Transport Infrastructure and Economic Growth Report (international version) This report is a short international version of our main report on Russian released in 20191. The report classifies and describes the main types of socio-economic effects, both direct and indirect, arising from implementation of transport projects. The given list and classification of effects do not claim to be exhaustive, and our proposed methods do not claim to be universal and exceptional.
In the report, some formulas and approaches are given for calculating various effects from the development of transport. We have set the task to accumulate existing and create some new approaches in terms of maximum applicability «here and now». As it will be shown in the review of world experience, there are sufficiently developed software products with complex mathematical models for evaluating the effects. At the same time, there is a lack of literature on this topic that carry a direct physical meaning of these effects. We deliberately omit all complex formulas (for example, in I/O models for estimating multipliers or calculating elasticity and damping coefficients for agglomeration effects) in order to focus on the semantic description of effects types.
The report may be of interest to all researchers and experts of the transport sector, economists, and statesmen.
Scientific guidance Petr Lavrienko, Pavel Chistyakov
Authors Anton Vlasov, Anastasiia Glazunova, Mikhail Dmitriev, Valerii Dymov, Nikolai Isain, Ekaterina Kozyreva, Vladimir Kosoi, Karina Malaia, Aleksandr Morozov, Tatiana Pavlova, Anna Romashina, Vladimir Sviridenkov, Igor Smirnov, Pavel Stepanov, Maksim Fadeev, Oksana Filippova, Aleksandr Shirov, Dmitrii Shults
Special thanks to Tatiana Mikhailova and Natalia Trunova as well as Institute of Economic Forecasting, RAS
1 https://infraeconomy.com/effecty Content
Key findings 4
Dialog with an opponent 6
1. Investment in the transportation industry 11
2. Existing methods and models for assessing the impact of transport projects on economic development 15
2.1 Methodological approaches 15
2.2 Models for assessing economic effects 16
3. Types of socio-economic effects of transport development and suggestions for their assessment methodology 19
3.1 Effects of investment demand related to the implementation of infrastructure projects 20
3.2 Effects that have a direct impact on the transportation industry 22
3.3 Agglomeration effects 22
3.4 Effects of industrial output growth, associated with the elimination of infrastructure constraints 27
3.6 Effects of Increasing the Reliability of Freight Transport (Reliability Effects) 31
3.7 Projects of integrated territorial development 34
3.8 Environmental effects 36
3.9 Effects of increasing transport accessibility to global markets 38
Conclusion 40
References 42
Quantitative analysis of socio-economic effects. The Yekaterinburg–Chelyabinsk high-speed railway (HSR) 46 4 INFRASTRUCTURE ECONOMIC CENTRE
Key findings
It is difficult to overestimate the impact of the transportation industry on the economy. Transport provides the ability to move people and goods, being a necessary condition for creating a single economic space. Transport is the basis of trade infrastructure; it has a significant impact on the competitiveness of certain industries in countries and regions. Imperfections in the transport system (for example, bottlenecks, limited multimodality, high tariffs) negatively affect the efficiency of the country’s economy as a whole. Conversely, accelerated development of transport infrastructure and improvement of transport and logistics systems can have a significant impact on economic growth and, ultimately, on the well-being of the population.
Transport projects affect a wide range of sectors of the economy during the construction period by creating an order for industry and services. However, it is the operational stage that transport causes the main socio-economic effects due to the impact on transport costs (in the broad sense) and factor productivity.
Not only passengers and cargo-interests benefit from transport projects. For example, acceleration of commuter traffic and inclusion of new cities in agglomerations provides an economic effect for companies by expanding the labor market and sales, and all employees of a company benefit from this, including those who live in the suburban and do not commute. If a remote area of a city or region has become “closer” to the center, where “life is in full swing”, this leads to an increase in the population’s involvement in the economy, creates new incentives for personal development, for example, due to arrival of new residents with a higher level of education and consumer standards. Thus, indirect effects at the operational stage are obtained not only by direct users of the infrastructure, but also by organizations in which they work and localities in which they live.
Assessment of the socio-economic efficiency of transport projects should be mandatory when making decisions regarding their implementation. The results of quantitative assessment of effects allow us to assess the feasibility of project implementation more meaningfully, compare projects with each other, and choose between different technical solutions. Indirect effects can play a significant role in determining the structure of project financing, the size and format of state support for the project.
For a long time, the liberal economic agenda included the task of minimizing public expenditure on public infrastructure and, if possible, replacing it with extra-budgetary investment. The first victims of such economy were often transport projects due to their capital intensity. Understanding indirect effects allows us to conclude that direct budget savings should not always be the main criterion for choosing a particular project. In some cases, assessment of indirect effects shows that a project that is cheaper for the state may be less profitable than a project that is more expensive, but more in demand from the population and businesses. This seemingly trivial principle is critical in shaping the country’s infrastructure policy. It follows that the more universal a project is and the more people and companies will experience positive changes in transport communication (reducing travel time, reducing costs, improving the reliability and safety of transport, and so on), the greater the indirect effects on the economy are. Conversely, other things being equal, projects that benefit one particular company are less valuable for the country’s development. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 5
The socio-economic effect depends not only on the scope of population and business coverage by changes in transport, but also on the intensity of these changes. For example, the shorter the travel time between major cities is, the higher the indirect effects are, and in some cases, this relationship is not linear, but exponential. This means that in order to achieve greater economic effects, it is better to concentrate investment in space in a smaller number of areas, but with more appreciable gains for users to improve transport accessibility, than to “spread a thin layer” across the country by implementing local events. For example, other things being equal, it is better to reconstruct one road and improve its category throughout its entire length than to make a dozen four-lane road sections of several kilometers apiece in different parts of the country.
The two conclusions listed above about population coverage and the intensity of changes are, above all, important for countries with a low initial level of transport infrastructure development, which include many CIS countries (especially Russia), countries of South America, Asia (especially India), and others. This is also relevant for China, which already has a significantly developed transport infrastructure and with that, great opportunities for its further development. Based on these principles, one can identify the project classes for each country and region that have the greatest impact on the economy since they improve transport accessibility.
In the EU countries, the U.S., Australia, and some other countries, methodological state-level work to assess the indirect effects of infrastructure development was started 20–30 years ago. As a result, today they have a whole set of proven, approved methods, the use of which makes it possible to effectively evaluate infrastructure projects in a comprehensive manner. In Russia, this area of research has remained exclusively the subject of interest of academic economists for many years. Only in 2019, the Ministry of Economic Development of Russia developed a Methodology for assessing the socio-economic effects of transport projects, which is a huge advance in this issue. Our team participated in the development of the Methodology, and many of the provisions of this Report correspond to the approaches of the Ministry of Economic Development. At the same time, we try to expand these approaches.
Over the past 10–15 years, several specialized software products have been developed around the world to assess the impact of transport projects on the economy at the city, regional, or national level. These software products are used by infrastructure companies and government authorities when forming infrastructure policies and making decisions on particular infrastructure projects. Infrastructure Economic Centre has also followed this path. Using the gained international experience and Russian data, we have created and are now improving the TMF software product2, in which the assessment of socio-economic effects is one of the functional blocks.
2 https://infraeconomy.com/tmf-transport-mobility-forecast 6 INFRASTRUCTURE ECONOMIC CENTRE
Dialog with an opponent
We have decided not to write the introduction to the report in the classicgenre of a short “essay”. There are many similar essays on the impact of transport on the economy in the world literature on that topic. The Report itself is devoted to it. We decided to make the introduction informal and devote it to criticizing our own approaches. And to present it as a conversation with an opponent. The arguments and counterarguments given below are taken from real dialogs in which the authors of the Report participated.
A: You claim that there are transport projects that have more B: After the NEG theory was formulated, it turned out that budget effects than the budget costs for them. The need for it perfectly fits the statistics of trade not only between transport infrastructure is obvious, but how can we quantify countries, but also between regions. When it comes to its contribution to economic growth, and even more so trade between countries, total costs are slightly broader compare different projects in regard to this contribution? than merely transport costs. They include issues of customs, duties and taxes, perception of foreign products, B: What usually springs to mind when it comes to the effects of and so on. When we talk about trade within a country transport projects? Reduction of transport costs in a broad and between cities, the factor of net transport costs sense. Paul Krugman created the theory of New Economic come to the fore, and all other barriers are low. In other Geography (NEG) in the 1990s. According to this theory, words, according to both theory and practice, changes two countries trade with each other in a volume inversely in transport costs within a country have an even greater dependent on transport costs. Before Krugman, Ricardo, effect than when we talk about world trade. That is why the well-known classical economist, presented a theory NEG can perfectly help us deal with this issue. according to which Russia buys tea and exotic fruits from Vietnam and sells metal structures and gas, as the climate, А: Net transport costs are more or less clear. It is easy to technology, and other factors thus predetermined the calculate fuel savings, vehicle depreciation, wages, and specialization of these countries. In reality, everything is even working capital savings. Moreover, it is important more complicated, and we see that Germany and Belgium to take into account not only the effects directly in the trade sewing machines with each other, because these transport sector, but also in all sectors of the economy machines are slightly different. Italy and Greece mutually that have transport costs, as well as the effects on related trade all possible types of food. The real economy shows industries and on export growth. But these are all fairly that countries that are closely located (which means that small effects. You say that infrastructure affects economic growth not only by reducing total transport costs, and other effects are even more significant.
