, MOCT, Korea
Safer Roads - The Challenges Ahead ......................................... 5 Privatisation of Four RoadRelated Corporations in Japan ..11 Comparative View of Road Infrastructure in India: A Quest for Quality and Growth ............. 18 Research And Development for Future Roads In Korea* ...... 34 Research and Development in the Japanese Road Sector* ..... 40 Modelling Accidents Along Two-Lane Single Carriageway Roads in Malaysia: Research Methodology and Data Collection* ....................... 50 Permanent Deformation of Concrete Block Pavements Under Highway Accelerated Loading* ................................... 59 Resilient Modulus of Malaysian Asphalt Mixes ........................... 66 Deviation Study of Pavement Marking Retroreflectivity ........... 76
JOURNAL Publisher THE ROAD ENGINEERING ASSOCIATION OF ASIA & AUSTRALASIA No. 46B Jalan Bola Tampar 13/14, Section 13, 40100 Shah Alam, Selangor, Malaysia Tel: 60-3-5513 6380 Fax: 60-3-5513 6390 E-mail:
[email protected] Website: www.reaaa.com
Lay-Out Scanprint Creative Tel: 60-3-9285 2689
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Vice Presidents Public Works Department, Malaysia Dato’ Sri Prof. Ir. Dr. Judin Abdul Karim
Editorial ..................................... 3
1
Katahira Journal Award The REAAA Governing Council, working with the Katahira Fund Committee and the Technical Committee, has recently agreed to extend the Katahira Award to include papers submitted for publication in the REAAA Journal.
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The award, to be known as the “Katahira Journal Award” will be presented to the author/s of the paper which is deemed by the judging panel to be the best paper of the year. The panel reserves the right not to recommend an award if there are insufficient candidates and/or eligible papers are not seemed suitable for the granting of an award. Until now, the Awards were only given to eligible authors judged to have prepared the best papers for presentation at REAAA Conferences.
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The Katahira Award was established in 1991 in memory of the late Dr Nobutaka Katahira, the REAAA President for the 5th Council term from 1983 to 1986. Dr Katahira originally willed 3 million Yen (£11,106 )* to the REAAA to encourage keen participation among young engineers in the promotion and advancement of science and technology in road development and roadrelated engineering. The Governing Council for the 6th term decided to use the donation to set up the Katahira Fund. Dr Katahira’s endowment was deposited with the Standard Chartered Bank, Singapore, in January 1991. Donations of £19,080 by Mr. Katahira’s followers (students) were deposited with the same bank in October 2000 to coincide with the 10th REAAA Conference in Tokyo. Since 1991, the Fund has earned interest totalling £16,632. Of this, £8,052 has to date been given out as Katahira Awards in conjunction with REAAA Conferences in 1992, 1995, 1998, 2000, 2003 and 2006. Award will also be available for the next Conference in Seoul in 2009. The value of the Fund is currently £38,766 (US$58,000).
Entry Rules The entry rules for the “Katahira Journal Award” are as follows: •
To be eligible for consideration for the Katahira Award, either the first author or the second author (if there are multiple authors) must be under 40 years of age at the time of the submission of the paper and must be an Ordinary/Associate member of REAAA or an employee of an organization which is an Institutional Member of REAAA or associated with the above-stated member/employee as co-author.
•
The paper must not have been published elsewhere in the same form.
Authors wishing to nominate for the Katahira Journal Award should do so when they submit the paper for consideration for publication. Papers should be submitted to the REAAA Technical Executive (
[email protected]) who will pass it to the Technical Committee for processing. All eligible papers will be assessed by the review panel each year and, if appropriate, awards announced. For further information contact the Chairman of the Katahira Fund Committee, Mr. Yasumasa Torii (
[email protected]) or the Chairman of the Technical Committee, Mr. Kieran Sharp (
[email protected]).
*
≈ £22,500 (December 2008).
EDITORIAL The REAAA Governing Council, working with the Katahira Fund Committee and the Technical Committee, has developed a proposal for the funding of an award for authors of original papers published in the REAAA Journal. It will be known as the ‘Katahira Journal Award’. Further details are available in this issue of the Journal. It is hoped that the Award will encourage the submission of quality original papers for consideration for publication in the Journal. This (double) issue of the REAAA Journal (Volume 15, Nos 1 and 2) contains nine papers. Two of the papers won awards for best paper at the 7th Malaysian Roads Conference in 2007:
Permanent Deformation of Concrete Block Pavements under Highway Accelerated Loading, by Tung Chai Ling, Hasanan Md Nor and Ming Fai Chow, Universiti Teknologi, Malaysia The Keynote address to that Conference (“Safer Roads - The Challenges Ahead”), presented by the then Hon. Minister of Works, Malaysia, Dato’ Seri S. Samy Vellu, is also included in this issue. The following two keynote addresses to the recent 23rd ARRB Conference are also presented: Research and Development for Future Roads in Korea, by Kyong-Soo Yoo, Head, Korea Road & Transportation Research Institute and President of REAAA Research and Development in the Japanese Road Sector, by Asao Yamakawa, President, Infrastructure Development Institute, Japan In addition, the following four papers are presented: Privatisation of Four Road-Related Corporations in Japan, by Hiroshi Makino and Mitsuya Nagasawa, Ministry of Land, Infrastructure and Transport, Japan Comparative View of Road Infrastructure in India: A Quest for Quality and Growth, by AK Sharma and Ekta Vohra, Indian Institute of Technology Resilient Modulus of Malaysian Asphalt Mixes, by Ahmad Kamil Arshad and Mohd Yusof Abd Rahman, Universiti Teknologi MARA, Malaysia Deviation Study of Pavement Marking Retroreflectivity, by Heung-Un Oh, Hyun-Suk Lee and Jae-Soo Kang, Korea Expressway Corporation Topics addressed in this issue include road infrastructure, road safety, pavement performance, asphalt mix design, pavement markings and privatization. This vast array of topics reflects well on the membership of REAAA and its role in the region. Of special interest are the papers prepared by the then Hon. Minister Dato’ Seri S. Samy Vellu, Dr Yoo and Mr Yamakawa which all address the issue of facing future challenges and the key role that research and developments plays, and will continue to play, in assisting these endeavours.
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Modelling Accidents along Two-Lane Single Carriageway Roads in Malaysia: Research Methodology and Data Collection, by Jamilah Mohd Marjan, Malaysian Institute of Road Safety Research (MIROS), Professor Ir Dr Radin Umar Radin Sohadi, (formerly) Director General, Malaysian Institute of Road Safety Research (MIROS) and Ir Dr Safry Kamal Ahmad, Public Works Department, Malaysia
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The Editorial Panel continues to seek papers and technical notes for publication in the Journal. The membership of the Editorial Panel follows. The Panel is striving to publish at least one paper from each Chapter or region each year. Readers who would like to nominate for membership of the Editorial Panel should contact their appropriate Chapter. The size of the panel can easily be expanded by another three or four members. Kieran Sharp Chairman REAAA Technical Committee
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MEMBERSHIP OF EDITORIAL PANEL: REAAA JOURNAL
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AUSTRALIA
PHILIPPINES
Mr Kieran Sharp Chairman REAAA Technical Committee ARRB Group 500 Burwood Highway Vermont South Vic 3133 AUSTRALIA E-mail:
[email protected] [email protected]
Mr Isaac David President Filipinas Dravo Corporation 5th Floor Aurora Milestone Bldg 1034 Aurora Blvd Quezon City PHILIPPINES E-mail:
[email protected]
MALAYSIA
NEW ZEALAND
Prof. Dato’ Ir. Dr. Radin Umar bin Radin Sohadi Director General, Department of Higher Education Federal Government Administrative Centre 62505 Putrajaya MALAYSIA Tel: +603 8883 5000 Fax: +603 8889 3921
Dr Bryan Pidwerbesky Fulton Hogan Ltd PO Box 39 185 Christchurch NEW ZEALAND E-mail:
[email protected]
KOREA
JAPAN
Dr Heung-Un Oh Senior Researcher Korea Highway Corporation Highway Transportation Technology Institute 50-5 Sanchug-ri, Hwasung-si, Kyonggi-do 445-812 KOREA E-mail:
[email protected]
Mr Asao Yamakawa Vice Chairman and Executive Director Japan Bridge Association 2-2-18, Ginza, Chuo-ku Tokyo JAPAN E-mail:
[email protected]
Safer Roads – The Challenges Ahead th ( Keynote address to 7 Malaysian Roads Conference, July 2007.)
