46792
THE WORLD BANK GROUP WASHINGTON, D.C.

TRANSPORT BUSINESS STRATEGY

Safe, Clean, and Affordable...
Transport for Development

The World Bank Group's
Transport Business Strategy for 2008-2012

Prepared by the Transport Sector Board

Safe, Clean, and Affordable...
Transport for Development

The World Bank Group's
Transport Business Strategy 2008-2012

THE WORLD BANK
WASHINGTON, D.C.

� 2008 The International Bank for Reconstruction and Development / The World Bank
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CONTENTS

FOREWORD............................................................................................................... IX
ACKNOWLEDGMENTS................................................................................................... XI
ABBREVIATIONS AND DATA NOTES .............................................................................. XIII
OVERVIEW ................................................................................................................ 1
1 ORIGINS OF THE REPORT ........................................................................................ 11
1.1 The 1996 transport strategy.......................................................................................11
1.2 The evolution of development issues ...........................................................................12
1.3 The Independent Evaluation Group's review of transport ................................................13
1.4 The 2008 transport business strategy..........................................................................14
2 FOCUS ON DEVELOPMENT IMPACT.............................................................................. 17
2.1 Transport and the Millennium Development Goals .........................................................17
2.2 Serving international trade.........................................................................................18
2.3 Making cities more efficient and livable........................................................................20
2.4 Increasing rural economic opportunity .........................................................................21
2.5 Accessing health care and education ...........................................................................22
2.6 Making transport safer and cleaner .............................................................................23
2.7 Measuring impact and sharing knowledge ....................................................................23
2.8 Implications of the development focus.........................................................................25
3 FOCUS ON POLICIES............................................................................................... 27
3.1 The roles of governments ..........................................................................................27
3.2 Rationalizing public and private sector roles in transport delivery.....................................28
3.3 Improving the performance of state-owned enterprises..................................................30
3.4 Preserving the value of public assets ...........................................................................31
3.5 Encouraging private sector participation.......................................................................33
3.6 Setting transport prices.............................................................................................35
3.7 Fostering competition and strengthening regulation.......................................................36
3.8 Making transport more inclusive .................................................................................37
3.9 Improving transport safety and security.......................................................................39
3.10 Combating transmission of HIV/AIDS ..........................................................................41
3.11 Reducing transport emissions and climate change .........................................................42
3.12 Fighting corruption ...................................................................................................45
3.13 Implications of the policy focus...................................................................................46
4 FOCUS ON MODES OF TRANSPORT.............................................................................. 47
4.1 The modes of transport .............................................................................................47
4.2 Roads .....................................................................................................................48
4.3 Railways .................................................................................................................51
4.4 Urban transport........................................................................................................53
4.5 Ports and maritime transport......................................................................................55
4.6 Inland waterways .....................................................................................................56
4.7 Airports and aviation.................................................................................................58
4.8 Multimodal transport.................................................................................................59
4.9 Implications of the modal focus ..................................................................................61
5 FOCUS ON REGIONS ............................................................................................... 63
5.1 Regions, diversity, and partnership .............................................................................64
5.2 Sub-Saharan Africa...................................................................................................64
5.3 East Asia and Pacific .................................................................................................66
5.4 Europe and Central Asia ............................................................................................67

vi CONTENTS

5.5 Latin America and the Caribbean ................................................................................68
5.6 Middle East and North Africa ......................................................................................70
5.7 South Asia...............................................................................................................71
5.8 Global partnerships supporting regional programs .........................................................72
5.9 Implications of the regional focus................................................................................72
6 TRANSPORT BUSINESS STRATEGY 2008�2012 ........................................................... 75
6.1 Comparative strengths ..............................................................................................75
6.2 Strategic objective....................................................................................................80
6.3 Strategic directions...................................................................................................80
6.4 Process adjustments .................................................................................................82
6.5 Results framework....................................................................................................83
6.6 Implementation Action Plan .......................................................................................90
6.7 Resource implications................................................................................................94
ANNEX A TRANSPORT LENDING TRENDS 1996�2007...........................................................95
ANNEX B MAIN OPPORTUNITIES FOR INCREASED PRIVATE SECTOR PARTICIPATION
IN TRANSPORT ACTIVITIES.....................................................................................99
ANNEX C MIGA PRODUCTS ...............................................................................................103
ANNEX D WORLD BANK REGIONS.......................................................................................105
REFERENCES.......................................................................................................................107
ADDITIONAL RESOURCES .....................................................................................................113

BOXES

Box 2-1. The impact of roads on agricultural production .............................................................21
Box 2-2. Ratio of social indicators in villages in rural Pakistan that do not have all-weather
motor accessible roads (sample A) relative to those that do (sample B) ..........................22
Box 2-3. The power of results.................................................................................................24
Box 2-4. The impact of transport on national economic growth....................................................25
Box 3-1. Reforming state-owned transport enterprises: Lessons from experience...........................31
Box 3-2. Output-based contracts.............................................................................................32
Box 3-3. Sustaining road maintenance financing in Sub-Saharan Africa ........................................33
Box 3-4. Issues in the design of economic regulations in transport...............................................37
Box 4-1. Road projects in Ethiopia and Vietnam ........................................................................48
Box 4-2. China's Third National Rail Project ..............................................................................52
Box 4-3. Colombia's Integrated Mass Transit Systems Project .....................................................54
Box 4-4. Croatia's Rijeka Port Gateway Project..........................................................................56
Box 4-5. Vietnam's Inland Waterways and Port Rehabilitation Project ...........................................57
Box 4-6. Egypt's Airports Development Project..........................................................................58
Box 4-7. The Pakistan National Trade Corridor Program, 2005-2007: A trade corridor project with
regional benefits .....................................................................................................60
Box 5-1. Tailoring responses to needs in the East Asia and Pacific Region......................................66
Box 5-2. Getting the best value for transport investments in Latin America ...................................69
Box 5-3. Global initiatives that support regional programs ..........................................................73
Box 6-1. IFC support of private sector participation in transport infrastructure: Illustrative projects ..76
Box 6-2. MIGA contribution to private sector participation in transport infrastructure:
Illustrative projects .................................................................................................79

Contents vii

FIGURES

Figure 3-1. Division of household transport responsibilities in Makete, Tanzania.............................38
Figure 3-2. Changes in number of road accident deaths, by region, 2000-2020..............................39
Figure 3-3. World transport emissions of carbon dioxide, by vehicle type, 2000 .............................44
Figure 3-4. Carbon dioxide emissions in Europe, by freight mode.................................................44
Figure 3-5. Carbon dioxide emissions in the United Kingdom, by passenger mode
(measured for modern vehicles at average loading) .....................................................44
Figure 4-1. Length of the road network, by region, 2005 ............................................................49
Figure 4-2. Ratio of road network to population, by region, 2005 .................................................49
Figure 4-3. Registered vehicle ownership, by region, 2005..........................................................50
Figure 4-4. Ratio of vehicle ownership to population, by region, 2005...........................................50
Figure 4-5. Railway network, by region, 2005 ...........................................................................51
Figure 4-6. Modes of transport for daily trips in nine cities in China ..............................................54

TABLES

Table 3-1. Projected health losses from traffic accidents as a proportion of the total health
losses in each region, plus ranking of road deaths and injuries as a cause of
healthy life-years lost, by region, 2002-2030...............................................................39
Table 6-1. IBRD net staff by network and sector mapping...........................................................76
Table 6-2. Transport staff overview by appointment type and location ..........................................77
Table 6-3. Intersector synergies and cooperation ......................................................................84
Table 6-4. Indicative applications of World Bank Group instruments in the transport sector .............85
Table 6-5A. Results Framework--Transport Sector: Rural Access .................................................86
Table 6-5B. Results Framework--Transport Sector: Freight Transport...........................................88
Table 6-6. Strategic directions: Implementation Action Plan........................................................90
Table 6-7. Process adjustments: Implementation Action Plan ......................................................92

FOREWORD

Around the world, in much of development work, transport is the ultimate enabler. By serving other
sectors of a nation's economy, it puts development goals within reach. We know, for instance, that an
estimated 75 percent of maternal deaths could be prevented through timely access to childbirth-
related care, facilitated by transport. We know that girls' enrollment in education can more than triple
after completion of a rural road. And, we know that lowering transport costs along a modernized
international corridor can unlock growth potential, create jobs, and bring wealth to local communities.

Mobility--the ability to access health care, education, jobs, and markets--may be something that
citizens of developed countries take for granted. Yet for the 1 billion poor people in developing
countries today who lack access to basic all-weather roads, for the 40-60 percent of people in
developing countries who live more than 8 kilometers from a health care facility, or for poor urban
dwellers who must spend up to five hours daily commuting in order to make a living, safe, clean, and
affordable transport is a necessity.

In striving to achieve its development objectives--and foremost to eradicate poverty--the World Bank
Group is mobilizing the transport sector to the fullest possible extent. To that end, the transport
business strategy outlined in this document aligns Bank Group instruments along a few key strategic
directions that will pave the way to truly sustainable development, one where transport plays a crucial
role.

In a world with rising levels of greenhouse gases, poor road safety, and the all too frequent spread of
communicable diseases along international routes, transport must be looked at anew. A coherent way
forward requires innovative thinking and cooperation among sectors to optimize the role of transport
without jeopardizing personal and commercial mobility. In particular, we need to look at the evolution
of urban environments, where half the world's population lives, with most of those people in
developing countries. Reliable, comprehensive, affordable urban transport systems will have to play a
critical role in helping bring urban development under control, while simultaneously helping diminish
the carbon footprint of a growing metropolis.

We hope the directions proposed in this document will make it easier for the development community,
and all the partners of the World Bank Group interested in transport, to mobilize the resources
required to address the critical issues identified. We also hope it will allow us all to join forces to
implement policies and projects that will ultimately support developing and transition countries on
their journey towards sustainable growth and better livelihoods.

Let us, then, embark together on the path towards safe, clean, and affordable... transport for
development.

Katherine Sierra
Vice President, Sustainable Development
The World Bank

ACKNOWLEDGMENTS

This report of the World Bank Group was prepared under the guidance of the Bank's Transport Sector
Board (TSB). The TSB is chaired by the director of the Energy, Transport, and Water Department of
the World Bank's Sustainable Development Network. It comprises the managers of transport
development operations in each of the World Bank's six regions and the manager of the central
transport department based in Washington, D.C. The TSB includes representatives of the International
Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), which together with
the International Bank for Reconstruction and Development (IBRD), the International Development
Association (IDA), and the International Center for the Settlement of Investment Disputes (ICSID)
form the World Bank Group.

The document was prepared by a team led by Paul Amos, with contributions by Anthony Bliss, Ravi
Bugga, Robin Carruthers, Isabel Chatterton, Jean-Charles Crochet, Moustafa Baher El-Hefnawy, Marc
Juhel, John Hine, Henry Kerali, Bert Kruk, Tesfamichael Nahusenay, Nicolas Peltier, Edith Quintrell,
Cordula Rastogi, Peter Roberts, Charles Schlumberger, Elizabeth Wang, and Sam Zimmerman, under
the overall guidance of Jamal Saghir, chair of the Transport Sector Board. Anna Piasecka and Barbara
Gregory were responsible for production and publishing.

Particular thanks are extended to Maryvonne Plessis-Fraissard who, as chairperson of the TSB during
the early period of the transport business strategy preparation, guided the process, and provided her
valuable support and encouragement.

The Bank appreciates the insights, inputs, and advice received from staff involved in transport and
other sectors throughout the World Bank Group. Their dedication, expertise, and experience have
been critical to this report's content.

The Bank is committed to coordinating its transport sector activities with other regional and global
partners and sought comments on the emerging ideas from peers, partners, and nongovernmental
organizations. Their comments, criticisms, and suggestions have contributed greatly to the quality of
the final product. While taking full responsibility for the views expressed herein, the TSB would like to
acknowledge contributions made by the following: Asian Institute of Transport Development, Delhi;
Australian Agency for International Development (AusAID); Canadian International Development
Agency (CIDA); Disability Consultation Group (various contributors); European Bank for
Reconstruction and Development (EBRD); European Investment Bank (EIB); FIA Foundation for the
Automobile and Society; Gender and Transport Network (GATNET) (based on 160 messages from 29
participants); GTZ-KfW combined response (Germany); Indian Government Planning Commission;
Institute for Transportation and Development Policy (ITDP); International Transport Workers'
Federation (ITF); Irish Aid; Islamic Development Bank (IDB); IT Transport Limited (ITT); Japan Bank
for International Cooperation (JBIC); Japan International Cooperation Agency (JICA); Monash
University Accident Research Centre; Netherlands Directorate Road Infrastructure and Traffic Safety;
New Zealand's International Aid and Development Agency (NZAID); Norwegian Agency for
Development Cooperation (NORAD); Organisation for Economic Co-operation and Development
(OECD); REAL Support Systems, Limited; Sub-Saharan Africa Transport Policy Program (SSATP);
Swedish International Development Cooperation Agency (SIDA); University of South Australia,
Transport Systems Centre; Warsaw School of Economics; Warsaw University of Technology; World
Health Organization (WHO); Yousaf Sikander.

ABBREVIATIONS AND DATA NOTES

AAA Analytical and Advisory Activities
ADB Asian Development Bank
AFESD Arab Fund for Economic and Social Development
AFR Africa Region
AusAID Australian Agency for International Development
CAS Country Assistance Strategy
CIDA Canadian International Development Agency
CMEA Council for Mutual Economic Assistance (or COMECON)
CODE Committee on Development Effectiveness
EAP East Asia and Pacific
EBRD European Bank for Reconstruction and Development
ECA Europe and Central Asia
EIB European Investment Bank
ESW Economic and sector work
EU European Union
FAA Federal Aviation Administration
FY Fiscal year
GAC Governance and Anti-Corruption
GDP Gross Domestic Product
HDM-4 Highway Development and Management Tool
IAP Infrastructure Action Plan
IBRD International Bank for Reconstruction and Development
ICSID International Center for the Settlement of Investment Disputes
IDA International Development Association
ICAO International Civil Aviation Organization
IEA International Energy Agency
IEG Independent Evaluation Group, formerly OED (Operations Evaluations Department)
IFC International Finance Corporation
IFRTD International Forum for Rural Transport and Development
ILO International Labour Organization
ITDP Institute for Transportation and Development Policy
ITF International Transport Workers' Federation
IDB Islamic Development Bank
JBIC Japan Bank for International Cooperation
KICA Japan International Cooperation Agency
LAC Latin America and the Caribbean
MIGA Multilateral Investment Guarantee Agency
MNA Middle East and North Africa
NZAID New Zealand's International Aid and Development Agency
NORAD Norwegian Agency for Development Cooperation
OECD Organisation for Economic Co-operation and Development
OED Operations Evaluations Department
OPCS Operations Policy and Country Services
PRI Political risk insurance
SAARC South Asia Association for Regional Cooperation
SAR South Asia

xiii

xiv ABBREVIATIONS AND DATA NOTES

SACTRA Standing Advisory Committee for Trunk Road Assessment
SSATP Sub-Saharan Africa Transport Policy Program
SSIU Sector Strategy Implementation Update
SIDA Swedish International Development Cooperation Agency
TA Technical assistance
UNAIDS Joint United Nations Programme on HIV/AIDS
WBG World Bank Group
WCO World Customs Organization
WHO World Health Organization

All dollar amounts are U.S. dollars unless otherwise indicated.
Billion means 1,000 million.
Fiscal year is July 1 � June 30.

It is the vision of the World Bank Group to contribute
to an inclusive and sustainable globalization--to overcome poverty,
enhance growth with care for the environment, and create individual opportunity and hope.

Robert B. Zoellick
President
World Bank Group

OVERVIEW

The 1996 World Bank strategy, Sustainable Transport, had as its pillars social, financial, economic,
and environmental sustainability, acknowledging the likelihood of tradeoffs (for example, between
safety and costs, or financial returns and user fees, or vehicle standards and air quality). This
background paper was prepared to inform the update of the 1996 strategy. It presents in more detail
the arguments for broadening the transport agenda, and seeking stronger intersectoral connections
and synergies. Overall, the goal of the Bank strategy is safe, clean, and affordable transport that
contributes to economic development. We are thus moving from a strategy based on transport modes
to a business approach driven by results, inside and outside the transport sector. As with other
infrastructure sectors, transport is above everything an access agenda, aimed at unlocking growth and
development potential in an inclusive fashion.

Safe transport

Safe transport acknowledges the prominence of people's health in the Millennium Development Goals
and the safety of transport users, transport workers, and the larger community.

For health
Between 40 and 60 percent of the people in developing countries live more than 8 kilometers from a
health care facility. So, good transport services are essential for getting health care and improving
health. That is why transport is now explicitly linked to the World Bank's new "Healthy Development"
strategy. In addition to ensuring broader access to social and health services, we are working with our
clients to mitigate the spread of HIV/AIDS along transport corridors.

For safety
Road crashes kill an estimated 1.2 million people a year and injure 50 million more, disproportionately
affecting the poor. More than half the road deaths in urban areas in developing cities are pedestrians
and cyclists. Fatalities are projected to rise 80 percent by 2020 in low- and middle-income countries,
just as they fall by 30 percent in high-income countries.

Going forward, we will be seeking greater safety and security in air and sea transport, in passenger
and freight transport, and in national and global supply chains. We are placing special emphasis on
road safety, extending our support to include not only road safety components embedded in road
infrastructure projects, but also larger standalone projects to formulate national policies and strategies
that would improve road safety across the board. Cross-sectoral approaches, such as adding hospital
and ambulance components in road programs and road safety components in health programs, will
also be pursued.

2 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Clean transport

Clean transport acknowledges the contribution of transport to the wider environmental aims of the
Millennium Development Goals.

For air quality
Urban air pollution, 90 percent of it generated by motor vehicles, kills an estimated 800,000 people
each year. That is why we are focusing on phasing out highly polluting vehicles, improving public
transport, and monitoring air quality more intensively.

For climate
Transport now produces an estimated 15 percent of global greenhouse gas emissions. The strong
connection between economic growth and transport-generated greenhouse gases can be moderated
over time by changes in travel behavior, logistics decisions, technology choices, and transport modes.
These changes can also be influenced by planning, by fiscal and regulatory measures, and by public
investments in infrastructure, which we intend to support. Within this policy mix, it seems likely that
fiscal instruments on fuel consumption will have to be at the core.

Going forward, we will be working to help restrain transport energy consumption. We are assessing
and controlling transport emissions, favoring shifts to low carbon modes. We are setting guidelines for
environmentally effective transport planning and decision making, and we are seeking ways to
mitigate the effects of transport on the climate--and the effects of climate change on transport assets.
We intend to build climate change issues into project appraisals where appropriate. We will issue
technical papers on: parameters for estimating energy use and emissions by mode and circumstance;
valuation of emissions in transport project appraisals; incorporating such values into cost-benefit
analysis; the impact and treatment of discount rates; and other relevant factors.

Affordable transport

Affordable transport acknowledges that the physical supply of transport is not enough. Efficient and
affordable freight transport and logistics services are critical for trade, both domestic and foreign. And
efficient and affordable personal mobility is essential, in both urban and rural areas, to make cities
work better and to diversify rural economies.

For businesses
Affordable transport is the key to trade and competitiveness. In OECD countries transport accounts for
a quarter of all logistics costs, and in developing economies it can account for an even larger share.
The Bank is thus seeking to control transport costs and facilitate trade in competitive economies. More
effective transport services can improve the trade competitiveness of low- and middle-income
countries, where domestic suppliers account for the majority of transport costs. Optimizing these
services for freight, however, will not automatically meet the needs of poor households.

As part of the transport-for-trade agenda we will identify opportunities to promote regional economic
integration and increase cross-border trade. In both national and regional programs we will encourage
client countries to adopt corridor approaches to investing in transport infrastructure and improving
transport services, especially along multicountry regional routes.

Overview 3

For individuals
An estimated 1 billion people in low-income countries lack access to an all-weather road. So,
affordable transport can enhance mobility and inclusion. It can promote social, economic, and political
integration, by keeping a country together despite geographic disparities, by overcoming potential
disputes over access to resources, and by defusing the seeds of conflict that sometimes arise from
feelings of isolation.

One of the best ways to promote rural development is to ensure good accessibility to growing and
competitive urban markets. And improving urban transport improves both urban areas and the wider
economy. We are thus promoting urban and interurban transport strategies to increase access for the
urban and rural poor.

The Bank believes that national and municipal governments will benefit by assessing new models of
delivery that can offer better value through more affordable service per unit of subsidy. The key here
is to capture, through competitive means, the benefits of private sector efficiencies in the delivery of
municipal services. We will thus reinvigorate private participation in transport to improve management
skills, increase operating efficiency, and impose market discipline on project delivery and operations.

Background

The World Bank Group's work in the transport sector includes lending activities by IBRD/IDA and IFC,
MIGA guarantee products, policy discussions, and analytic and advisory activities. The previous
strategy that addressed transport as a whole was endorsed by the World Bank Group's Board of
Directors and published in May 1996. That report, entitled Sustainable Transport: Priorities for Policy
Reform, advocated economic, financial, environmental, and social sustainability in transport policies
and systems. Going forward, those sustainability principles espoused in Sustainable Transport (as it is
referred to in this report) will continue to guide the Bank's work in the transport sector.

An implementation update of the Bank's 1996 transport strategy has recently been discussed in the
"Sector Strategy Implementation Update: Third Review" (September 26, 2007). The update proposes
to strengthen the alignment of the transport sector approach with the Millennium Development Goals,
adopted by the United Nations in 2000, as well as with a number of other factors, namely:

The Bank's 2003 Infrastructure Action Plan (IAP) (2003b): results on 2003-2007 have been
reviewed and a second-generation IAP 2009-2011--Sustainable Infrastructure Action Plan--is
under preparation where this business strategy will fit in

The Bank's subsequent rebuilding of engagement in publicly financed transport infrastructure

The enduring need to match investment with good public governance, now supported by the
World Bank Group Governance and Anti-Corruption (GAC) action plan

The principle of "ownership" by countries of their development policies

The need to be responsive to the changing needs of middle-income countries

The need for measurable results from development aid

A ten-year review of the Bank's work in transport by the Bank's Independent Evaluation
Group.

Meanwhile, the trends of trade globalization, urbanization of populations, increasing motorization, now
also coupled with the climate change challenge, have continued to create higher and more complex
demands on freight and passenger transport systems in developing countries. This report offers

4 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

guidance to staff, partner countries, and other stakeholders in development, on an updated transport
strategy.

This paper focuses on transport in four main ways: its development impact (Chapter 2); transport
policies (Chapter 3); modes of transport (Chapter 4); and regional transport priorities (Chapter 5).
Each focus has influenced the update, which is summarized in Chapter 6.

Focus on development impact

Chapter 2 argues that transport contributes to development in many ways. It encompasses passenger
and freight operations, spans urban and rural areas, includes public and private transport, meets
economic and social needs, and serves domestic and international demands. It can do so through five
main routes:

Facilitating economic growth and regional integration through international trade

Making cities work better for their citizens, for the environment, and for economic growth

Creating economic opportunity and growth in rural areas

Providing access to facilities that deliver health and education services

In all these functions, becoming safer and cleaner for users and the community.

If the Bank were to maintain the predominance of attention given over the past ten years to the
support of nonurban transport needs and specifically to transport services that rely on roads, it would
miss many opportunities to maximize the contribution that its transport interventions can make to
economic development. Therefore, the business strategy makes a strong case for widening the scope
of the Bank's engagement in the transport sector. With such widening, however, comes a
responsibility to put more effort into demonstrating the impact of such engagement, measuring the
results, and sharing knowledge.

Focus on policies

Chapter 3 discusses 11 key policy issues in which Bank support can help the transport sector put into
practice the principles of economic, financial, social, and environmental sustainability. These priority
areas are:

Defining public and private sector roles in transport delivery

Improving the performance of state-owned enterprises

Preserving the value of public assets

Setting transport prices

Encouraging private sector participation

Fostering competition and strengthening regulation

Making transport more inclusive

Promoting transport, and especially road, safety

Combating transport-related transmission of HIV/AIDS

Reducing transport emissions to protect urban air quality and the global climate

Fighting corruption.

Overview 5

Not all of these areas are cause for concern in all countries. Different countries will inevitably weigh
and analyze them differently, and the Bank would anticipate a wholly legitimate and valuable diversity
in the policies and institutions that are established for their resolution. Nevertheless, that resolution
will be crucial to the sustainability of the transport of a country. As such, these areas provide a
systematic checklist for deepening the transport agenda that is integral to the business strategy.

Focus on modes

Chapter 4 emphasizes the modal diversity of transport and in particular the roles that different modes
of transport play in meeting the spectrum of freight and passenger demands. It describes the
subsectors of road transport, railways, urban transport, maritime transport and ports, inland waterway
transport, airports and aviation, and multimodal transport. It stresses the importance of those users of
roads in rural and urban areas who walk, cycle, or use other nonmotorized modes.

It notes the strong growth in demand in many developing countries for all types of transport services
and the infrastructure on which those services rely. It argues the case for balanced multimodal
investment to create a system that exploits the comparative economic advantages of different modes
to the benefit of the transport system as a whole, to create both integrated urban passenger transport
systems and efficient freight corridors to serve regional integration and international trade. The modal
focus confirms and extends the conclusion of Chapter 2: the desirability of widening the focus of Bank
transport interventions beyond single mode solutions to look at transport needs as a whole. This more
holistic view of transport is reflected in the business strategy.

Focus on regions

For the strategy to be successful, it needs to respond to the day-to-day transport problems and
demands for Bank services in a wide range of developing countries. In the poorest countries, the main
challenge in the transport sector remains how the Bank and other donors can together concentrate
effort, advice, and lending resources to meet the basic transport needs of the poor and help create or
improve access to markets for their products. With limited borrowing capacity, these countries need
blended financial support (combining loans and grants) and help to mobilize private finance alongside
public resources.

In contrast, most middle-income countries have been successful in raising their level of access, trade,
and development beyond basic thresholds. Many now have secure access to private capital markets.
They aspire to the levels of personal mobility, urban transport systems, and freight logistics
infrastructure of more developed countries. This implies a number of approaches: programmatic forms
of lending; more dependence on middle-income countries' own systems of project appraisal; use of
more diversified financial products; and provision of analytical and advisory services that are relevant
to their more advanced level of integration into the world economy. The aim is to consolidate the
progress they have made while not neglecting the considerable pockets of poverty that remain and
being ready to assist them in responding to global issues.

Although there are clearly regional differences in individual priorities, regional perspectives
consistently turn up some common emerging challenges. Examples include the need for improved
transport and logistics to strengthen trade competitiveness, the challenge of urban road congestion
and other urban transport problems, the widespread incidence of premature death and injury through
road accidents, and the needs of isolated rural communities for basic connectivity to transport
systems. Regional priorities have been given great weight in the business strategy.

6 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Regional priorities
Over the past ten years the proportion of Bank Group's transport lending directed to Sub-Saharan
Africa and South Asia has significantly increased. Though there will continue to be strong year-to-year
fluctuations, the overall regional balance of lending activity is not expected to change markedly over
the next five years. While urbanization and urban transport problems are growing in all areas, there
are other issues that bear most heavily in particular regions, and these are discussed in more detail in
Chapter 5. Key elements of the regional directions are:

Sub-Saharan Africa. A key focus will be the two thirds of rural people who lack reliable
access to an all-weather road and the even larger number of urban people who live in slums in
worsening environmental conditions. The former are locked into subsistence living and cut-off
from health care and education; the latter are growing rapidly in number and need access to
urban jobs and services, for which cost-efficient urban transport is a must; for both groups,
transport and logistics costs are excessive.

East Asia and Pacific. Transport has performed well in many countries in facilitating
impressive trade-driven economic growth and poverty reduction. The Bank Group is now also
looking at ways in which the capacity and quality of transport infrastructure and services can
be enhanced both to sustain that growth and to share its benefits more broadly in the region
and with people in remote areas.

Eastern Europe and Central Asia. Economic transition continues and market forces
increasingly shape all facets of transport demand. But following an investment hiatus during
the transition process, nearly all countries in the region face quality and technology
deficiencies, as well as big maintenance backlogs in their transport infrastructure.
Infrastructure modernization and enterprise reform remain key goals.

Latin America and the Caribbean. The Bank Group is working at promoting measures to
increase the sources, quality, and productivity of investment to help mitigate a massive
reduction in public and private investment in transport since the 1980s, which resulted in
excessive transportation and logistics costs that penalize trade.

Middle East and North Africa. The Bank Group will continue to offer support for strategic
infrastructure improvements and capacity building in transport, including frameworks for
successful private sector participation, in particular in urban transport. So far, the private
sector has contributed little to the region's transport needs.

South Asia. Investment climate surveys in the South Asia region have pinpointed transport
as a particular constraint for regional and international trade. Furthermore, at the micro level,
many rural households lack access to all-season roads, and many megacities are hampered by
the lack of reliable urban transport systems. The Bank Group will give attention to both
challenges.

Overview 7

Components of the business strategy

Chapter 6 describes the main components of the transport business strategy. The objective of the
business strategy, consistent with Sustainable Transport and aligned with the principle of country
ownership, remains:

to help partner countries to establish the governance, strategies, policies and
services that will deliver transport for development in a way that is economically,
financially, environmentally and socially sustainable.

Strategic directions
The business strategy widens the directions and deepens the routes that will be taken to meet the
evolving development agenda. For the five-year period ahead, the business strategy sets five key
strategic directions, as summarized below. In implementing those directions, it recommends priorities
for each region, four process adjustments, and a plan for monitoring progress.

Strategic direction 2. Deepen engagement in the roads and highways subsector. The
construction, management, and maintenance of roads and highways will continue to be the dominant
subsector for Bank Group engagement. This arises from the predominant role of road transport in
most countries for a wide range of development needs, the scale of the investment and maintenance
challenge in the subsector, and the need to be responsive to the demands of partner countries.

The Bank Group will pursue a broader agenda in the roads subsector to meet principles of
environmental and social sustainability, in ways that give increasing attention to four main issues:

The performance, affordability, and inclusivity of transport services that use road
infrastructure and that deliver the ultimate benefits of roads to people and goods.

The need to make roads safer for all their users and for those nonusers put at risk.

The strategies to support reduction of the high proportion of greenhouse gas emissions due to
road-based private and commercial transport.

The potential for transmission of HIV/AIDS through major road construction sites and new
road corridors into previously isolated areas.

Strategic direction 3. Increase engagement in the urban transport subsector. This
engagement will reflect the escalating development challenge of urban transport. In every region, the
combined effects of population growth, urbanization, and motorization are compromising the efficiency
and livability of cities. The Bank Group's engagement will include support for an increase of
investment in and efficiency of urban transport, with special emphasis on public transport. Analytic
and advisory services and country dialogue will support capacity building in urban transport
governance to enhance the role and quality of affordable public transport. This complex urban
transport agenda also includes the interaction of land use and transport, the mechanisms for financing

8 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

transport systems, the mobilization of the private sector to deliver public services, the management of
demand for private vehicles, the regulation of vehicle emissions, and the needs of pedestrians and
nonmotorized forms of transport. Strategic and operational coordination with the urban development
agenda will be enhanced.