B: First, if a country implements projects that radically change its transport accessibility (or its individual parts), these effects can be very significant. An example: the acceleration of container traffic on the Trans-Siberian Railway between Asia and Europe up to 7 days and the costs are low) and have a similar production structure creation of high-speed road corridors. According to our trade more. Lower transport costs lead to an increase in rough estimates, the increased accessibility of Russia’s trade, which means an increase in economic activity. The landlocked continental regions to global markets through first answer to the question: we can compare transport these projects provides almost a third of all the effects projects in regard to their contribution to economic growth on economic growth from the currently implemented by assessing their impact on trade costs. Comprehensive Infrastructure Development Plan. There are many examples like this within individual countries: A: How does the theory created to describe world trade help everyone knows what a boost to economic development to assess the impact of transport on trade between regions was given by the construction of high-speed railways in and cities? It seems like it is only relevant to the export China or France. infrastructure. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 7
As a rule, a reduction in total transport costs gives a one particular line is not linked to a fixed list of shippers diminishing return on growth in production and exports. in the long term. Even regarding raw materials (coal, ore), If transportation by all modes of transport is developed, if it is not always obvious who exactly will take goods and speeds are close to the limit on these modes of transport, where will they take them in the long term for over 5 years. and fares are competitive, it is difficult to get large effects Assessment of effects should be based on assessment of from further investment in infrastructure. But there are the market situation “from above”, and not on the plans also reverse cases, which in some sources are called of a particular shipper, because the planning horizon for under-delivery. This refers to situations in which the lack such projects is always long. In addition, infrastructure of infrastructure or the exhaustion of its capacity does not helps to overcome export barriers. allow increasing production volumes, regardless of how favorable the factors of demand and competition are. Finally, infrastructure development will benefit not only An example of this situation is the impossibility of further shippers, but also all their contractors; the investment increasing coal exports from the Central regions of Russia climate of a region as a whole will improve by increasing to Asian countries through the Far Eastern ports without transport accessibility to global markets, and so on. Large- debottlenecking on the Baikal–Amur Railway and Trans- scale transport construction projects launch entire sectors Siberian Railway. Theoretically, coal can be exported of the economy themselves. But here we turn to the effects to Asia via Saint Petersburg, but such transport costs are of investment demand, which are caused by the order for excessive. In such situations, reducing transport costs as a industrial products and services that is formed during the result of debottlenecking can lead to the creation of new construction stage. large enterprises and a significant increase in output at existing ones. In today’s Australia, further growth in coal А: You mean, the more expensive the project is, the more exports is hindered by insufficient capacity of dedicated effects there are? It is difficult to agree with this judgement. coal railway corridors. In India, many ports through At least, if investment is budgetary, private investment may which coal is imported are characterized by excessive be replaced in the productive sectors of the economy, and congestion at entrances/exits, which may soon provoke real economic growth will be slowed down, rather than an energy disaster. accelerated.
B: Correct project estimates are required to correctly assess the effects. Overstating the cost of projects, of course, leads to overstating the effects. Therefore, you should use different multipliers for different types of projects. With this principle, projects that have more high-tech products and fewer imports in their capital expenditure structure get a higher rating. But the impact of the project scale on the value of investment demand effects cannot be denied, especially if there are no overestimates. А: Elimination of under-delivery is taken into account in the direct effects, the revenue of operators, and it could be calculated even better if the so-called investment tariff was introduced, in which the development of infrastructure focused primarily on the export of raw materials is paid for by the exporters themselves. And if the modernization of the infrastructure for exporting the same coal cannot be paid off by the tariff, then the country does not need such an increase in production volumes. In this case, this growth is essentially subsidized, and it is not necessary that Replacing private investment with public investment? subsidies are received by an industry with a sustainable Yes, we agree that there is such a risk. To minimize these return on economic growth. negative processes, we need tools that involve locked- up market financial resources to a greater extent and to B: First, even if there is an investment tariff, and it is still a lesser extent compete for debt and equity financing profitable for the producer to increase production as a that can be directed to the real economy. In the today” result of the appearance of additional freight capacity, world practice, there are many tools to attract private the effects received by carriers can be correctly summed financing for long-term infrastructure projects, including up with the effects received by producers (at least if we TIF and infrastructure bonds. But for now, this is relevant are talking about effects on gross value added). Second, in the most developed countries of the world, where not all infrastructure costs need to be covered by the the infrastructure investment market itself has existed for tariff burden on shippers. The principle of infrastructure many decades. In Russia, for example, these tools are development is network-based, i. e. the improvement of only at the stage of discussions, which are so far not very 8 INFRASTRUCTURE ECONOMIC CENTRE
successful. In 2017–2018, the mechanism of infrastructure mortgage was widely discussed in Russia; this mortgage was supposed to direct the liquidity of financial institutions to infrastructure through specialized securities guaranteed by the state. The size of such state support was planned to be determined by taking into account the contribution to economic growth due to socio-economic effects. We hope that this discussion will resume, but it should be noted that this is only possible for countries with a low debt burden on the state budget, which include Russia. The topic of attracting extra-budgetary investments in Russia has become particularly relevant today. First, the country is implementing an ambitious plan to increase the share of investment in GDP to 25 % from the current 20 % А: But causes and effects are mixed up here! On the in just 5 years. Second, the coronavirus epidemic in 2020 contrary, we must first achieve a high level of economic and the resulting global economic crisis have shown a development (through policies that are mostly outside the great vulnerability of the transport industry. Using mainly physical infrastructure), and this will allow us to invest in budget funds for its development is not suitable for the new infrastructure. Agglomeration effects are caused by a long development model. historical process of urbanization and, in general, by the formation of a settlement system, rather than by transport. А: The effects of developing infrastructure for cargo transportation are a much clearer thing than the effects of B: This question boils down to the concept of endogeneity, implementing projects aimed at passenger transportation. which is also important for other types of effects. Projects like HSR or subsidizing air transportation —all Endogeneity is a complex of internal environmental factors these activities meet significantly more resistance than that significantly affect the evolution of phenomena, cargo projects. What effects are there? Or are these just as well as industrial, technical, commercial, and other examples of projects where the more expensive the project economic structures. In simpler terms, endogeneity is, the more effects you think it gives? is a process when the cause-and-effect relationship operates in two directions, direct and reverse. As for B: This is primarily about agglomeration effects. They arise agglomeration effects, how do we understand what from the fact that economic ties between localities are comes first: scale or performance? And then we face the being strengthened or expanded due to the growing question: does population growth in the agglomeration density of economic agents. Due to increasing density of lead to an increase in labor productivity? If so (i. e. the population and business, the efficiency of labor (and the connection is direct), then agglomeration effects total factor productivity) is increasing. Why? A. Marshall exist. We should understand that there can be no such answered this question by identifying three key groups of factors: a larger sales market, a larger labor market, and net agglomeration externalities —the best exchange of experience and information. Many researches on that topic are aimed to the elasticity coefficients assessments, which shows how productivity increases as population grows in the agglomeration. On average, foreign estimates indicate an increase in productivity by 5–10 % while doubling population in a zone of 1.5–2-hour extreme in reality: either yes (1) or no (0). Endogeneity accessibility to the center. French and English economists, exists, but we need to understand what proportion of the such as Graham, Combes, and others, can be called estimated agglomeration effects (elasticity coefficients) pioneers in the study of agglomeration effects. is due to the direct effect (net effect), and what is due to the reverse effect (just because of endogeneity). When The agglomeration effect can occur for two reasons. first publications on agglomeration effects appeared First, because of direct population growth in the in France, researchers immediately began to study this agglomeration without expanding its borders. Second, issue. They used various instrumental variables, historical the increase in population may depend on the expansion data first. In their econometric analysis, they took current of the border of 1.5–2-hour accessibility from the center production data (gross value added) and population of the agglomeration and the inclusion of additional data from 100 years ago. The premise was that today’s localities in these borders. And it is here that a new or productivity does not depend much on factors that were reconstructed transport artery (road or railway line) and 100 years ago. Thus, past settlement does not significantly the organization of transport services along it are the affect today’s technologies (and hence productivity), but cause of agglomeration effects. it correlates well with today’s population due to the inertia TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 9
of this indicator. As a result, by eliminating endogeneity, they found that instead of 8–10 % elasticity of productivity in terms of population, it became 5–6 %. This 5–6 % for Europe is the net direct agglomeration effect.
А: It follows that in countries with underdeveloped transport infrastructure, agglomeration effects should be 2 times less than you think now using the example of Russia, doesn’t it?