YB Dato’ Seri S. Samy Vellu Hon. Minister of Works, Malaysia
1
Introduction
Malaysia is now at the second phase of its journey towards becoming a fully developed nation by the year 2020. In striving to be a developed nation, emphasis has been placed on the use of capital-intensive sophisticated technology. Malaysia will continue to improve its economic foundation in terms of quantity and quality of human resources, development of indigenous R&D, and adequate supply of modern infrastructure.
Obviously, Malaysia will need to deal with great changes in the global environment, while improving and upgrading the country’s domestic conditions. Therefore, there is a need for the Government to carry out programs that enhance the nation’s capability to compete globally, to strengthen national unity and to bring about a better distribution of income and wealth and higher quality of life among the people. The Government of Malaysia is also intending to reduce the disparities between rural and urban areas as well as between less developed and more developed regions. To achieve this aim, the Government will increase the allocation for the development of rural areas and less developed regions. In this regard, more roads will be constructed in rural areas and less developed regions.
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The Malaysian Road Network
Development expenditure for roads has been steadily increasing over the last few years and this has resulted in the establishment of new growth centres and improved road connectivity. For the 9th Malaysia Plan, RM17.3 billion has been allocated for roads, and another RM3.6 billion for rural roads (Figure 1).
Figure 1: Government allocation to roads
Apart from Government initiatives, infrastructure projects initiated through private industry are also expected to be quite significant. In an effort to move the national economy up the value chain, the private sector will
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The thrust of road development under the current 9th Malaysia Plan (2006-2010) will focus on increasing road network coverage, optimising the use of existing facilities and increasing accessibility to rural areas, particularly those areas with the potential for tourism, agriculture development and rural growth centres. Upgrading the quality and efficiency of the services provided will also be given due emphasis. This will be achieved through increased investment in research, improved technologies, infrastructure management and human resource development. All these are important to raise the capacity for knowledge and innovation by Malaysians.
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be given the lead role. The Government will provide an enabling environment for doing business to encourage the private sector to be the main catalyst going forward. The Malaysian road network has been expanding steadily from about 54,000 km in 1990 to 80,000 km currently, including 78,300 km of State or Federal roads and 1,700 km of tollways (Figure 2). However, the total number of registered vehicles now exceeds 13 million and, of this, more than 10% is concentrated in Kuala Lumpur (Figure 3). The average annual growth of vehicle ownership is over 7% per annum compared with the average annual increase in road length of less than 4% per annum. This is a huge imbalance.
Kilometres (thousands)
Road Network Growth Trend 90 80 70 60 50 40 30 20 10 0
State Federal
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1990
1995
2000
2005
YEAR
Figure 2: Growth in the road network
Vehicles (thousands)
Motor Vehicles Growth Trend
6
14000 12000 10000
Others
8000
Goods Private
6000 4000 2000 0
1990
1995
2000
2005
YEAR
Figure 3: Growth in motor vehicles
Road transport continues to be the most popular mode of transportation for both passengers and freight. Approximately 94.8% of passengers and 96.4% of freight movement are transported by road (Figure 4 and Figure 5). This predominance of road transport is a hindrance to the efficiency of the entire transport system. A huge effort from the transport authorities to promote a more balanced mode share is vital.
Freight Transport
Passenger Transport Road
Rail
Road
Air
Rail Air 5% 1%
Rail 1%
Road 94%
Figure 4: Transport modal share (passenger transport)
Rail
Air
Maritime Maritime 2%
Air 0%
Road 97%
Figure 5: Transport Modal Share (freight transport)
On the international scene, Malaysia is still lacking in terms of road development compared to developed countries such as Japan. The Road Service Level, which is the road length divided by the population in thousands, is only 3.25 compared to Japan (9.17), France (15.01) and the USA (22.59) (see Figure 6). In terms of the Road Development Index, which measures the level of road development taking into account both area and population size, the index is currently 0.85. This is targeted to reach more than 1.0, the desired level for a developed nation, by 2020. In order to bridge the international divide, major road projects are currently being undertaken, including the West Coast Highway, Second East-West Highway, East Coast Highway Phase II, Trans Eastern Kedah Interland road, Ipoh to Lumut road, Kajang-Seremban Highway, Senai Desaru Highway and Johor to Pasir Gudang road. Other major road projects being implemented include capacity improvement schemes, city bypasses, the construction of bridges, bridge capacity improvements, the rehabilitation of road pavements, improvement to road geometry and road safety programs.
Road Service Level
25
22.59
20 15.01
15 9.17
10 3.25
5
3.23
U SA
ce
n Ja pa
co ex i
Fr an
M
M
al a
ys i
a
0
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Road Service Level
(length/1,000 population)
7
Figure 6: Road service levels
2.1 Toll Highway Development Since the privatization policy was introduced in 1983, the development of toll highways in Malaysia has increased dramatically. Currently, the total length of completed toll highways is about 1,700 km, including inter-urban expressways such as the North-South Expressway and North-South Central Link which links many major cities in the western part of the Peninsular, and the East Coast Expressway Phase 1, which links major cities in the eastern part of the Peninsular. There are also about 18 toll completed highway projects in urban areas, including the Klang Valley and major cities in the north and south of the Peninsular. These include the Shah-Alam Expressway, the DamansaraPuchong Highway and the SMART Tunnel, which was officially opened recently. Other toll highways which are either in the midst of construction or soon to be constructed are the Kuala Lumpur-KLIA Expressway, DUKE Highway, South Klang Valley Expressway, Kemuning-Shah Alam Expressway and the Eastern Dispersal Link Highway. There are many challenges faced in the development of toll highways. During the initial stage, the Government had to be sure that the toll highway was socially acceptable, environmentally friendly, and technically as well as financially viable. During the construction stage, challenges include minimizing the impact to the public and the environment without compromising the safety, especially when the highway is located in fully-developed areas. It is also a challenge for the Government to decide on an acceptable and affordable toll rate that can be accepted by the public.
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Future Prospects
The thrust of infrastructure development during the 9th Malaysia Plan will be on greater utilization of existing facilities, with emphasis on better delivery and quality of services, expansion of networks to under-serviced areas as well as capacity expansion.
In this respect, infrastructure will be developed to facilitate the growth of other sectors and be guided by the following strategies: enhancing accessibility to quality infrastructure facilities in rural areas to reduce the development gap between urban and rural areas providing efficient and reliable services to ensure optimal utilization of infrastructure facilities as well as improving the safety and comfort of users optimizing the use of resources through sustainable management and better infrastructure facilities encouraging the use of public transport as the preferred mode of travel, particularly in urban areas, by promoting seamless integration of various transport modes increasing the competency and capability of service providers of infrastructure services
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encouraging the export of expertise in construction and project management.
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Future development of the road network in Malaysia will be guided by the Review of the Highway Network and Development Plan Study. This review will formulate a Development Plan and Program for the national road network in Peninsular Malaysia up to 2020. It is expected to formulate an efficient, reliable and safe road network that promotes multi-modalism which extends urban amenities and infrastructural facilities to rural areas. It also identifies and prioritises road projects for implementation, including those under the privatisation program. The planning process involves consideration of the hierarchy of conurbations, locations of industrial estates, The following strategies were tourist attraction areas, and regional land development schemes. recommended by the review: rationalise and strengthen the west coast and east coast corridor strengthen east-west movement improve linkage and support growth of regional development and new entry points improve linkage for promoting growth of central corridor; this will to open up the under-developed central corridor. Based on these strategies, and also on a consideration of the current and imminent projects being implemented by JKR and LLM, a conceptual highway network configuration was proposed. A conceptual project list was drawn up, covering a total length of 6,120 km, of which 3,741 km are targeted for upgrading with the remaining 2,379 km involving new roads. The total investment required to realise the prioritised conceptual highway network for Peninsular Malaysia to 2010 is estimated at RM10 billion; it will be implemented in the 9th Malaysia Plan. Many of the road projects proposed by the review are on-going under the 9th Malaysia Plan, but need further funding to continue.