Strategic direction 4. Diversify engagement in transport for trade. Driven by increasing
globalization and regional economic integration, diversification of engagement will be implemented by
increasing support for public and private infrastructure investment to overcome transport bottlenecks
in the trade in goods and services. Although much of the Bank Group's existing road transport lending
is for major trade routes, more diversified support will be given for investment in nonroad transport
infrastructure (railways, ports, inland waterways, and airports) and attention to the transport services
that use them, including multimodal services. The Bank will help countries develop the institutional
capacity to implement transport and logistics strategies that address nonphysical barriers as well as
infrastructure deficiencies, improve the management of public infrastructure assets, and encourage
greater private sector participation.

Where appropriate, regional transport projects will be identified and supported, particularly when
these can help improve service and cost in landlocked countries. Corridor approaches will be adopted
for the diagnosis of needs and design of strategies for major trade routes. The Bank Group will also
help countries to meet international safety and security standards, particularly in ports and in aviation.

Strategic direction 5. Transport and climate change: control emissions and mitigate impact.
Bank Group's activities in the transport sector in the years ahead will cover the issue of greenhouse
gas emissions from transport as a priority for action, with attention paid to both mitigation in terms of
operational services and adaptation in terms of infrastructure sustainability to climate change effects.
In line with this direction, the work will encompass the domain of technology policy to support the
adoption of carbon saving technologies and to help the adaptation of current technologies to the
conditions and needs of the Bank Group's client countries.

Process adjustments
In implementing the five strategic directions, the Bank Group intends to adjust the way it does
business in the transport sector, in four main ways.

Process adjustment 1. Increase the proportion of Bank Group's transport lending made
through program approaches. This will strengthen long-term client relationships and reduce the
costs and time of project preparation.

Process adjustment 2. Enhance the quality of policy dialogue and sharing of transport
knowledge. The Bank Group's analytic and advisory activity in transport includes the economic and
sector work that is important to properly inform policy dialogue, as well as the technical assistance to
build capacity and implement change. These activities are essential to maximize the development
effectiveness of the Bank Group's engagement in transport.

Process adjustment 3. Improve monitoring and evaluation. Progress and accountability in
transport and development require more effort to improve measurement of the performance of
transport systems, of the results of Bank Group-financed transport projects, and of the impact of
alternative transport policies. Specific improvements are proposed.

Overview 9

Process adjustment 4. Capture synergies across sectors and Bank Group instruments. Within
IBRD/IDA, the skills of the Infrastructure Network have been aligned in 2007 with those of the
Environmentally and Socially Sustainable Development Network to form an integrated Sustainable
Development Network, which is enhancing cooperation with IFC and MIGA. This will help strengthen
the already productive links between the Bank Group's transport professionals and those working on
social and environmental areas of the transport sector. In view of the strategic directions spelled out
in this paper, some skill-mix rebalancing will take place within transport sector staff to adjust the Bank
capacity to meet agreed objectives and make the most of the institution's comparative advantage.
This report describes the main synergies that are expected.

Monitoring progress

The Bank Group's Transport Sector Board will take responsibility for annually reviewing progress
toward implementing the transport business strategy.

The Bank Group's approach to transport will, however, continue to evolve as we learn from
experience. It therefore offers a flexible framework that is open to new ideas, and adaptable to
country demands for financial support and analytical and advisory activities.

1 ORIGINS OF THE REPORT

This report follows up on the World Bank Group's comprehensive 1996 transport strategy, described in
Sustainable Transport: Priorities for Reform (World Bank 1996). That strategy has successfully guided
the Bank's transport work for more than a decade and still embodies the Bank Group's commitment to
economic, financial, environmental, and social sustainability in transport systems and policies.

After a decade of success, however, the time is right to revise the Bank Group's agenda to give more
attention to emerging issues, including the commitment of the development community to achieving
the Millennium Development Goals, the rising concerns about climate change, the increase in traffic
congestion, and the recognition of access as a key to both economic opportunity and good
governance. All of these new concerns point to the need to make transport systems safer, cleaner,
and more affordable.

The themes of this Report reflect some of the thinking behind the business strategy update that was
presented to the Committee on Development Effectiveness (CODE) in 2007. Safe acknowledges the
prominence of health outcomes within the Millennium Development Goals; clean reflects the greater
contribution that transport can make to the environmental aims of the Millennium Development Goals
and to the mitigation of climate change impact; and affordable acknowledges that efficient freight
infrastructure translated through well-functioning markets into affordable transport and logistics
services is critical for trade and access to all economic and social opportunities. Finally, transport for
development asserts that, while transport can have many purposes, the Bank Group's focus must be
on its contribution to economic development.

1.1 The 1996 transport strategy

The World Bank Group works extensively in transport to support the development programs of its
partner countries. That support is provided in a variety of ways, including policy dialogue with
governments, analytical and advisory services, and lending and guarantee products to the public and
private sectors.1

In recent years, the Bank Group's Transport Sector Board (TSB) has issued many specialist reports
and papers on specific transport issues and modes (references to these and websites where they can
be obtained are provided in this report in the References and Additional resources sections). However,
the last transport strategy report that addressed the sector as a whole was published in May 1996.
That report, Sustainable Transport: Priorities for Policy Reform, advocates economic, financial,
environmental and social sustainability in transport policies and systems. It argues that a number of
policies will promote the attainment of sustainability: sound institutional and regulatory frameworks;
greater private involvement in service delivery; competitive or contestable markets where possible;
economic pricing of infrastructure; and attention to transport-related public health problems. The
sustainability objectives and principles set out in Sustainable Transport (as it will be referred to in this
report) have guided the Bank's work over recent years and will remain central to the Bank Group's
work in the transport sector.

1A fuller description of products and their potential applications in the transport sector is given in Table 6-2.

12 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

1.2 The evolution of development issues

Five years after the publication of Sustainable Transport the international development community
agreed upon the Millennium Development Goals. Despite being prepared earlier, the principles stated
in Sustainable Transport were generally well aligned with the Millennium Development Goals, even
though transport does not constitute a specific goal. As an enabler rather than an outcome itself,
transport is often a critical means for achieving improvements in health care, education, economic
opportunity, and social participation. Thus, one objective for the Bank Group's transport business
strategy is to articulate how transport and development goals come together.

Several other issues that have implications for implementation of the transport development agenda
have also emerged or developed since the publication of Sustainable Transport:

The Bank Group has affirmed that, to attain development goals, economic growth must
continue to be emphasized, as well as social measures aimed at delivering benefits directly to
the poor; the Bank's Infrastructure Action Plan (World Bank 2003b) has revitalized the Bank's
commitment to infrastructure in support of economic growth. Transport constitutes around
half of the Bank's infrastructure business and is therefore central to the second-generation
IAP--Sustainable Infrastructure Action Plan--now under preparation.

The transport business strategy seeks to diversify involvement in transport logistics by
increasing support for investment (public and private) for a wider range of transport
infrastructure in the supply chains of developing countries. The report also gives attention to
policies that will support well-functioning markets in the (mainly private) transport services
that will use the new infrastructure. To ensure that transport is affordable, competition
between private suppliers is likely to lead to the greatest efficiencies, with governments
contracting for specific services. The traditional model of supply by state-owned enterprises
controlling infrastructure and fares has not always served the poor (or anyone else) very well.
The Bank Group believes that governments may benefit from assessing new models of
delivery and pricing (such as those involving public-private partnerships, output-based
contracting, user taxes on fuel consumption and traffic congestion), which may offer better
and more affordable service per unit of subsidy. The key is to capture through competitive
means the benefits of private sector efficiencies in the delivery of public services. But while
private ownership of transport services is widespread and beneficial, the private sector has
had so far a limited role in financing basic common-user transport infrastructure. This role
peaked in the 1990s and is currently meeting only a small fraction of overall transport needs
(mainly in airports and port terminals). In accordance with the Bank's Infrastructure Action
Plan, the Bank Group is therefore now successfully reengaging in publicly financed transport
infrastructure, while fostering private-public partnerships to the largest feasible extent.

The importance of good public governance in successful development is regularly confirmed by
experience: the need for competent state institutions to make and implement policy, the
complementary roles of public and private sectors, the roles of markets and regulations, the
importance of fighting corruption, and many more. Governance is especially important to the
transport industry because of its size and complexity, the strong public interest in its
performance, and the heavy involvement of both public and private sectors in its delivery.
Along with developing its lending for transport, the Bank Group is equally responsible for
maintaining support for complementary governance and institution building measures that will

Origins of the Report 13

ensure that transport investment brings benefits to users and to the poor. The GAC action
plan will be fully incorporated in sector analytical work and country dialogue.

The principle of "ownership" by countries of their development policies and processes has been
increasingly accepted by the international development community. Ownership arises from
choice. The Bank Group should support transport administrations in building the capacity for
sound public policy choice and implementation. That support will beneficially include the
Bank's advice on what alternatives (whether policy or project alternatives) should be
considered, how they have worked elsewhere, and how they might be compared. Nonetheless,
there is merit in being less prescriptive about which course is "best" for the country
concerned.

The Bank Group's lending programs to some middle-income countries declined after 1996,
partly because the Bank's methods of engagement did not always evolve in a way that the
countries found to be most relevant to their needs and growing economic stature. While
declining participation in middle-income countries has been less pronounced in the transport
sector than in the Bank as a whole, there is no room for complacency. Approaches in these
countries need to be particularly responsive to changing needs and circumstances.

The world is looking for quantifiable results from development aid and investments, not just
money transfers. The transport sector is one of the Bank Group's largest areas of development
finance, representing some 15 percent of its lending commitments since Sustainable Transport
was published (a statistical summary of activity in the transport sector since 1996 is given in
Annex A). It is important that the Bank measure the impact of interventions in this sector and
build this experience into future projects. It is also important for both the Bank Group and its
partner countries that better transport statistics and performance indicators be kept for
making decisions and monitoring the results.

In the meantime, both IFC and MIGA activities have increased in the Transport sector, with
IFC getting involved in 93 projects for $2.1 billions over the period, and MIGA in 8 operations
for a total commitment of $330 million (as of June 30, 2007).

Climate change has been given wider international and Bank attention in recent years and is
now a compelling public policy issue. Transport currently contributes about 15 percent of
global greenhouse gas emissions (and around a quarter of energy-related emissions). That
proportion is increasing, as is the proportion of such emissions attributable to the Bank
Group's regions of operation. The Bank Group therefore intends to build climate change issues
into its project appraisals, where appropriate. It will issue technical papers on parameters for
estimating energy use and emissions by mode and circumstance; valuation of emissions in
transport project appraisals; incorporating such values into cost-benefit analysis; and the
impact of and treatment of discount rates.

Meanwhile, globalization, urbanization, and motorization have continued to create higher, changing
and more complex demands on freight and passenger transport systems.

1.3 The Independent Evaluation Group's review of transport

While the transport business strategy was being prepared, the Bank's Independent Evaluation Group
(IEG) undertook an in-depth review of the performance of the Bank's support for the transport sector
during 1995�2005. This independent evaluation included a detailed analysis of 284 projects that were

14 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

completed in the period and drew upon staff and stakeholder interviews, an extensive literature
survey, and a review of analytical and advisory work (IEG 2007).

The independent evaluation concluded that the Bank's transport sector activities have been well
managed and effective, providing for a solid portfolio. It noted that efforts in the ten years focused
heavily on intercity highway construction and rehabilitation; it expressed the view that while highways
remain important to development, continuing Bank relevance to the sector as a whole would be
enhanced by a more diverse and multimodal engagement. It also observed that, on the whole,
success with institution building and ensuring infrastructure sustainability had been modest.

IEG concluded that, past successes notwithstanding, the time had come to reassess priorities and
develop a revised agenda that better meets emerging challenges to improve the sustainability of
human actions in transport and to improve peoples' welfare. It recommended, in summary, that:

The focus of the Bank's transport operations should go beyond intercity highways and give
more attention to issues of environmental damages, energy efficiency and climate change,
traffic congestion, safety, affordability and trade.

In implementing its transport business strategy, the Bank should give emphasis to six issues:
transport pollution and realization of environmental gains; synergies with other relevant
sectors of Bank Group attention; enhancement of knowledge sharing and analytical and
advisory services and their contribution to country strategies; continuing support of private
participation in transport through coordination among IBRD/IDA, IFC, and MIGA; increasing
attention to governance and corruption issues; and redeployment of staff and budget
resources accordingly.

Monitoring and evaluation in the sector should be built up and aligned with the strategy. The
Bank should develop intermediate indicators applicable to a broad range of projects; launch an
enhanced program of impact evaluations for selected programs; evaluate experience with
sectorwide approaches;2 and support an independent evaluation of the Sub-Saharan Africa
Transport Policy Program within two years.

The IEG Report has provided a timely, objective and authoritative platform for this business strategy,
in terms both of its detailed analysis of transport sector activity since publication of Sustainable
Transport in 1996, and the thrust of its conclusions and recommendations. These align closely with
the Bank Group's own conclusions as to the adjustments necessary to the implementation of its
transport strategy, and are reflected in the directions set out in Chapter 6.

1.4 The 2008 transport business strategy

The proposed adjustments to the Bank's transport strategy were presented to the Bank's Committee
on Development Effectiveness (CODE) on September 26, 2007, as part of the "Sector Strategy
Implementation Update: Third Review." This Report offers further elaboration of those strategic
adjustments and guidance to staff, partner countries, and other stakeholders.

The themes of this report reflect some of the thinking behind the transport business strategy. Safe
acknowledges the prominence of health outcomes within the Millennium Development Goals; it implies

2A term used for operational and financial instruments that give budgetary and other support over a sector or
subsector as a whole, as opposed to single investment loans.

Origins of the Report 15

safety for transport users, for transport workers, and for the wider community. Clean reflects the
contribution that transport can make to the environmental aims of the Millennium Development Goals.
Affordable acknowledges that physical supply of infrastructure is not enough. Efficient freight
infrastructure, translated through well-functioning markets into affordable transport and logistics
services, is critical for trade. Similarly, efficient and affordable transport underpins personal
accessibility and mobility in both urban and rural areas. Finally, transport for development asserts
that, while transport can have many purposes, the Bank Group's focus must be on its contribution to
economic development.

The report is divided into six chapters. Chapter 2 describes the development benefits of transport and
explains why the transport business strategy should seek broader engagement in the sector as a
whole. Chapter 3 focuses on what the Bank Group considers to be the key issues of transport policy
and governance to be addressed in the update. Chapter 4 illustrates the diversity of transport
challenges by taking a modal focus, summarizing the development roles of different modes of
transport and specific issues relevant to each mode. Chapter 5 focuses on the geographic diversity of
transport by highlighting strategic priorities in different regions and the regional partnerships that are
being pursued. It also describes those global partnerships that provide an umbrella within which to
pursue the regional and local programs. Finally, Chapter 6 describes the main strategic directions
contained in the business strategy and the process adjustments that will help in implementing it.

2 FOCUS ON DEVELOPMENT IMPACT

Transport contributes, and could contribute more, to the achievement of the Millennium Development
Goals in five key ways:

By facilitating economic growth and regional integration through international trade.
High transport costs magnify the impact of distance and reduce trading opportunities, while
good freight services can make traded goods more affordable and help developing countries to
build more complex supply chains that facilitate trade. Furthermore, a reduction in
international transport costs for traded goods can give producers more disposable income.

By making cities work better for their citizens, for the environment, and for
economic growth. Rapidly growing urban populations and numbers of private vehicles are
overwhelming the roads in many cities, leading to increasing congestion, poor service and
reliability of road-based public transport, low mobility, more accidents, and poor air quality.
Yet, stronger institution building, more incentives, and better regulation can improve existing
city transport systems by making them more affordable for taxpayers and users and by
making them safer and cleaner through proper maintenance, investment, and service
expansion.

By creating economic opportunity and growth in rural areas. Poor transport is often the
main restraint on economic progress and poverty reduction in rural areas. Improving access to
markets encourages rural farmers to modernize with fertilizers, mechanized equipment, and
new seed varieties, which, in turn, raises yields, lowers unit costs, and increases demand for
inputs and credit. Rural transport also provides access to labor markets and thus the
opportunity to earn nonfarm income. Moreover, the same road that provides access to
product, service, and labor markets often provides the right of way for electricity lines and
water pipes.

By providing access to facilities that deliver health care and education. Better access
to education and health facilities increases enrollment rates in rural schools and leads to more
visits to health care services. The impact on girls and women, who often suffer
disproportionately from poor transport, is especially profound, as better transport services
help to ease the risks of travel and the burdens of collecting firewood and water and thus
allow more opportunities for school attendance, home hygiene, and prenatal care.

By becoming safer and cleaner for users and the community. Although improvements in
transport are essential to meeting the Millennium Development Goals, transport also creates
its own set of problems, which detract from those goals. In the transport business strategy the
Bank intends to provide more support to help mitigate transport's contribution to three major
problems: the growing incidence of road traffic accidents, the health and environmental
impact of vehicle emissions and the broader contribution of transport activities to climate
change, and the role of transport in the transmission of disease.

2.1 Transport and the Millennium Development Goals

The Millennium Development Goals are now the main focus of the world's development effort.3 These

3See the Bank's website about the Millennium Development Goals at http://go.worldbank.org/D0OS4C8BK0.

18 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

goals both contribute to economic development and are in themselves primary ends of that process:
freedom from hunger, universal primary education, gender equality, reduced child mortality, improved
maternal health, control of disease, environmental sustainability, and global development partnership.

People who enjoy a high level of personal mobility also put a high value on it. In that sense, there is a
reasonable case for transport opportunity to be considered a goal of development. Nevertheless,
specific passenger trips or freight movements are, for the most part, a means to other ends. Such
ends include education, employment, production, distribution, trade, health and social service, civil
administration, and many others. It is the essential contribution of transport to achieving these ends
that links transport to the outcomes targeted by the Millennium Development Goals.

Transport is therefore a necessary, though not sufficient, contributor to economic development. But its
contribution cannot be taken for granted. In rural areas, nearly a billion of the world's poorest people
still do not even have adequate access to one all-weather road. In most of the cities that will soon
contain half of the developing world's population, public transport systems are struggling to cope.
Many countries that have enjoyed strong trade growth in recent years are now facing capacity and
quality constraints in transport and logistics.

This chapter articulates the rationale for the Bank Group's involvement in the transport sector. In
particular it describes five main areas in which transport contributes, and could contribute more, to
the achievement of the Millennium Development Goals:

By facilitating economic growth and regional integration through international trade

By making cities work better for their citizens, for the environment, and for economic growth

By creating economic opportunity and growth in rural areas

By providing access to facilities that deliver health care and education

In all these functions, by becoming safer and cleaner for users and the community.

This five-part structure is an abstraction that helps to describe specific development impacts of
transport. Transport in the real world is a much more complex business. It contains numerous
individual modes performing different roles. It has both freight and passenger roles. And its rural,
urban, regional, national, and international dimensions are not separate but interrelated. These
dimensions are explored in more detail in Chapter 4.

2.2 Serving international trade

The role of trade in economic development is highlighted in the eighth Millennium Development Goal
that seeks to "develop a global partnership for development," and in its targets for an "open, rules-
based, predictable and non-discriminatory trading system that addresses the special market access
needs of the least developed countries."

Good freight transport services integrate developing countries into longer, more complex, and more
demanding supply chains that facilitate trade. These services do not stand in isolation from the
domestic economy; domestic freight flows can enter the productive process many times, contributing
to the local economy as well as to internationally traded products. Beyond trade-related gains in
growth, a reduction in international transport costs for goods whose price is set by international supply

Focus on development impact 19

and demand can give producers more disposable income. For this reason it is important to encourage
competition in transport supply, so that such gains do flow through to producers.

Freight transport and logistics service providers include shipping companies, coastal and barging
operators, stevedores, airlines, air freight companies, road haulage companies, train operating
companies, international freight forwarders, third-party logistics providers, and many others. They, in
turn, depend on transport infrastructure: waterways, ports, airports, air and maritime navigation
systems, roads, railways, and various kinds of intermodal transfer, storage, and terminal facilities. The
costs of freight transport depend partly on the quality and capacity of the infrastructure that service
providers use and partly on the governance and market structures within which they operate.

Transport costs do not just include the tariffs. They can also include many indirect, but by no means
hidden, costs that can render the trade of some countries closed, unpredictable, and influence-based.
These costs can include: slow, irregular, and unreliable transit (which increases inventory costs);
excessive handling and storage costs due to poor terminal infrastructure; losses due to theft,
deterioration and damage to goods (or excessive insurance premiums to cover these risks); and
sometimes also bribes paid to officials. As tariff barriers have diminished, direct and indirect transport
costs have, for many countries, become the most important levy on trade. The Logistics Performance
Index and Indicators, first issued by the Bank in 2007, illustrates how logistics efficiency impacts on
trade competitiveness (Arvis et al. 2007).

High transport costs magnify the impact of distance and reduce trading opportunities. For example, it
can cost three times as much and take five times as long to move a container 500 kilometers inland in
China as it would in the United States (Carruthers et al. 2003). A container shipped from Yokohama,
Japan, to a town 500 kilometers inland from a port in Mozambique is likely to cost more for that last
500 kilometers than for the first 14,000 kilometers.

Transport is particularly challenging to landlocked countries. Their trade relies on transit through
neighboring countries, which may be minded to discriminate against transit traffic (often seen as a
nuisance, a competitive threat, or an opportunity to impose formal and informal levies) rather than to
facilitate it. Significantly, 16 out of 31 landlocked countries in the world are classified by donors as
highly indebted poor countries. Research suggests that trade-associated transport costs for landlocked
countries are around 50 percent higher than in coastal countries, and the volume of trade is 60
percent less (Arvis 2005). A large part of the transit cost to landlocked countries is associated with the
border crossings. In Africa, for example, it is estimated that the cost of crossing a border can be
equivalent to 1,600 kilometers of inland road transport (Wilson 2003).

Small island states, such as those in the Pacific and Indian Oceans and in the Caribbean, also
experience maritime and other transport services that are often infrequent and expensive. Their
transport disadvantage is partly inherent in being small markets served by smaller ships on multiple-
stop feeder routes out of hub ports (similarly with aviation and airports). But the disadvantage can be
partially mitigated by appropriate transport policies, infrastructure, and institutions (Castalia 2006).

The Bank Group has been active in recent years in analytical and advisory services associated with the
contribution of transport to trade. It has also been heavily engaged in financing the construction,
rehabilitation, and maintenance of road systems, to the benefit of road freight haulage. However,
railways, ports, inland waterways, airports, and other forms of freight and trade-related transport
infrastructure have collectively constituted less than 10 percent of the Bank's transport lending
program over the past ten years. This may have diluted the potential scope of impact that the Bank

20 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

could have given to the policy and institutional dialogue that typically accompanies project
engagement. The transport business strategy seeks to diversify involvement in transport logistics by
increasing support for investment (public and private) for a wider range of transport infrastructure in
the supply chains of developing countries. It also gives attention to policies that will support well-
functioning markets in the (mainly private) transport services that will use the new infrastructure. In
doing so, the Bank is also committed to ensure that throughout the supply chains appropriate labor
standards are upheld, in compliance with ILO's core labor standards and recently updated IFC's
Performance Standards on Labor and Working Conditions (IFC 2006).

As part of the transport-for-trade agenda the Bank Group will try in particular to identify opportunities
to develop projects with cross-border trade impact that can promote regional economic integration. In
both domestic and regional transport projects and programs it will encourage partner countries to
adopt corridor approaches to infrastructure investment and transport service improvement (including
multicountry regional corridors). This will lead both to more comprehensive solutions to overall
logistics challenges and higher project impact. Section 4.8 provides an illustration of this approach.

Better transport infrastructure and services are most effective alongside other trade facilitation
measures: liberal trade regulations, available trade finance, insurance services, security systems that
comply with international requirements, efficient and honest customs services and other border
services, and corridor performance monitoring, among others. This will require working, not only with
transport companies but with customs services, border police, health inspection services and many
other agencies involved in regulating international movements of goods and people. The Bank Group
will also encourage and contribute to concerted actions taken by international bodies such as the
Global Facilitation Partnership for Transportation and Trade described in Section 5.8.

2.3 Making cities more efficient and livable

Cities are a second critical area where transport and development meet. Cities are engines of
economic growth. Cities also contain major concentrations of the poor, who need transport to improve
their lives. Rapidly growing urban populations and numbers of private vehicles are overwhelming the
roads in many cities, leading to increasing congestion, poor service and reliability of road-based public
transport, low mobility, more accidents, and poor air quality. Private vehicle passengers are
themselves adversely affected. But it is arguable that the larger burden of impact is borne by the
other street users who do not use private cars and far outnumber private car occupants (see Section
4.4). Sound urban transport governance and investments are central to confronting these problems.

In cities where the poor are concentrated in outlying suburbs and public transport is actually available,
the proportion of income spent on public transport can be high and therefore the affordability of public
transport is often an issue (Carruthers et al. 2005). Inexpensive access to income-generating
opportunities can be an important lever to help the urban poor to progress up the economic ladder.

The amount of land that can be dedicated to transport infrastructure is limited by the scarcity of space
in cities. This is particularly true in the developing world, where urban population densities are often
much higher than in developed countries. Practical plans that promote and facilitate urban growth
patterns around efficient public transport networks can do much to help. But in much of the
developing (and developed) world there is little integration of transport and land-use planning.
Nonetheless, existing city transport can be improved by building institutional and regulatory structures
that create public transport systems affordable for taxpayers and users and that give incentives for
proper maintenance, investment, and service expansion. But transport demand by private vehicles

Focus on development impact 21

needs to be managed, by physical and/or pricing means. These issues are explored further in Section
4.4.

Urban population growth has been rapid since 1996, yet more than 600 million more people will move
into cities in developing countries in the next ten years (United Nations 2003). This implies a need for
new transport capacity to serve the equivalent of over 70 cities the size of London or Moscow. Indeed,
by 2025, more than half of the developing world's population will be living in cities (United Nations
1996). Yet, in the past ten years the Bank's engagement in urban public transport projects has
represented less than 8 percent of transport lending (it is part of the General Transport category of
lending shown in Annex A). The transport business strategy will seek to increase Bank engagement in
the urban transport subsector.

2.4 Increasing rural economic opportunity

In poor rural areas, isolation caused by poor transport is often the main restraint on economic
progress and poverty reduction. Poor transport restricts opportunities to trade even within local
markets. It raises the costs of production and distribution, reduces the profit margin from sale of
produce that can be traded, and limits production yields to levels below their potential. It thereby
slows efforts to migrate from subsistence to income-producing agriculture. The economic impacts of
improved access can be cumulative and far-reaching. Access to markets makes it worthwhile to
modernize agriculture through mechanization, use of fertilizers, and planting of higher-yield varieties.
This, in turn, increases demand for inputs and corresponding demand for and availability of sources of
credit. When road access is improved to remote rural areas, the economic effect can be dramatic (Box
2-1).

Rural transport also provides access to labor markets and therefore creates the opportunity to earn
nonfarm income. Studies in China indicated that investment in improving low-standard roads
generated 1.57 yuan of agricultural GDP for every yuan invested, but generated more than 5 yuan of
nonfarm GDP (Fan and Chan-Kang 2004). Evidence from both Latin America and Bangladesh also
shows that investments in rural roads provide a high share of benefits to the poor (Ahmed and
Hossain 1990). Moreover, the same road that
provides transport access to product, service, and
labor markets often provides the right of way for Box 2-1. The impact of roads on agricultural

electricity lines and water pipes. production

It is therefore not surprising that poor people in Guinea: In areas where rural roads had been

rural areas view isolation as a major reason for provided, the area sown with crops doubled
compared with other areas. Output sold to
their poverty. The Bank has attempted to quantify market for cash almost quadrupled. In areas
this problem. The results are summarized in a Rural where no such access improvements were made
Access Index that measures the proportion of rural there was no change: citizens remained locked
dwellers who live within 2 kilometers of an all- into traditional subsistence living (R�publique de
season road. In the richer IBRD-supported Guinee Minist�re des Transports 2005).
countries, 94 percent of rural people live within 2
kilometers of an all-weather road. In the poorest Colombia: An improvement of rural roads in

group of 15 Sub-Saharan African countries, only 37 areas previously inaccessible to vehicles reduced

percent live within 2 kilometers of an all-weather travel times and transport costs by 80 percent.
Farmers responded by increasing production of
road (Roberts and Shyam 2005). Rural roads goods for market (particularly perishables) by
already constitute over half of the total length of between 50 percent in one area to 200 percent
roads built, rehabilitated, or maintained with Bank for some products in others (Evans 1990).

22 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

funds.4 They remain an enduring priority for the Bank, together with policies for their maintenance
and management (and are discussed in more detail in Sections 3.4 and 4.2).

Inland waterways are also an important transport resource for people living in delta areas and those
living along rivers, canals, or lakes. Their particular contribution to development is described in more
detail in Section 4.6. The proportion of transport investment used to maintain and improve inland water-
ways in regions endowed with rivers, lakes, and a legacy of canal systems is often very low relative to
their transport role. The Bank Group will support partner countries in efforts to efficiently use inland
waterways in a way that also protects the interests and livelihoods of riparian communities.

2.5 Accessing health care and education

Five of the eight Millennium Development Goals seek health or education improvements. Basic mobility
plays a critical role in delivering and providing access to health care and education. Most programs that
directly target these goals (programs involving schools, health clinics, emergency services, nutrition
programs, and social services) depend on road transport (motorized and nonmotorized) to underpin
their delivery.

In a study in Bangladesh, out of 129 villages
surveyed, those with better access were found Box 2-2. Ratio of social indicators in villages
to be better off in terms of health and in rural Pakistan that do not have all-
participation of women in the economy (Ahmed weather motor accessible roads (sample A)

and Hossain 1990). An investigation by the relative to those that do (sample B)

Bank's Independent Evaluation Group of the Indicator Ratio A/B
benefits of paving rural roads in Morocco (OED
1996) found that improved access to education Girls' net primary school enrollment
0.66
and health facilities increased enrollment rates rate (NER)

in rural schools and led to more visits to health Boys' net primary school enrollment
0.87
care services. The impact on women, who often rate (NER)

suffer disproportionately from poor transport, Female literacy rate (for ages 10
was especially profound--girls' enrollment in 0.57
years and above)
education in the project zones more than tripled Male literacy rate (for ages 10 years
within a few years of project completion. In 0.83
and above)
health terms, women's daily burden of collecting
firewood was dramatically reduced as paved Immunization coverage(1) 0.85

roads increased the affordability of butane for Contraception (2) 0.63

heating water for cooking and washing clothes Prenatal consultation 0.50
(Levy 1999). Recent surveys by the Bank in Births assisted by skilled attendant 0.67
Pakistan tell a similar story (Box 2-2).
Births at home 1.07

Accessibility to basic services remains a priority Postnatal consultation 0.71

area for Bank Group engagement in transport. (1)Fully immunized 12�23 months based on recall
But provision of infrastructure by itself does not and record.
solve the social and economic transport needs (2)Percentage of married women of age 15�49
of the poor. The poor do not own motor vehicles, who ever used contraception.
and the existence of a road does not Source: Essakali 2005.
automatically lead to the provision of affordable

4 Based on analysis of all roads projects completed between 2002 and 2006.

Focus on development impact 23

transport services. More attention will be given to the transport services that use new roads. Markets
can be made to work more efficiently to provide safe and affordable transport services through policies
that affect the cost and availability of transport service vehicles (import and sales taxation, import
controls and duties, vehicle taxes, road transport regulations, anticartel measures, etc.) However, this
is not only a matter of government policies; the Bank will also continue to support NGOs, which often
are the conduit for service innovation at the local level.