B: Not really. Similar studies in Russia have shown that there is almost no reduction in agglomeration effects as a result increase in labor productivity, and in municipalities where of eliminating endogeneity. First, cities in Russia were often speed train stops were organized, the growth rate was formed for strategic reasons, and second, there is more higher than the average for the region. The reason for the distance between major cities; there are also long winters demonstrated rapid development of these municipalities, and historically less developed infrastructure, including in our understanding, is the obvious economic advantage transport. As a result, one kilometer of distance “costs’ of high transport connectivity with the Moscow more, which means that it is much more profitable for us agglomeration. At the same time, high frequency of to be closer, and we get more agglomeration effects. This communication during peak hours (and this is really can be regarded as a “low base effect”. The larger the determined by the presence of demand), as well as low gap between the center and the periphery, the greater costs of travel, was important. In any case, you need to the agglomeration effect. We rather underestimate these understand that transport is only a tool, and economic effects. Closer location and lower transport costs have a growth cannot occur without certain prerequisites. major impact on the economy, and we have not learned how to quantify most of this impact yet. А: But population growth will be accompanied by an increase in the cost of housing and the cost of living in А: It looks like agglomeration effects are a panacea. Just general where it was previously cheaper. build roads connecting cities that are already developed, and everyone will be fine. Even if agglomeration effects B: This is often the first argument that is advanced by exist, it is necessary to take into account the demand for opponents of the idea of monetized effects from the movement, otherwise it will turn out that you need to build development of transport networks. Let’s consider it in roads in the desert. more detail. The real estate market is inelastic in the short term, both residential and commercial sectors. B: Of course, it’s much more complicated. Some industries benefit best from increased connectivity, primarily trade, With accelerated transportation, it is assumed that the the financial sector, the insurance sector, and the real economic situation in the new agglomeration areas will estate sector. It’s very simple: the more people there begin to improve. This will lead to a gradual increase are, the more money moves in the economy. But there in the cost of housing due to greater demand from new are also industries that will have a negative effect, such residents of the agglomeration. as raw materials and low-processing industries. Some industries do not get the effect. Generally, we can say, that half of the agglomeration effects are provided by population growth, and the other half by the fact that this industry is already developed in this city. For example, let’s say there is a factory in City A that produces paints. If the city becomes 2 times larger, then the effect will take place: let’s say, 50$ due to the fact that the labor market will become larger, and the sales market will become larger. If a new competitor plant appears in City A, the effect will also be 50$ due to the fact, that there will be competition and exchange of experience (although naturally in the longer term). And if there is a population growth and new competitors appear, the effect will be 100$. The agglomeration effect is greatest In the short term, sellers (and these are the current owners where the economy is already developed and there are who will get a net gain) will, of course, benefit, but is this a prerequisites for further growth. We conducted a study bad thing? Existing residents of the area will increase their in the suburbs of Moscow to identify the impact of the wealth (their property will become more expensive). New launch of speed trains (100–160 km/h) on economic residents understand the increased costs due to proximity development, and found that after 2015, there was an to the center, this is their conscious choice. In the longer 10 INFRASTRUCTURE ECONOMIC CENTRE
term, construction of new housing will begin, therefore, the price will fall. As a result, the new equilibrium will be purely better than the old one: higher prices, more housing.
А: What about purely negative effects? We all know about the formation of “sleeping towns”, in which nothing good usually happens. At best, they are a burden on the budget (people in them generate little taxes, while the cost of social services must be borne in full). At worst, they turn into deprived ghettos. An example is a suburb of Lyon some time after the launch of the first HSR in France. Will these negative effects outweigh the positive ones?
B: Here we turn to New Economic Geography again. First, let’s talk about suburbs. With reduced travel time to the development of transport, small towns do not disappear center, indeed, more suburban residents will rush to work from the map. Moreover, they can get a new impetus in the center. Moreover, in the suburbs where housing to development. In the long term (and this is important, is cheaper, there will be new residents, commuters. But because negative effects are inevitable in the short or soon a part of offices will move from the center after the even medium term), a new equilibrium is achieved, and residents, and large shopping centers will be created, it is more profitable than the previous one for both an because commercial real estate is cheaper here too. There agglomeration and a small remote town. As in the case will be a new balance of jobs and population. The right with the development of processes within a city, other urban planning policy is a prerequisite for the formation of policy areas, in particular, the balanced development of prosperous suburbs while speeding up transportation to the social sphere, play a great role. the center in the long term. Tax policy and administrative measures should increase the attractiveness of commercial This favorable scenario, of course, is not universal. If real estate construction relative to housing. an industry experiencing an outflow of personnel does not have a natural competitive advantage, owners In the long term, migration from less productive territories will be unlikely to have incentives to invest in improving to more productive ones has a positive effect on both. productivity. Imagine that a young man after graduating from a college moved from a small rural town to a large agglomeration. About 10 years ago, for the first time in history, the In the town, he worked at a sawmill and received a salary proportion of the world’s urban population exceeded of €800. In the agglomeration, he got a job at a furniture that of the rural population. Today, the world’s urban factory and began to receive €1,500, increasing its population has reached 4.2 billion people, or 55 % of the productivity. In the town, due to the outflow of personnel, world’s total population. The process of urbanization is sawmill owners will experience certain difficulties, but if especially typical of a country like Russia, where about their business has a good raw material base and is able 75 % of the population lives in cities today, and this to arrange sales, they will be able to purchase more proportion will not stop growing (in long-term even with the productive logging equipment and even increase revenue Cov-2). The today’s task is only to ensure that there were and productivity with a smaller staff. Working with more not one or two cities that “raise” the economy of the entire complex equipment will require higher qualifications and country —the centers of economic growth —in Russia, but appropriate remuneration. Thus, as the agglomeration much more (which is typical of most developed countries). expands and attracts more migrants, employees in this In order for economic growth to be more uniform, it is field who remain in small towns will receive higher salaries necessary to imagine that all potential growth centers and more incentives to stay in the town. Thanks to the in the country are districts of one large city. In order for a city to develop and have few internal social conflicts, its districts must be connected by transport infrastructure properly. A developed transport system is a necessary condition for economic growth, but not a sufficient one. The smartest transport policy will not have any effect without simultaneous measures to increase human capital and improve the investment climate.
А: I’m not convinced yet. Let’s take a closer look at the methods… TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 11
1. Investment in the transportation industry
According to the long-term economic forecasts of the Organization for Economic Co-operation and Development (OECD), the average annual growth rate of the world economy will be 3% for the period until 2035. Thus, the global GDP will almost double by 2035 to US$130 trillion.
Key drivers of growth will be as follows:
growth of the global population up to 8.3 billion people (+20 % by 2035);
urbanization of the global population: increasing the proportion of people living in cities from 52 % as of today to 58 % by 2030 and 70 % by 20504 (while for OECD countries these values are 15–17 % higher);
outpacing growth in real income;
development of international trade and tourism.
EXPECTED COMPOSITION OF INFRASTRUCTURE INVESTMENT WORLDWIDE UNTIL 2030 %, MGI
2,6 2,6 10,5 15,8 15,8 23,7 28,9
Seaports Airports Railway Water transport Telecommunications Roads Electricity
Such changes in the global economy and population will lead it has historically been underfunded (which was especially to a multiple increase in the burden on infrastructure in most observed in the BRICS countries). According to MGI, the total countries of the world. value of infrastructure assets should be at least 70 % of GDP on average in order not only to maintain but also to develop According to McKinsey Global Institute (MGI) estimates, the infrastructure. Those countries that have a lower share (for minimum need for infrastructure investment in the world is $66 example, Brazil —16 %, Russia —61 %, India—58 %, and even the trillion 5 for the period of 2017–2030 (with an average of $3.7 United States —64 %) should increase investment in infrastructure trillion per year). At the same time, this is only the minimum level at a faster pace, while those that have a higher share (Japan— that is necessary to maintain the current growth rate. These figures 179 %, China —76 %, Germany —71 %) can slightly reduce are based on the historical volume of investment in infrastructure investment in the coming years. over the past 20 years at the level of 3.5–3.8 % of GDP, and by 2030, this figure may reach a value of 4.1 %. At the same time, it should be borne in mind that investment in infrastructure has two directions: first, for the repair and These forecasts do not take into account the outpacing growth maintenance of existing infrastructure, and second, for the in demand for infrastructure due to increasing real incomes and construction of new facilities. This ratio varies from country improving the quality of infrastructure in those countries where to country6. For example, in France, an average of 75 % of
3 OECD Economic Policy Papers —“Looking to 2060: Long-term global growth prospects”. 4 OECD —“Trends in Urbanization and Urban Policies in OECD Countries: What Lessons for China?” 5 McKinsey —“Bridging global infrastructure gaps. Has the World made progress?” 6 OECD.Stat—Transport infrastructure investment and maintenance spending, Infrastructure Economic Centre estimates. 12 INFRASTRUCTURE ECONOMIC CENTRE
investment in railways has been spent on the construction of new picture is observed in regard to highways. Russia has one of facilities over the past 5 years. In Canada and Norway, this ratio the lowest rates among developing and developed countries. is approximately 50:50. China has the most impressive figures: Only 40–45 % of the investment is directed to the construction up to 95 % of investment is directed to the construction of new (including modernization) of new road facilities. In Canada, transport infrastructure (in the sphere of railways). India has one Mexico, France, the United States, and Australia, 70–80 % is of the largest railway networks in the world (4th place), however, directed to the construction of new roads. The figures in Russia up to 80 % of investment is spent on the maintenance and current are comparable to those in India, where only 40 % is spent on repair due to high wear and tear. In Russia, 80 % of investment new construction in the road sector. is spent directly on the construction of new facilities according to the annual reports of Russian Railways. But it is necessary to The indicator of infrastructure investment volume as a share of keep in mind that this item includes not only new kilometers of GDP is often used to assess the long-term prospects for economic railways, but also the modernization of existing tracks or the development (along with other indicators, such as investment in construction of duplicate lines to increase capacity. A different human capital).