3.1 Rural Transport There will be a concerted effort to provide more and better quality roads of minimum JKR-R3 standard to the rural areas. These will improve the transportation of agricultural produce and accessibility to villages. In addition, rural industrial estates will be targeted for better connectivity to reduce the development gap between rural and urban areas. In East Malaysia, rural roads will be provided to connect resettlement areas to estates to improve mobility of the rural population to employment in the estates.
3.2 Urban Transport Urban congestion is of urgent concern in Malaysia because it has impacted negatively on the environment and affected the national economic productivity through time loss by road users, increased operational costs and wastage of energy resources. With the rapid increase in motorization, heavy traffic congestion is occurring in urban areas, especially in the Klang Valley. The construction of ring roads and improvement of inner city roads has been completed in the Klang Valley. Other projects such as the Jalan Duta gradeseparated interchanges and the Stormwater Management and Road Tunnel (SMART) Project have also been recently completed. Several privatised road upgrading projects were undertaken, including the DUKE Highway, KL-KLIA Highway, Kemuning-Shah Alam Highway and SKVE. These highway will help to disperse
traffic as well as reduce congestion in Kuala Lumpur. Computerised traffic control systems have also been implemented and upgraded. To improve traffic flows and dispersal in other major cities in Malaysia, several urban roads will be upgraded while ring roads and bypasses will be constructed. The Eastern Dispersal Link will disperse traffic into Johor Bahru, while the Penang Outer Ring Road and the Second Penang Bridge will ease congestion to and on the island. Phase I of the Seremban Ring Road is complete and Phase II is under construction. Public transport in the Klang Valley is also being upgraded, where currently only 16% of the travelling public use public transport. This is much lower compared to Bangkok, where 30% use public transport, or Singapore (56%), or Seoul (60%). The Government will be implementing measures to shift the public to private transport split to a more comfortable ratio of 30:70. This includes expanding train services, the procurement of more buses, and the provision of park-and-ride facilities.
3.3 Intelligent Transport Systems The next step to combat congestion is through the use of Intelligent Transportation Systems (ITS). ITS activities in Malaysia are taking shape, commencing with the provision of quality real-time traffic and travel information to optimize the use of existing facilities. The Malaysian Highway Authority established and launched the National Traffic Management Centre (LLM’s TMC) in 2007 to consolidate traffic data collection and information dissemination to the public. Under the first stage of implementation, 12 highways are connected to this centre. The public can obtain real-time traffic conditions from the LLM TMC’s website, SMS and MMS as well as direct call to the TMC’s hotline, all for free. In the near future, this centre will be upgraded to include all the highway concessions. At the highway operator’s level, the PLUS Expressway, the largest toll operator in Malaysia with some 965 km of highways under their control, operates three regional communication centers to coordinate traffic information from operations to management. Other privatized highway operators are also following suit. This advanced information network for road traffic will soon become an indispensable part of the Malaysian lifestyle.
3.4 Road Safety Under the 9th Malaysia Plan, emphasis on road safety will be on improving the physical aspects of the road and improving the ethics of the road users (Figure 7). Measures will continue to be undertaken to improve accident-prone locations on major roads as well as state and local authority roads. These include the straightening of roads, the provision of overtaking lanes, improving road markings and the provision of pedestrian crossings.
Figure 7: Facing the road safety challenge
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To encourage the use of public transport, the Malaysian Government has developed some urban transportation strategies focused on the development of an integrated, efficient and reliable public transport system. Measures such as restructuring the public transport system through the Integrasi dan Penysunan Semula Pengangkutan Awam di Lembah Kelang (INSPAK) program have been undertaken. Under the INSPAK program, bus services have been improved, particularly to support the urban rail systems, thereby optimizing the potential of the rail systems as the backbone for public transport services in the Klang Valley.
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The Government will also be championing the provision of motorcycle lanes for all roads based on the availability of funds. Motorcyclists make up 49% of the vehicle population and more than 60% of fatalities. Currently there are only a few hundred kilometres of motorcycle lane, compared to the total 80,000 km of road, and this needs to be addressed. Exclusive motorcycle lanes provided where warranted according to standard and well maintained can greatly reduce motorcycle fatalities. The Government has also incorporated road safety features, imposed lower speed limits, held road safety campaigns, improved hazardous locations, and tightened rules. Of the over 250,000 accidents that occurred in 1996, 80% were linked to bad driving habits.
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Whilst it is difficult to change road user behaviour, better coordinated efforts among the various agencies and organisations in Malaysia with interests in road safety have made inroads into the development of a road safety culture in Malaysia. This has contributed to a reduction in road fatalities over recent years; fatalities have declined from 5.7 deaths per 10,000 registered vehicles in 2000 to 4 deaths per 10,000 in 2006. The Malaysian Government aims to achieve 2 deaths per 10,000 registered vehicles by 2010. In order to enhance the current road safety level, the Malaysian Institute of Road Safety Research (MIROS) was recently established. Besides functioning as a one-stop centre for the generation and dissemination of road safety information, the main function of MIROS is to conduct relevant research on road safety and to establish cost-effective road safety interventions. The Government is also seeking international help in its aim to cut road deaths by participating in the Global Road Safety Partnership (GRSP). As Malaysia is currently implementing community-based road safety programs which require the active participation of the private sector, GRSP will work together with MIROS to accelerate, enhance and consolidate co-operation and partnership with the private sector. Under the MOU between Malaysia and GRSP, an agreement was reached to work together to achieve a 50% reduction in the number of accidents, injuries and fatalities due to road accidents by 2010, as envisioned under the Malaysia Road Safety plan 2006-2010.
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For the first time ever, other Government Departments such as Jabatan Keselamatan Jalan Raya, PUSPAKOM, Jabatan Pengangkutan Jalan and the traffic police are also helping to showcase the Government-led road safety initiative.
3.5 Other issues The Malaysian Government has also established the Slope Engineering Branch within the Public Works Department. This Branch has been entrusted to manage and reduce slope failures and to undertake the National Slope Master Plan study in response to the rising landslide problems and the realization of the negative impacts of landslides in the country. The National Slope Master Plan will include goals and policies to guide the country’s future in the management of slopes to meet the demands of development. While implementing its road development programs, the Government has always placed importance on care for the environment. Environmental Impact Assessments have been mandatory in Malaysia for particular projects since 1988. All road projects require an Environmental Management Plan. Environmental considerations will be emphasised in project planning and implementation to ensure sustainable development.
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Conclusions
Under the 9th Malaysia Plan, the Government is focusing on increasing the coverage of the road network and optimizing the utilization of existing facilities to support economic activities. It is about building more new roads while making the best use of the existing roads by treating those locations with the worst congestion, safety and environmental records. Ultimately the goal is to provide reliable accessibility that is affordable and complies with safety and sustainability criteria. With proper planning, the future road network should benefit the national economy in terms of economic savings from reduced fuel consumption, vehicle maintenance, environmental costs, health costs and time wastage due to delays.
Privatisation of Four Road-Related Corporations in Japan Hiroshi Makino and Mitsuya Nagasawa Road Bureau, Ministry of Land, Infrastructure and Transport, Japan
ABSTRACT
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Four Public Corporations were established under the tollway road system to promote expressway developments in Japan. As a result of the adoption of a national fee pooling system, highway development, the foundation of the Japanese road network, has progressed satisfactorily, with the length of the national expressway system now being 7,389 km. However, during the recent prolonged economic slump, structural reforms were instigated by the Government and the privatisation of public corporations was one of his top-priority issues. The aim was to take advantage of the knowledge held by the private sector in the development of public expressways. There were nationwide discussions with respect to the need for reform, especially with local residents who were complaining about delays in road development. Based on those discussions, the Government decided to reduce the number of tollways and to construct the remainder of the system using revenue raised from the gasoline tax. As a result, six new private companies were founded in October 2005. At the same time, an independent administrative corporation was established to manage the expressway system, including debt repayment.