As in cities, rural transport in many developing countries is also characterized by an enormous range
of trips made by nonmotorized transport: on foot, by bicycle, barrow, and cart (and in some places by
small boat). In an analysis of five districts of Malawi the motorized mobility rate was found to be only
about one-tenth of a trip per person a year. Over 99 percent of out-of-village trips (including virtually
all to health or education facilities) were made by nonmotorized modes of transport (walking, cycling,
animal-drawn vehicles, etc.) over an average round-trip distance of nearly 20 kilometers. Indeed, the
average round-trip distance just to reach a motorized form of transport in these districts was over 11
kilometers (Hine and Rutter 2000). The issue of nonmotorized transport is discussed further in Section
3.8.

2.6 Making transport safer and cleaner

It is clear that improvements in transport are essential to meeting the economic, social, and
environmental aims of the Millennium Development Goals. Unfortunately, transport also creates its
own set of problems, some of which detract from those goals.

Sustainable Transport already emphasizes the importance of the environmental and social dimensions
of transport. In the transport business strategy the Bank intends to provide more support to help
mitigate transport's contribution to three major and specific health and environmental problems: road
traffic accidents, the role of transport in transmission of disease, and vehicle emissions (with effects
on local air quality and global warming). On this last point, the business strategy will focus on the
transport impact on climate change, with attention paid to both mitigation in terms of operational
services and adaptation in terms of infrastructure sustainability.

These problems bear heavily on developing countries. Around 83 percent of the world's road fatalities,
94 percent of deaths attributable to urban air pollution, and 96 percent of HIV/AIDS infections are
found in low- and middle-income countries (UNAIDS 2004). Within countries, these impacts usually
fall disproportionately on the poor. These three areas are discussed in more detail in Sections 3.8�
3.11.

2.7 Measuring impact and sharing knowledge

There are deficiencies in international statistics about the performance of transport infrastructure and
services generally. The Bank Group has accepted the need to put more effort into measuring the
results of its own development interventions (OPCS 2004). Measuring the physical and economic
performance of the transport sector is challenging, but the Bank has made a start in the rural roads
subsector. Over time, the performance indicators will be most effectively improved if countries that
routinely collect extensive statistics about many smaller industries can be encouraged to give similar
attention to the transport sector.

Better use can be made of the Bank Group's existing project appraisal and monitoring systems to give
more attention to specific intermediate development targets that can be cost-effectively measured

24 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Box 2-3. The power of results

Trade and Transport Facilitation in South East Europe

The project addressed in a comprehensive manner (including transport, customs, health, and immigration
functions) and on a regional basis the long delays that were occurring at road border crossings throughout
South East Europe, impeding trade and development in the region. Results monitoring was an integral part of
the project design and a direct input into its effectiveness. Over the first three years the project had recorded
an average 63 percent reduction in customs clearance times, combined with a 60 percent increase in customs
revenue collected, plus a 65 percent reduction in border crossing times. Results were measured specifically by
country and border crossing, so that immediate benchmarking was available to all participants. Based on the
demonstrated success a second project is being prepared to cover railway and river transport in the region.
This emphasis on measuring corridor performance is being adapted in the development of new corridor trade
and transport facilitation projects in the Eastern Europe and Central Asia region.

Project ID P070086: South East Europe Trade and Transport Facilitation Project, approved May 2000.
Implementing agency: Customs Directorate.

Provincial road maintenance in Argentina

Effective long-term monitoring of the impacts of performance-based road maintenance contracts let in 1996�
1997 in Argentina enabled the benefits to be clearly demonstrated: the share of roads in poor condition fell by
41 percent to 6 percent, unit costs were 12�18 percent lower than traditional contracting, and the achieved
economic rate of return was estimated to be 60 percent because of the savings in vehicle operating costs.
Demonstration of such results has led to a much wider application of performance-based road maintenance to
both national and provincial roads in Argentina.

Project ID P070628: Argentina Provincial Road Infrastructure Project, approved June 2005.
Implementing agency: Provinces.

(Box 2-3 provides illustration). For example, in cases where such impacts can be isolated, it is
important to try to measure the impact of major road investments on the prices of freight and
passenger services, as well as on vehicle flows and time savings.

An enduring long-term challenge is to quantify the impact of specific transport investments on
economic growth and, through economic growth, on poverty reduction. Despite the difficulties
(described in Box 2-4), well-designed research can improve understanding of how various linkages to
growth work and so how they might be strengthened.

Knowledge of how transport performs, what it can achieve, what works (and what does not) in
transport policy and practice is only valuable if it is disseminated to those who can use that knowledge.
Sustainable Transport emphasized the importance of this role in the transport sector. The Bank Group
has played its part in generating and sharing knowledge products both at central and regional levels.
However, the benefits of enhancing the Bank Group's transport knowledge-sharing activities and
analytical and advisory services were stressed by IEG (IEG 2007). Such enhancement is included in
the transport business strategy.

Focus on development impact 25

Box 2-4. The impact of transport on national economic growth

Why is it so difficult to measure the contribution of transport interventions to economic growth? There are four
main reasons:

First, there are many steps between cause and effect: (a) transport infrastructure (which forms the majority of
Bank-supported investment) facilitates (b) further supply activity (freight and passenger transport services)
which serves (c) market demands (distribution of goods and personal travel) which are themselves at least one
(and usually more) steps away from (d) economic growth. Second, the supporting conditions and actions
necessary to trigger these various steps are not fully understood. Third, the time lags involved between cause
and effect are not known, but may sometimes be very long. Fourth, there are reverse links from growth back
into transport demand and investment that are difficult to disentangle.

Therefore, to define a point at which the growth impact of a specific transport project can be said to have
occurred, isolate it from the impacts of many other policy or economic changes that may (or may not) have
taken place, and then measure its unique contribution to economic growth is a formidable research challenge
that has not yet been, and will probably never be, fully met.

One of the most thorough reviews of evidence concerning the relationship between transport and economic
growth concluded that it is "dependent on the context within which transport interventions take place--the
state of economic development, the degree of integration of markets, the extent to which there is already a
well-developed transport infrastructure, the strength of competitive forces in the areas affected by transport
change; the capacity (of beneficiaries) to respond to the opportunities and threats of wider markets, and on the
incidence of congestion" (SACTRA 1996).

2.8 Implications of the development focus

This chapter has shown that transport makes a multifaceted contribution to development that includes
passenger and freight operations, spans urban and rural areas, includes public and private transport,
meets economic and social needs, and serves domestic and international demands. If the Bank Group
were to maintain the predominance of attention given over the past ten years to the support of
nonurban transport needs, and specifically to transport that relies on roads, it will miss many
opportunities to maximize the contribution that its transport interventions can make to economic
development. Thus, there is prima facie case for widening the scope of Bank Group engagement in the
transport sector.

3 FOCUS ON POLICIES

Eleven policy issues described here together provide a checklist for deepening the policy agenda of the
transport business strategy: rationalizing public and private sector roles in transport delivery;
improving the performance of state-owned enterprises; preserving the value of public assets; setting
transport prices; encouraging private sector participation; fostering competition and strengthening
regulation; making transport more inclusive; improving transport safety; combating transmission of
HIV/AIDS; reducing transport emissions; and fighting corruption. Although countries will inevitably
weigh and analyze all of these issues differently, how decision makers resolve them into enforceable
policies and implement them through institutions and regulations will be crucial to the sustainability of
the country's transport systems. Bank Group support can help the transport sector put into practice
the principles of economic, financial, social, and environmental sustainability and build systems that
are cleaner, safer, and more affordable.

The goals of fostering competition and strengthening regulation underlie many of the recommended
policies in the transport business strategy. Competition creates incentives to managers to meet
market needs at the lowest possible cost, and it encourages them to innovate to obtain market
advantage. Regulation protects public interests and can set parameters--for example, for energy
efficiency or vehicle safety--that shape the response of competitive markets. To ensure that transport
is safe and clean, regulations or other governmental interventions are likely to be required, whether
assets are under public or private ownership. These policy measures can help to improve the access to
transport services for those now underserved and most in need (rural women, the disabled and
elderly, the poor who rely on nonmotorized transport). They can also help all transport users by
raising safety standards to reduce the toll of traffic accidents, by requiring greater fuel efficiency and
more controls on vehicle emissions to improve air quality and protect the global climate, and by
combating corruption (such as informal payments to inspectors, traffic police, or customs officers),
which can facilitate dangerous driving, unsafe vehicles, noxious exhausts, or vehicle overloading.

To ensure that transport is affordable, competition among private suppliers is likely to lead to the
greatest efficiencies, with governments contracting for specific services. The traditional model of
supply by state-owned enterprises controlling infrastructure and fares has not always served the poor
(or anyone else) very well. Monopoly supply has often meant that costs have been higher than they
need be and that services have not been very responsive to needs. Controlled fares have sometimes
resulted in increasing losses for the public transport provider and progressive deterioration because of
the inability to reinvest. The Bank Group believes that governments may benefit from assessing new
models of delivery and pricing (such as those involving public-private partnerships, output-based
contracting, user taxes on fuel consumption and traffic congestion), which may offer better and more
affordable service per unit of subsidy. The key is to capture through competitive means the benefits of
private sector efficiencies in the delivery of public services.

3.1 The roles of governments

Whether transport contributes effectively to development and whether it is safe, clean, and affordable
often depend on the wisdom of government policies and the capacity of governments to implement
those policies. Governments (and their subnational divisions and municipalities) are responsible for
the governance of the transport sector. While a full description of the Bank Group's work in public
sector governance is given elsewhere,5 this section deals with issues that arise out of four key roles of
the public sector in the transport sector:

5http://www.worldbank.org/publicsector/.

28 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Policymaker: Discerning the public interest in transport and translating these interests into
the legal, institutional, and regulatory frameworks governing the sector.

Custodian: Maintaining good stewardship of public assets, including deciding how they should
be financed, operated, and maintained (either through state operators or private managers
and concessionaires).

Regulator: Administering conditions of market entry to the various parts of the transport
industry, investigating the exercise of market power and anti-competitive practice, influencing
pricing and service levels where justified, and setting rules and standards to protect public
safety and the environment.

Customer: Purchasing transport services via implicit or explicit public service agreements or
on behalf of particular community groups (for example, through subsidizing transport for
students, or to remote areas, or for poor or disabled people).

Good transport policies are transparent and consultative. Nearly all transport policies, plans, and
systems impinge upon a wide range of user and community groups. Consultative and participatory
mechanisms are not only desirable, but essential to gaining all the information and perspectives
needed for good policymaking in transport.

Many Bank Group interventions in the transport sector try to improve public sector performance in one
or more of these areas through policy dialogue and advice, capacity building, financial and information
systems development, conditions attached to project loans, and other means. This chapter highlights
and summarizes the Bank Group's views on 11 key policy issues that governments face in performing
their roles. These issues are crucial to the Bank's sustainability objectives in transport, and the
transport business strategy will give particular attention to them.

3.2 Rationalizing public and private sector roles in transport delivery

Throughout the world, transport infrastructure and service delivery are shared by the public and
private sectors. The public-private balance in each country stems from its history, culture, and
circumstances. The Bank Group is mindful of the need to respect alternative policy approaches (Amos
2004). The treatment of this issue is helped by drawing a broad distinction between transport services
(for example, road haulage companies, shipping companies, airlines) and the transport infrastructure
that service suppliers use (for example, roads, seaports, and airports).

Transport services
Public sector supply of transport services has often been disappointing. Experience suggests that
private operation of transport services leads to a better outcome, if markets are competitive (or
periodically contestable) and if the regulatory framework protects public interests from any misuse of
market power. To ensure that transport is safe and clean, regulations are likely to be required,
whether assets are under public or private ownership. To ensure that it is affordable, competition
among private suppliers is likely to lead to the greatest efficiencies, with government acting as a
customer when appropriate (for example, in public passenger transport) to contract for specific social
services.

Transport infrastructure
Transport infrastructure is more contentious. As with state-owned transport services, state-owned
infrastructure companies face an enduring challenge to maintain adequate efficiency incentives
(discussed further in Section 3.3). But many countries are uncomfortable with fully private ownership

Focus on policies 29

or free-market operation of transport infrastructure. The discomfort arises from the presence of
natural monopolies (for example, rail and waterway networks); the existence of market power due to
exclusive location (some ports and airports); the practical or economic difficulty of fully recovering
costs from user charges (road networks, waterways, passenger railway networks, and metro
systems); and the "lumpy," long-term, and risky nature of much transport investment (which limits
private financing). In some countries there is also a public perception that transport infrastructure is
an inherent part of the public patrimony and should be run for the public good rather than for
commercial gain.

Public ownership of transport infrastructure is a legitimate public policy choice. The public sector is the
owner and usually the "manager" of nearly all the world's roads, inland waterways, navigable
airspace, and shipping channels, as well as most of the basic port, airport, and navigation
infrastructure, most metro and tram networks, and most national railway infrastructure (including
over 95 percent of the rail network outside North and Latin America). The Bank Group will remain
engaged with partner countries to improve the management capacity and operating efficiency of
publicly owned transport enterprises (Section 3.3). But there are often ways for governments, as
custodian of such assets, to seek the benefits of greater private sector participation in their financing,
management, and operation. The Bank will continue to encourage partner countries to consider these
options for public-private partnership (Section 3.6).

Separating services and infrastructure
Transport infrastructure and transport services are sometimes tied together in one vertically
integrated entity. This can effectively extend a natural infrastructure monopoly into a potentially
contestable market for transport services. Partner countries may therefore be able to improve
performance by separating infrastructure and services. Examples include the separation of national
airlines from their host airports, stevedoring from port infrastructure, and ports from shipping
companies. In these cases, both private participation and competition in transport services can be
facilitated to the benefit of customers and development, while leaving infrastructure under public
control.

Separation of service and infrastructure is a more complex issue for railway systems, however. The
technological, operational, safety, and economic interfaces between railway infrastructure and train
services are not always benign and, in practice, require active management. Separation of the
institutions that manage each side typically adds complexity, transaction cost, and regulatory burden
to achieve clear and effective responsibility and accountability at the interfaces. Full separation is
currently confined to relatively few railways in Europe and Australia, while about 97 percent of all the
world's railway traffic is carried on vertically integrated railways, either public or private.

Even in the case of railways, however, with favorable market conditions and complementary policy
measures, separation can provide a platform for attaining beneficial outcomes. These may include
increased competition in rail freight markets (though there are also many instances, particularly in
North America and Europe, of third-party access to lines owned by railway companies that are
vertically integrated); the ability to tender passenger train operating concessions; and greater
transparency in use of public subsidies (for example, to support infrastructure only). Vertical
separation in railways is therefore not desirable as an end in itself, but may have value as part of a
wider package of structural reforms in particular circumstances.6 The Bank Group therefore remains

6The practical challenges and solutions to managing economic interfaces in multioperator railway environments
are described in more detail in Amos and Bullock 2006.

30 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

open-minded on the issue of separation and will support partner countries committed to achieving
efficient and effective railway services under either integrated or separated models.

3.3 Improving the performance of state-owned enterprises

Given the heavy public sector involvement in transport, particularly in infrastructure, the majority of
the World Bank Group's transport operations in the near to medium term will continue to involve
transport departments, agencies, and enterprises that are publicly owned and operated. The
contribution of transport to development is heavily influenced by the effectiveness of these entities.
Bank financial support can sometimes be justified only in the context of a parallel reform program,
because it is not in the long-term interests of partner countries and their citizens to provide funding
that simply perpetuates nonperforming institutions, without the structural reforms and capacity
building that can create enduring improvement.

State-owned transport enterprises may face many obstacles to sound business management. The
multiple, changeable, and often conflicting pressures that bear on governments can filter down to the
management of the enterprises, leading to lack of clear purpose and weak commitment to specific
goals. Fluctuating national budgets can weaken business and investment planning. Public service
norms and procedures can lead to commercial inflexibility. Board members and senior managers may
be selected through political patronage rather than on merit.

Improving the performance of state-owned enterprises typically requires separating the policy and
regulatory functions of government from the operational and commercial functions of business
management. This separation is not sufficient on its own but enables more far-reaching reforms: a
more professional and independent board of directors; management selected on merit; management
accountability through short- and medium-term business planning targets; business segmentation and
concentration on core functions; greater freedom of pricing to reflect costs and markets; use of
internationally recognized commercial accounting and auditing standards; and formal agreements
between enterprises and government for reimbursement of the public service obligations imposed by
governments through mandated service or tariff conditions. Arm's length or semi-autonomous
supervision also facilitates more transparent oversight of safety and environmental performance,
which can be more easily overlooked when government departments are responsible both for
regulatory and commercial functions.

While it is easy to delineate the principles, restructuring of any large enterprise is complex and
sensitive. Future interventions in transport that involve reform of state-owned enterprises will take
account of lessons learned (Box 3-1).

Traditionally, sector reform has often been sought by applying conditions to individual loans
("conditionality"). Experience in the transport sector in this regard has been much the same as in the
Bank Group as a whole: "The track record indicates that using conditionality to induce policy and
institutional change seldom succeeds unless there is adequate understanding and support for it within
the country" (OPCS 2004). Country ownership rather than conditionality is the key to change.

Focus on policies 31

Box 3-1. Reforming state-owned transport enterprises: Lessons from experience

Stay the course. Restructuring a complex industry or organization is a long-term process. It often requires
legislative, as well as institutional and management changes, and a period of cultural adjustment within
organizations before benefits emerge. Unrealistic timetables that do not allow for the time needed to work
through political processes, to build the consensus needed for radical change, and to overcome
organizational inertia are likely to be frustrating.

Emphasize performance. Structural change is only a means to an end. That end is to improve
performance. Governments can create the policy platform and framework for this improved enterprise
performance, but only enterprise managements and their employees can deliver the goods. Close attention
therefore needs to be given to investing in the actual process of business change management, including
attraction of the best skills and experience, consultation and participation of workers, and creation of a
commercial culture with incentive structures.

Adapt to local conditions. Even within a particular sector of transport, such as a highways agency or rail
or port company, one structural model does not fit all. The international experience needs to be mined, but
then shaped to local markets and circumstances.

Monitor progress. Public enterprise reform is not a "fire and forget" process. Good public custodianship
requires explicit supervisory and monitoring mechanisms. When government enterprises are not working
well, it is often the processes of public governance that need scrutiny as much as the enterprises
themselves.

Respond to changes. Transport markets and technologies are continually changing. New transport
demands and opportunities will emerge with economic development and technological progress. The
objective of transport policy should not be to achieve a given end-state but to create an industry adaptable
and responsive to change.

Well-designed project conditions that are within the power and capacity of the beneficiaries to
implement can help them to secure the most effective returns from specific physical investments, and
strengthen governance and institutions in ways that bring enduring benefit. However, conditions will
generally fail if they impose requirements that are outside the sphere of responsibility of the
beneficiary organizations, or if they require policy or organizational changes that contradict political
precepts. The Bank Group will avoid imposing wider sector policy conditions on individual project loans
unless they are truly essential to the investment benefits.

Sound policy and governance in transport nevertheless remains paramount. It will be pursued through
country dialogue, analytical and advisory activities, and policy-based lending. Because reform is a
long-term process, Bank involvement needs to be part of a long-term relationship. This implies greater
use of programmatic engagement to sustain relationships with clients over longer periods. These
relationships can help to build a stronger policy framework, to build on individual pilot initiatives, to
develop wider relationships involving safety and environmental programs, and to focus on longer-term
outcomes. Program approaches will also permit a more effective use of Bank resources and expertise.

3.4 Preserving the value of public assets

The developing world's transport infrastructure represents an enormous asset. The value of the road
network alone in the Bank Group's regions of operation is of the order of US$2 trillion.7 Many transport
infrastructure assets have extraordinarily long lives, if they are maintained. But transport infrastructure
that is not well maintained deteriorates, in some cases quite rapidly (particularly in harsh climates). The
government's custodial role implies the adoption of policies that protect and preserve the economic

7Extrapolating from estimates made for Latin America and Africa (Fay and Yepes 2003; Heggie and Vickers 1998).

32 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

value that is embedded in assets for which there is a continuing economic demand. Failure to do so is
usually costly to users because of the asset's substandard economic, safety, and/or environmental
performance and costly to governments because of the asset's premature reinstatement or replacement
costs.

Assets that are managed by revenue-earning transport enterprises (such as ports, airports, air traffic
control systems, railways, etc.) generate internal funds that usually contribute at least some of the
resources needed for asset maintenance. However, some forms of transport infrastructure are treated
as public goods, with no direct fee for use. The most important example in transport, in terms of cost
impact, is the provision of public roads.

One of the biggest development challenges in transport is therefore to ensure that maintenance of the
public road network is allocated the resources and attention it needs. The roads subsector cannot
necessarily expect to be at the front of the queue for public resources, but does appear to be
particularly prone to budget vicissitudes. The economic and political impact of cuts may not be as
immediate as in many other areas of public expenditure. Moreover, expenditure on building new roads
often has greater electoral reward than the less visible task of maintaining what is already there. In
the 85 countries that had received World Bank Group financing for roads during the 1980s, inadequate
maintenance meant that ten years later 15 percent of the total capital invested in main roads had
been lost (Heggie and Vickers 1998).

Therefore, an enduring priority for the Bank that was set out in Sustainable Transport is to work with
partner countries to improve the sustainability of their road infrastructure assets. This will require
institutional arrangements that encourage a network management culture; systematic use of asset
management tools; innovative technologies that can utilize local materials and labor; effective exploitation
of private sector efficiencies through competitively tendered output-based maintenance contracts (Box 3-
2); enforcement of maximum truck loading regulations; and stable long-term financing sources for
maintenance and safety. The Bank Group and other donors will need to cooperate in helping many
countries to attain the capacity to successfully adopt these approaches.

Road funds, often replenished from fuel and vehicle registration taxes levied on road users, have been
found helpful in some countries, because they secure some stable funding sources for road
maintenance. If adopted, road funds should form part of a wider framework for sound road
administration. As in other areas of public enterprise reform, the main objectives should be sound
asset and financial management and efficient construction and maintenance operations. A dedicated

Box 3-2. Output-based contracts

A form of private management contract that is being increasingly applied by partner countries with Bank
support is the output-based or performance-based contract for the management and maintenance of road
networks (Stankevich et al. 2006). Such contracts are established on a multiyear basis and pay a private
contractor for delivering objectively defined infrastructure performance levels, rather than simply for carrying
out defined maintenance engineering tasks (or inputs). When let by competitive tender, such contracts can
improve asset management and yield better value for money than traditional approaches to road maintenance.
In many countries where maintenance work has traditionally been carried out by a works department of the
road agency, this approach will often need to be introduced in phases, with complementary measures to help
build the capacity of local private industry to respond to the new market opportunities (Andreski et al. 2006).

Website on Global Partnership on Output-based Aid: http://www.gpoba.org/index.as.p

Focus on policies 33

road fund can form an influential feature of such a framework, with revenues generated from direct
and indirect road user charges in the form of fuel levies, vehicle registration fees, road tolls and (with
evolving technology) more general road pricing. More detailed Bank analysis of road funds is given in
Gwilliam and Shalizi 1997, Gwilliam and Kumar 2002, and in Heggie and Vickers 1998. An
independent assessment of road funds and the conditions for their success has also been made by the
Bank's Independent Evaluation Group (OED 2005) and by the Sub-Saharan Africa Transport Policy
Program (Box 3-3).

Box 3-3. Sustaining road maintenance financing in SSA

The second-generation road fund has become a significant feature of road
sector reform programs in SSA. According to a recent review of the status
of road sector policy reforms in SSA, there are at least 27 countries in SSA
with road funds in place. This number has shown a substantial growth since
2000 and is likely to increase further in the coming years as a result of
ongoing reforms in West and Central Africa (the countries in light green
on the map). Senegal, Burkina Faso and the Democratic Republic of Congo
are finalizing the last steps for the creation of second-generation road funds.
Uganda, after being for many years the only country in East Africa without
a road fund has recently established one.

The results of financial audits indicate that, in general, funding arrangements are more transparent than in the
past and an increasing number of road funds now have considerable financial autonomy. These road funds raise
most of their revenues from road user charges and most of the proceeds are channeled directly to their bank
account. Road funds have secured a more stable and predictable flow of funds for road maintenance.

The results of the survey on road funds performance indicators show, on average, road funds have an amount
of two months equivalent of road maintenance works as a minimum amount of cash available in their bank
accounts. The time period for paying the undisputed contractors' bills varies from 5 to 90 days with an average
time of 32 days. For comparison, the time difference between the budget and road maintenance cycles in some
countries, which have not established a road fund as yet, is currently around nine months and delays for paying
contractors bills have reached one year. Road funds also provide a basis for the development of local small-
scale contractors (e.g. around 2,000 local contractors have been promoted in rural Tanzania).

Overall, the road maintenance needs are becoming more visible. The creation of road funds has sustained a
stable flow of funds for road maintenance. This should not imply that road funds raise sufficient revenues to
meet all the assessed demands for maintenance but the reported fact of about one third of countries meeting
routine maintenance needs on a regular basis is a large improvement on the situation ten, even five, years ago.

Source: Benmaamar M., SSATP Discussion Paper No. 6. 2006.

3.5 Encouraging private sector participation

At the time that Sustainable Transport was published in 1996, some observers believed that private
investment would play the main role in meeting developing countries' infrastructure needs. The authors
of Sustainable Transport were less sanguine; they concluded that "the public sector will continue to bear
the primary responsibility for provision of transport infrastructure." Experience suggests that so far they
were right. However, the private sector, under appropriate contractual conditions, should be able to play
a larger role, and in particular to stimulate innovation.

34 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

The World Bank's Private Participation in Infrastructure (PPI) project database tracks infrastructure
projects in developing countries that involve private participation in funding and risk taking.8 During
the 15-year period after 1990, private investments in transport showed early growth but subsequently
declined. The peak was in 1997 with total "expected" investment of US$18.4 billion. This had steadily
dropped to US$2.9 billion by 2003, though with a strong upturn since then that is mainly confined to
the port and airport sectors. These data, though the best available, tend to give an optimistic view of
the extent of private investment so far.9 In the 15 years to 2004, only six countries accounted for
nearly 80 percent of the total investment recorded: China (18 percent), Brazil (16 percent), Malaysia
(11 percent), Mexico (11 percent), Argentina (11 percent), and Chile (10 percent). In most of the
other 150 or so developing and transition countries, new private finance for transport infrastructure
varied from little to none.

For the period covered by this report, the public sector will continue to be a major owner and operator
of basic transport infrastructure throughout the Bank's regions of operation. But the Bank Group will
also support the reinvigoration of efforts to attract increased private sector participation that will
improve management skills, attract private funds, increase operating efficiency, and impose market
discipline on project delivery and operations. The new financing sources that can be tapped by private
approaches could also be vital for poor countries. Annex B provides a detailed summary of the many
areas where private sector participation can be pursued; they are categorized by mode of transport
and broken down by transport infrastructure, transport services, and ancillary activities. Experience
suggests that the most promising areas for increasing private participation in partner countries appear
to be in port terminals, airport operations generally (and terminals in particular), freight rail
operations, toll roads (particularly on high-density roads in middle-income countries), urban public
transport operations, and a range of maintenance and other ancillary activities associated with the
different modes.

There are many models for increasing private sector participation in transport. These include
management contracts, lease contracts, franchises and concessions, or full privatization. They can also
include construction, operation, and financing of infrastructure on existing or new facilities. 10 The
success of all models in meeting development objectives will depend on structures that provide clear
delineation of rights and obligations, including the allocation of commercial and other risks, on
transparent competitive procedures for selecting private participants, on the regulatory arrangements
that apply, and on the rights of recourse in situations of alleged breach of agreements. Chapter 6 (Table
6-2) shows how World Bank Group financial and other instruments can be applied and combined
to offer a full range of public, private, and combined public-private solutions to transport
development needs. The Bank has published a number of toolkits that can help countries
implement higher levels of private involvement in the different transport subsectors, and these
are referenced by mode in Chapter 4.

In whatever form, private or combined public-private transport projects that are supported by the
Bank Group should meet the standards of cleanliness, safety, and affordability that would be applied
under alternative structures. Private sector participation in former state-owned enterprises often has
implications for employment levels and practices. Genuine social dialogue between all stakeholders is

8The PPI database can be found at http:/ppi.worldbank.org/.
9 The investment recorded in the database is that which was "expected" at closure: it does not track actual
disbursements (many projects lapse or investment commitments are renegotiated downward after closure). The total
investment recorded also includes the portion (often significant) of public sector investment committed to these projects
by government, or sourced from international financial institutions and bilateral agencies; thus, not all the finance
recorded is private finance.
10A detailed discussion of the many alternative forms of private sector participation is in Klein and Hadjimichael
2003.

Focus on policies 35

required to reach a common understanding and agreement on how to proceed while safeguarding
social rights of all parties involved, in particular transport workers. Ways of analyzing and dealing
equitably with these issues have been addressed in a Bank-sponsored toolkit on labor issues (World
Bank 2004b).

3.6 Setting transport prices

Sustainable Transport rightly emphasizes the role of cost-reflective prices in attaining efficient use of
transport resources. It also recognizes the case for peak pricing of congested facilities and the
importance of market-based elements to recover those elements of fixed infrastructure costs that
cannot be clearly attributed to specific user groups. In practice, most pricing for commercial transport
is set at least partly to recover costs and reflect market conditions. Where markets are competitive or
sufficiently contestable, there is a strong case against government interference in pricing mechanisms.
Where market power is more concentrated, as it is for some types of infrastructure, regulatory
oversight of pricing may be justified. In both cases, however, permanent subsidies are not warranted.

Where infrastructure is more appropriately treated as a public good, as in the case of road and inland
waterway systems (other than high-density tolled freeways), costs are recovered through fuel taxes,
vehicle registration fees, and other taxes rather than pricing. Most countries in the world also treat
passenger public transport as a public good. Widespread government and municipal intervention in
pricing and subsidized provision of infrastructure and services are prevalent in both developed and
developing countries. The reasons are not difficult to comprehend. Beyond simply the political profile
of such services, there is often a policy aim of transport "equity"the idea that accessibility and
affordability of basic transport service (like health and education) is something that a government
should ensure is available to the widest range of its citizens, including passengers who could not
otherwise afford the full cost, or who live in remote or lower density areas, or who need to travel in
time periods when average costs of provision may be high. Some countries also choose through low
prices actively to encourage the use of public transport as an alternative to private travel. In the case
of high�capacity, fixed-track systems, some countries are persuaded by the economic case that
recovery of the fixed costs from fares will lead to underutilization of sunk assets and may not
maximize community economic benefit. Apart from budgetary subsidies, a certain level of internal
cross-subsidy is also prevalent within nearly all public passenger transport systems (as it is in other
network industries, such as electricity, gas, water, postal services, and broadcasting).

Budgetary support of passenger transport services is a legitimate public policy choice, if it is affordable
to taxpayers and if mechanisms exist to deploy resources in an efficient way. Unsustainably high
levels of subsidy, ratcheted up by holding down fares at times of political pressure, typically lead to
long-term instability in funding, poor and fluctuating service, and inadequate investment. Budgetary
support should not therefore be simply a question of picking up the bill for whatever losses occur, but
should be based on financial capacity and specific support aims and criteria, allied to efficiency
incentives. Even then, if suppliers are protected from competitive forces, subsidies to them can end up
benefiting their managers and employees more than the users.