SHARE OF INFRASTRUCTURE INVESTMENT AS % OF GDP Global Infrastructure Outlook
9 5,64 China 8 4,08 India 7 3,65 World 6 3,12 World (demand) 5 3,02 S. Korea 4 2,80 Russia 2,42 Italy 3 1,55 USA 2 1,53 Germany 1
2007 2009 2011 2013 2014 2015 2016 2017 2018 (F) 2019 (F) 2020 (F) 2021 (F) 2022 (F)
The forecasts made by the G20 INITIATIVE researchers confirm Group indicates that if the current pace of infrastructure McKinsey’s findings that there is a significant gap between spending continues, there will be a significant deficit of long- actual (2.9 % of global GDP) and necessary (3.6 % of global term investment resources required annually for sufficient and GDP) infrastructure investment. Not taken into account here, balanced reproduction of the corresponding infrastructure in but 2020 is likely to show a drawdown due to the crisis in the many countries of the world in the next two decades. This deficit global economy and restrictive measures due to the pandemic. A is estimated at US$1–1.5 trillion annually7. drawdown will mean a more significant drop in investment amid a general economic decline However, it should be borne in mind that investment in infrastructure is itself a source of economic growth, which is the The indicator of infrastructure investment volume is quite complex main theme of this Report. from the point of view of calculation, since there is often no data on investment in the repair, modernization or expansion of The long-term effects of infrastructure investment on the economy, transport infrastructure. According to the official data from the including productivity and output growth, have been assessed Russian Federal State Statistics Service, the total investment in the for quite some time. In 2018, the European Parliament released Russian economy over the past 10 years has averaged 17–20 % a study on the impact of infrastructure investment (through the (₽19.3 trillion in 2019) of GDP annually. Transport (other than indicator of fixed capital investment in infrastructure-related pipeline transport) accounts for about 13 % of all investments industries). So, all EU countries were divided into 5 groups with today, which is 2.3 % of GDP (₽2.5 trillion in 2019). pronounced links between GDP growth and investment growth:
Many countries underfund the development of national infrastructure due to a lack of resources on the part of the government. A study conducted by the Boston Consulting
7 The Boston Consulting Group—“Bridging the Gap. Meeting the infrastructure challenge with public-private partnerships”. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 13
CLUSTERING OF EU COUNTRIES BY GDP GROWTH AND INFRASTRUCTURE INVESTMENT, AN AVERAGE FOR THE PERIOD OF 2009–2015 %, Council of Europe Development Bank
GDP Investment 10
5 3 3 3 2 1 0 –8 –1
Group 1 Group 2 Group 3 Group 4 Group 5 Spain France Latvia Denmark The U.K. Cyprus The Netherlands Belgium Slovakia Iceland Ireland Czech Republic Finland Hungary Sweden Portugal Lithuania Bulgaria Poor GDP growth Switzerland Greece Slovenia Norway Strong investment Strong GDP growth Croatia Estonia GDP growth growth Growth of investment Italy Austria Growth Zero GDP growth Germany of investment Dramatic fall Romania in investment Poland Poor GDP growth Slight decrease in investment
According to McKinsey analysts, in the long term, an additional 1 % of GDP of investment in the country’s infrastructure will help to create:
3.4 million 1.5 million 1.3 million 0.7 million new jobs in India jobs in the USA jobs in Brazil jobs in Indonesia
McKinsey also claims that $1 of additional investment in the elasticity coefficient of output in the economy as a whole to infrastructure can increase GDP by 20 cents in the long term only the level of transport infrastructure development is 7 %. due to the indirect effect of increasing labor productivity, without taking into account other effects, including construction itself. The World Bank claims9 that an increase in assets in infrastructure sectors of the economy by 2 times leads to GDP growth by an Columbia University in the United States, after conducting average of 15 percentage points (pp), but this applies only to a study8 of 95 countries around the world, claims that doubling developed countries. And the elasticity of output to the level of the density of highways on average leads to an increase in infrastructure development is from 7 to 10 %, which surprisingly economic growth by 1 % annually. An increase in the “total correlates with the data from Columbia University. infrastructure provision” of the economy by 10 % leads to an increase in economy output by 1 %. According to their estimates,
8 The Effect of Transportation Networks on Economic Growth (1993), Columbia University. 9 World Bank—How Much Does Infrastructure Contribute to GDP Growth? 14 INFRASTRUCTURE ECONOMIC CENTRE
We made similar calculations using the example of Russia. Today, Russian transport industry. As a result, it was found that the increase the key strategic document for infrastructure development in the in investment in transport of 1 % of GDP (about ₽1 trillion or $14 short and medium term in Russia is the Comprehensive Plan for billions) today will provide GDP growth of 0.2 % of GDP over a 15- Modernization and Expansion of Transport Infrastructure for year horizon annually. Taking into account the long-term forecast the period up to 2030 (hereinafter referred to as KPMI)10. KPMI of the Ministry of Economic Development of the Russian Federation, defines the development direction of the country’s transport we can calculate that each ruble of investment in transport today system for a period of next 10 years. Total investment expenditure will bring up to 4 rubles of GDP growth over 15 years in total. It under the Comprehensive Plan will amount to about ₽10 trillion should be taken into consideration that according to KPMI, most (or about $140–150 billions), which will amount to an average of of the projects imply construction of new infrastructure facilities, 0.85 % of the anticipated annual GDP volume. Based on our own that is, implementation of capital investment, which always has methodological developments, we calculated the expected future a much larger multiplier compared to the costs of repairing or even effect of KPMI, which will total some ₽ 45 trillion by 2040. Based modernizing existing facilities. on the results obtained, we assessed the investment multiplier of the
AVERAGE MULTIPLICATORS FOR TRANSPORT INDUSTRY
up to 0,7 rubles up to 4 rubles 1 ruble for budget for GPD in transport revenues
TYPICAL SCHEDULE OF EFFECTS ON THE EXAMPLE OF A SUBURBAN COMMUNICATION DEVELOPMENT PROJECT
Effects during the construction phase Effects during the operational phase ≤ x1.5 on GDP ≤ x 2.5 on GDP
The main effects of the dramatic increase “Eternal” effects after reaching the design in business activity (agglomeration effects) capacity, expressed in the growth of transport work, tourist flow, costs saving etc.. All indicators are relative to the “base” scenario without project implementation
1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 11 year 12 year 13 year 14 year 15 year
Construction phase Operation phase
10 In fact, the approach of developing such “packages” that determine the exact direction of infrastructure investment by project and year is now widely used in the world. In particular, Canada, the United States, Australia, Mexico, and other countries have similar versions of the Comprehensive Plan. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 15
2. Existing methods and models for assessing the impact of transport projects on economic development
2.1 Methodological approaches
In world practice, there are three key approaches for assessing, or meet delivery requirements in a shorter period of time, which comparing, ranking, and selecting ongoing projects in the affects their productivity. However, saving time for personal transport sector 11: travel (i. e. vacations or visiting friends and relatives) is more likely to fall into the second category —effects that have real value for Benefit-cost analysis (hereinafter referred to as BCA); people but do not lead to noticeable changes in the structure of income or expenditure in the economy. Economic impact analysis; The BCA assesses only those indicators that can then be Multi-criteria analysis. compared with the costs incurred —mainly income (public or private). At the same time, the economic impact analysis also According to the benefit-cost analysis, effects should be includes an analysis of many other economic categories (jobs, measured quantitatively with the possibility of monetary income, mobility of the population, and so on), which do not assessment, as well as taking into account the distribution over necessarily need to be compared with the costs incurred. Thus, time, which makes it possible to calculate the present value of all the “benefit” component of the BCA is a stripped-down analog benefits and costs. Then, the results obtained can be expressed of the total economic impact. as a net benefit from the project implementation (positive effects minus costs) or as a ratio of total positive effects to costs incurred. The multi-criteria analysis is a fairly specific method used for particular purposes, most often for comparing projects When conducting the economic impact analysis, the impact of and compiling ratings. According to this approach, effects are projects is usually assessed in terms of the following indicators: assessed through quantitative ratings or qualitative assessments. This approach allows us to consider and assess the widest range increase in output; of positive and negative effects, as well as analyze the impact of project implementation on the activities of households and net income growth; businesses. This can include such assessed categories as:
creation of new jobs; The competitiveness of the business (changes in operating expenses of businesses); investment growth. Capacity and efficiency of logistics systems of a business This assessment method includes the following effects: (increased reliability in cargo delivery);
direct effects that lead to changes in cash flows; Availability of jobs (changes in the labor market);
effects that are aimed at the social sphere but do not have Export markets (changes in intermodal connectivity). a direct impact on cash flows. The approaches considered above include a set of indicators The effects of the first category include skimping on operating necessary for assessing an infrastructure project. The choice of expenses or net income. This can include 0 on the cost of an approach is determined by the goals of assessing effects. operating vehicles, as well as on working time for freight and For example, if an assessment is initiated by a state, the relevant commercial transportation. Cost reduction is due to the fact that regulatory body usually needs an assessment conducted in employees can serve more customers during the working day accordance with approved methods and based on official or, at
11 For classification and general description, see “Development of Tools for Assessing Wider Economic Benefits of Transportation”, National Academy of Sciences, 2013. 16 INFRASTRUCTURE ECONOMIC CENTRE
least, easily verifiable data. In this case, as the world’s experience on all areas of the country’s life is often necessary (investment shows, the BCA approach is more often used. At the same time, justification, business plan, concession application, and so on). the most complete assessment of the impact of a planned project In this case, the economic impact analysis effect is usually used.
2.2 Models for assessing economic effects
The models used to assess future effects may differ significantly Input-output models (I/O models); and include different calculation algorithms and input data sets. The main categories of models used in different countries to assess Land-use transport interaction models (LUTI); the impact of infrastructure projects on the economy of a region or country may include (there are many classifications based on Computable general equilibrium models (CGE); different criteria): Econometric models.
Input–Output Models
This model type is used to calculate interindustry relationships The advantages and disadvantages of the input–output models resulting from increased demand and consumption in a particular are widely known. sector. For example, the construction of a transport facility leads to an increase in production, consumption, and employment in In the world’s practice, there are a number of elaborate, manufacturing industries such as metallurgy, building materials, developed input–output models used at the state level, including glass, and so on, which are suppliers. In addition, the described RIMS-II (Regional Input–Output Modeling System)12, IMPLAN models can also track indirect effects that occur due to reduced (Impact Analysis for Planning)13, REMI (Regional Economic transport costs and travel time. Models Inc.)14, and RIM (Russian Interindustry Model)15.