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1
History of Road Development in Japan
Two systems have supported the development of roads in Japan since the end of World War II: Government-funding of roads and tollways. The earmarking of Government funding for road development was based on the concept that vehicle users should pay the cost for road development through taxes on gasoline and, since 1953, light oil, liquefied petroleum gas (LPG), and a Motor Vehicle Tonnage Tax. Approximately 5.7 trillion yen* has been raised through this taxation. The toll road system commenced in 1952 when the Act on Special Measures for the Road Development was introduced and the Japan Highway Public Corporation established. Since then, the Metropolitan Expressway Public Corporation, the Hanshin Expressway Public Corporation, the Honshu-Shikoku Bridge Authority and the Trans-Tokyo Bay Highway Corporation have also been established. The establishment of these corporations has greatly assisted expressway development because funding has been made available through loans during times of severe economic environments. The 4th Comprehensive National Development Plan, formulated in 1987, stated the need for the provision of a high-standard arterial road network appropriate to the 21st century. It was proposed that 14,000 km of arterial road be constructed, of which 11,520 km was to be national expressways, with the remaining 2,480 km upgraded to freeways on national highways. The fourth new comprehensive national development plan, ‘The Grand Design for the 21st Century’, was formulated in 1998 in order to address issues related to the vulnerabilities caused by national land structures, changes in public awareness such as an over-emphasis on spiritual richness, global environmental issues, increased international competition, declining population, an aging society, and the increase in community use of information systems.
*
US$1 ≈ 100 Japanese Yen (November 2008).
1.1 History of Arterial Road Development By the end of March 2005, the total length of arterial roads was 8,851 km, including 7,389 km of expressways (Table 1). This represented approximately 63% of the total length of 14,000 km proposed in the 4th Comprehensive National Development Plan. Table 1: Total In-Service Length of Arterial Roads 31 March 2006 Total Length (km)
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Total Length in Service (March 2005)
Total Length in Service
Service Rate (%)
A
B
C
D
E = B/A
14,000
11,119
8,703
8,851
63
National expressways
11,520
9,342
(576) 7,363
(597) 7,389
64
Private tollways
10,821
8,643
7,363
7,389
64
Toll-free roads
699
699
0
0
0
Arterial roads
12
Length of Planned Improvement
Honshu-Shikoku Expressway National highways
180
177
164
164
91
2,300
1,600
627
701
30
The figures in parentheses ( ) opposite ‘national expressway’ are the lengths of national highways which run parallel to national expressways calculated using national highway data, and scheduled to be extended by 31 March 2006.
The toll road system relies on loans to repay the debts incurred in constructing the toll road. The debts are repaid over 50 years. In 1972, a national fee pooling system was adopted as a means of further developing the expressway system. In this system, the fare revenue is summed and the surplus is used to either fund the construction of a new toll road or support an existing road that is unprofitable. This ensures that the revenue sources are stabilized and loan redemption is implemented in a smooth manner. However, as the number of toll roads with poor profitability gradually increased owing to insufficient traffic, rises in the tolls could not be avoided. In response to user dissatisfaction with the rising tolls, tolls have not increased since 1995. As a result, however, the interest-bearing debt increased, reaching 28 trillion yen in the Japan Highway Public Corporation and 40 trillion yen in the four public corporations. The created a critical situation because the remainder of the network needed to be constructed without increasing the tolls and also repaying the outstanding debt.
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History of Privatisation of Road-Related Corporations
In April 2001, the Government introduced administrative and financial reform with the privatisation of government-affiliated agencies a top priority. As a general rule, it was announced that Corporations which had high profitability and operated efficiently should be privatized. The four road-related Corporations fitted this condition. Issues in terms of the organizations that would replace the four public corporations, and their profitability, were discussed in the ‘Promotion Committee for Privatisation of Road-Related Four Corporations,’ and the committee submitted a written statement to the Prime Minister in December 2002. The fundamental framework of the privatisation was eventually determined in December 2003. The ‘Four Laws Related to Privatisation of Road-Related Four Corporations’ was established and promulgated in June 2004, followed by the privatisation of the corporations on 1 October 2005. The aims of the privatisation of the four Corporations were to secure repayment of interest-bearing debts 40 trillion yen within a certain period of time construct the needed roads without placing a financial burden on the public but at the same time respecting company autonomy
provide a variety of flexible toll fee settings or diversified services drawing on the knowledge available in the private sector.
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Overview of Privatisation of the Four Corporations
3.1 Review of Targeted for Toll Road Projects 3.1.1 Review of Development Plan for the National Expressways Of the sections planned to be constructed as toll roads (9,342 km), the sections not in service (approximately 2,000 km) were reviewed in terms of the method of project operation and similar issues. If all of the expressways were updated to toll roads, the increase in debt could interfere with the certainty of debt repayment. Therefore, in line with the wishes of the Privatization Promotion Committee, the new direct control system of road development, regardless of fee revenue and with the earmarked funds for road development, was introduced to those expressways which were judged to be necessary based on cost-benefit analyses and other external effects.
STEP 1 Verification of the necessity of project
STEP 2 Verification of eligibility of toll road
STEP 3 Comprehensive evaluation
STEP 4 Distribution of method for improvement
Will social benefit exceed cost*? ＮＯ Social benefit – Cost * > 0 Whether to continue on with the project or not ＹＥＳ
Review project
*Nakamura criterion used remaining cost in view of project progress, but “total cost” has been used from the viewpoint of making a stricter evaluation
ＮＯ
Can the toll receipts cover operating cost? Toll receipts – operating cost > 0
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ＹＥＳ Evaluation based on objective indicators: ・Cost versus benefit (consideration of project progress) ・Profitability ・Other external effects evaluation based on above Routes and sections where non-toll is desirable
Routes and sections where toll is desirable
Improvement by a new organization or corporation
Review of structural standard, etc to be considered with the locals aimed at further cost reduction
Reconsider comprehensively by carrying out thorough review of structure and standard.
Improvement by the government (MLIT)
Figure 1: Method of assessment of national expressways
3.1.2
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As a result, the new direct control system was applied to those sections which were not to be adapted to the toll road system – a total of 27 sections 699 km in length. In addition, those sections to be reviewed – a total of five sections, 143 km in length – were identified (see Table 1 and Figure 1).
Reduction in Construction Costs
Of the planned development sections of the national expressways, it had been previously determined by the Japan Highway Public Corporation that those sections not in service sections would be improved. However, it was then decided to halve the targeted project cost for the toll roads from the original estimate of 20 trillion yen to a maximum of approximately 10.5 trillion yen in the following way: cost reduction of approximately 4 trillion yen based on the ‘Cost Reduction Plan’ (March 2003) additional cost reduction of approximately 2.5 trillion yen determined by the ‘Fundamental Framework of Privatisation of Road-related Four Corporations’ (December 2003) approximately 3 trillion yen associated with the new direct control system (see Figure 2).
20 trillion Yen (balance after 2003) Cost reduction: 4 trillion Yen 16 trillion Yen
＜Toll roads by private company＞ company＞
＜TollToll- free roads by national government ＞
Cost reduction: 2.5 trillion Yen
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10.5 trillion Yen
14
3 trillion Yen
Figure 2: Reduction in construction costs
3.1.3
Reduction of Management Cost
In terms of the management costs, the following factors were considered in the ‘Cost Reduction Plan’. reductions in labour costs and overheads including fee collection operation review of the frequency of cleaning of the road surfaces and associated facilities cuts in business expenses, including leasing costs. The four public corporations were required to reduce costs by approximately 210 billion yen by the end of the fiscal year 2005. Furthermore, costs associated with the fundamental framework in 2002 were required to be reduced by 30% by 2005 with further cost reductions expected. In addition, the appropriate conservation of long-span bridges was to be considered.