Partly for these reasons, the traditional model of supply by publicly owned (state or city) monopolies
under controlled fares has not always served the poor (or anyone else) very well. Monopoly supply has
often meant that costs have been higher than they need be and that services have not been very
responsive to needs. Controlled fares have sometimes resulted in increasing losses for the public
transport provider and progressive deterioration because of the inability to reinvest. Governments and
municipalities may benefit from assessing new models of delivery that may offer better and/or more
affordable service per unit of subsidy. The key is to capture through competitive means the benefits of

36 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

private sector efficiencies in the delivery of those services sought by city governments. This approach
is described in more detail in Section 4.4.

3.7 Fostering competition and strengthening regulation

The benefits of competition are as real in transport as in other sectors. Competition creates incentives
to managers to meet market needs at the lowest possible cost, and it encourages them to innovate to
obtain market advantage. This is true of competition both between and within individual transport
modes. Experience clearly favors competition "in the market" in most kinds of transport services.
Competition among service providers who use public infrastructure ensures that the benefits of public
infrastructure projects are passed on to users. There are also some types of transport infrastructure in
which competition can be beneficially sustained (such as among container ports or among different rail
freight companies).

Nevertheless, wholly free competition in the market is not always practical or the preferred option.
Some transport infrastructure has features of natural monopoly or monopoly based on a unique
location. Sometimes, transport markets are too thin to sustain effective competition. Some transport
concessions also actively create exclusivity, either to encourage long-term investments (particularly in
infrastructure concessions) or to promote a particular pattern of service (such as in passenger public
transport service contracts). When some measure of market exclusivity can be justified, the Bank
supports periodic competition "for the market" through a competitive and transparent bidding process.

In both competitive and exclusive markets, regulation can sometimes strengthen public interests.
Sustainable Transport stresses the importance of strengthening economic regulation in transport as a
way "to ensure fair competition, avoid predation and cartelization, and to protect the public interest."
Conversely, with an exclusive operation for whatever reason, regulation may be required to protect
against abuse of market power. In the case of transport concessions, regulation may sometimes be
required to give the parties to the concession agreement confidence in their recourse to contractual
rights and obligations.

In short, market competition and economic regulation both play a part in establishing an efficient transport
system that meets public needs. Box 3-3 summarizes some of the key regulatory design issues. More
detailed regulatory policy analysis in transport, with practical examples from different countries, can be
found elsewhere (Estache and de Rus 2000; Estache and Serebrisky 2004; Kessides 2004).

Finally, regulation is not a panacea. Regulation that replaces the functions of markets needs to be well
considered and proportionate. It should not be the knee-jerk response to every market imperfection
that may arise. Economic regulators are also rarely perfect and can be costly, ineffective, or influenced
by special interest groups. It is important to justify regulation by its expected benefits relative to its
costs. Competition does not need to be perfect to be effective. And some customers, particularly large
companies involved in freight services, have the countervailing economic power to protect their own
interests against infrastructure suppliers.

Focus on policies 37

Box 3-4. Issues in the design of economic regulations in transport

Independence. Although responsibility for economic regulatory policy is a public sector role, there are
advantages in delegating this policy area to a quasi-independent body at "arm's length" from government. This
type of delegation is particularly relevant in markets where the state is conflicted because it owns one of the
players (for example, state railways, shipping companies, and airlines), because it is a customer (for example,
a contract purchaser of public transport services), or because it is one of the parties to an agreement that is to
be regulated (such as with a public-private partnership agreement).

Location. A second issue is whether transport economic regulators should be established in mode-specific
organizations, for the transport sector as a whole, or within economy-wide regulatory bodies. The Transport
Sector Board considers this to be a matter of practicality rather than principle. The best approach can only be
judged against the scale of the regulatory task and the administrative and financial resources available to take
it on. National competition policies and laws will often be capable of encompassing economic regulation of the
transport industries. But transport sector expertise will usually be necessary for efficient regulatory decisions.

Process. Regulatory process should not be arbitrary and ad hoc. It is important to consider how to give
support to governments to establish appropriate regulatory regimes that have resources and skills to carry out
this most difficult task, with tools of asset valuation, regulatory accounting methods, efficiency measurement
techniques, and so on (World Bank 2004a).

3.8 Making transport more inclusive

Inclusive transport development policies address the specific needs of community groups whose
transport needs and constraints may either (a) differ from the general pattern; (b) not be revealed by
conventional planning methods that start from surveys of current travel--from which unmet needs will
inevitably be omitted; or (c) be concealed by analytical approaches that look for aggregation and
homogeneity rather than diversity. There are many dimensions of inclusive planning; three key areas
of specific need that were identified in Sustainable Transport are the transport needs of women, of
disabled people, and of those who use nonmotorized forms of transport. They will be areas for special
attention in the duration of the transport business strategy.

Gender
The third Millennium Development Goal (to promote gender equality and empowerment of women by
eliminating gender disparity in education) and the fifth Goal (to improve maternal health) both
recognize specific aspects of the differing needs of women in development. As discussed in Section
2.5, transport will need to play a key role in meeting those goals. It is evident that the transport
needs of pregnant or parturient women cannot be addressed through broad-brush transport plans or
interventions, but must involve a tailored approach. What is less widely acknowledged is that the
disparity and disadvantage women face in their need and opportunities for transport are, in fact, a
much more widespread phenomenon (IFRTD 1999, and case studies in the Bank's transport sector
resource Web page on Gender and Transport11). Empirical evidence shows that in both urban and
rural contexts, women have different transport priorities and needs, are affected differently by
transport interventions, and sometimes bear the major part of the transport burden in families (as
Figure 3-1 illustrates). Transport will be most effective for development if significant gender
differences in demand and impact are properly identified and if transport policies and programs then
reflect the full range of transport needs that exist. The identification of differences begins with the
appropriate design of transport diagnostics and a participatory process that includes women. More
detailed experience of applying a gender-sensitive approach can be found on-line in the World Bank

11 http://www.worldbank.org/responsibletransport/.

38 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Gender and Transport Resource Guide. 12 The Transport sector was actually among the first
contributing sectors to the drafting of the World Bank Group Gender Action Plan approved in 2006.

Disability
A second area for inclusive transport policy is in meeting the transport needs of physically disabled and/or
elderly people, who often have the greatest personal need of transport services. Large numbers of poor,
disabled people in developing countries are currently denied the basic mobility to participate in either
economic or social life because of inaccessible vehicle design and/or operational practices. Exclusion
increases the human and economic costs associated with disability and constrains disabled people from
breaking out of poverty. Inclusion depends upon establishing the right policies and the supporting
legislative, regulatory, and operational measures. In particular, the Bank will factor in its transport
operations the implementation of the UN Convention on the Rights of Persons with Disabilities, adopted on
March 1, 2007 (World Bank 2007b). A deeper account of the transport needs of disabled people in
developing countries, and how they can be addressed through policy and practices, can be found in Venter
et al. 2004 and Heumann and Willing (forthcoming).

Nonmotorized modes
As was stressed in Chapter 2, nonmotorized transport is important in moving both people and freight;
in serving both rural and urban areas; and in achieving both social and economic purposes. Indeed,
the first link in a supply chain from a poor rural area to a rich international market is often made by
people carrying their produce on foot, by bicycle, on a horse-drawn cart, or in a country boat. The
relative importance and specific needs of these modes can be captured by well-designed transport
surveys that look beyond the movement of conventional motor vehicles. They can be supported by the
way projects are conceived and the way infrastructure is designed to improve their accessibility,
safety, and amenity. Policy and operational guidance on how such help can be delivered is given in
World Bank publications on rural transport development (Malmberg Calvo 1998, Starkey et al. 2002)
and for urban transport in Cities on the Move (World Bank 2002).

Figure 3-1. Division of household transport responsibilities in Makete, Tanzania

900 812
800
700

600 537
500
400 342

Hours/Year300

200 141
84
100 59 46 74 52 32
0
Water/Firewood Crop Trips to Village Trips to Market Other Trips
Collection Production,
Harvesting and
Grinding

Men Women

Source: Malmberg Calvo 1994 and Barwell 1996.

12http://www4.worldbank.org/afr/ssatp/Resources/HTML/Gender-RG/index.html.

Focus on policies 39

3.9 Improving transport safety and security

Road transport
Already, around 1.2 million people die each year as a result of road accidents, comparable in death toll
to a disaster such as the 2004 Tsunami happening about every three months. By 2020, road deaths
and injuries are predicted to become a leading contributor to the global burden of disease and injury
(Murray and Lopez 1996).

Low- and middle-income countries bear about 90 percent of the current burden of road deaths and
injuries. The road safety performance gap between poor and rich countries is huge and widening, and
this trend will continue unless new global, regional, and country initiatives are taken. Bank projections
indicate that between 2000 and 2020 road crash fatalities will increase by more than 80 percent in
low- and middle-income countries, but will decrease by nearly 30 percent in high-income countries
(Figure 3-2). In developing countries, the incidence of road crash deaths and injuries afflicts the poor
disproportionately, and the consequences can also plunge previously nonpoor households into poverty
(Aeron-Thomas et al. 2004). For each death, there are many more cases of injury and permanent
disability that lead to poverty and loss of productive contribution to economic activity.

Figure 3-2. Changes in number of road accident deaths, by region, 2000�2020

160% 144%
140%

e 120%
100%
easr 80% 80%
80% 68%
inc 60% 48%
40% 18%
Deaths 20%
-28%
0%
-20% AFR EAP ECA LAC MNA SAR
-40% High-income
countries

Note: See Annex D for listing of World Bank regions.
Source: Kopits & Cropper 2003.

Region Proportion of healthy life�years Ranking in region of road deaths
lost in region due to road deaths and injuries as cause of healthy
and injuries (%) life�years lost

2002 2030 2002 2030

Africa 2 4 10th 6th
East Asia and Pacific 3 4 6th 5th
Europe and Central Asia 2 2 7th 9th
Latin America and the Caribbean 3 3 8th 8th
Middle East and North Africa 5 8 3rd 1st
South Asia 2 5 12th 5th
Source: WHO 2005.

40 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Road deaths and injuries are not only expected to increase in absolute terms, but also as a proportion
of total health problems. Table 3-1 shows the World Health Organization's projections of health losses
due to road deaths and injuries, expressed as a percentage of the total healthy life�years lost in each
region from all causes (WHO 2005). It also shows the ranking of road accidents as a cause of healthy
life�years lost in that region. For example, for the Middle East and North Africa, it is projected that, in
the absence of mitigating actions, between 2002 and 2030, road deaths and injuries will increase from
5 percent of health losses in the region to about 8 percent and will move up as a cause of health
losses from the third leading cause to the leading cause.

These trends are raising concerns globally, regionally, and nationally. In the transport and health
sectors, policies and measures are required to reduce the growing vulnerability of communities to
rapid motorization and road expansion, which are often occurring in the absence of an effective road
safety policy.13

More systematic approaches can be built on the findings and recommendations made by the World
Health Organization (WHO 2004, 2005) and the Bank (Peden et al. 2004). The benefits of
improvement would be significant. Bank estimates indicate that a 30 percent improvement in the ratio
of fatalities to vehicles in low- and middle-income countries by 2020 would save around 2.5 million
lives and avoid 37.5 million hospital confinements and 175 million incidents of minor injuries (McIntyre
et al. 2004).

Countries face the challenge of how to manage the road system to reduce road crashes. Safety can be
made integral to the design and management of the road transport system, just as it is in the
management of other transport modes, aviation in particular. However, this concept is not yet
accepted in many countries, despite the high economic and human costs of road crashes.

Once a country has ownership of and commitment to this approach, it is usually necessary to develop
or strengthen the capacity to implement it through:

Legislation and institutions. Road safety management requires stable, long-term policy and
funding frameworks, which are likely to develop only with appropriately designed legislation
and institutions. The policy framework should address infrastructure design, road contractor
responsibilities, vehicle standards, and driver requirements. Accountability for leadership,
coordination, promotion, performance monitoring, and evaluation should be vested in a
responsible agency.

Safety practices. Comprehensive standards and rules are needed to govern the safety of roads,
vehicles, road users, and road contractors. Compliance requires a mix of specific training, driver
examinations, and vehicle inspections (with systems and sanctions to counteract corruption), and
penalties and incentives for enforcement of road rules. Saving lives cannot rely, for example,
simply on advertising campaigns exhorting drivers to drive more safely.

Results focus. Targets for improving road safety should be set and results monitored using
comprehensive and consistent systems for recording data. Agencies need to know and be held
to account for safety results that fall within their sphere of responsibility and influence.

13 UN General Assembly Resolution 58/289 (Improving global road safety) was passed in 2004 with unanimous
consent and underlined the need to assist the capacity-building efforts of low- and middle-income countries. World
Health Assembly (WHA) Resolution 57.10 (Road safety and health) later that year urged member states to mobilize
their public health sectors in the prevention and mitigation of the adverse consequences of road crashes. UN
General Assembly Resolution A/60/L.8 (Improving global road safety) in 2005 placed special emphasis on
international cooperation in supporting road safety capacity-building initiatives in developing countries and
providing the financial and technical support associated with such efforts.

Focus on policies 41

As part of its contribution to the global road safety effort, the Bank is extending its support to include
not only road safety components embedded in specific road infrastructure projects but also larger,
stand-alone road safety projects that would address national strategy and policy to improve road
safety results across the board. Cross-sector approaches to extending the road safety agenda will also
be pursued: for example, hospital and ambulance components in road programs or road safety
components in health programs.

Air transport
Air transportation has become very safe in the developed world. Its reliability, flexibility, and
affordability made air travel one of the most important catalysts for economic progress. However, this
is not yet the case in many developing countries, where the accident rates remain unacceptably high.
High accident rates not only hamper the market development efforts, they also render it difficult to
finance and insure aircraft, or to establish code share arrangements with reputable partner carriers.

Accident rates are very high in Africa (3.6 fatal crashes per million departures), the Middle East (1.8),
Latin America (1.7), and Asia (1.3) when compared with the United States (0.4) or Western Europe
(0.6). The cause of high accident rates include primarily poor safety oversight by Civil Aviation
Authorities, followed by deficient infrastructure (airports, air traffic surveillance), and operating
aircraft, which do not meet international standards (equipment, maintenance).

The Bank Group considers that air transport safety must therefore be systematically included in
project design and economic sector work addressing: (i) air transport policy advice (e.g. liberalization
of air services) (ii) regulatory reform and capacity building at Civil Aviation Authorities, (iii) air
transport infrastructure improvements (airports, air traffic surveillance), and (iv) airline fleet renewal
(privatization and modernization of state-owned carriers).

Supply chain security
Transport and supply-chain security has also become a major issue in ensuring fair access of
developing country exports to developed markets, and needs to be addressed as a new global public
good. The Bank Group is committed to helping developing countries comply with new and updated
international agreements to this effect, like for air transport the updated Chicago Convention of the
International Civil Aviation Organization (ICAO), or for maritime transport the International Ship and
Port Security Code of the International Maritime Organization (IMO). Simultaneously, the Bank Group
is also cooperating closely with the World Customs Organization (WCO) in supporting the
implementation of the Framework of Standards to Secure and Facilitate Global Trade.

3.10 Combating transmission of HIV/AIDS

Since Sustainable Transport was published, the cumulative evidence in many developing countries has
increasingly pointed to a link between new transport routes and the spread of communicable diseases,
such as HIV/AIDS (World Bank 2003a). This is due not only to a general increase in personal travel but
also to the separation from family and high-risk behavior of road construction workers, truck drivers, and
other transport suppliers in the informal sector. Countries affected can reduce risk by prevention policies.

Countries are being supported by mitigation strategies adopted by the World Bank and other donors as
an integral part of highway improvement projects, particularly in Africa. HIV/AIDS prevention contract
clauses are now included in standard Bank bidding documents. One project, the HIV-AIDS Abidjan-Lagos
Transport Corridor Project (Project ID P074850, approved November 13, 2003) has been entirely
designed around the concept of using the corridor as a means and focus for providing active awareness,
prevention, and treatment services to corridor users, truck drivers, and border communities. The project

42 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

demonstrates that transport also has a positive role in fighting disease and can support outreach of anti-
HIV/AIDS work to other hot spots, such as conflict zones and mining areas.

The Bank Group will enhance relevant transport interventions with anti-HIV/AIDS measures over the
next few years as part of the contribution that the transport sector can make to fight this devastating
disease. In doing so, the transport sector itself will be a beneficiary. Transport is not only a conduit,
but also a victim of HIV/AIDS, which has created a void in the skills and capacities available to the
sector in many countries.

3.11 Reducing transport emissions and climate change

Vehicle emissions have a direct and deleterious impact on the health and environmental targets in the
Millennium Development Goals. The air pollutants most immediately damaging to human health are
lead, fine suspended particulate matter (for example, dust), and in some cities ozone. Respiratory and
other diseases related to local air pollution in developing countries contribute to the premature death
of more than half a million people each year, imposing an economic cost of up to 2 percent of GDP in
many countries (Gwilliam et al. 2004). Transport typically causes about a quarter of this impact,
mainly from private and commercial vehicles. Accordingly, the Bank Group focuses on phasing out
highly polluting vehicles, improving public transport, and monitoring air quality more intensively. Also,
the impacts of air transport on the environment have always been a concern to many partner
countries (particularly noise), but recent evidence on the disproportionate contribution of air travel to
greenhouse gas emissions has strengthened that concern. The Bank is working with the International
Civil Aviation Organization on environmental issues regarding air transport, but much remains to be
done in this area.

Globally, motorized transport emissions also contribute to the greenhouse gases responsible for
climate change (Stern 2006, IPCC 2007). Countries that are signatories of the Kyoto Protocol have
made commitments to reduce these greenhouse gas emissions. To date, attention has been mainly
given to the reductions attainable in power generation and large industrial processes. The progress in
these other sectors, combined with the high growth in transport demand, means that the proportion of
global emissions attributable to transport will increase. Several Bank transport projects, in the urban
sector in particular, are leveraging resources from the Global Environment Facility14 to pursue local
initiatives aimed at reducing vehicle emissions, particularly in cities.

Global warming is, of course, much more than just a transport issue and not one that implies action
only, or even mainly, by developing countries. The transport sector generates about 15 percent of global
greenhouse gas emissions. 15 Developing countries (low- and middle-income countries) currently
contribute only about a third of these. Both these proportions will increase. In the developing world,
greenhouse gas emissions from transport are growing at 3�5 percent each year, compared with 1�2
percent a year in the developed countries. As a result, it is expected that transport energy use in the
developing countries will increase from 32 percent of the global transport total in 2000 to 46 percent in
2030 (IEA/SMP 2004). This should become one of the factors to be considered in national transport
strategies and policies for both passenger transport, which contributes about 53 percent of transport
emissions of greenhouse gases, and for freight transport, which contributes the remaining 47 percent
(IEA/SMP 2004).

There is a nearly direct short- and medium-term relationship between the volume of transport activity,
the amount of energy used for that activity, and the generation of greenhouse gases. More than 95

14 http:/www.worldbank.org/environment/.
15 This is equivalent to around a quarter of energy-related emissions.

Focus on policies 43

percent of global transport energy use consists of oil-based fuels used in internal combustion engines.
Policies will need to be multimodal, taking account of country circumstances, but will generally need to
give particular attention to private road transport that at a global level accounts for around 70 percent
of emissions, and aviation, which accounts for 12 percent (though less in developing countries). These
modes are in many circumstances (though not always) the most energy intensive per traffic unit;
moreover, they are fastest growing in terms of traffic volumes. Sea and inland waterway transport are
together 11 percent, and railways (freight and passenger) 2 percent of total emissions (Figure 3-3).

While economic growth contributes directly to economic welfare and poverty reduction, without
international action to reduce the carbon intensity of transport in general, and road transport in
particular, the consequences of growth will be to increase both the quantum of emissions from
transport and its proportional contribution to total emissions. The energy efficiency of specific
transport modes is crucial because virtually all measures that increase the efficiency of energy use will
reduce greenhouse gas emissions per unit of transport: in other words, they can permit the benefits of
transport to be sustained while making it more climate-friendly. But policies will also need to consider
how to alter the demand for and modal distribution of transport in economically efficient ways to
reduce aggregate carbon intensity. (Figures 3-4 and 3-5 show emission rates for freight and
passenger vehicle types from European studies: the numbers are indicative, and there are likely to be
strong regional variations depending on the technology, age, and regulation of vehicles or vessels.)

This nexus between economic growth and transport-generated greenhouse gases can be moderated
over time by changes in travel behavior (of people), by logistics decisions (affecting freight), by
technology choices (in fuel, engine, and vehicle design), and by distribution of transport modes (cars
versus mass transit, for example). These, is turn, can be influenced by planning, fiscal and regulatory
measures, and public infrastructure investments. Within the policy mix, it seems likely that taxes on
fuel will need to play a central role because carbon emissions are directly correlated with fuel
consumption. Thus, pricing signals will affect both the immediate consumption and, if high fuel costs
are expected to be permanent, the longer-term technological and behavioral responses to achieve
greater energy efficiency. Moreover, revenues from such taxes can provide part of the source of public
investment in less carbon-intensive transport. However, price mechanisms alone are unlikely to be
politically or socially acceptable, nor sufficient for the challenge. It will take concerted and sustained
long-term effort using a mix of policies, applied over decades and on an international scale, just to
stabilize the level of transport�related greenhouse gas emissions.

The good news is that many of the transport policy measures that can help reduce greenhouse gas
emissions have other benefits. They already cohere with many of the Bank Group's transport policy
positions associated with the transport business strategy: for example, greater attention to railways and
inland waterways for freight; better urban public transport services; urban road traffic demand
management to reduce congestion and facilitate better performance of public transport; support of
nonmotorized transport, management of vehicle emissions, safe driving behavior (which is also more fuel-
efficient driving behavior), and so on.

Improvements can be made to carbon-financing mechanisms in the Clean Development Mechanism16
to raise the scope for emissions reductions programs in the transport sector. A programmatic
approach can do so by aggregating smaller projects within a program, such as by incorporating
reductions from households, small enterprises, rural electrification, and transport projects. It is also
important to explore the opportunities and mechanisms that exist to include the transport sector, and
in particular the roads sector, in carbon capping and trading schemes.

16 Clean Development Mechanism, United Nations Framework Convention on Climate Change, Kyoto Protocol 1997,
http://unfccc.int/kyoto_protocol/mechanisms/clean_development_mechanism/items/2718.php.

44 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Figure 3-3. World transport emissions of carbon dioxide, by vehicle type, 2000

80%

70% 67%

60%

50%

40%
emissions
30%
CO2 20% 11% 12%
10% 6%
2% 2%
0%

2-3 Wheelers Ships/barges Railways Buses Cars/trucks Aircraft

Source: WBCSD-IEA/SMP 2004.

Figure 3-4. Carbon dioxide emissions in Europe, by freight mode

100 86.3

40 29.4 34.4

20
grammes/tonne-km
0

Freight railways Inland waterways Heavy road haulage

Source: IFEU 2006.

Figure 3-5. Carbon dioxide emissions in the United Kingdom, by passenger mode (measured for
modern vehicles at average loading).

120 104
100 76
80
55
60
40 22
20
grammes/pax-km
0

Petrol car Bus Diesel train Electric train

Source: U.K. Office of Rail Regulation 2005.

Focus on policies 45

The Bank Group will develop and analyze policy options, so that it can properly encourage and support
long-term transport policies in partner countries that address this issue. This guidance will also identify
the critical issues to be considered by governments in assessing the cost-effectiveness of other policies,
such as mandated proportions of low-carbon fuels (such as biofuels) and railway electrification.

Transport policies cannot be decided on the basis of energy efficiency or emissions alone: it is
important to embed these issues within a wider policy context that reflects economic efficiency, social
equity and political feasibility. Policies also need to reflect local circumstances. In the richest countries
that are responsible for two-thirds of transport-related emissions, and in the large, fast-growing
middle-income countries, the adoption of policies aimed primarily at reducing their greenhouse gas
emissions is essential to tackling the global problem. For many small, poor countries, there is a need
to explore the synergies between local and global benefits with a view to avoid carbon-intensive
growth by shifting policy direction early, taking advantage of carbon financing and/or climate change
related financing.

The Bank Group can also lead by example in its own project interventions. It intends to build climate
change issues into its project appraisals where appropriate. It will issue technical papers on
parameters for estimating energy use and emissions by mode and circumstance; valuation of
emissions in transport project appraisals; incorporating such values into cost-benefit analysis; the
impact of and treatment of discount rates; and other relevant factors.

3.12 Fighting corruption

In some countries the transport industry is a victim of corruption. Informal payments may be
demanded by vehicle inspectors, traffic police, customs officers, and others, all of which can mean
higher transport costs. Some of these bribes may also facilitate dangerous driving, unsafe vehicles,
noxious exhausts, or vehicle overloading that damages roads. Corruption tends to make both freight
and passenger transport less safe, less clean and less affordable for the community as a whole.

As the Bank Group strengthens its engagement in freight transport and logistics, it will need to
highlight the problems and costs caused by corruption and to encourage reforms that may help reduce
it: for instance, electronic documentation processing or modernization of border stations to minimize
opportunities for informal transactions. Similarly, government policies to improve road safety or
reduce vehicle emissions will not work if the power to enforce new laws is converted into opportunity
to extort payments for turning a blind eye.

Closer to home, the Bank's loans for transport projects often finance large infrastructure or equipment
supply contracts. They can be targets for corrupt procurement practices. The Bank Group agenda to
fight corrupt practices17 includes the creation and sharing of knowledge in this area.18 The Bank's
transport sector is contributing to this effort through the development of new good practice
procurement guidelines; the update and publication of an Infrastructure Contracts and Licenses
database that will make certain business relationships transparent; and an evaluation and
dissemination of the corruption risk characteristics of alternative market and regulatory models.

Since 1999, the Bank has also developed a Road Cost Knowledge System (ROCKS)19 to monitor and
benchmark Bank-financed road and highway project costs. Updating and deeper analysis of the data are
being undertaken to find correlations between costs and quality of governance in project procurement.

17 http://www.worldbank.org/anticorruption.
18http://www.worldbank.org/wbi.
19 http://go.worldbank.org/ZF1I4CJNX0.

46 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

This analysis will help to improve strategies already being applied in a number of countries to mitigate
the risk of corruption.

3.13 Implications of the policy focus

Chapter 3 has identified 11 of the most important areas for Bank support of policymaking and
implementation in the transport sector to meet the objectives of economic, financial, social, and
environmental sustainability. Not all of these areas are a cause for concern in all countries and
regions. Different countries will inevitably weigh and analyze them differently, and the Bank Group
would anticipate a wholly legitimate and valuable diversity in the policies and institutions that are
established for their resolution. Nevertheless, that resolution will be crucial to the efficiency and
effectiveness of the transport of a country. As such, the 11 policy areas provide a systematic checklist
for deepening the transport agenda that is integral to the business strategy described in Chapter 6.

4 FOCUS ON MODES OF TRANSPORT

Roads, railways, buses, metros, taxis, bicycles, wagons, ports, ships, barges, inland waterways,
airports, aircraft, and the many combinations of these--all these diverse modes of transport serve
particular parts of a wide spectrum of needs that arise in moving freight and passengers. As trade has
globalized and incomes have risen in many developing countries, the demand has mounted for all
types of transport services and the infrastructure on which they rely. This chapter focuses on the
comparative advantages and risks of seven major modes or types of transport in meeting that
burgeoning demand. It makes the case for balanced multimodal investment to create transport
systems that exploit and integrate the best economic, environmental, health, and safety features of
different individual modes. The multimodal approach confirms the desirability of broadening Bank
transport interventions beyond single-mode solutions to look at transport needs as a whole.

This more holistic view of transport, which is reflected in the business strategy, supports both
integrated urban passenger transport systems and efficient freight corridors to serve regional
integration and international trade. Although roads have long been an essential component of all
national transport systems, usually consuming the greatest share of public and private transport
investments, the projected expansion of demand for road transport in developing countries will also
bring more traffic accidents, higher greenhouse gas emissions, increased urban congestion, and other
adverse effects. Balanced investment in many modes of public transport can contribute to making
cities work better: urban roads, railways, and even nonmotorized transport all contribute most
effectively when the service offered to the public is integrated to create physical connectivity, spatial
coverage, and ease of transfer. Cleaner, safer transport will mean cleaner, safer cities.

Similarly balanced investment in different forms of corridor infrastructure (connecting roads, railways,
inland waterways, ports and shipping, airports and aviation) may yield better solutions than a focus on
individual modes of freight transport and may achieve better coordination between, say, port
investments and surface access links. Most important, multimodal integration would enable customers
to choose their most cost-effective modes for specific types of freight, which would lower average
transport costs and raise environmental acceptability and energy efficiency overall.

4.1 The modes of transport

Transport in all its facets is a remarkably diverse sector. The different modes--roads, railways, urban
transport, ports and maritime transport, inland waterways, airports and aviation, and combinations of
these--serve particular parts of a wide spectrum of freight and passenger transport demands. While
some modes do compete in some markets, they are not always close substitutes and in many
circumstances are not substitutes at all. So each mode makes different but complementary
contributions to development, and each faces specific issues. This chapter highlights those issues and
the nature of Bank Group engagement in each modal subsector.

The subsectors are generally defined here according to the Bank's own statistical categories. However,
urban transport, which is not a separate subsector in the Bank's records (and is not a single mode
anyway), is sufficiently distinct and strategically important to warrant special attention. Nonmotorized
transport, too, is not a specific mode, but is treated as a distinct user group both of the roads network
and of the urban transport system; indeed, users of nonmotorized transport need to be integrated in
this way to ensure that their needs are not overlooked. As an antidote to the sometimes arbitrary
modal distinctions, the chapter concludes with a case for Bank Group promotion of multimodal
transport and logistics strategies.

48 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

4.2 Roads

Since the start of recorded history, roads have underpinned economic progress. Transport on
early roads and rivers permitted the movement of food and raw materials and was instrumental to
the development of towns, cities, and their surrounding areas. Urban agglomeration, along with
the resulting growth of income and population, led to the increased demand for food and raw
materials from nearby rural areas. Road networks grew as rural output and income increased.
Centuries later, a surge of canal and then railway building in industrializing countries underpinned
a massive expansion in trade, transport, and wealth. With the advent of the internal combustion
engine and improvements in road-building methods, roads have now come to dominate land
transport between settlements and regions in most countries.

It is not difficult to see why this should be so. Roads are multifunctional and can be readily accessed
by a wide range of users. They provide the
infrastructure used by private passenger Box 4-1. Road projects in Ethiopia and Vietnam
transport (cars and motorcycles), buses,
trams, taxis, paratransit services, own-
account goods transport, commercial road Ethiopia: Road Sector Development Program

haulage services, emergency services This project improved 1,334 kilometers of trunk and
(ambulances, police vehicles, fire vehicles), regional roads, helped build institutional capacity for
utility vehicles (such as for refuse collection), sustainable road development and maintenance, provided
and a variety of personal and freight employment for the poor in rural road works, and helped
transport functions carried out on foot, by develop appropriate and affordable means of transport.
bicycle, or by animal-drawn vehicles. They The project helped reduce vehicle operating costs by 16
frequently also provide convenient rights of percent and travel time by 25�30 percent. In addition,
way for electricity, gas, telecommunications, freight rates were reduced by 25 percent on the main
water, and drainage systems.20 It is because import export route and by 47 percent on trunk roads.

of their high and diverse functionality and Project ID P000755, approved January 1998.
wide range of beneficiaries that roads have Implementing agency: Ethiopian Roads Authority.
become such an essential component of all
national transport systems, usually Vietnam: Rural Roads Project
consuming the greatest proportion of public
and private investment resources in both This project involved the rehabilitation of 7,600 kilometers

infrastructure and services. of roads and 26 kilometers of bridges. Moreover, over
14,000 staff were trained in rural road maintenance. The

In 2005 it is estimated that road transport project improved accessibility to all-weather roads for
about 16 million people and helped lift more than 200,000
worldwide accounted for about 28,000 billion people out of poverty. Evidence suggests that the project
passenger-kilometers of travel (about 13 also led to increased health facility visits, improved school
times the traffic of nonurban railways) and attendance, and reduced rural-urban price differences.
9,000 billion freight tonne�kilometers (a simi-
lar order to railways). 21 Low- and middle- Project ID P039021, approved December 1996.
Implementing agency: Ministry of Transport.
income countries account for an increasing
share of the growth in road transport,

20Research undertaken by the Bank in Peru (World Bank 2006b) has shown how the simultaneous provision of
roads in conjunction with other infrastructure services (i.e., electricity, telecommunications, water) can give much
higher returns than if these are provided separately. At the village level, the Integrated Rural Accessibility Planning
Tool: IRAP (ILO 2000) is now being applied in a number of countries to map and efficiently coordinate the provision
of roads, footpaths, and tracks together with the provision of other services (for example, water sources, woodlots,
schools, health centers).
21The figures should be treated with caution. There are no complete or consistently defined global data sets for
transport activity by mode.