LUTI Models
These models are based on the assumption that improving One of the most well-known models is MEPLAN16, a mathematical accessibility can increase the attractiveness of the territory for algorithm and software product designed to model the economic people, positively affect the development of economic activity in the and geographical development of cities and regions. The regions under consideration, and increase the cost of real estate. MEPLAN model was developed by Marcial Echenique & Partners Ltd, a private company, in the early 1980s. The model Thus, the key area of LUTI research is understanding long-term uses input–output model data as input. This model was used to household behavior in terms of choice of residence, work, determine the effects of the development of transport systems in and spatial movement. In fact, LUTI models are used to assess London and Helsinki. agglomeration effects. These models are also used to model the possible consequences of implementing new policies and projects (primarily in the field of transport) in existing urban systems.
12 https://www.bea.gov/resources/methodologies/RIMSII-user-guide 13 https://www.implan.com/ 14 https://www.remi.com/ 15 http://eng.macroforecast.ru/ 16 https://www.semanticscholar.org/paper/The-MEPLAN-models-of-Bilbao%2C-Leeds-and-Dortmund-Eche%C3%B1ique-Flowerdew/6f2904b0a234c447f44560eb72fe349d857adc5f TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 17
Computable General Equilibrium Approach
Computable General Equilibrium Approach (CGE) is a type of An important advantage of CGE models is the ability to non-linear models that describe interaction of economic sectors: analyze welfare effects. Due to this ability, they are used for the households, industries, the rest of the world, and the public sector. development and optimization of state economic policy measures as well as for calculating compensations to various population The effects of transport infrastructure development are taken groups and subsidies to enterprises in the real sector. into account through the impact on total factor productivity (economies of scale), lower production prime costs and The reverse side of using CGE models is their complexity and the prices, increased competitiveness, increased production and need for special software, as well as some subjectivity in terms of employment, increased investment and foreign trade. hypotheses about the value of certain coefficients. For parameter calibration, special data (social accounting matrix) is required, Thus, CGE models are a complex system of non-linear equations which is a separate methodological task. A serious limitation of describing simultaneous equilibrium in the labor, capital, goods, CGE models is the assumption that the entire economic system is and services markets. The result of the solution to this system is an in equilibrium at each period of time. To overcome this problem, equilibrium of production and prices, employment and wages, a different class of models is used —dynamic stochastic general exports and imports, investment, interest rates and exchange equilibrium models. rates. The most well-known models of this category include Modelling Some CGE models include the unobserved sector and take into International Relationships in Applied General Equilibrium (MIRAGE), account the interaction of the economy and the environment as The Centre of Policy Studies VU-National model, The Regional well as the impact of scientific and technological progress. Economy, Land Use and Transportation Model (RELU-TRAN).
Econometric Methods
Econometric methods are quite extensive in terms of application equilibrium models or LUTI models. In this regard, it is difficult to possibilities. In fact, using econometrics, you can perform call econometrics a separate approach for assessing effects —it is independent research, including forecasting indicators, analyzing rather a tool, both independent and auxiliary. However, the use historical data, searching for elasticity coefficients, and so on. You of econometric methods is widespread in the creation of software can also perform auxiliary calculations within creating general products for assessing the effects of infrastructure development.
TREDIS
We are convinced that the most promising direction in the model is a comprehensive tool for assessing and predicting development of assessing the socio-economic effects of transport socio-economic effects. TREDIS includes an econometric projects is the creation of integrated software. Such programs analysis system, but, like the CGE method, it includes elements already exist today. We see TREDIS as extremely successful of cost and price analysis, as well as their dynamic changes. This in terms of user friendliness. TREDIS is a commercial product, approach, in our opinion, is the most suitable for a comprehensive however, it is widely used by government agencies in the field assessment of transport effects. All such programs have a single of transport regulation in the USA, Canada and Australia. This general scheme for constructing the calculation.
I/O Econometrics Equilibrium Block “Initial data of Initiators the project” BCA Block “External data Block “Effects Assessment” Block “Results Analysis” Recommendations for calculation” Economic impact
Effect type 1 Effect type 2 Recommendations Effect type 3 ... About Methods for Assessing Socio-Economic Effects in Russia
There are several methods for assessing the effects of transport The main result of applying the Methodology is an increase in projects in Russia, and all of them were developed quite recently budget revenues and an increase in GDP. Unfortunately, the (last 5–6 years). Their methodological approaches are indicated methodology does not imply an analysis of the results in terms of in the industry documents of the relevant departments for all modes the CBA, which is undoubtedly the global standard today. of transport. The key disadvantage of these documents is that they are mainly used only within their departments to assess the effects It is assumed that the appendices to the Methodology will contain within a single mode of transport, and the results obtained do not the values of all used partial coefficients and indicators, which play an important role in deciding whether to implement a project will make this document more convenient to use. at the top level. In essence, this is due to the fact that these methods are not coordinated with the Ministry of Economic Development The key disadvantage of the Methodology is the implicit and the Ministry of Finance of the Russian Federation, and the emphasis on assessing road and railway projects. Maritime results obtained are often impossible to verify on one’s own transport, inland water transport, and air transport will receive a (whether they are authentic). Although industry-specific methods priori lower effect assessments. Thus, the Methodology are more are developed by taking into account international experience suitable for comparing projects within a single mode of transport. and are quite elaborate, they are primarily just a set of formulas (not models, even at a simple level), which often require large Another major flaw is the organizational confusion that lasted amounts of input data (which is not provided), which in reality are until the end of 2020, when this version of the report was sometimes available only to departments themselves. Due to this published. The official developer of the Methodology is one fact, the applicability of these approaches is rather limited. of the departments of the Ministry of Economy. But in fact, all data for assessing should be collected (according to the current An attempt to remedy this situation was made by the Ministry regulations) by the Ministry of Transport, which naturally creates of Economic Development of Russia in 2019. This document a conflict, since the responsibility for the reliability of the data and is called Methodology for Assessing the Socio-Economic responsibility for the calculation itself lies with different federal Effects of Construction (Reconstruction) and Operation authorities. of Transport Infrastructure Projects Planned to Be Implemented with the Involvement of Budget Funds and Another disadvantage is that the possibility of using other State Guarantees of the Russian Federation and Constituent industry methodological documents is not reflected. In fact, this Entities of the Russian Federation, as well as the Provision creates a conflict of various guidelines, all of which are approved of Tax Incentives. This Methodology was under developing in by the state and all are valid. We see the solution to this state of 2018–2019 (including with the participation of IEC experts) and affairs in the use of an approach that has proven itself in world was adopted in November 2019. experience. Namely —the use of unified integrated software, the methodology in which is transparent and clear. At the same time, This document is the first great attempt to create a unified one should not limit the methodology itself and approaches to methodological approach for assessing the socio-economic assessment to specific documents, since this area of economic effects of transport projects in the Russian Federation. The science is relatively young and new studies on the topic appear Methodology has several important advantages. First, it takes into constantly. account a number of industry-specific types of effects, which were previously not assessed. The full list of effects types is the following:
effects of investment demand during the construction and operational phase;
direct effects from the transport facilities operators and carriers;
effects for time saving (sometimes it is named as “hours of better time”);
effects of reducing road accidents;
effects of the elimination of infrastructure restrictions, which are expressed in the growth of industrial production;
agglomeration effects. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 19
3. Types of socio-economic effects of transport development and suggestions for their assessment methodology
Currently, in the world scientific literature, there are a large – effects of improving the safety of transport number of possible classifications of socio-economic effects by communication; the stage of the project at which the effects occur, by the direction and channels of influence on the economy, by assessment – effects of improving the reliability of freight transport. methods, and so on. There is no single approach, and all new methodological official documents and scientific publications In addition to regional and interregional transport projects, the only expand the semantic field but do not structure it. report provides an analysis of the effects of urban transport improvement projects. In the main part of our report, we have tried to reduce the whole variety of ways transport projects influence to specific types of The above effects lead not only to economic growth but also effects. At the same time, of course, all possible effects are not to a number of other positive socio-economic types of impact, limited to this list. And the classification itself does not claim to be including increased living standards, expansion of opportunities exceptional. for self-realization of people, strengthening economic connectivity and integration of areas of the country, as well as The development of the main transport infrastructure has a long- expansion of trade exchanges between regions. term positive impact on economic growth due to the following types of effects: This Report will focus on the assessment of two key indicators, namely: effects of increased investment demand for products, materials, components and services required for the – gross value added; construction and operation of an infrastructure facility, including the purchase of machinery and equipment, as – budget revenue. well as ongoing maintenance and repair work; By the value-added method, GDP (GRP) is calculated as the direct effects that occur in the course of economic sum of gross values added (GVA) for all economic activities in (operational) activities of the operator and the owner of the country (region), adjusted for net taxes. For this reason, if the infrastructure (participants in the infrastructure project). the concept of GVA growth is used in formulas hereinafter in the Direct effects should be assessed within the project’s report, it is equated to the concept of GDP (GRP) growth. financial model; For a larger number of effects, the assessment is performed effects of improving transport accessibility of territories, primarily for the gross value added indicator. Unless otherwise including: indicated, the increase in budget revenues is estimated based on the share of taxes of all types in the GRP of the region or the – agglomeration effects; country’s GDP (it is advisable to exclude “raw” taxes).