3.2 Role of the New Organisation 3.2.1 Establishment of Six Companies and JEHDRA Six companies were established to take over the projects being managed by the four corporations, their role being to implement the construction, management, and toll collection. In addition, the Honshu-Shikoku Bridge Expressway Company Limited was merged with the West Nippon Expressway Company Limited. The Japan Expressway Holding and Debt Repayment Agency (JEHDRA) assumed the road assets and debts previously owned by the four corporations. The JEHDRA is expected to ensure the completion of payment of the debts within 45 years after privatisation, and at the same time transfer the expressways to the road administrator to provide free admission (see Figure 3). In terms of the interest-bearing debt, the JEHDRA will ensure that the debts associated with the national expressways and the Honshu-Shikoku Bridge Expressway do not exceed the total amount at the time of privatisation, and make every effort to ensure that other debts do not to exceed the total amount. From a viewpoint of securing user convenience by accurately responding to the fluctuation risk in the interest or traffic volume, the JEHDRA will align the basic fare levels and repayment period of debts on the national expressways in a uniform way between the East Nippon Expressways Company Limited, the Central Nippon Expressways Company Limited, and the West Nippon Expressways Company
Limited. In terms of the roads controlled by the Japan Highway Public Corporation, the timing of debt repayment will be aligned with that of the national expressways. [Privatization of Road-related Four Corporations] Metropolitan Expressway Public Corporation
Japan Highway Public Corporation
Hanshin Expressway Public Corporation
Honshu-Shikoku Bridge Authority
Expressway Companies East Nippon Expressway Company Limited
Central Nippon Expressway Company Limited
West Nippon Expressway Company Limited
Metropolitan Expressway Company Limited
Hanshin Expressway Company Limited
Honshu-Shikoku Bridge Expressway Company Limited
Debt Repayment Agency Japan Expressway Holding and Debt Repayment Agency (JEHDRA)
Figure 3: Overview of the privatization of the corporations
3.3.1 Respect of Company Autonomy It was decided to abolish the framework of unilateral order from the government to the public corporations, for example the order of enforcement on existing national expressways. It was also decided that applications for the construction of new expressways would be considered based on the sound business judgment.
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3.3 Implementation of Project by the Companies and the JEHDRA
15
3.3.2 Conclusion of Agreement It was also agreed that JEHDRA would enter into agreements with the companies which described the contents of the new construction and reconstruction, the accepted line of debts incurred during construction, the amount of loan fees, and the length of a loan period for each national highway network, regional highway network, or other general expressways. In addition, it was agreed that JEHDRA would prepare a business operation program which documented the amount of the loan fee and the length of the loan period, the debt repayment plan, etc. and conduct business under the authority of the Ministry of Land, Infrastructure and Transport. It was also agreed approval for the contents of construction, the amount of the toll fee, and its collecting period, based on the agreement, would be given by the Ministry of Land, Infrastructure and Transport (see Figure 4).
JEHDRA Receiving assets and assuming debts
Expressway Companies - Constructing expressways
- Holding expressways Leasing assets - Repaying debts
Borrowing funds
- Managing expressways - Collecting tolls
Paying the rent
Agreement Approval of the Minister of Land, Infrastructure and Transport (MLIT)
Approval of the Minister of Land, Infrastructure and Transport (MLIT)
Figure 4: Implementation scheme of expressway project by companies and JEHDRA
3.3.3 Attribution of Assets and Repay of Debts In principle, any expressways constructed by the companies would belong to JEHDRA after the completion of construction. At the same time, JEHDRA would assume and repay any debts incurred by the companies during construction. The companies would repay the debts via JEHDRA through the costs of renting the road assets.
3.3.4
Fee and its Level
In setting the toll fee, it was agreed that company profit would not to be included.
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With the utilization of the ETC, a flexible toll fee would be positively introduced and toll fee reductions implemented using a wide variety of discounts. In addition to the approximate 10% discount in the toll fee for the national expressways, some discounts, such as a mileage discount, night-time discount and commuting discount would come into effect following the abolition of the ‘post-paid discount’. This reduced toll level will be adopted in the post-privatisation period, with further flexible toll fee settings achieved without interfering with the ensured payment of the loan fee.
16
In terms of two inter-city expressways (Metropolitan Expressway and Hanshin Expressway), a unified toll fee system has been adopted. The distance-based toll system (which is based on the concept of the burden appropriate for the degree of use) was to be implemented by 2008, taking consideration of the appropriate fare revenue necessary for the repayment of the loan fee.
3.4 Handling Towards Takeover of Projects and Conclusion of the Full-Scale Agreement 3.4.1 Takeover of the Expressways Projects Being Conducted by Public Corporations In terms of those expressways already in service, the new companies would take over the management and toll collection. Until the finalisation of the full-scale agreement, which was scheduled to be concluded within six months from the privatisation, the companies would take over responsibility for construction, based on the provisional agreement set up by the Ministry of Land, Infrastructure and Transport.
3.4.2 Expressways Under Construction and Under Investigation Within four months of the privatisation, the Ministry of Land, Infrastructure and Transport would hold discussions with the companies to decide which expressways would be constructed. During this process, discussions would also be held with JEHDRA. Following the receipt of recommendations from the Panel on Infrastructure Development, no designation would be made if the reason why the construction could not be implemented was seen to be legitimate. Within six month of privatisation, as a general rule, the companies and JEHDRA would conclude the agreement, and both parties would receive both project permission and a project implementation plan permission from the Ministry of Land, Infrastructure and Transport.
3.5 Debts Disposal of Honshu-Shikoku Bridge Authority The ‘Law concerning Special Measures urgently Taken in Fiscal 2003 to Reduce the Burden of Debts Owed by the Honshu-Shikoku Bridge Authority’ was passed by Parliament in 2003. It stipulated that long-term borrowings and a part of the debts owed by the Honshu-Shikoku Bridge Bond out of debts of the Honshu-Shikoku Bridge Authority should be transferred to general accounting. In accordance with this law, out of the 3.5 trillion yen of interest-bearing debt owed by the HonshuShikoku Bridge Authority at the end of 2002, approximately 1.34 trillion yen was transferred to general accounting. With respect to the debts transferred to general accounting, the required budgetary steps have been taken since 2003, and the disposal was expected to be implemented by fiscal year 2007.
In terms of the Honshu-Shikoku Bridge Expressway, appropriate repayment of debts will be conducted using investments up to fiscal year 2032 and reduction of the basic charge will be implemented within the range of improved management effects by local investment (from fiscal 2022 to fiscal 2032). Furthermore, it was agreed that the method of payment of the investment money of the HonshuShikoku Bridge Expressway would be discussed before JEHDRA was dissolved.
3.6 Varieties of Services Provided by New Companies The degree of freedom has been spreading rapidly with respect to projects in the service areas and parking areas as well as projects in new fields. New businesses to improve convenience for users are expected to be available, including the introduction of convenience stores in the service areas or parking areas. In addition, operations such as parking lot businesses and track terminal businesses would continue, and advertisement-related businesses were expected to develop in the business utilizing space underneath the elevated road or on the website.
4
Conclusions REAAA JOURNAL
This paper has discussed the privatization of four road-related corporations which brought about drastic change in the environment surrounding the management of expressways in Japan. However, the expressways remain as shared possessions of the nation. In the future, with the efficient and economical business operation by the introduction of the private sector knowledge and experience, road development, which is the foundation of national development, will move ahead in pursuit of assured debt repayment, cost reductions associated with expressway construction, and improved customer service.