Focus on modes of transport 49

whereas high-income countries have now reached a more mature, lower growth path. Comparing the
regions of the developing world with high-income countries indicates the enormous scope for further
growth in vehicle populations that could occur in low- and middle-income countries and the big gap in
their available road capacity. Around 60 percent of the world's paved road length is currently in high-
income countries (Figures 4-1 and 4-2); if this were measured in road lanes rather than simply length,
the proportion of total paved road capacity in the high-income countries would be even greater.

The total length of the road network in high-income countries is now growing very slowly (in the
United States the growth of the past 15 years amounted to just 0.2 percent a year), although the
quality of the network is changing as an increasing proportion of roads are upgraded. In low- and
middle-income countries road networks are increasing in length, on average, by about 2 percent a
year. Although some networks appear relatively slow growing or static (particularly in Latin America),
others are growing rapidly, in particular India (at 4 percent a year) and China (at 6 percent a year).

Figure 4-1. Length of the road network, by region, 2005

35.0
30.7
30.0

25.0

20.0 16.8
15
Roads15.0
10.2
10.0

4.1
5.0 2 2 3.1 2.2 3.4
0.3 1.4 0.5 0.5 1 1.9

0.0
AFR EAP ECA LAC MNA SAR High Global
Income Total
Paved road Total road
length length

Note: Road lengths are in millions of kilometers.
See Annex D for listing of World Bank regions.
Source: International Road Federation Statistics 2005 and World Bank analysis.

Figure 4-2. Ratio of road network to population, by region, 2005

16 15
noi 14
at
12
opulP 10.2
10

8
1000 6.2
6 4.8 4.8
km/
4 2.8 3.1 3.4 2.8 2.6
1.6 1.7
oadsR 2 0.4 1.1 0.9 1.3

AFR EAP ECA LAC MNA SAR High Global
Income Total
Paved road Total roads
km/1000 pop km/1000 pop

Note: See Annex D for listing of World Bank regions.
Source: International Road Federation Statistics 2005 and World Bank analysis.

50 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

The world's total population of motor vehicles is now over 800 million (Figures 4-3 and 4-4). In high-
income countries the number of cars is growing at just over 1 percent a year, while commercial
vehicle numbers are barely increasing at all (though average size is increasing in many countries). In
low- and middle-income countries, in contrast, cars are currently increasing, on average, at around 7
percent a year, and commercial vehicles at just over 6 percent a year. As with the road networks,
particularly high growth rates are now being recorded in Asia. In the past four years, India's car
population has been growing at about 12 percent a year and China's at 20 percent a year.

Although most roads in most countries are appropriately treated as public goods, there are
opportunities for private participation in the sector. In the 1980s and 1990s many motorway schemes,
particularly in middle-income countries, were funded through a variety of public-private partnership
(PPP) schemes. However, interest and funding from the private sector in these schemes declined after
the financial crises of the late 1990s. The Bank Group is interested in continuing to develop ways to
increase the involvement of the private sector in financing and managing road schemes. Better ways
need to be found to handle the associated risks. To this end the Bank has developed a PPP toolkit to
promote the continued involvement of the private sector in providing and maintaining road
infrastructure (World Bank 2003c).

Figure 4-3. Registered vehicle ownership, by region, 2005

493
500

450

400

350

eslc 300

250

Vehi 200

150

100
49 63 59 56
50
9 4 19 13 19 13 7 14 6
0

AFR EAP ECA LAC MNA SAR High
Income
Cars Commercial vehicles

Note: See Annex D for listing of World Bank regions.
Source: International Road Federation Statistics 2005 and World Bank analysis.

Figure 4-4. Ratio of vehicle ownership to population, by region, 2005

600
492.5
500

400
Population
300

200 137.9 108.3
100 25.9 28.4 34.9 44.724.1 55.9
Vehicles/1000 12.45.5 10 9.7 4.1
0

AFR EAP ECA LAC MNA SAR High-income

Cars Commercial Vehicles

Note: See Annex D for listing of World Bank regions.
Source: International Road Federation Statistics 2005 and World Bank analysis.

Focus on modes of transport 51

The financing and management of road network infrastructure has been highlighted in Section 3.4 as
one of the major policy issues in the transport sector. We note here, however, that the high growth in
the use of roads in developing countries not only exacerbates the challenges of financing and
management, but also implies a set of wider issues. This growth in road transport will both promote
and reflect great economic and social progress. But it will also be a cause of more traffic accidents,
higher greenhouse gas emissions, increased urban congestion, and other adverse effects. As argued in
Chapter 3, it is necessary for the Bank's transport business strategy to deepen its engagement in the
roads sector by giving greater attention to policies for mitigating adverse effects.

4.3 Railways

Like roads, railways serve several different transport needs in freight, passenger, and regional
markets. Like roads, too, the railway network is concentrated in high-income countries, although it is
expanding faster now in developing countries (Figure 4-5). But railways are not as suitable as roads
for all transport needs; they are efficient in a narrower range of services than roads, and the global
railway network is only 6�7 percent of the length of the paved road network. Furthermore, railways
must manage a more complex mix of public and private ownership arrangements. Rail freight services
are critical in a large number of developing countries to the production, trade, and distribution of bulk
materials, such as coal, ores and minerals, oil products, grains, chemicals, iron and steel, cement,
bulk timber, and sand and gravel. Over sufficiently long distances railways can also provide efficient
and effective transport alternatives for general freight, particularly in the movement of international
shipping containers to and from ports. In 2000�2005, global rail freight traffic grew about 25 percent
(UIC 2006). Railways can also perform a valuable economic and social role in transporting passengers
in dense intercity corridors, in major cities, and in some rural regions where population density
permits. In many cases these roles could only be transferred to road transport at a higher cost in road
infrastructure, traffic congestion, vehicle emissions, and traffic accidents. The five-year global growth
of rail passenger traffic has been about 19 percent.

In Latin America, Canada, Sub-Saharan Africa, and Australasia, private sector participation in the
railway industry has increased in recent years, particularly in rail freight operations. About 40 percent
of global rail freight (excluding industrial railways) is now carried by private train operators. Though
the great majority of this volume is concentrated in North and Latin America, there are many private

Figure 4-5. Railway network, by region, 2005

600
535

500

000)
400
msk(
h
300

Lengt 208
e 200

Rout 109
100 82
55 75

-
AFR EAP ECA LAC MENA SAR High-income

Note: Data exclude industrial railways. See Annex D for listing of World Bank regions.
Source: World Bank Group Railways Database 2007.

52 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

railway concessions or companies in both Africa and Australasia, and some emerging niche players in
Europe are using track access rights on publicly owned networks. By contrast, over 95 percent of the
world's railway passengers are carried on publicly operated trains. In New Zealand, Great Britain, and
Estonia rail infrastructure that had been privatized in recent years has been effectively renationalized,
though in the first two cases train operations remain privately owned.

In Eastern Europe and Central Asia, railways have continued to make the transition from roles
mandated by a centrally planned economy to new roles, which depend on market demands and
management competence. Moreover, the ending of the political unions of the USSR, Yugoslavia, and
Czechoslovakia led in the 1990s to the emergence of more than 20 newly independent national
railway companies, some of which (Russia, Kazakhstan, and Ukraine) are among the world's largest
railway businesses. They are now experiencing a resurgence of demand, but assets have deteriorated
through the transition period and investment needs are substantial.

In the European Union, public ownership and operations predominates, but a new model of railway
industry organization is taking root, driven by European Union legislation aimed at increasing the economic
role of railways and gaining social and environmental benefits. This model has involved varying degrees of
separation of railway infrastructure from train operations, alongside the implementation of defined access
rights for third-party train operating companies. Since January 1, 2007, properly licensed freight train
operators have also been granted open access to anywhere on the European Union network, where
capacity exists.

In China, the high rate of economic growth in recent years has imposed increasing freight and
passenger demands on a relatively sparse
network, which has led to the highest Box 4-2. China's Third National Rail Project
average traffic utilization in the world. The
30,000-kilometer network enhancement China has adopted an ambitious plan to increase the
program that has recently been adopted by capacity and performance of its railway network, the most
the government represents the biggest burst densely utilized in the world. This project is one of a
of railway-building activity since the series of supportive Bank operations and in this case will
nineteenth century, with multiple objectives help to meet the growing demand for transport of people
of increasing capacity, extending the network and goods between Guizhou and Yunnan provinces. The

to more remote areas, and enhancing service line between the city of Liupanshui in Guizhou and the city

quality (Box 4-2). India is also planning a of Zhanyi in Yunnan will be upgraded with the assistance

substantial program of new dedicated rail of a Bank loan of US$200 million. The project includes

freight lines to provide capacity and quality realignment of the existing track and construction of a
second track throughout, to design standards that will
improvements to meet growing demand. allow operation of double-stack container trains. The
upgraded facilities will reduce costs of international
Many national railways in countries that do container transport between inland centers and ports.
not have strong traffic flows of a kind that Analytical and advisory support services will include
are most suited to railways are struggling to research on application of modern track and catenary
maintain existing markets and to finance management technologies. At the same time the Bank is
system renewal and modernization. The pursuing a parallel policy dialogue with the Ministry of
main challenge for some countries is to Railways on how to attract external investment into the

concentrate public resources on improving railway industry and how to manage the economic

rail infrastructure and services in the densest interfaces in situations where different companies may

corridors, rather than to continue supporting become involved in the ownership and operation of rail

the whole network, especially where road infrastructure and services on the national network.

transport could provide good service at lower Project ID P086515, approved January 2007.
cost. Central control of the rail network is Implementing agency: Ministry of Railways.

Focus on modes of transport 53

also challenged where ownership could be decentralized to local or regional governments or given over
to low-cost private rail operators. National transport strategies that seek to address priorities
therefore need to take account of the full costs of different modes, including the implicit subsidy of
road haulage costs if heavy vehicles do not pay a fair price for capital and maintenance costs of the
road system or for their adverse impacts on congestion, environment, and accidents.

The Bank Group's lending for railway projects has significantly increased over the past five years,
albeit from a very low base. This higher level of engagement is proposed to continue, reflecting the
strategic intention to grow a more diversified transport portfolio that addresses transport�for-trade
needs (more broadly than just road systems) and which would also give greater emphasis to public
transport service and to energy efficiency. In tandem with lending operations, the Bank Group will
continue through its policy dialogue and technical cooperation to bring international experience to bear
in matters of railway policy, industry organization and institutions, management structure, asset
management and modernization, investment prioritization, opportunities for private sector
participation, and sector regulation.

4.4 Urban transport

Urban transport and urban development are closely intertwined, jointly influencing the accessibility
and mobility of the increasing urban populations in developing countries. Viewed from one
perspective, transport "serves" urban land-use and economic development. But transport also
influences the character and amount of development. Different types and locations of transport
infrastructure and services will result in different development patterns in a rapidly growing city and
different access for its residents to employment, health, educational, and social opportunities. The
Bank Group stresses the importance of trying to integrate land-use and transport planning, or at least
to achieve consistent decision making between the two.

The most important trends affecting urban transport in developing countries are the simultaneous,
explosive growth of population, income, and private vehicle ownership in cities. In China and India
alone, more than 500 million more people are expected to migrate into urban areas by 2020, most of
them to areas that already have more than 1 million residents. Motor vehicle ownership rates in many
Chinese and Indian cities are rising even faster than population and income, in some cases more than
15 percent annually. But the challenge bears upon all regions (Chapter 5). In many, perhaps most
developing cities, the social, economic, environmental, safety, and health consequences of this growth
in private vehicle travel have been severe. Private vehicle travel in cities impacts all those who need to
travel, even though the proportion of trips made by private transport tends to be rather low compared
with public transport and nonmotorized trips. Figure 4-6 illustrates this trend for China, a middle-
income country: four-fifths of urban trips are not by private car. In many parts of Africa and Asia the
proportion of trips made without cars is 90 percent or more.

Efforts to accommodate the mobility and access needs of huge numbers of new residents, while
dealing with the negative impacts of motorization, have created unprecedented stress on public
transport systems in developing cities. Not only must they try to add service for new demand, but
they must often do it in the increasingly hostile operating environment that results from road
congestion. As general traffic speeds decline, bus systems require more human, material, and
financial resources just to maintain the same level of service. There is a need to significantly expand
and improve public transport systems throughout the developing world, with particular attention to
multimodal planning and to the integration of public transport improvements with road traffic demand
management.

54 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Figure 4-6. Modes of transport for daily trips in nine cities in China

50%
45%
45%

40%
ipsrt 35%
al
ott 30%
of 25% 21% 21%
oni 20%

15% 11%
Proport 10%

5% 3%

Motor car Motorcycle Public transport Walk/cycle Other trips

Source: Data from nine cities and World Bank analysis 2005.

Many modes of public transport can contribute to making cities work better: metrorail systems,
suburban railways, trams, buses, minibuses, and shared taxis. They contribute most effectively when
the service offered to the public is integrated to create physical connectivity, spatial coverage, and
ease of transfer.

As in the developed world, road-based public transport will inevitably need to play the major role in
most cities and will need supporting policies that give priority to buses and trams over private cars.
Bus rapid transit systems have the potential to provide high-quality, cost-effective, and inclusive
public transport systems in many cities. In
a number of cities in Latin America, Box 4-3. Colombia's Integrated Mass Transit
implementation of bus rapid transit systems Systems Project
has been used as a tool for initiating wider
reforms. The Bank has recently published a This project is developing high-quality and sustainable bus
toolkit on bus services (World Bank 2006c). rapid transit systems including six cities--Pereira,
Medellin, Cartagena, Barranquilla, Bucaramanga, and
Existing urban rail systems can perform Bogot�. Its aim is to improve mobility along main mass
enhanced roles if their infrastructure and transit corridors and improve accessibility for the poor
rolling stock can be improved and through feeder services and fare integration. A loan of

integrated with other modes. New urban rail US$250 million is being used to build segregated

and metro lines require very dense transportation corridors in participating cities, including:

passenger flows to justify the costs relative creation of busways; repaving of mixed-traffic lanes;

to other options. But they can be effective construction and installation of bus stations and
terminals; and paving of feeder roads. A capacity-building
and affordable in the larger and richer component will provide technical assistance and policy
cities, in concert with land-use development advice to the national government and to participating
policies that create high density of usage municipal governments, to strengthen national urban
and where enhanced property value may be transport policy and local programs. Policy consultations
captured to help offset capital cost. will focus on regulatory, institutional, environmental,
social, and road safety issues. Appropriate mass transit
Another important task in cities is to solutions will be identified to improve transport and traffic
provide appropriate infrastructure and basic management. An operational structure will be developed

services for pedestrians, cyclists, and other to monitor and administer public transportation services.

users of nonmotorized transport. The Project ID P082466, approved June 2004.
poorest travelers are found in this group, Implementing agency: National Planning Department and
and their conditions of travel are often dire Ministry of Finance.
and dangerous because of poorly

Focus on modes of transport 55

maintained footpaths, unsanitary conditions, lack of lighting, poor security, inadequate road safety,
and little protection from motorized traffic. Bank Group interventions in urban transport will support
policies and investments that address these problems.

The Bank Group will encourage cities to seek service and value-for-money benefits by separating
service specification from delivery, so that a municipal government sets service and accessibility
parameters for passenger services that are then supplied by private operators under competitively
tendered contracts or concessions. The objective is to control costs and improve service through
competition for operating rights, rather than open competition among operators on the street. Open
market competition in developing country cities has often been associated with a proliferation of
unsafe and low-quality vehicles and operations that make inefficient use of scarce road space, as well
as environmental degradation resulting from increased emissions and congestion.

The proportion of Bank Group transport lending in urban areas, irrespective of mode, has been
historically limited by the political, social, environmental, and institutional complexity of the large,
diverse, and dense cities within which the Bank Group works. In recent years, there has been a
renewed interest by the Bank's partner countries in financial and technical assistance and capacity
building in the urban transport subsector. The transport business strategy aims to respond to this
interest with a more substantial engagement.

4.5 Ports and maritime transport

Maritime transport moves more than 90 percent of world trade in volume. In 2005 the world's ports
handled more than 7 billion tonnes of dry bulk, liquid bulk, and general cargo, and the share of that
freight originating in developing countries has almost doubled from 16 percent in 1970 to just over 30
percent in 2005. The international maritime sector itself is one that has shown itself very adaptable to
changing demands, is managed largely in the private sector, and is regulated by international
conventions. Real shipping freight rates have been declining steadily over the past ten years. Thus,
there is little need or scope for direct Bank intervention in the shipping industry itself, but there is a
strong case for involvement in the ports that serve it and in the overall trade logistics issues of which
it is part.

To handle increasing volumes of cargoes, and of containerized cargoes in particular, the Bank Group's
partner countries need to ensure the availability of well-functioning ports. That challenging task
depends as much on institutional and regulatory structures as on infrastructure. Ports face continued
pressure to use new technology, handling techniques, and information/control systems to meet the
increasingly demanding service standards of ever-larger ships. New international and bilateral
regulations have also been imposed to improve the security of maritime transport and reduce its
vulnerability to terrorist incursion.

Traditionally, the large majority of ports in developing countries were so-called public service ports
that tended to be slow to adapt to the growing traffic and more demanding standards and that rarely
had access to the capital investment funding necessary to respond fully to industry changes.
Governments have therefore often looked to the private sector for both capital to meet growing
demand and professional operating experience to be able to offer world-class service levels to
facilitate international trade. As a result, developing economy ports have seen over 230 projects
totaling more than US$24.7 billion of investment that included private sector participation in the past
15 years.22

22 See the World Bank's Private Participation in Infrastructure Database (http://ppi.worldbank.org/).

56 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

The most prevalent mode of private
participation has been the "landlord" model, Box 4-4. Croatia's Rijeka Port Gateway Project
an approach that is frequently suggested or
endorsed by the Bank Group in dialogue The objective of the project is to increase Croatia's trade
with partner countries. In landlord ports the competitiveness. It is planned to do so by improving the
public sector is the owner and developer of international transport chain through the Rijeka Gateway,

the basic port infrastructure and manager by modernizing the port and road network connections,

of the common areas and facilities. Cargo- and privatizing port operations, with support of a US$204

handling operations (and other activities million loan. The project includes three components: port

such as pilotage and towage) are then restructuring and modernization; port/city interface
redevelopment; and international road improvements. To
contracted or concessioned to the private improve the efficiency and effectiveness of the port, the
sector. Partly as a result of this trend, the project will contribute to the cost of port infrastructure
port industry is itself becoming global, with rehabilitation; construction of a new container terminal;
the emergence of specialist container advisory services to concession specific terminals in the
terminal operators over the past five to port to the private sector; and support to prepare for the
seven years. The top 24 companies now redevelopment of part of port area for urban use, with a
operate two-thirds of the world's container waterfront area open to business and commercial
throughput. activities and the construction of a passenger terminal.

Some countries remain reluctant to Project ID P043195, approved July 2003.

embrace the approach. Many reasons are Implementing agency: Port of Rijeka Authority, Hrvatske

involved, including industrial opposition by Ceste (Croation Roads Company), Hrvatske Autoceste
(Croatian Motorways Company).
organized labor groups, but one easily
addressable reason has been unfamiliarity with the instruments and processes required to efficiently
transition from the public service port model to a landlord model. For that reason the Bank has
published a comprehensive toolkit for port reform, which also includes a dedicated module on Labor
Reform and Social Issues (World Bank 2006a). This has assisted many governments, port authorities,
and private companies. Recent updates have deepened and strengthened advice on options for
responsible and equitable handling of labor issues in reform process.

Given the high (and in some cases unmet) country demand for support in the ports subsector and the
intention in this update to give more focus to transport for trade, the Bank Group will increase
engagement. It is likely that lending operations for terminal infrastructure will remain relatively small,
as the private sector has shown its willingness and ability to invest in the sector. However, the
landlord model also depends on efficient public investment in the basic port substructure, including
access and protection, internal circulation and storage areas, and ancillary facilities. Therefore, a
modest increase is expected in the profile of port investment in the overall portfolio.

4.6 Inland waterways

Because of the natural endowments afforded by rivers and lakes or through historical investment in
canals, inland waterways play an important role for particular market segments of freight and
passenger transport in China, Brazil, Vietnam, Cambodia, India, Bangladesh, Russia, Bolivia, Tanzania,
Uganda, and other countries. In specific areas this role can dominate (Box 4-5).

The fast-growing industrial sectors in many developing countries are creating new demands for the
transport of raw materials, for which inland waterways are particularly well suited. In China, transport
on the Yangtze River of raw materials for industrial use--mostly mineral ores and coal--more than
tripled between 2000 and 2005. Transport of containers by inland waterway in China increased at an
annual average rate of 35 percent between 2000 and 2005.

Focus on modes of transport 57

Inland waterway traffic can include river-
sea vessels, barges of various kinds, Box 4-5. Vietnam's Inland Waterways and Port
passenger ferries and smaller vessels. Rehabilitation Project
Inland waterway transport tends to be most
efficient at carrying the same bulk Inland waterways in the Mekong Delta region carry

commodities as railways, particularly when around two-thirds of all freight in this region of around 20

transit time is not critical. Efficient barging million people. The project objective was to enhance the
capacity, efficiency, and safety of inland waterway
is, however, often cheaper than either road transport. This was approached in three ways. The first
or rail transport where the navigation was by improving the two main inland waterway routes,
infrastructure permits use of large modern including widening and deepening channels, replacing and
barges and/or barge combinations. Like or improving bridges, treating canal side slopes where
railways, good inland waterway routes from needed with proper surfacing materials to afford stability
ports can allow penetration of concentrated and prevent erosion, rehabilitating existing and installing
international container flows directly from new navigation aids, constructing a landing stage and
seaports to inland centers. relocating markets located on the waterways, constructing
a navigation lock with a pedestrian overpass to both limit

Throughout the world, most waterways salinity intrusion and permit the passage of barge

tend to be owned and administered as convoys, and dredging. A second component improved
port infrastructure and management at Can Tho, the main
public goods. Cost recovery mechanisms regional port for the Mekong region located on the Bassac
typically include a range of vessel licensing River. This was achieved by replacing the existing fenders
fees, river port dues, navigation fees, and with an improved system along the berth; providing
lock and other sundry charges. These equipment for collecting vessel bilge water and chemical
revenues are rarely sufficient to cover all spills; installing cargo-handling equipment; and providing
the costs of public resources, but these consultant services and staff training in marketing,
costs are usually very small compared with financial management, business development, and port
other modes in absolute terms and in management. A third component was targeted at

proportion to traffic handled. institution building by providing better equipment for
management of waterway operations and maintenance

The effective utilization of inland waterway generally and consulting services in inland waterway

transport generally depends on investment management.

in and upkeep of the navigation Project ID P004843, approved November 1997.
infrastructure (dredging, navigation aids, Implementing agency: Ministry of Transport.
locks, etc.), together with an institutional
regime that encourages an efficient and
competitive private barging industry. But inland waterways are often given little strategic attention or
investment. They may be afflicted by a multiplicity of administrations or constrained by the
involvement of different governments where rivers form international boundaries or flow between
countries.

The future of inland waterway transport must depend principally on its performance in serving
transport markets. It is not in the interest of any country to overinvest where demand by suitable
traffic is lacking or to force usage of inland waterways against customer preference. Nonetheless, even
though waterways generally need much less capital investment and maintenance than other transport
modes, they have been rather neglected in many countries, despite evident demand and utilization.
This is a pity, not only because of the economic advantages of efficient barge services in appropriate
markets, but also because of the lesser environmental impacts from inland water transport than from
competing modes.

Apart from larger-scale commercial barging (and sometimes in conflict with it), inland waterways are
often the first link in the transport chains faced by poor riparian communities. Large numbers of
country boats in certain regions (1.5 million in Bangladesh alone) are crucial to the livelihoods of these

58 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

communities, both for personal and freight transport. It is therefore important to ensure that transport
policies in the relevant countries, and the Bank Group's own interventions, consider both the
commercial potential of waterways and the interests of the many communities that depend on them
for their livelihood and their access to health, education, and social services.

The main scope for private sector involvement in port infrastructure is by contracting with
governments to construct, dredge, or maintain navigation aids and by owning port facilities or cargo-
handling concessions at inland ports. For private sector involvement in commercial barging itself,
competition among private barge operators is likely to yield the most successful transport services for
development.

The Bank Group intends to support specific partner countries endowed with inland waterway resources
to consider ways to optimize their use when establishing multimodal transport strategies. It will also
continue through its policy dialogue and technical cooperation to bring international experience to bear
in matters of inland waterway policy, asset and financial management, private sector participation,
and sector regulation. The Bank Group will respond positively to opportunities to support economically
justified inland waterway improvement and navigation projects in corridors where there is viable
demand.

4.7 Airports and aviation
Box 4-6. Egypt's Airport Development Project
Aviation is becoming increasingly important
to development in all regions. Air freight To promote growth and employment, the government is

services carry a significant proportion of focused on encouraging private sector development,

trade by value, and they are vital for the attracting more foreign direct investment, and maximizing

export of perishable commodities (flowers, foreign exchange earnings from tourism and agriculture.
The air transport sector has a key role to play, but its
seafood, etc.) produced by many contribution is currently limited by bottlenecks in airport
developing countries for international capacity, gaps in its aviation governance framework, a
markets. Safe and secure air passenger narrow airport revenue base, and a protected air
services underpin the international tourism transport market. The objectives of the project are to
industry. Reliable air transport links also eliminate capacity constraints on the growth of traffic,
influence the investment location decisions particularly for tourism and associated foreign exchange
made by international companies, earnings; raise the service quality of the Cairo
particularly technology companies with high International Airport and Sharm El Sheikh Airport to

value-added products. international best-practice standards; and promote
efficient private participation in airport management and

Strong international growth in aviation is airport service delivery in a more competitive market. A

straining the physical and management US$335 million loan will be used to build a third terminal
at Cairo International Airport and a new terminal at
capacities of many developing country Sharm El Sheikh Airport, both to be managed under
airports. Over the ten years to 2005, both contract by the private sector. Analytical and advisory
passenger travel and air freight have services provided or funded by the Bank include support
increased by about 55 percent (ICAO to prepare a national airport master plan, develop a plan
2006). In 2005 some 4,020 billion revenue to gradually liberalize air transport in Egypt, devise a
passenger�kilometers were flown, with a national strategy for developing air cargo, establish
projected annual average growth of 4.9 environmental units within the administration, and
percent a year for the next 20 years. Cargo strengthen airport management capacity.

flights worldwide involved 178.1 billion Project ID P082914, approved March 2004.
revenue tonne�kilometers (29 million Implementing agency: Egyptian Holding Company for
Airports and Air Navigation.

Focus on modes of transport 59

tonnes), with a projected average annual growth of 6.1 percent a year. 23

The Bank Group's transport business strategy will give increasing support to the development of safe air
transport services in client countries. The key issues being addressed by Bank operations and advice in
the subsector are regulatory oversight, safety and security, air traffic infrastructure and facilities,
provision of essential air services, the liberalization of air transport in regions and subregions, and
environmental impact.

Fatalities are very low in air transport worldwide, compared with other modes of passenger transport
and, unlike road accidents, cannot be classified as a major public health issue. But safety is critical to
the development of aviation services and hence to the industries that depend on it. Safety varies
widely: for example, West Africa has an aviation accident rate 30 times that of the United States. High
accident rates have become the prime hurdle for development of air services in many developing
countries because of the impact of blacklists (in Europe), certification requirements (in the United
States), and related difficulties in raising finance and procuring insurance. Regular aircraft crashes in a
region also inevitably affect the confidence of investors.

The fixed infrastructure for air transport includes airports and runways, navigation technology for
flights en route or landing (installations on the ground or satellites in orbit), and air traffic control
facilities. The Bank Group has financed airports, both with IBRD/IDA lending instruments and IFC
financing. The Bank is currently supporting the preparation of a major air transport infrastructure
project to provide the East African Community with a satellite-based air traffic control system, as well
as several runway projects.

The liberalization of air transport services (in terms of rights of service and access to airport capacity)
is particularly topical in Sub-Saharan Africa and East Asia. The Bank has provided research and been
involved in the policy dialogue in both regions, generally in support of increased economic
liberalization coupled with higher regulatory standards for safety and environment.

4.8 Multimodal transport

Multimodal freight refers to the carriage of goods by two or more modes of transport under one
contract, using one consignment document, and with one party to the contract responsible for making
the transport and security arrangements from origin to destination. 24 Multimodal transport has
become increasingly important to the quality and efficiency of the transport service available to
support trade. Interest in it has been driven mainly by the emergence of widespread transport of
industrial components between one region of the world and another, as part of globalized
manufacturing processes.

Multimodal transport and the logistics industry that normally arranges it sometimes suffer from a lack
of policy attention, because often each of the modes involved is the responsibility of a different agency
of government. All international multimodal transport also requires the involvement of customs,
taxation, and security agencies and, if food products are involved, sanitary and phytosanitary
agencies. Rarely do all these agencies have a common objective of facilitating easier international
trade, and quite often achievement of their own departmental objectives is counterproductive to trade
facilitation.

23 See Boeing Company 2006a and 2006b and Airbus 2006. Both Boeing and Airbus arrive at nearly identical
growth rates in their projections.
24 Intermodal transport (in contrast) is simply the transport of goods by two or more modes of transport, usually in
a container.

60 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

The World Bank has been at the forefront of making multimodal transport a key concern in developing
countries. It sponsored and supports the Global Facilitation Partnership for Transportation and Trade
(discussed in Chapter 5). The Bank has also implemented a series of trade and transport facilitation
projects, starting in South Eastern Europe and now being replicated in Central Europe and other
regions. It is also in a partnership with the Dutch government to sponsor a series of activities aimed at
improving the trade and transport prospects of landlocked countries. The Bank has recently published
a best-practices guide to the management of international trade corridors (Arnold 2006).

Attention to multimodal transport highlights the different roles that alternative transport modes play in
different markets and leads logically to trying to implement a corridor approach to transport planning
on major trade routes. The corridor approach may yield better solutions than a focus on individual
modes of freight transport and may achieve better coordination between, say, port investments and
surface access links. Similarly, balanced investment in different forms of corridor infrastructure (roads,
railways, inland waterways) may enable customers to choose their most cost-effective modes for
specific types of freight, which would lower average transport costs and raise environmental
acceptability and energy efficiency overall. An illustration of a project in Pakistan being developed on
these lines is given in Box 4-7.