– effects resulting from the output growth achieved Unless specified separately, each variable in the formulas is by the elimination of infrastructure restrictions not a value for the year but the sum for the entire calculation (debottlenecking). period (so the t time index is omitted for ease of perception of the formulas). effects of changing infrastructure parameters, including: The figure below shows a conceptual formula for the emergence – environmental effects (reducing hazardous emissions of socio-economic effects, which, in turn, are generated by to the atmosphere); infrastructure projects. 20 INFRASTRUCTURE ECONOMIC CENTRE
GENERAL SCHEME OF SOCIO-ECONOMIC IMPACTS FORMATION IEC
Project parameters Environment Infrastructure effects Socio-economic effects
Agglomeration population growth Traffic speed, connection frequency, reliability Reduced travel time for Growth of economic Reducing transport costs of transportation, passengers and cargo agents’ productivity multimodal capabilities Growth of foreign trade
CAPEX and OPEX Growth of investment
Passenger and cargo Growth in the output of the transport traffic growth industry and other related industries
Capacity Debottlenecking Growth of industrial production GDP (GRP) growth Increase in investment Growth of investment in projects attractiveness of integrated territorial of adjacent territories development (PITD)
Reducing the number Traffic safety Reducing deaths and injuries of accidents
Reducing hazardous Reducing the negative impact on the Budget revenue Environmental impact emissions to the atmos- environment, improving the living growth phere standards
Improving living Real estate value growth standards in cities
3.1 Effects of investment demand related to the implementation of infrastructure projects
The effects of investment demand occur during the construction high-tech the order is, the longer the chain of added costs is phase, when an order for construction materials, equipment obtained, and the greater the final multiplicative effect is. and components appears, as well as an order for construction services. The effects of investment demand are not specific to With other parameters being equal, the effects of investment demand transport projects, as they occur during the implementation of any depend on the depth of localization of the production chain, in other construction projects, whether infrastructural, industrial or social. words, the share of imported products. The higher the share of The effects of investment demand also occur at the operational imported products, the lower the multiplier for the national economy. stage, when routine maintenance or repairs are being carried out. The effects of investment demand in the economic literature To assess the effects of investment demand, we use multipliers are often referred to as multiplicative effects. calculated based on I/O model. Multiplier is a numerical coefficient that shows what fold will the final indicators of Multiplicative effects are expressed in the growth of production economic development (of a country or region) change with of goods and services not only in those industries that will directly the growth of investment or production in the analyzed type participate in the construction of this infrastructure project, but of activity. When analyzing the effectiveness of infrastructure also in many related industries. For example, a massive order projects, production and investment multipliers may differ. for a new type of rail will be accompanied by an increase in production not only in the metallurgy, but also in the mining The average values of multipliers for projects in the transport industry, electric power, transport, and services. And the more industry on the example of the Russian economy are shown below: TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 21
MULTIPLIERS OF VARIOUS TYPES OF TRANSPORT PROJECTS (WITHOUT DIRECT EFFECT IN THE CONSTRUCTION INDUSTRY ITSELF) Institute of Economic Forecasting, RAS
Multiplier for production volumes Multiplier for GDP Multiplier for budget income
1,4 1,42 1,27 1,47 1,19 1,33
0,71 0,67 0,71 0,52 0,46 0,74 0,22 0,2 0,2 0,18 0,15 0,23
Construction Construction Construction Construction Construction Construction (general) of roads of airports of ports of pipelines of HSR and power lines
It can be observed that the multiplier values are quite different for different projects, which is due to the different complexity of the production chain, the depth of localization, and other factors. High- speed connection projects have the greatest multipliers, since there is a high share of expensive equipment (automation and telemechanics, rails, components of a ballastless track, and so on).
We directly assess the effects of investment demand using the following formula:
j = constr. constr. constr. machinery machinery machin. Increase in GVAconstr. (Multi + GVA i ) × Invest j + (Multi + GVA i ) × Investj where:
j Increase in GVAconstr. is the increase in GVA from the effects of investment demand as a result of construction and installation works for region j, in rubles;
constr. Multi is the multiplier of investment demand for GVA growth from construction and installation works for an infrastructure project from industry i, with due consideration of the planned share of imports17;
constr. GVA i is the share of gross value added in the construction industry i;
constr. Invest j is the cost of construction and installation works on the project performed by contractors who are residents of region j, with due consideration of construction materials cost, produced on the territory of region j, in rubles;
machinery Multi is the multiplier of investment demand for the growth of GVA in the machinery and equipment production industry for an infrastructure project from transport type i, taking into account the planned share of imports;
machinery GVA i is the share of gross value added in the machinery and equipment production industry i;
machin. Investj is the costs of purchasing machinery and equipment (without the import component), the production of which is planned to be carried out on the territory of region j, in rubles, at constant prices.
17 The resource plan requires information about the share of imported products. If this information is not available, it is recommended to use the mean industry values for the import share. 22 INFRASTRUCTURE ECONOMIC CENTRE
3.2 Effects that have a direct impact on the transportation industry
With rare exceptions, when implementing infrastructure projects in provide for the operational activities of any economic agents (with the field of transportation, the economic activity of economic agents the exception of companies that provide maintenance and repair, that directly operate the transport infrastructure arises or increases. and these are already effects of investment demand). Related For example, during the construction or expansion of port facilities, projects in the field of logistics (transport and logistics centers, stevedoring companies increase their operating activities to service warehouses, multimodal transport hubs) also provide revenue cargo turnover. The implementation of the railway project leads to growth effects for their operators. economic activity of the railway owner, as well as passenger and freight operators. Similarly, the construction of toll roads usually The economic activity of all direct participants in the infrastructure involves the presence of a concessionaire, as well as an operator project determines the direct effect that has an influence on both who collects fees from passing cars. Road projects aimed at the the gross product through an increase in output in the transport construction or modernization/reconstruction of free roads do not industry and budget revenues at all levels through the deduction of lead to direct effects, since roads are state property and do not tax payments by the relevant economic agents.
The direct effect on GDP is defined as the sum of the key GDP components:
Direct effect = EBITDA + Salary where EBITDA is the gross profit of economic agents However, such a calculation requires at least a basic financial within the framework of the infrastructure facility operation model of the project, which, in addition to revenue, provides before taxation, interest payments on debt obligations and a calculation of operating expenses. If such information is not depreciation expenses; Salary is the cumulative payroll budget available (for example, at the pre-project stage), the direct of employees working for these economic agents. effect on GDP can be estimated based on revenue data:
Direct effect = Revenue × Share of GVA, where Revenue is the income (turnover) of economic agents the output of the transportation industry. The source of data on within the framework of the functioning of an infrastructure the share can be both official statistics of Rosstat in the industry facility; and Share of GVA is the share of gross value added in context and microdata on individual enterprises in the industry.
3.3 Agglomeration effects
Until recently, the agglomeration effect did not appear at all in Savings on transport costs due to proximity to raw material the Russian practice of project assessment, but today it is of great markets, suppliers and sales sources. interest, since in case of a significant acceleration of passenger traffic, budget effects can be comparable to budget investments. Common labor market. A large city is more attractive for This type of effects is also included in the Methodology of the organizations in terms of the range of potential employees. Ministry of Economic Development of the Russian Federation. This factor is most important for innovative and high-tech industries, where the quality of labor resources is more The mechanism of the agglomeration effect emergence is directly important than the quantity. related to the concentration of the population and economy. Historically, the society developed most intensively in places of Pure agglomeration externalities are all the knowledge, its greatest density —settlements, which then transformed into practices, experience, and technologies that businesses modern cities and megacities. In general, the key advantages obtain in the process of interacting with each other, which of the concentration of economic agents were expressed by allows them to increase productivity. This factor is also A. Marshall, the classic author of economic science: most significant for high-tech and innovative industries. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 23
The issues of economic concentration within the framework of distance from the agglomeration center. Agglomerations tend economic growth models, the theory of agglomerations, central to have higher productivity of production factors (labor, capital) places, and random growth based on increasing economies of compared to suburbs; as a result, there are higher average scale have been widely covered in the scientific literature and wages, higher competition in the commodity and labor markets, by P. Krugman, J. Harris, J. Ellison, E. Glaser, and P. Romer. It can which also has a positive effect on labor productivity. Real be concluded that the economic benefits from the concentration estate prices and demand are also higher. The positive impact of economic activity are the root cause of the formation of urban of the agglomeration factor is determined by the economies of agglomerations. scale, arising from the territorial concentration and diversity of economic agents and places of employment. The economic benefits of concentration are not limited to the administrative boundaries of the city, but tend to fade with the
Agglomeration effects occur when implementation of a transport project significantly expands the suburban area of a large agglomeration. As a result of its expansion, the size of the agglomeration increases.