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Comparative View of Road Infrastructure in India: A Quest for Quality and Growth AK Sharma and Ekta Vohra Department of Management Studies Indian Institute of Technology, India*
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ABSTRACT The aim of the study described in this paper was to examine the current status of road infrastructure in India and to identify needs and gaps in the availability of quality roads compared with other economies. The socio-economic and political environment in India is also analysed to assess the country’s attractiveness to private sector participation in road infrastructure development. The targets set by the Government of India for the road sector development and the current road status in China were used as benchmarks to enumerate the existing gap in road development in India. For this purpose reference is made to growth trends of the road sector vis-à-vis the manufacturing sector in order to examine the impact of road development on the industry. The study advocates that the present pace of road infrastructure development is inadequate in India compared with other developing countries. The quality of roads compared to China is below expectations, and poor access to the hinterland is affecting trade growth.
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1
Introduction
In any modern economy, infrastructure plays a pivotal role, often being decisive enough in determining the overall productivity and development of a country’s economy (Mody 1997). In this context, for developing nations the creation of adequate and state-of-the-art infrastructure becomes imperative. India, being a developing economy, needs to build state-of-the-art infrastructure to augment its economic growth process. The inception of economic liberalisation in India commenced in the early 1990s and, since then, the global trade in terms of imports and exports has increased as one of the natural outcome of the liberalisation process. However, this initial phase lacked the proportionate development of additional infrastructure for new entries into the market, especially the six core infrastructure sectors: electricity, coal, steel, crude oil, petroleum refinery products and cement, all of which have a direct bearing on overall infrastructure. The repercussions of this neglect were quite visible in the late 1990s and early this century when the GDP growth rate commenced to decline below expected levels. The small observed growth in GDP and the manufacturing sector was due to the phenomenal rise in the service industry and the existence of a liberal investment environment in India; however, the core infrastructure sector did not complement this growth. As a result, the existing infrastructure deteriorated because it was not able to handle this growth and no plans were in place to manage this infrastructure. Figure 1 compares the growth in manufacturing, GDP and the six core infrastructure sectors in India.
*
[email protected].
in percent
12 8 4 0 2001 2002 2003 manufacturing GDP
2004
2005 2006 6-core infrastructure
Figure 1: Comparison of growth in manufacturing, GDP and the six core infrastructure sectors in India Source: www.mospi.nic.in; Monthly Economic Report India; Economic Survey, India
2
Infrastructure Investment: Comparison of India and China
in percent
12 8 4
19
0 2000 2001 2002 2003 2004 2005 2006 India
China
Figure 2: Comparison of growth of GDP in India and China Source: World Economic Outlook database 2007 International Monetary Fund (GDP at constant prices)
This decline in GDP growth rate in the first part of this century in India, and the lower growth rate compared to China, may be related to the very low level of investment in infrastructure development in India as outlined in Figure 3 and Figure 4. Investment in infrastructure development in India compared to China, in terms of the percentage of GDP declining during 1997-2002 (Figure 3), whilst investment, in dollar terms, was static (Figure 4). It is also clear that public spending on infrastructure in China in the first part of this century was about five times that of Government spending in India. 20
% of GDP
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In order to better understand the significance of these observations, infrastructure investment in India is now compared to that in China, another growing economy in Asia that has several regional and economic contexts similar to India. It is clear from Figure 2 that, between 2000-2002, the growth in GDP in India declined, while in China during the same period and onwards it has risen sharply. However, the Indian economy has improved sharply over the last few years, with an average growth in GDP of 7.6%; however, this was still short of the targeted growth rate of 8%.
16 12 8 4 0 1997
1998
1999 India
2000
2001 2002 China
Figure 3: Comparison of infrastructure investment in India and China (% of GDP)
in billions US$
300 250 200 150 100 50 0 1997
1998
1999 India
2000
2001
2002
China
Figure 4: Comparison of infrastructure investment in India and China (US$B)
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Source: National Bureau of Statistics, China; RBI; Morgan Stanley Research
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India’s infrastructure needs have been recognized by international investors, Indian business organizations and the Government as one of the main obstacles to the country’s future economic growth (Ahuliwalia 2006).
3
Literature Review
In any nation infrastructure plays a major role in economic development. Numerous studies have been conducted addressing the issues related to infrastructure development. Some of the important studies are now reviewed to gain an appreciation of infrastructure development in developing economies. A study reported by Blejer and Khan (1984) framed the background for encouraging the research community to study the impacts of public stocks (public infrastructure) and infrastructure spending on the various sectors of the economy. Using data from a number of countries, the study found that public investment in infrastructure complimented private investment. However, a study conducted in the USA (Aschauer 1989) established a link between productivity growth and infrastructure availability in any economy. It analysed data pertaining to United States from 1949-85 and suggested that a decline in productivity between 1971 and 1985 in the USA was largely due to a decline in public investment in infrastructure. Munnel (1990) studied the economic impacts of the non-military public and non-residential net capital stock in the USA between 1970 and 1986. She found that those States which made heavy investment in building infrastructure generated greater economic output and attracted more private investment. Evans and Karras (1994), analysed infrastructure and productivity data for 12 OECD countries between 1963 and 1988. They concluded that the increase in the stocks of public capital was due to the increased productivity and economic growth and not vice-versa, as found in Aschauer’s study. Some OECD studies (Demetriades 2000; Esfahani and Ramirez 2002) took account of the concept of ‘time-lag’. In these studies, investments were compared with the productivity data several years afterwards, providing a time gap as a cushion to accommodate the returns of infrastructure investments on the productivity figures. Both studies found that public infrastructure had a measurable impact on increasing productivity and economic growth. Harchaoui and Tarkhani (2003), studied the productivity impacts of infrastructure across various sectors of the economy. They found that the impacts were not uniform across the business sector. Kumar (2001) concluded that infrastructure availability contributed to the relative attractiveness of a country towards FDI by MNEs. A study analysing the impact of certain determinants on FDI inflows to Brazil suggested that investments made on building international-class infrastructure served as a major catalyst towards attracting higher inward FDI (Mollick, Ramos-Duran and Silva-Ochoa 2006). Mattoon (2004), studied the impact of the existing infrastructure on the productivity of a region. He argued that poor quality infrastructure drove companies away from a location more often than good infrastructure would attract them. A study conducted on African countries to assess the effectiveness
with which the infrastructure capital is used, advocated that ‘if capital stocks are not used effectively additional capital formation may be of little help in stimulating economic growth’ (Hulten 1996). In the Indian context, a study conducted by Fan, Hazell and Sukhdeo (1999) examined the linkages between public investment on rural connectivity, agricultural growth and poverty alleviation, over the timeframe 1970-1993. It was estimated that the living standards of 123.8 poor people could be raised above the poverty line for each Rs.1 million† (1993 prices) of additional investment in roads. Several studies have found that rural road development is the key to growth of agricultural production (Hine 1982). Songco (2002) also concluded that investment in building rural infrastructure resulted in increases in income and consumption level of the rural population. Another study conducted on the Indian economy revealed the existence of a positive relationship between increased infrastructural provision and average growth rate of the Indian States (Barro 1990). The study also found that some types of infrastructural investments – power, irrigation, roads, bank provision – produced much higher growth than others (Nagaraj 1998).
It is instructive to study the correlation, if any, between economic growth and infrastructure availability. For this purpose five economies, two growing economies of Asia (India and China), two growing economies of Latin America (Brazil and Mexico) and a developed economy (USA) were considered (Figure 5). The global infrastructure ranking presented is as assessed by the World Economic Forum (WEF) for establishing the Global Competitiveness Index. As the trend reflects, in the cases of India, China and Mexico, the results are in line with the findings available in the literature, as the quality and availability of infrastructure increases as the GDP growth rate increases. For Brazil, it is observed that the scoring on the infrastructure seems to have a direct effect on the economy in the following one or two years and not in the current year, which is in agreement with the studies conducted by Demetriades (2000) and Esfahani (2002). In the case of the USA, the trend for the two variables is not in agreement with the observations in the literature. However, the Aschauer study on productivity growth during the 1970s in the USA argued that the decline in productivity growth during this period was mainly due to a decline in public investment in infrastructure which was not supported by the trend shown here over recent years. In order to examine the effect of the availability of infrastructure on growth compared to other sectors, the yearly growth of total exports and the relative infrastructure scoring of the five countries over a period of six years was compared. As shown in Figure 6, a linear relationship exists between two variables for India and Mexico and, to some extent, China, as the trend lines are almost parallel. The trend for Brazil and the USA is, however, the reverse of the other countries. In the case of the USA this may be due to infrastructure development reaching a stage where it has the least negative impact on exports and growth in GDP growth. However, in Brazil, other factors seem to be contributing to this unexpected trend.