Box 4-7. The Pakistan National Trade Corridor Program, 2005-2007: A trade corridor project with
regional benefits

In 2005, the government of Pakistan launched major initiatives around the National Trade Corridor (NTC), the
north-south backbone route from Karachi via Lahore to Rawalpindi with onward links to Afghanistan. The
corridor contains two ports handling 95 percent of Pakistan's external trade; it is home to 80 percent of the
Pakistani population; and it carries two-thirds of the country's surface freight. The objective is to reduce the
cost of trade by improving transport logistics infrastructure and services. It is estimated that inadequate
performance of the transport sector costs the economy 4 to 6 percent of GDP each year.

The Bank has played a catalytic role in identifying the significance of the corridor for trade and growth and in
designing the development program that aims to bring the quality of transport services to international
standards. This will reduce the cost of doing business in Pakistan and enhance export competitiveness,
accelerate industrialization, and sustain the high economic growth achieved in recent years. The country has
adopted a holistic and integrated approach, which encompasses the public and the private sectors, services and
infrastructure, reforms and investments, and the various sectors that are responsible for the performance of
the corridor (highways, road transport, ports and shipping, civil aviation, railways, and customs and trade
logistics).

The key outcomes to be achieved under the program include:
� Reduction in the cost of domestic transport and nonfactor services in the total value of commodities
� Reduction in transport and transit costs and times for goods overall
� Increase in the rail share of long-distance transport of freight
� Reduction in the operating deficit of railways, with objectively determined and targeted subsidies
� Increase in the satisfaction of corridor users
� Increase in the safety and reliability of transport operations
� Improvement in the governance and accountability of entities participating in the program.

The Bank is planning a program of financial support for roads, railways, and ports and technical assistance to
assist with the implementation, monitoring, and evaluation of the National Trade Corridor Program over the
next five to six years.

Project ID P101683, to be approved in November 2007
Implementing Agencies: Planning Commission; Central Revenue Board; Ministry of Railways;
Ministry of Communications/National Highways Authority; Ministry of Ports & Shipping; Ministry of Defense

Focus on modes of transport 61

The Bank has initiated a number of other transport corridor projects, such as those in East Africa and
Latin America and being planned for South Asia, that involve several countries in facilitating
multimodal transport in a specific region. Many client countries of the Bank Group are looking for
similar projects in their own regions. In the transport business strategy, the Bank Group will increase
its involvement in multimodal transport, corridor approaches, and associated trade and transport
facilitation strategies.

4.9 Implications of the modal focus

Chapter 4 has emphasized the modal diversity of transport, and in particular the different roles that
different modes of transport play in meeting the spectrum of freight and passenger demands. It has
drawn attention to the strong growth in demand in many developing countries for all types of
transport services and hence of the transport infrastructure on which services rely. It has made the
case for balanced multimodal investment to create a system that exploits the comparative economic
advantages of different modes to the benefit of the transport system as a whole. The modal focus
confirms and extends the conclusion of Chapter 2, namely, the desirability of widening the focus of
Bank Group transport interventions beyond single-mode solutions to look at transport needs as a
whole. This more holistic view of transport is reflected in the business strategy described in Chapter 6.

5 FOCUS ON REGIONS

Regions and countries are the ground on which any transport strategy must be implemented, and to
have a chance of success that strategy must respond to the day-to-day transport problems of
developing countries and their demands for assistance. Although countries in the Bank's six regions
differ in many ways--both within and across regions--their priorities for transport consistently show
some common challenges, albeit in different guises. Examples include the need for better
management of road infrastructure, the importance of improved transport and logistics to strengthen
trade competitiveness, the challenge of urban road congestion and other urban transport problems,
the widespread incidence of premature death and injury through road accidents, the need of isolated
rural communities for basic connectivity to transport systems, and the pervasive implications of
climate change on transport operations and infrastructure. These priorities all point to a strategy that
will make transport cleaner, safer, and more affordable.

In addressing the following regional priorities, the Bank recognizes the need for support from regional
and global partnerships with aid organizations, governments, private sector organizations, and
community representatives:

Sub-Saharan Africa. A key focus will be the two-thirds of all rural people who lack reliable
access to an all-weather road and the even larger number of urban people who now live in
slums in worsening environmental conditions. For both groups, transport and logistics costs
are excessive.

East Asia and Pacific. Transport has performed well in many countries in facilitating
impressive trade-driven economic growth and poverty reduction. The priority now is to
enhance the capacity and quality of transport infrastructure and services to sustain that
growth and to share its benefits more broadly in the region and with people in remoter areas,
while addressing carbon emissions and climate change impact.

Eastern Europe and Central Asia. Market forces now increasingly shape all facets of
transport demand, but following an investment hiatus during the transition process, nearly all
countries in the region face maintenance backlogs and quality deficiencies in their transport
infrastructure. Infrastructure modernization and enterprise reform remain key goals.

Latin America and the Caribbean. To mitigate a massive reduction in public and private
investment in transport since the 1980s, which resulted in excessive transportation and
logistics costs that penalize trade, the priority is to increase the sources, quality, and
productivity of investment, factoring in the climate change agenda.

Middle East and North Africa. The priority is for strategic infrastructure improvements and
capacity building in transport to attract private sector participation, in particular in urban
transport, and provide better access to job opportunities that can reduce the region's high
unemployment.

South Asia. Investment climate surveys have pinpointed transport as a constraint on regional
and international trade. Furthermore, many rural households lack access to all-season roads
and have not shared in the region's trade-led growth, and many megacities are hampered by
the lack of reliable urban transport systems. Both challenges are high priorities, and the latter
is also part of the broader emissions/climate change challenge.

64 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

5.1 Regions, diversity, and partnership

The development aims that drive the Bank Group's interest in transport and the key policy issues that
are likely to arise (as described in Chapters 2 and 3) apply across the Bank Group's regions of
operation. There are differences, however, in the degree to which particular transport issues bear on
particular countries and regions, and also differences in demand for and supply of particular modes of
transport. These differences will influence the way the transport business strategy may bear on each
region.

In the poorest, generally IDA-assisted countries, the main challenge remains how the Bank Group and
other donors can together concentrate effort, advice, and financial resources to increase the
contribution of transport to development, to meet the basic transport needs of the poor and to help
create or improve access to markets for their products. With limited borrowing capacity, these
countries need financial support that can blend loans and grants and technical assistance that can help
to mobilize private finance alongside public resources.

By contrast, most middle-income countries have succeeded in raising their finances, trade, and
development beyond basic thresholds. Many now have secure access to private capital markets. They
aspire to the levels of personal mobility, urban transport, and freight logistics infrastructure of more
developed countries. The aim for middle-income countries is to consolidate the progress they have
made, while not neglecting the considerable pockets of poverty that remain, and to be ready to assist
them in responding to global issues. They need broader programmatic forms of lending, integrating
individual projects; more dependence on their own systems of project appraisal; more diversified
financial arrangements for transport development; and more access to analytical and advisory
services that are relevant to their more advanced level of integration into the world economy.

Every country has its own context and culture, which are the focus of the Bank's Country Assistance
and Partnership Strategies and are not dealt with in this report. Instead, this chapter illustrates the
diversity and commonality of transport issues across regions. It also identifies the cooperative regional
relationships that the Bank is building in transport and the key global partnerships that support the
regional programs.

5.2 Sub-Saharan Africa

Poor and costly transport jams economic development, slows poverty reduction, and hinders efforts to
meet the Millennium Development Goals in Sub-Saharan Africa. 25 Two-thirds of Africa's rural
population--about 300 million of the world's poorest people--do not have reliable access to an all-
weather road. Most are locked into subsistence living and are disadvantaged in access to reliable
health care and education. The region contributes only 2 percent of world trade and its share is falling,
while its unit transport costs are typically three to five times higher than those of developed countries.
Africa also contains half of the world's landlocked developing countries, whose special problems were
described in Section 2.2.

Many factors push up Africa's transport costs, some of them mutually reinforcing. Small product
markets and low flows of goods mean that most shipping services are feeders from larger ports, which
often adds to shipping costs. Poor rail, port, and road infrastructure afflicts many African transport
corridors, but thin markets also make it difficult to justify investments to overcome infrastructure
deficiencies or to introduce new transport handling technology. Traffic flows are often unbalanced by
direction, with lack of two-way loading adding to transport costs to and from ports.

25The Bank's regional structure treats Sub-Saharan Africa as one region, while North Africa is grouped with the
Middle East as a separate region. See Annex D for listing of World Bank regions.

Focus on regions 65

Poor road asset management is a particular problem. Since the 1960s, many African countries have
lost around half of their road network (and especially their rural roads). Part of the answer is to help
build the capacity for transport administration and management. A recent report by the Bank's
Independent Evaluation Group (OED 2005) has indicated deficiencies in previous fragmented
approaches to capacity building in Africa and has called for fostering and improving country-led
capacity building within sector programs such as transport.

Road safety, too, is a major and growing problem. Road crash deaths are predicted to increase by 80
percent between 2000 and 2020 unless new approaches are adopted (Box 2-3). For each death, there
are many more incidences of injury and disability, which have consequences beyond the affected
individuals; the loss of the main breadwinner can also lead to extreme poverty for others in the family.

Africa's recent military conflicts have also disrupted transport, as they have disrupted communities
and economies. Improved transport can help to rebuild economies in post-conflict countries and to
lessen vulnerability to future conflict. Transport can play a key role in keeping a country together, in
overcoming potential disputes over access to resources, and in defusing the seeds of conflict
sometimes arising out of the feeling of isolation. The Bank Group (and other donors) have recognized
this and are providing support to the transport systems of post-conflict countries such as the
Democratic Republic of Congo, Angola, Rwanda, and more recently Sudan.

In recent years the nature, number, and size of the Bank Group's transport lending operations in
Africa have increased and been increasingly aligned with the Millennium Development Goals and
national poverty reduction programs. A principal aim has been improving access to and from rural
areas, where poverty predominates. But there is also a need to help Africa's growth agenda, in order
to share the benefits of domestic, regional, and international trade through better transport and
logistics infrastructure. This will require greater investment and managerial capacity than is now
available to the public sector. The Bank Group has therefore promoted private-public partnerships in
African ports, railways, and airports. Research indicates that private participation in African railways is
unlikely on its own to ensure adequate funding for long-term railway asset renewal, but private
involvement has, in most cases, improved the efficiency and reliability of transport and alleviated to
some extent the short-term budgetary burden of railways operations (Bullock 2005). Over the
medium term, however, Government's financing of track renewal remains a necessity as existing rail
networks lack the necessary scale to generate enough profits to entice private operators in financing
both track and rolling stock renewal costs. Government's support, nevertheless, may enhance overall
economic growth as mining activities that would need to rely primarily on rail transport and which
were deemed financially non viable when most rail concessioning activities were undertaken, have
now reached financial maturity status thanks to the sustained increase in worldwide raw material
prices.

There is a continuing focus in Africa on how to lessen the impact of the transport industry (and
particularly new transport links) on the transmission of HIV/AIDS, as discussed in Section 3.10. The
Bank Group is also increasingly involved in the improvement of air transport safety and security in
Africa, both of which are critical to the development of its air transport services, inward investment,
and tourism. Enhancement of transport logistics, especially along multimodal corridors from African
seaports to landlocked countries, is another increasing focus for the Bank Group's activities in Africa.

A key partnership in all this work is the Sub-Saharan Africa Transport Policy Program (SSATP),26
financed through a multidonor trust-fund partnership that has, over the past 15 years, invested in the
creation and sharing of knowledge and ideas. The SSATP sponsored the inclusion of local and regional

26The SSATP website is at http://www.worldbank.org/afr/ssatp.

66 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

transport into poverty reduction strategies and helped establish better road maintenance systems in
many countries. It also encouraged measures by African transport ministers specifically to link
transport improvements to the achievement of the Millennium Development Goals. The Bank Group
has supported countries' efforts to achieve those goals in the implementation of regional infrastructure
projects, especially in air and road transport. The Bank Group continues to work with the African
Development Bank, the European Union, and others to support the Africa Action Plan (World Bank
September 2005a) in policy and project coordination.

5.3 East Asia and Pacific

In the years since Sustainable Transport was published, this region has grown at an average annual
rate of over 7 percent. Some countries, such as China, Thailand, Malaysia, and more recently
Vietnam, are development success stories, experiencing dramatic reductions in poverty. For such
countries, international trade has been an influential driver of growth; the region has the highest
trade-to-GDP ratio in the developing world--almost 75 percent. The transport system has performed
well in many countries in facilitating this rapid growth in trade. But economic growth and rising
incomes are themselves creating demands for travel and transport that are outpacing transport
capacity in many countries, threatening a constraint on future growth.

Other countries are lagging in development, and the overall performance also masks wide contrasts
across the region. For example, more than 90 percent of Thailand's roads are paved, compared with
less than 20 percent in Laos; the utilization of China's railway is the highest of any national network in
the world, while Cambodia's is close to being the
lowest. In addition, while much of East Asia enjoys Box 5-1. Tailoring responses to needs in the
high-density and low-cost international shipping East Asia and Pacific Region
with modern vessels, most Pacific Islands endure
expensive and infrequent service by small feeder Poorest countries: In these countries (for
vessels. Diverse challenges must be met by tailored example, Laos, Cambodia, Mongolia, and Pacific
responses (Box 5-1). Islands) the Bank's focus will be on transport
lending linked to specific poverty objectives and

At present, 1.1 billion people in East Asia (60 to emergency response (for instance, provincial
and regional infrastructure, rural roads, and
percent of the total) still live in rural areas. Rural disaster mitigation in Pacific Islands and
access needs to be improved in low-income Indonesia).
countries (Cambodia, Vietnam), in landlocked and
island states (Laos, Mongolia, Pacific Islands), and Savings-rich, fast-growing countries: The

in large poverty pockets in fast-growing countries Bank's transport focus in such countries (for

(western China, eastern Indonesia, the central and example, China, Vietnam, and Thailand) will be

northern highlands of Vietnam, northeast Thailand, on supporting government programs through a
combination of lending, high value-added ser-
and Mindanao in the Philippines). In these regions, vices, and knowledge transfer (for instance, in
a sustainable rural transport agenda will be railway commercialization, performance-based
promoted with strong emphasis on working with contracting, programmatic rural road develop-
subnational levels of government on poverty ment, advice on private participation in urban
targeting. mass transit and toll roads, and service
regulation).

At the same time, urbanization is creating new Fiscally constrained countries: In these
transport demands. By 2025, East Asia will absorb countries (for example, Indonesia and the
almost 500 million new urban residents. Over half Philippines) the Bank will continue to focus on
the people of the region will then live in cities. supporting strategic transport infrastructure for
Without active management of demand, and growth, sector management, and reforms, while
investment in public transport, traffic congestion leveraging private sector financing.
will reduce accessibility and mobility. Accidents and

Focus on regions 67

air pollution will add to health problems, adding to the urgent need to control vehicle emissions and
mitigate climate change impact. Urban transport activities will often be focused at the city government
level.

In many countries in the region reforms in sector governance are important to maintain progress. In
those countries that are in transition from command to market economies (China, Vietnam, and
Mongolia) reform of state-owned enterprises, commercialization of services, and tariff reform would
reduce economic distortions and inefficiencies, help attract private capital, and enhance market
responsiveness of services.

In terms of regional partnerships, the Bank Group will coordinate approaches with other donors, in
particular the Asian Development Bank and the Japan Bank for International Cooperation in key policy
areas, such as urban transport planning, capacity building for transport institutions, private sector
participation, and sustainable financing of transport. The Bank Group will increase its support to the
Greater Mekong Subregion, an initiative that should lead to better policies on transport and trade
facilitation and more investments to promote trade between the countries of the region. It is also
looking to support the recent ACMECS27 initiative to bridge the economic gap between its member
countries, which now include Cambodia, Lao PDR, Myanmar, Thailand, and Vietnam.

5.4 Europe and Central Asia

This region consists of 28 countries stretching from the borders of Western Europe to the Pacific
Ocean. They range from the largest by area in the world, Russian Federation, to some of the smallest,
such as Moldova and Armenia. The region includes both low- and middle-income countries, some of
which have experienced impressive economic growth, while poverty, inequality, and unemployment
remain high in others. The common factor28 is their recent history of transition from planned to
market economies. This has had a profound impact on their transport industries.

The collapse of the Council for Mutual Economic Assistance (CMEA or COMECON) and the breakup of
the former Soviet Union in 1991 led to momentous changes in the region's political and economic
structures. Over the period since Sustainable Transport was published, the transition countries have
largely completed the transformation from central economic planning in which the role, scale, and
operating responses of various parts of the transport system were determined by the state. Market
forces now increasingly shape all facets of transport demand: the types of freight and passenger
transport needed; the volume of demand; its geographic distribution; and the proportions of traffic
carried by each mode.

Many factors have influenced country responses. Ten of the countries are now members of the
European Union, and several others aspire to membership; their transport policies follow European
norms. In these countries the Bank is focused mainly on trying to support higher efficiency in state-
owned transport enterprises and greater capacity in those enterprises to adopt EU transport directives
and regulations and to productively absorb EU transport grant funds.

Elsewhere in the region, the former Soviet republics of Central Asia and the Caucasus (Azerbaijan,
Georgia, and Armenia) are adapting transport systems to radically changed regional trading patterns.
The former Yugoslav republics have had to rebuild both shattered transport infrastructure and
institutions following the economic and military turmoil during the breakup of Yugoslavia. Russia,

27Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (November 2003).
28With the exception of Turkey.

68 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Kazakhstan, and Ukraine have faced the bracing freight transport challenge of a boom in resources
and metallurgical industries.

By comparison with other Bank Group regions of operation, many of the transition countries started in
1990 with a large stock of transport infrastructure. The reduction of investment in transport
infrastructure that occurred in the 1990s was a predictable response to serious budgetary constraints
and declining freight (and sometimes passenger) traffic levels, as their economies declined and then
restructured. However, the investment hiatus has meant that capital assets to meet renewed growth
in transport demand are often technologically outdated and of poor quality, with long backlogs in
maintenance and renewal. With resurgent economic growth over a number of years, some countries
now face serious transport capacity bottlenecks at key locations.

Despite their differences, countries across the region share many common priorities for transport,
arising from the legacy of command economics. To be relevant to the fast-changing needs of this
transition region, the Bank applies cutting-edge knowledge in many of the policy areas described in
Chapter 3, including improving the performance of state-owned transport enterprises; managing
public assets; structuring private sector participation; advising on competition and regulation policy;
and implementing higher environmental and social standards in transport, including climate change
implications for the sector.

Many of the countries in the region are small, and transport development will require transnational
initiatives. The European Union provides a robust framework for its member states and other
aspirants. But other regional trade and transport facilitation programs are necessary and are being
supported by the Bank in both Southeastern Europe and Central Asia to complement national reforms.

The Bank Group will focus increasingly on promoting trade growth and regional integration through
highway improvements, railway modernization, and multimodal transport corridor development.
Furthermore, with car ownership increasing rapidly, traffic congestion is now a pressing problem in
many cities. As in other World Bank regions, the demand for advice and financial products for urban
transport development is also likely to increase.

The Bank Group is active in international regional integration forums, such as the Stability Pact for
South East Europe. The Bank Group participates with the European Union and the European
Investment Bank in forums intended to promote better links between the EU and countries bordering
its new extended boundaries. It cooperates with the Asian Development Bank on transport and trade
facilitation initiatives in Central Asia and the Caucasus. Transport projects have also been cofinanced
with the European Bank for Reconstruction and Development in Poland, Romania, Bulgaria, and
Croatia.

5.5 Latin America and the Caribbean

Although this region is made up predominantly of middle-income countries, it contains high levels of
poverty and the greatest income inequality of any region. The key development challenges for the
region are to boost and stabilize economic growth, while reducing poverty and inequality. Transport
will play an important role. Key Bank Group sector priorities are to enhance trade competitiveness
through transport and logistics strategies; to improve transport asset management and policies
(particularly for roads); to promote safe, clean, and affordable urban public transport; and to improve
access of the rural poor to services and opportunities.

Latin America needs to invest more in transport infrastructure and to ensure it gets good value from that
investment (Box 5-2). Total investment in transport has halved over the past two decades (Fay and Yepes
2003). As a percentage of GDP it has diminished to about a third of its mid-1980s level (Calderon and

Focus on regions 69

Serven 2003). The decline is mainly due to reduced
public investment, following the fiscal adjustment Box 5-2. Getting the best value for transport
measures that were taken in response to the investments in Latin America
region's many macroeconomic crises. This decline
has been only marginally offset by the emergence In response to fiscal constraints in the region,
of private investment in transport, even though this the Bank is contributing to country efforts to get
region contains four of the top six countries for better value for money from transport assets
private participation in transport infrastructure through management programs (in Argentina,
(Argentina, Brazil, Chile, and Mexico). Nearly all Uruguay, and Bolivia) that seek to increase
national railways and many ports in the region have expenditure in high-impact areas. Efficiency is
been privatized. being improved through innovative approaches
to private sector participation, such as multiyear

Partly because of low investment, transportation performance-based contracts and use of

and logistics costs in Latin America are significantly microenterprises for routine maintenance. The

higher than in the developed world and in many Bank has engaged more actively in analytical

competing developing regions. This disadvantage work to increase the efficiency of public
expenditure in the transport sector (in
is also felt in small Caribbean islands, where Guatemala, Mexico, and Paraguay). It is assisting
infrastructure deficiencies may be magnified by the the region in bringing the private sector back by
impact of infrequent service by small vessels. providing advice and technical assistance to
Across the region, countries need to reduce strengthen concession frameworks (in Chile,
transport and logistics costs, so that they may Guatemala, and Peru). It is also using innovative
take advantage of trade liberalization and products, such as partial risk guarantees, to
facilitation measures. Better road asset promote private investment in transport
management would boost transport efficiency and infrastructure (in Peru).

help to reduce costs, and in this regard the Bank is
promoting decentralization, road-funding mechanisms, commercialization of delivery agencies, and
improved governance of the roads subsector.

The region is one of the world's most urbanized, but nearly 40 percent of the urban dwellers live in
poverty--the highest rate in the world--and as much as 25 percent live in crowded slums with limited basic
services and few transport options. Expanding physical infrastructure (footpaths, bikeways, bus routes, and
roads) into poor settlements and providing affordable mass transit are fundamental to improving their
mobility and access to economic and social opportunity. The region's relatively high motorization rate
results in congestion and pollution in many cities. Aggravated by topographic and meteorological conditions
in cities such as Mexico City and Santiago, these problems are also severe and growing in many other
cities, such as S�o Paulo, Bogot�, Belo Horizonte, Buenos Aires, and Rio de Janeiro.

The region is therefore keen to improve the organization and delivery of urban public transport
services. Some large cities in the region have successfully developed efficient mass transit systems
that can provide services at a moderate cost; however, much remains to be done. The Bank is
supporting many of the initiatives: implementation of affordable bus rapid transit systems targeted to
the poor (Colombia and Peru); modernization of urban and suburban rail systems (Argentina and
Brazil); coordination of land-use and transport policies (Chile); introduction of sector reforms to
reorganize the provision of urban transport services and reduce negative environmental impacts
(Chile, Mexico); execution of important investments to promote the use of alternative transportation
modes and improve pedestrian access and safety (Colombia, Peru, and Chile); and analytical work to
support sector reforms (Dominican Republic). The Bank Group is also helping in the search for better
air quality and lower greenhouse gas emissions throughout the region, using resources from the
Global Environment Facility. This is part of the transport contribution to the global climate change
agenda in Latin and Central America. The Bank Group will continue to target city transport
improvements in this region.

70 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Despite the increasing urbanization of poverty, there are still 65 million rural dwellers that are poor.
Rural poverty rates exceed 70 percent in Bolivia, Guatemala, Honduras, Nicaragua, Paraguay, and
Peru. Many other people live in fringe settlements that are far away from the neighboring cities. With
low population densities, the unit cost of providing infrastructure and other services to these fringe
communities is very high, resulting in a high incidence of poverty. They are often physically and
economically embedded in a rural setting, sharing the socioeconomic characteristics and accessibility
constraints of the rural population. Targeted investments to improve rural and fringe-urban transport
links are critical for enhancing access to markets and services and increasing the productivity of small
farmers beyond subsistence levels.

5.6 Middle East and North Africa

For most countries in the region, the top development priorities are to accelerate economic growth
while reducing unemployment, vulnerability, and exclusion. Indeed, growth has been slower in the
Middle East and North Africa than in the other regions of the world. World market share has been lost
in many export sectors: nonoil exports from this region represent just 1 percent of world trade.
Unemployment, at almost 14 percent, is the highest of any region. Although poverty is comparatively
low (only 20 percent of the population live on less than US$2 per day, compared with more than 70
percent in Sub-Saharan Africa and South Asia), female labor participation is the lowest in the world,
and youth unemployment is very high. In the remote mountainous regions of countries such as Yemen
and Morocco, rural poverty is also a serious issue. The Bank Group strategy is to address these
challenges through private sector development and integration into global markets, better public
sector governance, direct measures to reduce poverty, and better natural resource management.

In this context, there is much that is being done in the transport sector. While remaining open to the
specific needs of the countries it serves, as well as the rapidly changing circumstances, the Bank
Group is focusing on four main priorities: improving regional and international transport services and
trade logistics, upgrading urban transport, increasing rural accessibility, and improving road safety.

Improving transport performance, together with other trade facilitation policies, is necessary to foster
economic competitiveness and integration into the international marketplace. Countries of the region
can draw benefits from their favorable location, comparably high level of education, and historical links
to Europe. Emerging trading blocks, such as the Euro-Mediterranean Free Trade Area, hold promise for
increasing trade, but their success will depend partly on the quality of transport infrastructure and
services. The Bank Group is actively supporting transport and trade in the region, both in its advisory
services and in its lending. A national transport facilitation strategy has recently been prepared for
Morocco, as well as reviews of the port and logistics subsectors for Iran and Djibouti. This advisory
work will be continued, in particular for Tunisia and Yemen in the very near future. Lending for
improving transport services and logistics is also important. The Amman Development Corridor
Project, for example, includes key investments to remove trade bottlenecks for Jordan. Other
operations to develop key transport infrastructure for domestic and international trade are under
implementation for railways in Tunisia and air transport in Egypt and in preparation for railways and
roads in Egypt. Throughout these activities, and in order to meet the investment financing gap and
foster efficiency, the Bank Group is also helping develop better frameworks to deliver successful
private sector participation, which has so far contributed little to the region's transport needs.

Upgrading urban transport is also an essential component of the region's transport strategy. Almost
60 percent of the region's population lives in cities. Eight of those cities have more than 3 million
citizens; Cairo and Tehran have more than 10 million. Because of resource constraints and serious
institutional weaknesses, urban transport infrastructure and public transport services have not kept

Focus on regions 71

pace with the expansion of cities. Excessive reliance on private vehicle travel has led to increasing
road congestion, which in turn has caused higher transport costs for industry (most of which is based
within the cities of the region). Bus services are often rudimentary and perform badly in many parts of
the large urban agglomerations, often the poorest parts; residents there have less access to public
services and employment opportunities and may have a greater sense of vulnerability and exclusion.
Air quality is poor; in Cairo and Tehran ambient concentrations of sulfur dioxide, particulates, and
nitrous oxides regularly exceed the World Health Organization's guidelines. The Bank Group is
assisting countries and cities address these issues, first by preparing sound urban transport strategies.
This has been done recently for Cairo, Egypt, and is under way for Morocco's main cities. There are
plans to do so soon for Iran's two largest cities, Tehran and Mashad. More focused advisory assistance
was provided to Algeria and is planned for Tunisia. Lending for urban transport is also a priority. An
operation focused on traffic management and institutional development is under implementation in
Beirut, Lebanon, and one focused on public transport is being identified for Tunis, Tunisia.

Yet, there also remains much to do in rural transport for those who make up 40 percent of the
region's population. Poor road conditions and lack of basic transport services are prevalent in rural
areas. In Morocco more than half of rural citizens live more than 2 kilometers from an all-weather
road; in Yemen that share is three-quarters. Two projects are under implementation in Morocco and
one in Yemen to improve rural accessibility. These projects combine road upgrading with major efforts
to develop institutional capabilities and to ensure sustainability of investments.

Unsafe roads are a problem in both urban and rural areas. The ratio of road deaths to registered vehicles is
20 times higher in Iran and 8 times higher in Jordan than in OECD countries. A flagship multisectoral
project was developed in Iran to demonstrate the potential for rapidly achieving sustained improvements in
road safety. A dialogue on road safety is also being pursued in several other countries.

Demand for financing to develop transport infrastructure is reemerging in the region, with recent
engagement in the transport sector in Egypt, Iran, and Iraq, in particular. The Bank Group is
partnering with other donors to fulfill that demand. In Jordan, for example, the Bank, the European
Investment Bank, and the Arab Fund for Economic and Social Development (AFESD) are cooperating
to finance three sections of the Amman Development Corridor Project. In Morocco, the Bank joined
forces with the European Investment Bank and others to finance the rehabilitation of a large program
of rural roads. In Yemen, the Bank's Rural Accessibility Project provides the institutional framework as
well as all preparatory studies and engineering for the subsector, thus leveraging much funding from
the AFESD, the Saudi Fund, and other donors.

5.7 South Asia

Since the publication of Sustainable Transport, the region has experienced average annual growth of 5
to 6 percent, second only to East Asia. Yet, South Asia still contains 400 million people who live on
less than a dollar a day; the largest concentration of the poor of any region. Transport has an
important role to play in both sustaining growth and ensuring that the poor participate in its benefits.

Investment climate surveys in South Asia have pinpointed transport as a particular problem for
regional and international trade. At the microeconomic level, many rural households lack access to all-
season roads: only 39 percent have such access in Bangladesh and 30 percent in Nepal. About 40
percent of villages in India are cut off from market centers and the main road network in wet seasons.
Yet, as in other regions, rapid urbanization is also increasing the profile of urban transport problems.
The region has five cities with population of more than 10 million.

72 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

On-going priorities in the region include the expansion of the trunk highway system to facilitate
regional and international trade; the facilitation of rural access; the improvement of road asset
management and maintenance, including its financial and management aspects; and the mitigation of
traffic accidents and the transport-related transmission of HIV/AIDS. But the program is being
diversified. There is continued engagement in various megacities in the region (such as Mumbai,
Chennai, and Dhaka), as well as in other medium-size cities in India and Pakistan, where controlling
carbon emissions and factoring in the climate change agenda becomes critical. Engagement in ports
and railways has been deepened in Pakistan, Bangladesh, and India. In Pakistan the corridor approach
is being implemented in a National Trade Corridor Program that contains multimodal elements of port,
road, and railway improvements (Box 4-7).

The road safety problem is alarming. India suffers over 85,000 road deaths each year. Bangladesh has
a fatality rate per vehicle nearly 40 times that of the OECD. Road crash rates are predicted to increase
by 144 percent between 2000 and 2020 unless new safety measures are undertaken (Box 2-3). The
region is also prone to natural disasters and has suffered from military conflict. Both require
substantial investment for reconstruction of transport infrastructure. Recent examples include the
reconstruction of war-torn Afghanistan; the 2004 floods in Bangladesh; the 2004 tsunami in Sri Lanka,
India, and the Maldives; and the 2005 earthquake in Pakistan.