DIAGRAM OF THE AGGLOMERATION EFFECT DUE TO ACCELERATION OF TRANSPORT CONNECTIONS IEC
New transport Acceleration of transport Geographic expansion Growth of the labor market infrastructure facility connections (reduction of the agglomeration and sales of goods and of travel time) services, reduction of transport costs
Growth in gross value added Labor productivity growth in the center of the agglomeration (less) and in the “approximate” suburbs (more) Growth of tax deductions
Growth of tax deductions Improving living standards in the suburbs and rising property values
The nature of the agglomeration effects impact varies for different the Madrid–Barcelona line, the Madrid–Seville corridor passed sectors of the economy and is largely determined by the phase through Cordoba). High-speed highways have similar effects. of the life cycle in which the industry is located. The greatest positive agglomeration effects are observed in areas with high Numerous foreign studies18 of the dependence of average labor added value, such as R&D, the financial sector, wholesale trade, productivity on the size of a locality offer estimations of the elasticity IT and communications, logistics, food production and high- of productivity to the population of an agglomeration from 2 to 10 %. tech industries. A number of industries that belong to previous In other words, when the population of the agglomeration doubles, technological patterns, such as oil refining, are characterized the productivity of factors in various sectors of economic activity by significantly weaker dependence or its complete absence. increases by 2–10 %. Financial, real estate and other services that Industries that tend towards raw materials (timber processing, require high qualifications, as well as trade, and high-tech industries metallurgy, ore mining, etc.) have negative agglomeration effects. have the greatest elasticity to the population. The smallest (and often negative) elasticity to the population have economy sectors, related In a number of countries, certain systemic “local” effects are to natural resources: agriculture, mining industry. noted—for example, the formation of new settlement centers in the so-called “intermediate” cities on the HSR lines (Cordoba Studies of agglomeration effects based on Russian data are still and Zaragoza in Spain, Lille in France). These cities, where HSR rare. According to some domestic estimates,19 the elasticity of transit stations are located, exploit the rent of their geographical total factor productivity of firms to the size of the city for Russian location between economic centers—HSR junction stations. Both manufacturing firms is average 9–11 %, which is definitely higher of these examples, with the expansion of the HSR network, began than the estimates obtained earlier by researchers for France and to develop themselves as hubs of high-speed communication (Lille other Western European countries. It is hardly surprising that the became a hub between Paris, London and Brussels; Zaragoza—on benefits of agglomeration, that is, the joint location of economic
18 See the works of the following authors: Bonnafous A., Graham Daniel J., Romer P., Combes P. P., Duranton G., Gobillon L., Puga D., Ciccone A. 19 Mikhailova T., Magomedov R., Gordeev V. Analysis of Agglomeration Effects in the Economy of the Russian Federation 24 INFRASTRUCTURE ECONOMIC CENTRE
DIAGRAM OF THE IMPACT OF AGGLOMERATION EFFECTS DURING THE MODERNIZATION OF TRANSPORT CONNECTIONS BETWEEN SUBURBS AND THE AGGLOMERATION CENTER IEC
Agglomeration population growth
After acceleration of transport connections
Before acceleration of transport
Geographic expansion Economic indicators of urban urban of indicators Economic development agglomeration of the agglomeration
Agglomeration center Agglomeration suburban zone (2-hour travel time)
agents, are high in Russia—this is a property of the geography of For details of the calculation process and the results obtained, Russia with its high transport costs and long distances. Besides, please see our article on the topic of agglomeration effects20. the benefits of agglomeration in our country still haven’t been Some values of the obtained elasticity coefficients are shown fully materialized: there is an opportunity to increase average below: productivity by improving the connectivity of the economic space.
VALUES OF ELASTICITY COEFFICIENTS THAT SHOW THE INCREASE IN LABOR PRODUCTIVITY IN SOME SECTORS OF THE ECONOMY WITH DOUBLING OF THE POPULATION IN THE AGGLOMERATION IEC
Population in a 2-hour radius, thousand people < 700 700–1.500 1.500–5.000 > 5000
Nutrition –0.2 % –0.6 % 4.6 % –1.4 %
Textile and clothing industry –1.8 % 0.0 % 16.6 % 0.0 %
Woodworking –1.3 % –3.4 % 6.3 % 0.0 %
Coke, petrochemicals, nuclear materials 10.8 % 10.6 % 0.0 % 0.0 %
Chemical 0.0 % 9.3 % 13.0 % 0.0 %
Means of transport 3.8 % 13.0 % 6.3 % 15.0 %
Metallurgy 0.0 % 0.0 % 0.0 % 0.0 %
Trade 0.0 % 22.2 % 18.2 % 3.8 %
Additional transportation and communication services –1.4 % 3.6 % 10.5 % 19.6 %
IT and research 0.0 % 0.0 % 25.1 % 30.0 %
Hotels and restaurants 6.9 % 9.8 % 9.9 % 2.3 %
Finance and insurance 15.4 % 11.1 % 11.1 % 12.5 %
Other services 0.0 % 4.4 % 15.6 % 37. 5 %
Construction 0.0 % 4.4 % 2.8 % 3.8 %
20 Lavrinenko P.A., Romashina A.A., Mikhailova T.N., Chistyakov P.A., Agglomeration Effect as a Tool of Regional Development, Studies on Russian Economic Development, Interperiodica Publishing (Russian Federation), 30, No. 3, p. 268–274 TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 25
LABOR PRODUCTIVITY CHANGES DEPENDING ON POPULATION, LIVING WITHIN 2-HOUR TRAVEL TIME (AVERAGE DATA THROUGHOUT ALL SECTORS OF SERVICE BUSINESS AND INDUSTRY, RESPECTIVELY) IEC
Labor productivity (services), thousand rubles Labor productivity (industry), thousand rubles
1500 100
1200 80
900 60
600 40 5 50 100 700 1500 5000 10000
Population within 2-hour area, thousand people
The following conclusions were obtained for aggregated Territories where 100 thousand people live within industries: a 1.5-hour radius of accessibility, demonstrate a local maximum of productivity in industry and significantly The highest elasticity is noted for agglomerations with less in services; a population of 1.5 million to 5 million people. For Moscow and Saint Petersburg (> 5 mln), the scale effect Agglomeration effects are significantly higher in the is significantly lower; service sector than in industry.
Agglomeration effects also apply to territories where As it was previously assumed, raw materials and industries that 700 thousand to 1,500 thousand people live within gravitate to places with natural resources, often have a negative a 1.5-hour radius, but the elasticity is significantly lower; dependence of labor productivity on the population of the locality they operate in. This phenomenon can be explained by the fact For territories with populations from 100 thousand to that the increasing transaction, transport, rental, and other costs 700 thousand people, the elasticity is negative or close occurring in wealthier cities, are greater than the opportunities to zero; from increasing sales markets and other agglomeration effects.
TRAVEL TIME ON THE FASTEST TRANSPORT TO THE CENTER OF THE AGGLOMERATION IEC
Services Industry
1
0,6
0,2
0 0,25 0,5 0,75 1 1,25 1,5 1,75 2 2,5 3 3,5
Hours from agglomeration centre
New thing in the practice of agglomeration effects assessing is move away from the center of the agglomeration (not in terms the use of attenuation coefficients. They show a decrease in the of distance, but in time). influence of the agglomeration factor on suburban areas as they 26 INFRASTRUCTURE ECONOMIC CENTRE
Agglomeration Effects Resulting from High-Speed Rail Projects
Numerous research efforts are dedicated to the calculation of the In Germany, after the opening of the HSR between the cities of effects, resulting from high-speed rail construction projects. For Frankfurt and Cologne, the economic performance of all cities instance, at the time of last century decision on commencement on the line has significantly improved. The average annual GRP of HSR system construction in France, special attention was paid growth of cities in the first 4 years of operation of the line was to forecast analysis of economic and cultural transformations 2.7 %, which was significantly higher than the average for other that project would entail. After the commissioning of HSR system, regions of Germany. France saw significant socio-economic effects, which to a great extent surpassed the initial calculations. Housing prices analysis Spain operates one of the world’s most developed high-speed in France before and after introduction of new lines showed that rail networks (although some lines have proven to be extremely prices grew up in regions, which previously didn’t have this new operationally inefficient, due to incorrect preliminary forecasts kind of rapid transport access to Paris. For instance, housing of passenger traffic between small cities). Now the total length price growth in the vast area surrounding HSR station in Lyon is more than 3 thousand km. According to Unife experts, the in the early years hit 43 %. Opening of the Paris–Le Mans developed HSR network gave an increase to Spain’s GDP of up line led to house price growth in Le Mans by 100 % in 3 years to 2.5 percentage points in 2005. across the entire Le Mans city. In Nantes, house price growth amounted to 20 %. Various studies indicate that the largest cities In Russia, the topic of agglomeration effects became especially in France (Lyon, Marseilles, Bordeaux, etc.) received significant popular 5 years ago by forces including the author of this additional economic growth after the introduction of the HSR, report. When the question of the need for the construction of expressed in an increase in the cost of land and real estate, high-speed rail lines arose in Russia, experts first of all turned as well as improved economic cooperation with Paris. Initial to this type of effects. Currently, there is not a single high-speed negative expectations in Lyon, concerning the HSR outlooks, railway in Russia, but about 20 projects are at the design stage were exactly the opposite of what it turned out to be. Many and investment justification. Until 2019, the key project was small and medium-sized firms feared that companies from Paris the construction of the Moscow–Kazan high-speed railway. It would capture the local market, but in reality the Paris market should have passed across the territory of 7 Russian regions: opened up for them with its more developed infrastructure and Moscow and Moscow region, Vladimir and Nizhny Novgorod greater opportunities for advertising and consulting. As a result, regions, Chuvash Republic, Mari El Republic and Tatarstan their economic indicators have increased significantly. Unlike Republic. HSR should have connected the capitals of regions by Le Mans, major companies in Lyon did not move their head the route 770 km long with stops in 16 settlements of different offices to Paris. Moreover, some companies had moved back size. HSR could have reduced way time till 3,5 hours against 14 from Paris, since it was no longer necessary to pay expensive hours on the existing railway infrastructure. The total population rent in order to be closer to the Paris market. In total, trips from on the line is more than 25 million of people. According to our Paris to Lyon increased by 52 % in the early years, and from estimates, the total agglomeration effects would be in the region Lyon to Paris by 144 %. In Lyon, the Business Park near the HSR of $ 100 billion, mainly in the regions, and not in Moscow, which station became one of the most developed areas, with growth would contribute to leveling the level of regional development. of the total area by 43 % from 1983 to 1990. This Business Park comprises more than 40 % of all office space in the city. Many But in 2019, it was decided to replace the project with the companies moved from nearby cities to this Business Park, Moscow –St. Petersburg high-speed railway, which, however, which even led to some negative effects there (for example, in seems to us to be a rather controversial decision, given the Grenoble or Mâcon). presence of a 130 km/h highway and semi-HSR (200 km/h). According to our estimates, the agglomeration effects from In London, the role of HSR is high in attracting global finance the St. Petersburg high-speed railway will be at least 2 times and creating new jobs in business services in areas, located near less due to the already well-developed transport links in this the central terminal stations. Due to this, the multiplier effect was direction. observed to stimulate the regeneration of once disadvantaged urban areas. The HS1 line resulted in significant macroeconomic The HSR to the South is also promising, which will connect effects. The line is estimated to have contributed to the creation Moscow and Sochi, the main resort on the Black Sea coast. of more than 70,000 new jobs and an annual GDP growth of The line will pass through such large cities as Tula, Voronezh £4.4 billion. Just like in France, introduction of the new line in and Rostov-on-Don, becoming the longest line in Russia. But the UK has led to housing price growth in the regions along the the expected start date for construction is in 2035 due to the route. The growth is expected to be around £1.6 billion. At the large capital intensity of the project and the need for significant same time, the greatest growth was observed in the most remote government co-financing. areas, which, after the line construction, received the maximum benefit in the form of reducing the actual travel time. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 27