†
US$1 ≈ 50 Rs (December 2008).
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In summary, this review has suggested that investment in building public infrastructure has a positive impact on improving the productivity of an economy. Some studies also suggested that the positive impact of increased spending on infrastructure development can be observed not only in the same year but also in later years. The literature also suggests that the benefits of infrastructure investment differ across industries and sectors, and investment in the maintenance and upkeep of existing facilities is more beneficial if spent on the creation of new facilities.
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4 2 0
12
5
10
4
8
3
6
2
4
1
2 0
2001 2002 2003 2004 2005 2006
0 2001 2002 2003 2004 2005 2006 GDP growth% at constant price Global Infrastructure Score
GDP growth% at constant price Global Infrastructure score
India
China
3 2 1 0
4 3
GDP growth% at constant price Global Infrastructure score
2
2
1
1 0
2001 2002 2003 2004 2005 2006
3
Global Score
4
GDP growth in %
5
4
5
Global score
4 3.5 3 2.5 2 1.5 1 0.5 0
0 2001 2002 2003 2004 2005 2006 GDP growth% at constant price Global Infrastructure score
Mexico 5
6.8
4
6.6
3
6.4
2
6.2
1
6
0
Global score
Brazil GDP growth in %
22
GDr growth in %
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6
5.8 2001 2002 2003 2004 2005 2006 GDP growth% at constant price Global Infrastructure score
USA Figure 5: Comparison of GDP growth rate and infrastructure score Source: GDP, International Monetary Fund data base; Infrastructure score, World Economic Forum database
Global Score
6
GDP growth in %
GDP growth in %
8
Global Score
3.5 3 2.5 2 1.5 1 0.5 0
10
2.5 2
100
1.5 1
50
0.5 0
0 2001 2002 2003 2004 2005 2006
960
5
800
4
640
3
480
2
320
1
160 0
0 2001 2002 2003 2004 2005 2006
Total Export
T otal Export
Global Infrastructure score
Global Infrastructure Score
120 80 40 0
300
3.7 3.6 3.5 3.4 3.3 3.2 3.1 3 2.9 2.8
240 180 120 60 0 2001 2002 2003 2004 2005 2006
2001 2002 2003 2004 2005 2006
T otal Export
T otal Export
Global Infrastructure score
Global Infrastructure score
1200
6.7 6.6 6.5 6.4 6.3 6.2 6.1 6 5.9 5.8
1000 800 600 400 200 0
Global score
Mexico Total Export in billions US$
Brazil
2001 2002 2003 2004 2005 2006 T otal Export Global Infrastructure score
USA Figure 6: Comparison of export growth rate and infrastructure score Source: GDP, International Monetary Fund data base; Infrastructure score, World Economic Forum database
After examining the growth rate, export growth and infrastructure provisions for the five countries over a period of six years, it can be concluded that, in the case of the four developing economies, the trend appears similar to the observation noted in the literature. The USA was not in line with the other countries; this may be the result of the very large investment made by the USA in the past years, the benefits of which are now being accrued. In this situation the growth in GDP may not be required to be supported by the growing investment in infrastructure development.
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4 3.5 3 2.5 2 1.5 1 0.5 0
Global score
160
Global Score
China Total Export in billions US$
India Total Export in billions US$
Global Score
3 150
Total Export in billions US$
3.5
Global Score
Total Export in billions US$
200
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4
Rationale and Scope of Study
As stated earlier, very few studies have been conducted on the development and growth of infrastructure in India compared to other countries and sector-specific studies are non-existent. It is accepted that there is a wide gap between the available and the required level of infrastructure facilities in India and that this is hampering desired economic growth. In order to keep abreast of the current growth in the country, it is important that policy-making for infrastructure development be supported by to identify the underlying deterrents.
4.1 Objectives of the Study The aims of the study were to: examine the state of infrastructure in India, compare it with other countries and establish its impact on overall economic development identify the gaps between the existing and required road infrastructure facilities and their probable impact on productivity, in the Indian context
24
review the policy statements pertaining to the sector under review and identify the underlying issues suggest viable solutions to the development of an efficient road network in India. The information presented in the paper is based on data collected mainly from secondary sources, in terms of physical status and spending status, pertaining to the road sector.
5
Discussion, Observations and Suggestions
5.1 Road Economics In 2006, the transport sector’s share of the GDP in India was estimated to be 5.5% in, of which road transport contributed 3.69%. The road sector handles 65% of the overall freight and about 87% of the passenger traffic. A recent study (Deloitte 2003) found that the total freight movement in India carried by roads has increased from 34.5% in 1970-1971 to about 63% in 2001-2002. This suggests that the finance provided by this sector is rising rapidly and that the sector has the potential to be the most preferred mode of transportation for both freight and passenger movement, over the present cheapest mode of transportation – rail. However, compared with China, India is still a long way from obtaining excellent gains from this sector (Figure 7). 100 90 80 70 60 50 40 30 20 10 0
as % of total traffic
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study the state of private sector participation in road infrastructure development in India
freight India
passenger China
Figure 7: Modal road traffic share as percentage of total traffic: India & China (2004) Source: Department of Road Transport & Highways, India; Li Liancheng, 2005
The road sector also has great employment potential, especially in rural areas, where is can help to reduce poverty. Rural road construction is a labour-intensive industry and provides immediate relief to the rural poor. For example, the National Highways Development Programme (NHDP) is expected to provide employment opportunities for about 2,500,000 construction workers in India (CMIE 2007). A study conducted on India in 1970-1993 concluded that investment in rural roads contributed effectively to productivity growth: an additional Rs.100 billion invested in roads increased productivity by more than 3% (Fan et al. 1999). At present India spends about Rs.160 billion annually on road development programs (Investment Commission, India).
5.2 Impact on Industry
12
35
10
30 25
8
20
6
15
4
10 5
2
0
0 India
10 8
China
Manufacturing share in country's GDP as % Global manufacturing rank
Figure 8: Manufacturing sector manufacturing sector: India and China (2006) Source: Global Insights (Lardy 2006)
% of world share
14
40
Global rank
share in GDP as %
45
6
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It has been realised for some time that the greatest impediment to the rapid growth of the manufacturing sector and exports in India is the inability to quickly and efficiently transport products from inland facilities to its ports. China’s economy is three times larger than that of India: about US$2.2 trillion for China compared to US$700 billion for India (2006 exchange rates) (Lardy 2006). A major contributor to China’s economy is its manufacturing sector. The share of the manufacturing sector to the GDP is 40% compared with only 25% in India (IMF 2006). In a survey of the top 15 manufacturing nations, China was third while India was twelfth (Figure 8). China also out-performed India in the exports sector. Although India’s exports almost doubled between 1995-2004, its share of world exports only rose from 0.6% to 0.8% (Winters and Yusuf 2007). China’s share of total world exports is almost nine times greater than that of India (Figure 9).