The transport sector has been the core of the Bank's recent infrastructure engagement in the region.
The transport portfolio has more than doubled over the past five years and it has also been diversified.
There are transport operations in Afghanistan after an absence of 23 years, and in Pakistan and Sri
Lanka, after an absence of Bank investment in the transport sector for over a decade.

Coordination with the Asian Development Bank (ADB) and the Japan Bank for International
Cooperation (JBIC) is as important for the South Asia region as it is for the East Asia region. The Bank
Group, ADB, and JBIC are supporting the formation of the South Asia Association for Regional
Cooperation (SAARC), which is expected to play a larger role in the transport sector that is essential
for regional trade. Two outcomes of this coordination are a joint road sector engagement strategy for
Sri Lanka and a coordinated assistance strategy for the road sector in India.

5.8 Global partnerships supporting regional programs

While many regional relationships continue to be developed, wider international partnerships are
better for addressing common problems across regions and complementing increasing regional and
country cooperation with other donors. The Bank Group has helped establish such partnerships in the
areas of transport and trade facilitation, traffic safety, aviation, and road management (Box 5-3). The
Bank Group will continue to help strengthen these relationships. It will also endeavor to establish a
global partnership to tackle urban transport projects and be an active participant in leading transport
research forums, such as the U.S. Transportation Research Board. Although the transport sector has a
long history of coordination and collaboration with external agencies, the emergence of more cross-
sectoral and cofinanced projects has increased the imperative for cooperation with others.

5.9 Implications of the regional focus

For a strategy to have any chance of success it needs to respond to the day-to-day transport problems
of developing countries and to those countries' demands for Bank Group services. While regions
clearly differ in many ways, their priorities for transport consistently show some common challenges,
albeit in different guises. Examples include the need for better management of road infrastructure, the
importance of improved transport and logistics to strengthen trade competitiveness, the challenge of
urban road congestion and other urban transport problems, the widespread incidence of premature

Focus on regions 73

Box 5-3. Global initiatives that support regional programs

The Global Facilitation Partnership for Transportation and Trade (GFPTT), of which the World Bank
was a founding member in 1999, includes public and private bodies whose aim is to help improve transport
and trade facilitation in Bank member countries. The partners initiate programs to meet this objective.
http://www.gfptt.org/

The Global Road Safety Facility (GRSF) was established in 2005 by the World Bank in partnership with
the FIA Foundation for the Automobile and Society, the government of the Netherlands, and the Swedish
International Development Agency. It will support capacity strengthening, program preparation, knowledge
transfer, and improved safety in low- and middle- income countries. The facility will complement and
support other global partners, such as the Global Road Safety Partnership initiated by the Bank in 1999, the
World Health Organization, the Global Road Safety Forum, and the Road Traffic Injuries Researchers
Network.
http://www.worldbank.org/grsf

A Working Group on Development and Air Transport was established in 2005 by the World Bank, the
International Civil Aviation Organization (ICAO), the Air Transport Action Group (consisting of the
International Air Transport Association and members of the air transport industry), and leading civil aviation
authorities, such as the U.S. Federal Aviation Administration (FAA). The objectives of the group are to
promote air transport as a catalyst for growth and development; to address constraints in air transport
systems and services; to identify good regulatory practices; and to promote close cooperation and public-
private partnerships in air transport development.

The World Road Association (PIARC) is an important partner organization, with which the Bank signed a
Memorandum of Understanding on cooperation in January 2007. PIARC is currently managing the
International Study of Highway Development and Management Tools (HDM-4) that has been developing
new knowledge and technology for planning investments in road infrastructure since 1993. The study was
sponsored by a range of institutions, including the World Bank, the Asian Development Bank, the U.K.
Department for International Development, and the Swedish Road Authority.
http://www.piarc.org/en/

death and injury through road accidents, and the need of isolated rural communities for basic
connectivity to transport systems. These priorities have therefore been closely reflected in the
transport business strategy described in Chapter 6.

Transport business strategy 2008-2012 75

6 TRANSPORT BUSINESS STRATEGY 2008�2012

The transport business strategy for 2008�2012 expands the World Bank Group's scope of engagement
in the transport issues of its partner countries. While retaining a strong commitment to economic,
financial, environmental, and social sustainability in all of the Bank's transport work, the approach
recognizes the broad role that transport plays as an enabler of economic and social development and
the urgent need to make transport cleaner, safer, and more affordable for all. This chapter:

Summarizes the comparative strengths of the World Bank Group and the basis of its
contribution to the transport sector.

Reiterates key objectives of the transport strategy, grounded in a wide concept of
sustainability.

Identifies adjustments in the strategic directions of Bank engagement in the sector.

Highlights adjustments in the processes through which the Bank engages in the sector.

Lists the key Bank Group instruments that will be used and how they can be combined to
deliver a range of public and private approaches.

Draws up a plan and targets for implementation.

The priorities of partner countries will continue to determine specific transport sector interventions in
country programs. Nonetheless, the approach delineated in the transport business strategy resonates
with the evolving interests expressed by partner countries for World Bank engagement. Given the vast
size and diversity of the sector, as well as the relatively small size of the Bank's professional transport
staff of 130, the business strategy's guidance on strategic directions and specific process adjustments
will focus transport activities in every region on the key goals, including the Millennium Development
Goals, and take advantage of the Bank's comparative strengths.

6.1 Comparative strengths

The Bank Group's strengths in the transport sector stem from four sources: global reach and
experience; the multimodal scope of Bank transport skills; the synergies among the Bank Group
disciplines; and the synergies among Bank Group entities (IBRD/IDA, IFC, and MIGA).

Global reach and experience
Each region and country has specific challenges, but all face similar policy and institutional challenges,
and all are afflicted by many of the same physical transport problems, such as urban road congestion,
road traffic accidents, and capacity bottlenecks. The World Bank Group is the only international
financial institution that has a long-established global reach in the transport sector. It can draw
lessons from a variety of circumstances, adapt these lessons to other countries and regions, and share
and deploy its knowledge globally.

Modal synergies
The solutions to transport needs are increasingly multimodal in nature, particularly in transport for
trade and in urban public transport. The synergies between Bank Group professionals with different
modal experience and between those with technical skills and policy skills provide a powerful basis for
successful interventions.

76 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Staffing, skill-mix and skills synergies
Overall sector staffing in the World Bank Group was distributed as shown in Table 6-1 on December
31st, 2007.

As to the transport sector, Table 6-2 provides a breakdown of sector staff between regions and
anchor, headquarters and field, and gives an overview of the skills and age distribution on December
31st, 2007. Overall number of transport sector staff has decreased from 141 in 2000 to 123 in 2007,
but new hires are now being planned to cope with the increasing level of lending.

Table 6-1. IBRD net staff by network and sector mapping

Sector Mapping Net Staff
Financial and Private Sector Development 239
Financial Sector 125
Private Sector Development 114
Human Development 479
Education 161
Human Development 26
Health, Nutrition & Population 169
Social Protection 123
Poverty Reduction & Economic Management 627
Economic Policy 325
Economic Policy & Public Sector 63
Economic Policy & Poverty Reduction 21
Gender & Development 10
Poverty Reduction 63
Poverty Reduction & Economic Management 48
Public Sector 97
Sustainable Development Network 1,112
Agricultural & Rural Development 236
Energy & Mining 126
Environment 163
Infrastructure 85
Social Development 126
Transport 123
Urban 102
Water 151
Operational Policy & Country Services 678
Source: IBRD Quarterly Staffing Report, FY08 Q2
Note: Data as of December 31, 2007. IBRD Regular, Open, Fixed-term and Term Staff. All levels. HQ and field
appointments. Data do not include staff mapped to the following networks: Administrative & Client Support,
Communications and Publications, Information Solutions, Resource Management.

Transport business strategy 2008-2012 77

Table 6-2. Transport staff overview by appointment type and location

Staff (no) Field (%) ETCs (no)
Unit
IRS LRS Total IRS LRS Total HQ Field Total
Transport
Anchor 10 4 14 0% 0% 0% 3 0 3
AFR 29 9 38 41% 89% 53% 1 1 2
EAP 11 3 14 20% 100% 38% 1 2 3
ECA 12 1 13 8% 100% 15% 4 2 6
LAC 13 1 14 8% 100% 15% 0 0 0
MNA 3 1 4 0% 100% 25% 4 4 8

SAR 8 18 26 13% 94% 69% 1 1 2

TOTAL 86 37 123 20% 84% 40% 14 10 24

Source: Human Resources.
Note: IRS � Internationally Recruited Staff; LRS � Locally Recruited Staff; ETC � Extended Term Consultant

Skills synergies
Within IBRD/IDA, the skills of the Infrastructure Network have recently been associated with those of
the Environmentally and Socially Sustainable Development network to form an integrated Sustainable
Development Network with a wide range of economic, environmental, social, and policy skills that can
underpin a deeper policy agenda throughout the transport sector. In December 2007 World Bank
Transport staff comprised 63 Transport Specialists, 16 Transport Economists, 5 Infrastructure
Specialists, 5 Transport Planners, 1 Municipal Engineer, 19 modal specialists (including 9 Highway
Engineers, 5 Urban Transport Specialists, and 1 specialist in each other mode and topic, ports,
railways, air transport, rural transport, road safety), and 14 staff covering a variety of project skills
(program manager, financial analyst, public/private partnerships, operations officer). In view of the
strategic directions spelled out in this paper, some skill-mix rebalancing will take place within
transport sector staff to adjust the Bank Group capacity to meet agreed objectives and make the most
of the institution's comparative advantage, in particular seeking staff with experience in transport and
energy linkages, transport safety and security, railways, waterborne transport and ports, aviation,
multimodal transport logistics, and with strong operational background in passengers and freight
transport services.

Bank Group synergies
The Bank's experience covers the full range of public, private, and public-private partnership solutions
to transport problems. The IFC's activity in the private sector complements the IBRD/IDA public
infrastructure focus by financing private transport services (such as port and stevedoring operations,
freight railways, airlines, shipping companies, and transport support services). It also supports
transport infrastructure concessions (Box 6-1).

MIGA guarantees are well suited to reduce transport sector investment risks. They are designed to
help companies overcome risk aversion, particularly for highly capital-intensive investments that are
typical of transport infrastructure in countries where there is a perception of high risk. Guarantees can
also be used to attract both equity investment and debt financing. And once a deal is in place, MIGA
guarantees bring companies additional comfort, through MIGA's mediation efforts, providing that
added measure of security that can help keep a project stable and reinforce positive relations with
host governments. MIGA has provided guarantees for a number of privately financed transport
projects, three of which are highlighted in Box 6-2.

78 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Many partner institutions and industry organizations also make very strong contributions to transport
and development in particular regions or particular subsectors (modes) of transport. However, no
other organization has a global responsibility or mandate for the transport sector as a whole. The four
sources of the Bank Group's strength--namely, its global reach, multimodal coverage, multidisciplinary
analysis, and the complementary public and private roles of its member entities--suggest strongly that
the Bank Group has not only the ability, but also a responsibility to adopt a wide rather than narrow
view in the range of its interventions and to assume a role of global leadership in transport and
development.

Box 6-1. IFC support of private sector participation in transport infrastructure: Illustrative projects

Panama: Corredor Sur Toll Road
The project included the construction, maintenance, and operation of a new four-lane, 19.5-kilometer toll
highway connecting Panama City with its international airport, under a 30-year concession awarded based on
competitive bidding. Project cost was estimated at about US$209 million and was supported by an IFC senior
loan of US$20 million, a syndicated loan of US$35 million and quasi-equity of US$15 million. The project was
completed on schedule. The project reduced substantially the travel time in the corridor and provided
incentives for housing developments along its route.

Kenya and Uganda: The Kenya and Uganda Railway Concessions
The project involved the rehabilitation, maintenance, and operation of 2,351 kilometers of rail track (1,920
kilometers in Kenya and 431 kilometers in Uganda), under two substantially identical 25-year concessions
awarded in October 2005 after an international competitive tender process. Project costs for the first five years
of the concession were estimated to be about US$111 million and are supported by an IFC senior loan of up to
US$22 million and a quasi-equity loan of US$10 million. KfW provided a parallel senior loan of US$32 million.
IDA provided a partial risk guarantee for the benefit of the concessionaire, and also assisted with resettlements
and retrenchments costs. And IFC's Advisory Services advised the Kenyan Government on privatization and
bidding processes. The project is expected to generate substantial benefits for the overall transportation
infrastructure of Kenya and Uganda, as well as for the adjacent landlocked countries of Rwanda, Burundi, and
Eastern Democratic Republic of Congo and is also expected to help ease the pressure on the regional road
system.

Dominican Republic: Airports
The IFC investment supports a US$300 million capital expenditure program carried out under a 30-year
concession. The capital expenditures included remodeling of existing terminal buildings; extension of runways
and aircraft parking areas; installation of security, baggage handling, and other equipment at five airports
operated by the company (including the capital city's domestic and international airports); and construction of
a new airport in Saman�. IFC supported the project with loans totaling US$60 million, a US$15 million
syndicated loan, and a parallel lender provided a US$55 million loan. The project is aimed at improving the
level of service and increasing the capacity at five airports and opening up the Saman� area to tourism
developments.

Transport business strategy 2008-2012 79

Box 6-2. MIGA contribution to private sector participation in transport infrastructure: Illustrative
projects

Dominican Republic: Autopistas del Nordeste Project
The US$220 million project involves the design, construction, operation and maintenance of a 106-kilometer
toll road under a 33-year concession that will connect Santo Domingo with the country's northwestern
peninsula (Saman�). Benefits of the toll road to the country include a reduction in distance and time traveled
from 220 kilometers and four hours to 120 kilometers and one and a half hours.

In February 2006, MIGA provided US$108 million in guarantees for this project. The guarantee covers portions
of an equity investment in and 51 percent of principal and interest of a bond issue of US$162 million in senior
notes for Autopistas del Nordeste Limited (AdN). The coverage is for up to 20 years against the risks of transfer
restriction, expropriation, war and civil disturbance, and breach of contract (first-time use of a political risk
insurance [PRI] product to enhance a bond issue to finance an infrastructure project in Dominican Republic).
Colombian and Dominican investors are jointly providing equity for the project. The Colombian partners--Grupo
Odinsa SA and Grodco SCA and their affiliates--are managing the project, operating the concession, and have
been responsible for securing the financing. The Dominican partner, Consorcio Remix, will provide local
equipment and labor. The 33-year concession was awarded to the partners in 1999 through an international
bidding process.

Key to the long-term funding for the project was the issue of US$162 million in 20-year senior secured notes to
international institutional investors, underwritten by Morgan Stanley. Commercial banks were unwilling to lend
money beyond ten years due to perceived political risks in the Dominican Republic.

Costa Rica: San Jos�-Caldera Toll Road Project
The project consists of the design, construction and/or rehabilitation, operation, and maintenance of the San
Jos�Caldera toll road in Costa Rica under a 25-year concession. The project is divided into three segments
totaling 76.8 kilometers. Segment I (San Jos� to Ciudad Col�n) includes 14.2 kilometers of existing road that
begins at the National Stadium in San Jos� and ends at the junction between the existing road and the new
section in Ciudad Col�n. Segment II (Ciudad Col�n to Orotina) includes the construction of a new 38.8-
kilometer road between Ciudad Col�n and Orotina. Segment III (Orotina to Caldera) includes an existing road
of 23.8 kilometers from Orotina to Caldera. Segments I and III include the relatively straightforward
rehabilitation of the road with a substantial number of refurbished and improved overpasses. Segment II is the
construction of a new road and represents approximately two-thirds of the total construction cost.

MIGA provided guarantees to Fomento de Construcciones y Contratas S.A. of Spain and Itinere Infraestructura
S.A. of Spain for their equity investments and to Caja de Ahorros y Monte de Piedad de Madrid (Caja Madrid) of
Spain for its loan to the Autopistas project. The project is one of the largest foreign investments in the
infrastructure sector in Costa Rica. There are significant advantages to the construction and upgrade of this
road corridor as it connects the main industrial and business area of the country to one of the main ports. In
the aftermath of the ratification by Costa Rica of the free trade agreement with the United States, this project
will have a positive impact on the country's trade competitiveness.

Doraleh Container Port Project
MIGA has issued guarantees totalling $427 million in support of the Doraleh Container Terminal project in
Djibouti. MIGA is covering DP World's equity investment and financing from Dubai Islamic Bank, Standard
Chartered Bank, and WestLB'. MIGA also provided guarantee capacity to cover swap agreements included in
the lender's financial package. The project involves a 30-year concession for the reclamation of land and the
development, financing, design, construction, management, operation and maintenance of a new container port
terminal in the Republic of Djibouti. MIGA's guarantees are for 10 years. Key development impacts include: (i)
Regional integration, trade facilitation and infrastructure development; (ii) improvements in competitiveness
and development of a full-fledged trans-shipment and transit cargo hub in East Africa; and (iii) employment,
training and skills transfer. This is a South-South infrastructure project located in a frontier market and new
host country in the MENA region. The project also represents MIGA's first guarantee issued in support of a
Shariah-compliant financing structure.

80 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

6.2 Strategic objective

The objective of the Bank's transport strategy, consistent with Sustainable Transport and aligned with
the principle of country ownership is:

Sustainable Transport established this underlying objective. The strategic directions planned by the
Bank Group over the next five years will widen the scope of the Bank Group's interventions and
deepen its treatment of the issues of environmental and social sustainability.

6.3 Strategic directions

The Bank Group will pursue five strategic directions in the next five years:

Strategic direction 1. Create the conditions for increased support for transport investment
and governance. During 2008-2012, the Bank Group will work with all development partners,
including the private sector, to channel and catalyze more resources towards investments in transport
assets, infrastructure and services. The expected increase in resource mobilization will be matched by
the necessary attention to governance; that is, the strategies and policies presented in Chapter 3,
which are important to achieving the objective of sustainable transport. Given the scale and
importance of the transport sector, the Bank Group will seek to incorporate more transport
governance goals in country strategies. This will be informed by enhancing analytic and advisory
activities and promoted through country dialogue, under the Bank Group Governance and Anti-
Corruption action plan.

Strategic direction 2. Deepen engagement in the roads and highways subsector. The
construction, management, and maintenance of roads and highways will continue to be the dominant
subsector for Bank Group engagement, because of the importance of road transport in most countries
for a wide range of development needs, the scale of the investment and maintenance challenge in the
subsector, and the need to be responsive to the demands by partner countries.

Sustainable Transport identified the importance of access for the rural poor to the road transport
system, and the Rural Access Indicator developed by the Bank in the intervening years confirms this
critical component of poverty reduction (Section 2.4). Rural access and the construction, rehabilita-
tion, and maintenance of rural roads will therefore remain a major priority of the Bank in both physical
and policy terms.

The Bank Group will pursue a broader agenda in the roads subsector to meet principles of
environmental and social sustainability in an inclusive manner and in four main ways:

The performance, affordability, and inclusiveness of road transport services will be given more
attention. The effectiveness of road transport services markets is instrumental in reaping the
benefits of transport infrastructure. Where distortions and constraints are apparent, analyses will
be required of the policies, institutions, and regulations that govern road freight and passenger
services markets, benchmarking these against successful international practice and pinpointing
policy options that help to ensure that good service follows good infrastructure.

Transport business strategy 2008-2012 81

The Bank Group will also scale up its work to make roads safer for all their users and for those
affected by them. This work includes supporting governments in developing and implementing
strategies, policies, institutions, infrastructure design, vehicle and driver regulations, and
enforcement mechanisms.

The Bank Group will begin to address the transport policy implications that may arise in
developing countries from the substantial proportion of greenhouse gas emissions due to of road-
based private and commercial transport (as part of a wider scrutiny of transport, energy
efficiency, and climate change).

The pilot approaches that the Bank Group and its development partners have identified to reduce
the transport-related transmission of HIV/AIDS through major road construction sites and new
road corridors in previously isolated areas will be applied to new projects.

Strategic direction 3. Increase engagement in the urban transport subsector. This direction
reflects global demographic trends and the escalating development challenge of urban transport in all
regions. A range of Bank Group instruments, including subnational financing instruments, will be used
to support an increase of investment in and efficiency of urban transport in general and urban public
transport in particular. Analytic and advisory services and country dialogue will address the need for
building capacity in urban transport governance; enhancing the role and quality of affordable public
transport; increasing financing mechanisms; mobilizing the private sector in the delivery of public
services; managing demand for private car travel; reducing vehicle emissions; and recognizing the
needs of pedestrians and nonmotorized transport forms.

Strategic and operational coordination with the urban development agenda will be enhanced. Success
will partly depend on progress made by the Bank Group as a whole in developing modes of direct
engagement with city authorities, by using subnational lending instruments. It will also depend on
support from national governments for the Bank Group's assistance to municipal authorities.

Strategic direction 4. Diversify engagement in transport for trade. This will be implemented by
increasing support for public and private infrastructure investment to overcome physical or quality
bottlenecks in transport that supports the regional and international trade in goods and services.
Although much of the Bank's road transport lending is for major trade routes, more diversified support
will be given for investment in nonroad transport infrastructure (railways, ports, inland waterways,
and airports) and attention to the transport services that use them (including multimodal transport
services). The Bank will help countries develop the institutional capacity to implement transport and
logistics strategies that address nonphysical barriers, as well as infrastructure deficiencies; improve
the management of public infrastructure assets; and encourage successful private sector participation
in competitive markets for transport and logistics services.

Where appropriate, regional transport projects will be identified and supported, particularly when
these can help improve service and reduce cost to landlocked countries. Corridor approaches will be
adopted in diagnosing the need and designing the strategies for major trade routes. The Bank Group
will also support countries to meet the emerging challenges of stricter international safety and security
standards, particularly in ports and in aviation.

Strategic direction 5. Transport and climate change: control emissions and mitigate impact.
Bank Group activities in the transport sector in the years ahead will cover the issue of greenhouse gas
emissions from transport as a priority for action, with attention paid to both mitigation in terms of
operational services and adaptation in terms of infrastructure sustainability to climate change effects.

82 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

6.4 Process adjustments

To achieve its objective and the five strategic directions, the Bank Group intends to adjust the way it
does business in four main ways.

Process adjustment 1. Increase the proportion of Bank Group transport lending made
through program approaches. This will strengthen long-term client relationships and reduce the
costs and time of project preparation. There are a number of instruments available, including both
specific investment-lending instruments (Table 6-4) and programmatic loans, which are scheduled
over a long-term period with corresponding development targets.

As part of this evolution, there will be increasing separation of policy dialogue on wider transport
governance and reform issues from the narrower focus and specific timetables of project-specific
investment loans. The former will be increasingly addressed through country dialogue, analytical and
advisory activities, and policy-based lending. Fewer sectorwide conditions will be attached to specific
project loans, unless the conditions are essential to the success of the specific investment project
itself.

Process adjustment 2. Enhance the quality of policy dialogue and sharing of transport
knowledge. The Bank Group's analytic and advisory activity in transport includes the economic and
sector work (ESW) that is important to properly inform policy dialogue. It also includes technical
assistance (TA) to help develop and implement policy, institutional, regulatory, and other changes
arising from that dialogue. These activities are essential to maximize the development effectiveness of
Bank Group engagement in transport.

ESW/TA products in the transport sector over the past five years have been around 5 percent of the
Bank's total ESW/TA products. Although low in proportion to the contribution of transport to Bank
lending, a substantial amount of additional activity of this type is funded by loan budgets themselves,
and some of the ESW supporting Bank work is effectively carried out by Bank-sponsored initiatives,
such as the Sub-Saharan African Transport Policy Program. The Bank also produces a number of
technical notes and papers each year, some supported with trust funds.29

The Bank intends to seek donor grants for some of the analytic and advisory activity required by the
transport business strategy. It is also anticipated that, with increased lending activity, technical
assistance funded by loans will be increased proportionately. Regional analytic and advisory activity
will continue to reflect regional programs and priorities, while the Bank's central or "anchor" transport
unit intends to put a higher proportion of the resources into the relevant policy issues described in
Chapter 3. This will result in major flagship products that deal more comprehensively with the
governance and operational issues that underlie the strategic directions that were described in Section
6.3. For example, it is anticipated that early papers in the series will support strategic direction 3 and
deal with the policy and implementation issues relevant to urban transport systems and strategic
direction 4 on transport for trade in a way that covers policy issues for the main freight modes and
multimodal transport. While aiming for the highest intellectual standards in each topic, the reports will
be designed to provide policy and practical guidance, while maintaining operational application for
development effectiveness. These reports will continue to be supported by shorter specialist transport
notes and papers that support the business strategy at an operational level.

29 Over the past five years 30 small knowledge-sharing products (on average costing $30,000) have been
produced using funds donated by the U.K. Department for International Development under its Transport and Rural
Infrastructure Services Partnership with the Bank. More than 40 products are expected by the termination of the
partnership.

Transport business strategy 2008-2012 83

Process adjustment 3. Improve monitoring and evaluation. Progress and accountability in
transport and development requires more effort to improve measurement of the performance of
transport systems, of the results of Bank Group-financed transport projects, and of the impact of
alternative transport policies.

At the broadest level, the Bank Group will continue to work with participating countries to establish
baseline indicators of transport infrastructure provision. The achievement of the Rural Access Index
discussed in Section 2.4 will be followed by work on an equivalent Urban Mobility Index.

At an operational level, the Bank Group will give priority to the recommendations made by the
Independent Evaluation Group in 2007 and, depending upon the quantum and timing of available
resources, will establish mechanisms to:

Develop intermediate indicators applicable to a broad range of projects.

Carry out an enhanced program of impact evaluations for selected programs.

Evaluate experience with transport sectorwide approaches to lending.

Support the establishment of an independent evaluation of the Sub-Saharan Africa Transport
Policy Program.

Process adjustment 4. Capture more synergies across sectors and Bank Group instruments.
Within IBRD/IDA, the skills of the Infrastructure Network have recently been consolidated with those
of the Environmentally and Socially Sustainable Development network to form an integrated
Sustainable Development Network. This will help strengthen the already productive links among the
Bank's transport professionals and those working on social and environmental areas of the transport
sector. Taking account of the Bank Group's objective in transport and its five priority directions, Table
6-3 summarizes the main potential areas of synergy within the Bank Group to implement the strategic
directions.

The synergies also include the potential to combine World Bank Group skills and instruments. Table 6-
4 summarizes the main instruments available through IBRD/IDA, IFC, and MIGA and gives examples
of how these can be combined to deliver from an indicative menu of public, private and combined
public-private solutions to transport development needs.

6.5 Results framework

The 1996 transport strategy highlighted the key importance of improved rural access and reduced
transport costs in combating poverty and stimulating growth. The results framework of the 2008
business strategy has been concentrating on these aspects and will continue to do so. The mobility of
the urban poor will receive increasing attention over the next few years, both in sector interventions
and in the development of the results framework.

It was recognized that the adoption of the MDGs would require giving more attention to measuring
impact and the performance of bank activity in the sector as a whole. This challenge is sharpened by
the fact that the MDGs themselves do not contain specific goals or targets for the transport sector. As
is widely acknowledged, transport is an essential ingredient in production, trade, education, health,
civil administration, social interaction, and social services, all of which are crucial to meeting the
MDGs. Equally, transport is not sufficient to achieve these results, rendering development-outcome
targets for transport alone invalid.

84 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Table 6-3. Intersector synergies and cooperation

Transport issues Interaction of TSB Transport issues Interaction of TSB with
with other Sector other Sector Boards
Boards

Transport for trade Economic Policy Inclusive transport Gender and Development

Private Sector Social Development
Development

Urban transport Urban Development Results measurement Social Development

Environment

Private Sector
Development

Rural transport Rural Sector Public governance Public Sector Governance

Social Development Financial Management

Education

Road safety Health, Nutrition, and Performance of state- Public Sector Governance
Population owned enterprises
Financial Management
Education

Transport and HIV/AIDS Health, Nutrition, and Private sector Private Sector Development
Population participation
Project Finance and
Guarantees

Vehicle emissions and Health, Nutrition, and Competition and Public Sector Governance
health Population regulation
Economic Policy
Environment

Vehicle emissions and Energy and Mining Corruption Public Sector Governance
global warming
Environment Procurement

Nevertheless, some (albeit slow) progress is being made in developing frameworks that trace the
paths by which Bank transport work affects development and in designing associated indicators of
transport performance. Examples of the high-level outcomes and goals to which transport
interventions contribute are shown in the matrices in Table 6-5, which illustrate the impacts of rural
access improvements and of reductions in freight transport cost. The matrices also show that these
key outcomes can often be achieved through a number of different outputs, such as better
infrastructure management, direct improvements in transport services, or aspects of sector reform
such as encouragement of competition in supply. Such different interventions need to be considered
as a package and to be set in the context of the sector as a whole. However, since this context varies
a great deal from one region to another and even among countries within a region, the form of the
matrix will be specific to each country.

Transport business strategy 2008-2012 85

Table 6-4. Indicative applications of World Bank Group instruments in the transport sector

PUBLIC INFRASTRUCTURE OR PRIVATE INFRASTRUCTURE PUBLIC-PRIVATE
SERVICES OR SERVICES PARTNERSHIPS IN
INFRASTRUCTURE OR SERVICES

Policy Advice on governance, strategy, and policy alternatives for sector and/or on alternative project
dialogue structures (public, private and PPP), and conveyance of international experience with lessons
learned.
Analytic Can be used to help develop AAA is not provided to Public-private partnerships
and national sector and/or subsector private companies, but typically impose heavy
advisory or sub-national strategies, benchmarking studies of requirements for professional
activity the private sector, and services that technical
identify and/or implement post-privatization or assistance as part of AAA can
institutional, organizational, concession performance can help to fund.
regulatory or business process be useful to provide models
reforms in government for other governments

enterprises; or to move them considering such policies.

towards greater private
participation.
IFC loans IFC financial support can be given IFC loans can be made to IFC loans can be made to the
for a publicly owned entity in the any private company in the successful private bidder in a
context of pre-privatization transport sector (whether PPP transport scheme.
equity. IFC can alternatively help infrastructure or transport
provide financing needs operators).
(including acquisition costs) of a
private purchase of a state-
owned entity.

IBRD/IDA IBRD/IDA loans can be made for Loans can be made to IBRD/IDA loans can be made
investment public sector transport government, or guaranteed to the public sector to meet a
loans enterprises, either for by government, for on- capital financial commitment
investment, structural reforms or lending to small and to a PPP scheme. May
transition costs such as labor medium private transport complement an IFC loan as
force restructuring. operators, for example, as above.
part of a rural development
project.

IBRD/IDA Can be used by partner country Part of a program loan can be
policy/ subject to a program of sector used to support the public
program governance or policy reform sector financial commitment
loans measures that would be to a PPP.
inappropriate to associate with a
specific investment loan.

MIGA MIGA can provide noncommercial risk guarantees (covering
guarantees transfer and inconvertibility, expropriation, war and civil
disturbance, and breach of contract) to investors, including
contractors and operations & maintenance providers, as well
as commercial banks. Breach of contract coverage is of
particular interest for PPPs as it guarantees the
investor/lender against the nonhonoring of sovereign or
subsovereign obligations regarding the PPP project,
including payment obligations (Annex C contains more
details).

IBRD/IDA Partial risk and partial credit guarantees can cover debt or
guarantees cash flow to private investors for specified project risks
related to areas of government responsibility or payment
obligation or specified political risks. Subject to
counterguarantee from government.

86
Table 6-5A. Results Framework--Transport Sector: Rural Access

Rural Access linked to MDGs (Goals 1, 2, 3, 4 and 5)
SAFE
What results on the ground are important? How do we know if
implementation is on track? ,CLEAN
Country Outcomes Process Indicators ,AND

How do we
How do we measure AFFO

measure Final Intermediate Intermediate Bank Strategy or RD

Goal Final Outcomes Indicators? Outcomes Indicators? Contribution Country Bank ABLE

...
MDG 1 � Increased � Rural Access � Target � Survey transport � Transport � Priorities Rural Access
access to Index communities services and interventions reflected in TRANSPOR
Eradicate Indices and
assets, (proportion of have improved, fares to target contribute to National Plan,
extreme other key
services and rural affordable communities National priorities PRSP, etc.
poverty and access data
markets population transport in food security, T
hunger � Record � Regular conduct updated at least FOR
� More effective with adequate services to pedestrian and education, health and analysis of every three
food access) IDA- markets nonmotorized and rural national living years DEV
marketing and 14 Result activity development standards survey ELOPMENT
Inter-sectoral
distribution Framework � Encourage sector with rural access awareness of
data coordination index rural access
with National indicators at
Statistics Office country level

MDG 2 � Improved � School � Improved access � Household � Rural transport or � Transport sector Output Based
school attendance leaves children surveys and infrastructure policy/ program
Achieve Aid provides
attendance and more time to other reports on interventions are integrating rural
universal incentives for
and performance attend school pupils' access to based on locally mobility/access
primary new rural
completion records school owned plans improvement
education � Children have transport
� More reliable � Reports of quicker, safer � Accident records � Local pedestrian � Local services
staffing and staff routes to school � Cost of rural and nonmotorized Government sets Loans agreed
equipping of attendance � Better staff transport activity must not priority for rural for sustainable
rural schools and equipment access and services be constrained by access road
availability equipment motor traffic � Local improvement
supply for rural coordination programs
schools between
Education and
Transport
Agencies

MDG 3 � Access needs � Gender � Transport � Disaggregated � Promote � Transport sector Disaggregated
of women and analysis of services measurement of interventions in plans consistent
Promote travel needs
men are met access in designed for the gender needs in line with national with national
gender assessments
effectively and household and needs of women household and strategies for commitments/str
equity and are in common
equitably other surveys and girls other surveys gender equity ategy for gender
empower use
equity
woman

MDG 4 � Improved � Records of � Rural families � DHS and other � Promote transport � Local Integrated Rural
access for formal health can have better reports on services to support coordination
Reduce Accessibility
mothers and service uptake transport to mother and improved between Health
child Planning
children to healthcare for infant access to preventive and Sector and
mortality � Records of principles
primary health emergency babies and health services curative health Transport applied to local
care and services infants � Household outcomes Agencies investment
emergency response � Rural families surveys on fuel decisions
services
� DHS data on have better choice, use of
� Reduced RAI incidence access to improved stoves
incidence of cleaner fuels
RAI in children and improved
under 5 due to stoves
improved
access to
cleaner fuels

MDG 5 � More reliable � Reports of � More effective � Lower cost of � Promote effective � Establish clear Promote
staffing and medical support of rural rural transport transport and policy on public
Improve coordination
equipping of staffing and health facilities services communication for responsibility for
maternal between
rural health resources emergencies emergency
health � Effective � Community communities
facilities � Reports of transport for reports of transport and transport
� Better access emergency women in peri- emergency � Strengthened providers for
for women to response natal crisis transport capacity for emergency
primary health times for availability and baseline and services
care and maternal and cost monitoring Support
emergency infant health surveys baseline and
services crises monitoring
surveys
Trans

port

bus

ines

sstrat
egy
2008-

201

Table 6-5B. Results Framework--Transport Sector: Freight Transport

Freight Transport Cost linked to MDGs (Goals 1, 6, 7 and 8)
SAFE
What results on the ground are important? How do we know if implementation
is on track? ,CLEAN

Country Outcomes Process Indicators ,AND

How do we AFFO
How do we measure
measure Final Intermediate Intermediate Bank Strategy or RD
ABLE
Goal Final Outcomes Indicators? Outcomes Indicators? Contribution Country Bank
...
MDG 1 � National and � Growth in � Domestic � Surveys of � Sector � Haulage services � Freight
local economy national and transport more domestic governance are operated on haulage TRANSPOR
Eradicate more active local GDP reliable and transport promotes commercial contributes
extreme affordable haulage rates effective terms and more
poverty and � More � Statistics of
and service competition marketed by positively to T
FOR
hunger employment formal � International
opportunities employment transport more levels by key between freight transport agents the
more widely and income competitive modes (road, services � Incentives are investment DEV
ELOPMENT
available levels rail, water) climate
� Production, � Promote effective explicit and set
� Wider access � Consumer marketing and � Surveys of use of transport to reflect poverty � Assist
to affordable prices distribution of international capacity through reduction and development
basic goods transit costs charging other objectives and
� Basic food food more
and services application of
prices effective � Facilitate � Statistics of
toolkits for
� More reliable international haulage by mode
management
access to transit share
of transport
essential food � Increase equity services and
supplies reduction of
accidents

MDG 6 � Reduced � Medical � Workplace � Surveys of � Liaise with ILO � Transport � Transport
spread of records policies employee and other UN integrated in sector
Reverse the disease along awareness and agencies in- national capacity and
spread of � Surveys of � Greater
main transport behavior country strategies for institutions
HIV/AIDS and disease awareness and
corridors AIDS and other strengthened
other diseases prevalence less risky � Support
� Reduced risk behavior by integrated diseases to engage
of disease vulnerable national strategies� Employer and with AIDS
from transport for combating employee strategies
construction employees and diseases associations
sites those cooperate on
associated effective
with them workplace
� Reduced policies
delays at
borders

MDG 7 � Land use and � Transport � Transport � Fuel � Promote � Strategic � Strategic
transport energy use per investments consumption instruments which environmental environmental
Ensure patterns unit GDP reflect full for freight encourage plan reflects assessment
environmental evolve in line (energy environmental haulage strategic international and process is in
sustainability with long-term balances, IEA) costs � Global and local environmental national active use
strategic � Samples of � Transport emissions of air assessments commitments � Distributional
considerations greenhouse strategy pollutants � Overall impacts � Transport analysis
including gases and incorporates equitable in short, investment including
environmental � Strategic
other pollution environmental medium and long program `external'
sustainability Environmental
� Surveys of and other Assessment at term consistent with impacts
land use, long-term planning stage � Long-term strategic plan
transport considerations environmental
demand and sustainability
freight traffic included in sector
dialogue with
clients.

MDG 8 � Open, � Transit � Practical, � Finance and � Promote practical, � Engagement � Extension of
predictable, constraints on equitable time costs equitable systems with security globally
Build global non- international systems imposed by for security of and processes and accepted
partnership for discriminatory trade established for security from transit other procedures systems for
a development trading system security of and systems and by cargoes for international checking and
(open trading; � Domestic
established from transit import / export transport sealing
landlocked transport � Expedite import /
shipments formalities cargoes
countries) � Needs of constraints on export � Bilateral
landlocked trade � Administrative � Insurance and procedures, agreements for � Transport
countries and � Competitive costs of import other costs for particularly for landlocked enterprise
small island transport / export cargo safety landlocked countries awareness of
developing arrangements minimized � Freight cost as countries � Encourage shipping
States met for landlocked � Transport a proportion of � Optimize competitive procedures
countries contribution to annual retail transport transport
trade is expenditure component of services through Trans

optimized trade transport agents,
etc. port

bus

ines

sstrat
egy
2008-

201

90 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

6.6 Implementation Action Plan

The main actions and broad indicators for assessing achievements in implementing the strategic
directions are summarized in Tables 6-6 and 6-7.

Table 6-6. Strategic directions: Implementation Action Plan

Table 6-6A. Strategic direction 1: Create the conditions for increased support for transport
investment and governance

Key actions Action/indicator By whom Target

D1.1 Enhance country Complete and Anchor/Regions One review for each of the
dialogue on transport sector disseminated Bank's major countries (or for
policy. comprehensive Transport subregional groupings of smaller
Sector Policy Reviews countries) during next five
covering relevant areas years. Reviews to address the
listed in Chapter 3 with 11 policy areas listed in Chapter
recommendations for 3. Hold seminars to discuss.
sector improvement.

Table 6-6B. Strategic direction 2: Deepen engagement in the roads and highways subsector

Key actions Action/indicator By whom Target

D2.1 Increase attention Produce guidance note on Anchor To be published FY2009.
given to road transport road transport markets
services. and regulatory models.

Selected roads projects to Regions Four projects a year.
include AAA product on
transport services.

D2.2 Scale up contributions Second-generation road Regions At least one project per region
to road safety safety projects, either over 2008�2012.
improvement. stand alone or part of
broader transport
operations.

D2.3 Apply lessons learned Annual review of Anchor N/A.
on HIV/AIDS pilot projects progress.
to new projects.

Transport business strategy 2008-2012 91

Table 6-6C. Strategic direction 3: Increase engagement in urban transport subsector

Key actions Action/indicator By whom Target

D3.1 Increase profile of All new CAS to be Region At least 50 percent of new CAS
urban public transport in reviewed by regions to to profile urban transport.
Country Assistance assess suitability of
Strategy. including an urban public
transport program.

D3.2 Increase financial New lending Region Average of at least
support for urban transport commitments for urban US$0.5 billion a year of new
with emphasis on public public transport and commitments over 2008�2012.
transport and/or traffic associated measures,
management to support including vehicle
public transport. emissions management.

Table 6-6D. Strategic direction 4: Diversify engagement in transport for trade

Key actions Action/indicator By whom Target

D4.1 Increase number of All new CAS to be Regions At least 50 percent of new CAS
countries in which there is a reviewed by regions to to profile transport for trade
transport for trade or assess suitability of including all import transit
similar subsector AAA including a transport for countries plus landlocked
project. trade program. countries.

D4.2 Increase financial New lending Regions Average of at least
support for non-road�based commitments for non- US$0.8 billion a year of new
transport infrastructure. road�based transport commitments over 2009�2012.
modes (railways, ports,
waterways, airports,
multimodal).
D4.3 Increase support for Annual review of progress Anchor N/A.
regional transport projects by TSB.
that support regional
economic integration.

92 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Table 6-6E. Strategic direction 5: Transport and climate change � Control emissions and mitigate
impact

Key actions Action/indicator By whom Target

D5.1 Incorporate the Guidance note. Anchor To be published by December
transport contribution to 2008.
climate change into Bank Transport and climate
policy agenda. change policies paper. Anchor
To be published FY2009.

D5.2 Mainstream assessing Methodology developed in Anchor 50% of Bank transport projects
the carbon footprint of coordination with other include carbon footprint
transport operations. IFIs. assessments by FY2010.
100% by FY2012.

D5.3 Establish a specific Estimation of modal shift Anchor/Regions 50% of Bank urban transport
measure of the cleanliness impact on urban projects include measurement of
of the urban transport emissions. modal shift impact by FY2010.
portfolio. 100% by FY2012.

Table 6-7. Process adjustments: Implementation Action Plan

Table 6-7A. Process adjustment 1: Increase the proportion of transport lending made through
program approaches

Key actions Action/indicator By whom Target

P1.1 Review pipeline and Proportion of lending Regions Average of 25 percent of new
potential programs in each made through program commitments over 2008�2012
region for scope for approaches, including to be by program approaches.
increasing program serial programs.
approach.

P1.2 Separate complex Annual review by TSB. Anchor/Regions Systematize separation starting
sectorwide reform in FY09.
conditions and policy
dialogue from individual
project loans.

Transport business strategy 2008-2012 93

Table 6-7B. Process adjustment 2: Enhance the quality of policy dialogue and sharing of transport
knowledge

Key actions Action/indicator By whom Target

P2.1 Secure additional Donor and other Anchor/Regions Minimum of US$10 million over
funding for AAA work in stakeholder consultations. 2008�2012.
transport.

P2.2 Preparation of flagship Product delivery. Anchor Minimum of 4 such products
products geared to meeting over 2008�2012 (topics to be
strategic objective and decided).
directions of this update.

Table 6-7C. Process adjustment 3: Improve monitoring and evaluation

Key actions Action/indicator By whom Target

P3.1 Further develop With change in Results Anchor TSB to affirm directions of next
transport results framework Staff, take stock of steps in results agenda by
geared to transport current frameworks (as December 2008.
business strategy. set out in SSIU).

P3.2 Develop intermediate Classification of transport Anchor Guidance note on transport
indicators applicable to a projects into a typology intermediate indicators for main
broad range of projects. and establishment of a types to be published FY2009.
menu of relevant
indicators for each with
advisory notes on
selection and use.

P3.3 Carry out an enhanced Program to be determined Anchor/Regions Subject to funding, program to
program of impact by end FY2008. commence in FY2009.
evaluations for selected
programs.

P3.4 Evaluate experience Evaluate overall success Anchor/Regions Completion by FY2010.
with transport sectorwide of program (including
approaches to lending. sectorwide) approaches
half-way through strategy
period.

P3.5 Support the Terms of reference, Regions Subject to funding, independent
establishment of an modalities, and funding of review to be completed by
independent evaluation of review to be determined. FY2010.
the Sub-Saharan Africa
Transport Policy Program.

94 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Table 6-7D. Process adjustment 4: Capture synergies between transport and other sectors

Key actions Action/indicator By whom Target

P4.1 Actions to be defined Annual review by TSB in Anchor/Regions Implement systematic cross-
and executed by individual consultation with IFC and sector project reviews, starting
regional and anchor units. MIGA. within SDN, to identify
opportunities.

6.7 Resource implications

As the modal diversification of the transport sector continues, the transport staff network itself will
continue to be strengthened in the number of staff with policy and operational skills in urban public
transport, railways, waterborne transport and ports, aviation, and multimodal transport logistics, as
well as in transport safety and security, and transport and energy linkages. The staff that do have
these skills are in great demand by regions and partner countries, and they complement the already
very strong team of roads and highways specialists. Although many staff very competently move
between modes and have broader transport policy and planning skills, there remains a need,
particularly in dealings with the middle-income countries, for key specialists with cutting-edge
subsector and policy skills, both to support more sophisticated operations that are demanded by
country programs and to lead high-level policy dialogue.

The five directions of the strategy will also tend to increase the time and resources that are on
average committed to program delivery. It is therefore important to increase the proportion of
transport lending made through program approaches (process adjustment 1) which may help to offset
this tendency. Bank transport staff have achieved substantial labor productivity gains: an increase of
more than 100 percent in IBRD/IDA lending per transport employee since the low point in FY2000 (in
FY2007 average lending per transport employee reached around $40 million, one of the highest levels
in the Bank). This productivity gain has partly been accomplished by reducing project preparation
time. The World Bank Group will periodically review staff resources to ensure that the transport
network has the resource levels and skills mix to implement the transport business strategy.

To pursue a stronger agenda in policy and governance will require a reallocation of funding for analytic
and advisory activities that support policy dialogue and implementation. The Bank intends to seek
donor grants for some of the analytic and advisory activity required by the transport business
strategy. It is also anticipated that, with increased lending activity, analytic and advisory activities
funded by loans will be increased proportionately.

Finally, the Bank Group's approach to transport must continually remain a process of learning and
evolving. It will therefore be flexible and adaptable to country demand for financial support and policy
advisory activities. The Bank Group will strive to be opportunistic and adaptable when good ideas for
promoting development in the transport sector need its support.

ANNEX A
TRANSPORT LENDING TRENDS 1996�2007

Figures A-1 to A-14 summarize trends in IBRD and IDA lending for transport over the past twelve
fiscal years. Over that period, average annual transport lending amounts to 15 percent of the Bank's
total lending (Figure A-1), though from year to year it has varied from 11 percent to 20 percent of the
total (Figure A-2). Total transport lending declined between FY1999 and FY2001, recovering to a high
point of US$5 billion in FY2007 (Figure A-3). The average annual transport sector commitment is
US$3.3 billion. With fluctuations, the average number of dedicated and non-dedicated transport
projects is about 78 a year (Figure A-4). The average size of dedicated transport projects increased
from US$90 million in FY1996 to US$120 million in FY2005, and is around US$60 million in FY 2007
(Figure A-5). At the end of FY2007, the Bank's active transport portfolio stands at US$22.5 billion, of
which 75 percent is for roads and highway projects (Figure A-6).

Transport commitment by region fluctuates greatly from year to year (Figure A-7). But compared with
the first six years of the period, the second six-year period shows a marked increase in lending to
South Asia and Sub-Saharan Africa (Figure A-8). In terms of commitment by mode of transport, roads
and highways remain the dominant uses of funds throughout the period (Figure A-9) at around three-
quarters of all transport lending. However, between the first half of the period and the second half,
roads and highways commitments have decreased by 12%, while general transport has increased by
11% (Figure A-10). In addition to lending, the Bank mobilizes resources from many trust funds for
technical advisory services (TA) in transport to partner countries (Figures A-11 and A-12). It also
undertakes or commissions its own policy and technical reviews, which are designated as economic
and sector work (ESW), (Figures A-13 and A-14).

For an activity to qualify as an economic and sector work by IBRD/IDA, it must meet all of the
following criteria: (a) involve original analytic effort; (b) be undertaken with the intent of influencing
policies and programs of an external client; and (c) be "owned" by a specific Bank unit and represent
the views of the Bank (rather than attribution to individual authors, be they Bank staff or consultants).
For an activity to qualify as technical assistance, it must meet three criteria: (a) have the primary
intent of enabling an external client to implement reforms and/or strengthen institutions; (b) be free-
standing (i.e., not compose an essential part of a lending project or economic and sector work); and
(c) be linked to a Bank unit, with clear accountability for the service provided.

96 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Figure A-1. Annual average Bank lending by Figure A-2. Transport as a proportion of Bank
sector FY1996�FY2007 lending FY1996�FY2007

Industry and 25%
trade
7% Agriculture
7%
Water/sanit/fld 20%
prot
7% Public admin,
Law 15%
Transportation 22%

15%
10%

Info &
communication
1% 5%
Energy & mining
10% Education
8% 0%
Health & social Finance FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
serv 11%

12%

Transport Total Lending = 39.5 USD billion

Figure A-3. Annual value of transport Figure A-4. Annual number of transport projects
commitments FY1996�FY2007 FY1996�FY2007

140
6,000

5,000 120

n
io 4,000 100
ill
m 3,000 80
DSU 2,000 60

1,000
40
0
6 8 0 2 4 20
FY9 FY 97 FY9 FY 99 FY0 FY 01 FY0 FY 03 FY0 FY 05 06 07
FY FY
0
Dedicated transport projects Non-dedicated transport projects FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

Dedicated transport projects Non-dedicated transport projects

Transport Average Lending/Year = USD 3.3 billion

Average Projects/Year = 78 projects

Figure A-5. Annual average size of a transport Figure A-6. Transport portfolio of active projects
project FY1996�FY2007 at end of FY2007

160 Gen transport
sector

140 13%

120 Railways
7%
n 100
lioil Aviation

m 2%
DSU 80

60 Roads &
Ports/water/ highways
shipping
40 75%
3%

0
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

Dedicated transport projects Non-dedicated transport projects
Transport Portfolio = 22.5 USD billion

Annex A: Transport Lending Trends 1996-2007 97

Figure A-7. Transport commitments by region Figure A-8. Annual average transport lending by
FY1996�FY2007 region FY1996�FY2007

6,000

5,000

n 4,000

lioil
m 3,000
DSU
2,000

1,000

0
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

AFR EAP SAR ECA MNA LCR

Figure A-9. Transport commitments by mode Figure A-10. Annual average transport lending,
FY1996�FY2007 by mode FY1996�FY2007

6,000.00

5,000.00

4,000.00

noili
m
D 3,000.00

2,000.00

1,000.00

0.00
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

Roads & highways Ports/water/shipping Aviation Railways Gen transport sector

Figure A-11. Annual number of technical Figure A-12. Annual number of technical
assistance products FY2001�FY2007 assistance products by region FY2001�FY2007

40 50

35 45

40
30
35
25 30

20 25

15 20

15
10
10

5 5

0 0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 AFR EAP SAR ECA MNA LCR other

dedicated non-dedicated dedicated non-dedicated

98 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Figure A-13. Annual number of economic and Figure A-14. Annual number of economic and
sector work products FY2001�FY2007 sector work products by region FY2001�FY2007

120 160

140
100

120

80
100

60 80

60
40

20
20

0 0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 AFR EAP SAR ECA MNA LCR other

dedicated non-dedicated dedicated non-dedicated

Figure A-15. IFC transport sector commitments Figure A-16. MIGA Transport sector
FY1999-FY2007 engagements FY1999�FY2007

450 120 1
2
400 13
15 100
350 2
12
300
n 10 80

iolli 250 11 noilli
m 11 m 60
DSU 200 D
1 7 US
150 13 40

100 1
20 1
50 1

0 0
FY99 F00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY98 FY99 F00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

Number of Projects Number of Projects

ANNEX B
MAIN OPPORTUNITIES FOR INCREASED PRIVATE SECTOR PARTICIPATION
IN TRANSPORT ACTIVITIES

ROADS

Infrastructure Services Ancillary

Toll road concessions" Road freight haulage services Car parking, service areas, truck
"Shadow' toll road concessions stops, etc.
Bus services (under competition or a
Public toll-road management and contestable concession) Vehicle inspection and compliance
toll-collection contracts services
Tram services (under concession)
Maintenance contracts Intelligent Highway Systems
Taxi services technology services
Performance-based maintenance
contracts Paratransit services of various kinds

RAILWAYS

Infrastructure Services Ancillary

Privatization or concessioning of Privatization or concessioning of Infrastructure maintenance
public rail networks public train operating companies
Rolling stock heavy maintenance
Sale of low density lines to low Participation of private train and overhaul
cost private operators operating companies through track
access rights Rolling stock availability contracts
Sale of mineral lines to prime including supply and maintenance
users (All options are available in principle (power by the hour)
for passenger and freight operations
Construction concessions for though in practice are easier to Rolling stock leasing contracts
building new lines or for major attain in freight operations.)
upgrades Sale or lease of right of way for
telecommunications, etc.
Integrated construction/train
operating concessions Concessions for major passenger
station upgradings

Train catering, revenue collection,
land sales/rental, etc.

100 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

URBAN TRANSPORT

Infrastructure Services Ancillary

Privatization or concessioning of All new country assistance strategies Infrastructure construction and
existing fixed track public to be reviewed by regions to assess major rehabilitation contracts
transport networks suitability of including an urban
public transport program Vehicle manufacturing and overhaul
Construction concessions for
building new lines or for major Concessions for fixed track transport Vehicle availability contracts
upgrades services including supply and maintenance
(power by the hour)
Integrated construction, service Bus services (under competition or a
operating concessions contestable concession) Vehicle leasing contracts

Taxi services Concessions for major passenger
facilities (bus stations,
Paratransit services interchanges, stations, etc.)

Courier services Development of airspace rights,
advertising, etc.

PORTS AND MARITIME TRANSPORT

Infrastructure Services Ancillary

Concessioning of seaports Shipping services Pilotage and lighterage

Private ownership of dedicated Concessioning or leasing of seaport Dredging
ports/terminals (e.g., oil, bulk container or other terminals under a
materials, etc.) landlord model Maintenance of navigation aides

Concessions for provision of new Security
port facilities
Container storage, repairs, etc.
Infrastructure management
contracts Warehousing and cold storage, etc.

Annex B: Main opportunities for increased private sector participation in transport activities 101

INLAND WATERWAYS

Infrastructure Services Ancillary

Concessioning of whole inland Barging and river shipping services Pilotage and lighterage
waterway ports
Concessioning or leasing of riverport Dredging
Concessioning or leasing of port container or other terminals under a
terminals under a landlord model landlord model Maintenance of navigation aides

Private ownership of dedicated Concessions or management Security
riverports/terminals (e.g., oil, contracts for road ferries
bulk materials, etc.) Container storage, repairs, etc.
Private ferries and other passenger
Concessions for provision of new vessels Warehousing and cold storage, etc.
riverport facilities

Port management contract

AIRPORTS AND AVIATION

Infrastructure Services Ancillary

Privatization or concessioning of Airlines Air navigation infrastructure
existing airports concessions or contracts

Construction concessions for Privatization, concessioning or Aircraft catering, baggage handling,
building new airports or for major leasing of existing or new airport fire services, security, parking, etc.
upgrades passenger terminals
Aircraft maintenance, etc.
Integrated construction/airport
operating concessions Facilities management contracts for Aircraft leasing
passenger terminals, etc.
Airport management contracts

Airfreight infrastructure Airfreight services

102 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

MULTIMODAL TRANSPORT

Infrastructure Services Ancillary

Transport interchanges Freight logistics planning including Product inventory management
supplying or arranging freight pick-
Inland container depots and up and delivery, storage, load Packaging
other specialist terminals consolidation/deconsolidation, freight
forwarding by one or more modes, Product testing and quality control
Warehousing/storage facilities customs clearance, transport
insurance, information services Assembly and installation of goods
on delivery
Courier services (full service mix)
Container hire, leasing, cleaning
repair, insurance, etc.

ANNEX C
MIGA PRODUCTS

MIGA guarantees are designed to help companies overcome risk aversion, particularly for highly
capital-intensive investments that are typical of the transport sector, in countries where there is a
perception of high risk. The types of coverage include:

1. Transfer Restriction
Transfer Restriction Coverage protects against (i) the inability to convert, from local currency into
guarantee currency, loan payments, dividends, profits, and proceeds from the disposal of the
guaranteed investment, and (ii) host government actions that prevent the transfer of the guarantee
currency outside the host country, including the failure of the government to grant an authorization
for the conversion or the transfer of such currency. Compensation is based on the guaranteed
percentage of any payments that cannot be converted or transferred.

2. Expropriation
Expropriation Coverage protects against losses attributable to measures taken or approved by the
host government that deprive the guarantee holder of its ownership or control over its investment, or
in the case of debt, results in the project enterprise being unable to meet its obligations to the lender.
Both direct and indirect (creeping) expropriation are covered. Compensation for equity is based on the
guaranteed percentage of the net book value of the guaranteed investment in the project enterprise.
For debt, compensation is based on the guaranteed percentage of the principal and interest that is in
default as a result of expropriation.

3. War and Civil Disturbance
War and Civil Disturbance Coverage protects against losses arising as a result of military action or civil
disturbance in the host country, including sabotage and terrorism, that destroys or damages tangible
assets of the project enterprise or interferes with its operations (business interruption), or, in the case
of debt, results in the project enterprise being unable to meet its obligations to the lender.
Compensation is based on the guaranteed percentage of the value of the assets destroyed or
damaged or, in the case of business interruption, the net book value of the guaranteed equity
investment. For debt, compensation is based on the guaranteed percentage of the principal and
interest that is in default as a result of war and civil disturbance.

4. Breach of Contract
Breach of Contract Coverage protects against losses arising from a repudiation or breach by the host
government of a contract entered into with the guarantee holder, provided that a final and binding
arbitration award or judicial decision has been rendered in favor of the guarantee holder and cannot
be enforced against the host government. Compensation is based on the amount that the guarantee
holder is entitled to recover from the host government in accordance with the terms of the arbitration
award or judicial decision.30

30MIGA's Convention provides for coverage under Breach of Contract in three different scenarios: (i) when the
Guarantee Holder does not have recourse to a judicial or arbitral forum to determine the claim; (ii) a decision by
such forum is not rendered within a reasonable period of time; or (iii) such a decision cannot be enforced.

103

ANNEX D
WORLD BANK REGIONS

The country composition of "regions" as used in this publication is based on the World Bank's
analytical regions and may differ from common geographic usage.

The World Bank's regions and their acronyms:

AFR Africa (Sub-Saharan)
EAP East Asia and Pacific
ECA Europe and Central Asia
LAC Latin America and the Caribbean
MNA Middle East and North Africa
SAR South Asia

Countries eligible for World Bank borrowing (by region):

Africa (AFR) Mali East Asia and Pacific
Angola Mauritania (EAP)
Benin Mauritius Cambodia
Botswana Mozambique China
Burkina Faso Namibia Fiji
Burundi Niger Indonesia
Cameroon Nigeria Kiribati
Cape Verde Rwanda Korea, Republic of
Central African Republic S�o Tom� and Principe Lao People's Democratic
Chad Senegal Republic
Comoros Seychelles Malaysia
Congo, Democratic Republic of Sierra Leone Marshall Islands
Congo, Republic of Somalia Micronesia,
C�te d'Ivoire South Africa Federated States of
Equatorial Guinea Sudan Mongolia
Eritrea Swaziland Myanmar
Ethiopia Tanzania Palau
Gabon Togo Papua New Guinea
The Gambia Uganda Philippines
Ghana Zambia Samoa
Guinea Zimbabwe Solomon Islands
Guinea-Bissau Thailand
Kenya Timor-Leste
Lesotho Tonga
Liberia Vanuatu
Madagascar Vietnam
Malawi

105

106 SAFE, CLEAN, AND AFFORDABLE... TRANSPORT FOR DEVELOPMENT

Europe and Central Asia Latin America and Trinidad and Tobago
(ECA) the Caribbean (LAC) Uruguay
Albania Antigua and Barbuda Venezuela,
Armenia Argentina Rep�blica Bolivariana de
Azerbaijan Belize
Belarus Bolivia Middle East and
Bosnia and Herzegovina Brazil North Africa (MNA)
Bulgaria Chile Algeria
Croatia Colombia Djibouti
Georgia Costa Rica Egypt, Arab Republic of
Hungary Dominica Iran, Islamic Republic of
Kazakhstan Dominican Republic Iraq
Kyrgyz Republic Ecuador Jordan
Latvia El Salvador Lebanon
Lithuania Grenada Morocco
Macedonia, former Yugoslav Guatemala Syrian Arab Republic
Republic of Guyana Tunisia
Moldova Haiti Yemen, Republic of
Poland Honduras
Romania Jamaica South Asia (SAR)
Russian Federation Mexico Afghanistan
Serbia and Montenegro Nicaragua Bangladesh
Slovak Republic Panama Bhutan
Tajikistan Paraguay India
Turkey Peru Maldives
Turkmenistan St. Kitts and Nevis Nepal
Ukraine St. Lucia Pakistan
Uzbekistan St. Vincent and the Grenadines Sri Lanka
Suriname

Since 1996 the following countries graduated from the World Bank and are no longer eligible for lending:
Slovenia (2004), Czech Republic (2005), Estonia, Lithuania (2006), Hungary, Latvia (2007)

The following countries graduated from the World Bank and later returned to borrower status:
Country Last year borrowed Year of reinitiatied
(before relapse) borrowing
Costa Rica 1994 2000
Malaysia 1994 1998
Korea, Republic of 1995 1998
Chile 1996 1999

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ADDITIONAL RESOURCES

A full list of all recent and forthcoming World Bank transport sector studies, toolkits, guidance notes,
and related information can be found at:

Transport Anchor Website
http://www.worldbank.org/transport/

Africa Region Transport Website
http://www.worldbank.org/afr/transport/

Sub-Saharan Africa Transport Policy Program (SSATP)
http://www.worldbank.org/afr/ssatp/

East Asia and Pacific Transport Website
http://www.worldbank.org/eaptransport

Europe and Central Asia Transport Website
http://www.worldbank.org/eca/transport/

Latin America and Caribbean Transport Website
http://www.worldbank.org/lactransport/

Middle East and North Africa Transport Website
http://www.worldbank.org/mena/ (click on Development Topics and select Transport)

South Asia Transport Website
http://www.worldbank.org/sartransport/

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