25
4 2 0
2001 2002 2003 2004 2005 2006
India
china
Figure 9: World export share: India and China Source: International Financial Statistics
India’s infrastructure-deficient environment has been one important cause hampering the growth of exports, especially the poorer parts of the National Highway network. The development of the National Highway network in India has lagged severally compared to that in China in the last decade (Figure 10). The logistics cost in India is 13% of GDP due to under-developed trade and logistics infrastructure; it is less than 10% in almost all of western Europe and North America (Data Monitor, 2007). The costs associated with moving freight in India are among the highest in the world at 11% of landed cost, compared with a global average of 6% (www.inboundlogistics.com). It is estimated that the inadequate physical road connectivity possibly constrains growth in the GDP up to 2 percentage points a year (Department of Road Transport and Highways, India 2006). This trend is a clear indicator of India’s initial ignorance about the importance of creating road assets to boost the economy as a whole and the manufacturing sector in particular.
in thousands of km
1250 1000 750 500 250 0 1986 19881990 19921994 199619982000
India
China
Figure 10: Growth in Length of national highways 1986-2000: India and China Source: Li Lienchang 2005
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5.3 Current Status of Road Network in India
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India has the second longest road network in the world but the standard of its road network is far below expectations (Table 1). China, which does not have a very long history of building highways and expressways, scores much better than India (Table 1). Table 1: Comparison of Road Network in India and China (2006) Length (km) India Total road length
China
3.85 million
1.87 million
Highways
194,000
1.83 million
National highways
65,5701
Expressways
200
State highways
128,000
Major district roads
470,000
Village and other roads
2,650,000
Surfaced road length
1.604,0002
Per cent paved roads
62.6
Rural access to all-season roads
45,000
82
60% of villages
Source: Department of Roads and Highways India; World Bank; World Development Indicators 2006, 2007; National Bureau of Statistics, China.
1. 2% of total road network; carries about 40% of traffic. 2. 48.6% of total road length.
While considering the contribution of the road network to the economy it is not only the length which is relevant but also the quality of the road infrastructure is an important determinant if the overall road infrastructure availability is to be evaluated. The relevant ranking of the quality of roads in five countries, according to the WEF, is shown in Figure 11. It can be seen that India scores 3.2 while the world average is 3.7; economies such as Guatemala, Pakistan and Botswana rank superior to India.
7
100
6 5
60
4
40
3
Score
Rank
80
2
20
1
0
0 India
China
Brazil
Mexico
Rank
US
Score
Figure 11: Comparison of road quality 2006-07 Source: Infrastructure GCR, 2006-07, WEF Note: Scoring is on 7-point scale: 1 – underdeveloped; 7 – as extensive and efficient as the world’s best.
1. Widening to two lanes 2. Widening to four lanes. 3. Strengthening weak two lanes
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The poor performance of India in developing a quality road network is also evident from the 10th Five Year Plan. Figure 12 shows that, under any of the three broad categories of National Highways, no targets have been achieved.
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2
1 0
2000
Target
4000
6000
in kms
8000
Acheivement
Figure 12: Development of highway network under 10th five year plan Source: Department of Road Transport & Highways, India. Note: Scoring is on 7-point scale: 1 – underdeveloped; 7 – as extensive and efficient as the world’s best.
Another important indicator of the poor progress in the sector is the number of roads widened. Figure 13 compares India’s performance with that of China. This current poor performance will make it difficult to achieve the targets set for 2011. The ‘Vision Document 2021’ for road network development in India states that, by 201,1 the length of four-lane and larger highways in India should be 16,000 km, the length of two-lane highways would be reduced to 15,000 km and the length of expressways would be as much as 3,000 km. However, India’s performance in the road sector under the 10th Five Year Plan period raises doubts that these targets will be met (Figure 13). In addition, between 1951 and 2004, the number of motor vehicle increased almost 100 fold (0.3 million to 30 million) whilst the length of the road network increased by only 8 fold (0.4 to 3.32 million km) (Figure 14). The failure of the road network to keep pace with the increase in motor vehicles is one of the causes of the below average productivity of heavy vehicles in India. On average, a truck travels about 200 km a day in India, compared with 350-400 km that would be possible if congestion was reduced. According to the data provided by the Planning Commission the amount of freight traffic is estimated to increase five-fold, and passenger traffic four-fold by 2020, compared to the current annual growth rate of 18% and 15% respectively. This further highlights the overstressed condition of the Indian road network.
32%
12%
56% 4-lane/more
33%
19%
48% class 3 & above class IV below class IV
double lane
single lane
India
China
Figure 13: Status of widening of national highways in India
million units
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Source: Economic Survey, 2006-07, India; National Bureau of Statistics, China
30 25 20 15 10 5 0 1951
2004
28
motor vehicle pop.
road network
Figure 14: Comparison of the number of motor vehicles and road length in India Source: Li Liancheng; www.indiacore.com
6
Road Network: The Ambitious Plans
With the advent of the 21st century, India ventured into two ambitious road sector projects: the National Highways Development Programme (NHDP) and the Pradhan Mantri Gramin Sadak Yojana (Prime Minister Rural Road Project (PMGSY).
6.1 National Highways Development Programme (NHDP) NHDP was launched in 1999. It has three main components: north-south-east-west corridor (NS-EW), Golden Quadrilateral (GQ) and upgrading highway to four lanes. However, the performance of these projects is mostly below expectations. The Golden Quadrilateral and NS-EW corridor projects are suffering from long delays. Originally the GQ project was slated to be completed by 2003 and the NSEW by 2007 (Planning Commission, 10th Five Year Plan). However it is now estimated that the NSEW and GQ project are unlikely to be completed before 2011 and 2008 respectively (CRISIL 2007) (see Table 2). Table 2: Status of GQ and NS-EW Corridor Projects (March 2007 GQ
NS-EW
Total length (km)
5,846
7,300
Already 4 lanes (km)
5,597
1,390
Being implemented (km)
2,49
4,931
–
821
Balance length (km)
Source: Planning Commission, India; NHAI.
The NHDP project is divided into five phases (I-V) but, by the end of 10th Plan period, only phase IIIA has been achieved and Phases I and II are also incomplete. In addition, studies suggest that the amount of infrastructure being built is much less than that reported in Government documents and also it is often of inferior quality. The Golden Quadrilateral project is one of the examples of a high profile project where the quality of roads provided is substantially lower than expected (Wilkinson 2006).
2.4 2 1.6 1.2 0.8 0.4 0 2002 2003 2004 2005 2006 Requirements as per norms Amount provided
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Rs. in millions
Apart from the lack of road infrastructure, the deteriorating quality of the existing road infrastructure and the maintenance of new highways is other major cause for concern, especially for National Highways. One basic cause of this is the lack of sufficient funding for maintenance works. The funding allocated to maintenance usually does not exceed 60% of requirements and this gap is increasing. It is clear from the last five years of data that the funding needed to meet both new construction and maintenance demands has not been provided (Figure 15). This shortfall is related to the demands from the other priority sectors. As maintenance of roads is a non-plan activity, there is a tendency to cut funding to meet the requirements of other priority sectors.
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Figure 15: Maintenance funding: requirements versus allocations Source: Planning Commission, 11th Five Year Plan document, India
6.2 Pradhan Mantri Gramin Sadak Yojana (Prime Minister Rural Road Project) The importance of rural connectivity cannot be ignored because rural India is perceived as the next destination for targeting by the global manufacturing and service industries. One of the most highprofile rural connectivity projects in rural development in the history of India, PMGSY commenced in 2000. The aim is to provide access for 172,772 towns and villages, requiring an anticipated investment of Rs.78,418 billion. It is wholly sponsored by the Central Government, with 50% of the excess on high speed diesel earmarked for this program. However, like the other two projects, PMGSY is also behind the targets set for the end of 10th Five Year Plan period (Planning Commission 2006). By October 2006 only 15.8% of habitations had been actually connected. Figure 16 shows the percentage of rural habitation not connected by roads, while Figure 17 shows the percentage of the population, classified according to the size of the village or town, connected by roads. It can be seen that there is a large imbalance in regional development in the country and that the performance over the last two decades in achieving total rural connectivity has been poor. This raises doubts regarding the expectations to connect the entire rural population with all-weather road networks in the near future.
0%
percentage of villages connected
Chattisgar W.B M.P Jharkhand Orissa Bihar Rajast U.P Gujrat Maharst Tamil.Na Karnataka Punjab Andhra.P Kerela Harayana
20%
40%
60%
80%
Figure 16: Percentage of habitations not connected by road: 2006
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Source: Ministry of Rural Development, Government of India th (2006); 11 Plan document, Rural Roads Report, Planning Commission, India.
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120 100 80 60 40 20 0 1980 >1500
1985 1990 1995 1000-1500