3.4 Effects of industrial output growth, associated with the elimination of infrastructure constraints
Bottlenecks are defined as transport infrastructure items or the railway network, in sea and river ports, as well as at airports. sections of them whose capacity or technical condition limits the In some cases, these effects can also be assessed for roads (for volume of transport work when there is a potential demand for example, if there are no roads at all or if they are unsuitable transport infrastructure from carriers. for transporting the types of goods in question in the required volumes). The key assessed parameter is the additional volume of Situations in which transport infrastructure constraints (bottlenecks) production (output) and, as a result, of the added value that may limit production volumes, and there are no other limiting factors arise if a debottlenecking project is implemented to increase the of comparable significance (market, resource, or other), can capacity of a section or sections of railways, port or airport. be defined as under-delivery of goods. Under-delivery leads to lost business profits and, ultimately, is reflected in the loss of The assessment of under-delivery of goods is carried out in gross value added and budget revenues of the state. Complete cases when shippers do not have alternative, economically or partial elimination of under-delivery, when a bottleneck is viable routes for the export of goods. In other words, if there is eliminated, brings about significant economic effects due to the another physical possibility to ship the cargo, but, for example, increase in output. Debottlenecking is defined as a set of measures the cost of transportation or the time of its implementation makes to improve the carrying capacity of the corresponding section of transportation completely unprofitable and impractical. Thus, infrastructure or increase the capacity of an infrastructure object. the rationale for assessing the effects of reducing under-delivery requires an assessment of additional production volumes resulting The effects of reducing under-delivery and increasing output from the debottlenecking. may occur with implementation of debottlenecking projects on
CONCEPTUAL FLOW CHART OF EFFECTS RESULTING FROM THE OUTPUT GROWTH ACHIEVED BY THE ELIMINATION OF INFRASTRUCTURE RESTRICTIONS (DEBOTTLENECKING) IEC
Route 1 Region exporting Capacity 100 V 100 Region importing products Transportation costs 20 Profitability 25 % products Travel time 10
170 units of products Route 2 150 units of products Capacity 50 V 50 Under current market Transportation costs 40 Profitability 15 % Production volume of 20 pcs conditions, the exporting is an under-delivery of products Travel time 30 region is ready to produce, and a potential increase and the importing region in output if the infrastructure Route 3 is ready to purchase 170 units constraints are eliminated of products Capacity 20 V 0 Transportation costs 60 Profitability – 5 % Travel time 50
Under-delivery may occur because of infrastructural constraints: Projects leading to the debottlenecking in the public railway infrastructure should be aimed at increasing the capacity of If a physical capacity of the infrastructure available does sections of the railway network. Projects may be aimed at building not allow you to deliver the entire volume of products additional main tracks, increasing the capacity of traction potentially ready for production and sale; power supply devices, increasing the length of receiving and departure tracks, classification and turnout tracks at stations, as If total costs (including direct (rate) and indirect (time) well as other measures that lead to the throughput increase. The transport costs) exceed revenue, then negative profitability capacity of the railway may also decrease due to the presence of makes freight transport pointless. track sections with overdue major repairs. Cutting the number of 28 INFRASTRUCTURE ECONOMIC CENTRE
sections of railway with overdue major repairs and bringing the A validated assessment of the effects of reducing under-delivery track to standard condition can also help reduce under-delivery of goods and increasing output requires a fairly systematic work, of goods by increasing capacity. which should include two key blocks:
Bottlenecks on river transport (inland water transport) can occur assessment of current and anticipated infrastructure as a result of the following conditions: constraints;
low capacity of existing hydraulic facilities, including estimation of current and anticipated freight flows on all locks; types of transport.
shallowness of certain sections of navigable rivers; The transport and economic balance should be used to determine the anticipated freight transport volumes (potential) insufficient depth and width of navigable channels in over the region-to-region network, as well as region-to- certain sections of navigable rivers, including due to country, for all modes of transport. The estimated potential silting; freight traffic is compared with the capacity under the inertial transport infrastructure scenario. The inertia scenario refers to the multimodal challenges: lack of wharfs, shortage of implementation of only those projects that have been decided transshipment or storage capacities in river ports; lack or upon, that are included in state programs at the Federal or low capacity of access roads to ports (wharfs). regional level, and for which sources of extra-budgetary funding have been identified. Also, the inertia scenario should include Projects aimed at ensuring the sustainable navigability of river the commissioning of facilities under construction. The increase sections and contributing to the removal of the above restrictions in output as a result of debottlenecking is estimated as the can lead to a reduction in under-delivery of goods. difference between under-delivery of goods under the scenario involving the implementation of the corresponding infrastructure The reduction of cargo under-delivery by the debottlenecking in project, or a group of them, and under-delivery of goods under seaports can be aimed at: the inertia scenario. Modeling of the transport and economic balance should make it possible to compare various multimodal expansion of approach channels; combinations of infrastructure development projects, among other things, from the point of view of minimizing under-delivery construction of new and extension of existing wharfs; of goods relative to the inertia scenario.
improving road and rail access to ports; The estimation of the volume of under-delivery of various types of cargo is based on an economic analysis of domestic and acceleration of icebreaking assistance in freezing ports. foreign trade, the distribution of total cargo transportation between modes of transport and routes, and specific transport Bottlenecks in the air transport infrastructure have local origins and infrastructure facilities. are typical of areas with focal settlement that are not connected to the rest of the country by year-round land transport. For such To determine the bottlenecks in the country’s transport network, areas in certain territories of the country, where land transport the forecast matrix of freight transport and the model of the infrastructure is poorly developed (among other things because transport network of the Russian Federation should be compared. of geographic remoteness from other economic agents and the The forecast matrix of freight transport should be based on: economic impracticability of having such infrastructure), bottlenecks in the air transport may be caused by the following factors: forecasts of indicators of socio-economic development of the country and regions of the Russian Federation; insufficient runway length, which makes it impossible to accommodate heavy-duty aircraft; medium- and long-term forecast of foreign and interregional trade. lack of airport infrastructure necessary for cargo handling operations. For medium-term forecasting of freight transport, estimates of the increase in the volume of production of goods from the largest An important condition for calculating this effect is lack shippers should also be obtained. These estimations should be of alternatives with regards to economy, of the facility or supported by letters of guarantee from shippers, confirming that infrastructure section under consideration to ensure the they are ready to deliver additional volumes of products. transportation of additional volumes of products. Justification of the lack of alternative transportation or higher transport and In general, the proposed transport and economic balance is as socio-economic efficiency of this debottlenecking in relation to follows: other bottlenecks should be part of the justification of the effects of reducing under-delivery. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 29
CONCEPTUAL SCHEME FOR CALCULATING THE VOLUME OF GOODS UNDER-DELIVERY FOR FURTHER CALCULATION OF THE EFFECTS OF OUTPUT GROWTH AS A RESULT OF THE ELIMINATION OF INFRASTRUCTURE CONSTRAINTS ON THE TRANSPORT NETWORK OF THE RUSSIAN FEDERATION IEC
Medium- and long-term forecasts of regional Forecast of macro-market conditions and forecast of regional and foreign trade environment
INPUT DATA Medium-term freight Long-term freight flow Parameters of the Russian The capacity of the flow forecast forecast transport network transport network of the Russian Federation
Forecast matrix of cargo transportation between regions Transport network of the Russian Federation, including road, CALCULATIONS and groups of countries by the type of cargo rail, air and water transport
Modeling of freight flows distribution in the transport network of the Russian Federation by types of cargo and modes of transport
OUTPUT DATA Identification of bottlenecks in the transport network of the Russian Federation + determination of the volume of under-delivery by the type of cargo
On the basis of comparison of the forecast matrix of freight Coal mining in India is concentrated in the northern and eastern transport and infrastructure parameters of transport network parts of the country, while coal fired power stations are located for of the Russian Federation (the throughput capacity of railways, the most part from its northeastern part, which is connected to the capability of ports to accommodate heavy ships and their ability main part of the country with only a small land corridor. The 4 largest to pass on sections of the rivers, length of runways, etc.) the coal mining states account for about 76 % of total coal production. bottlenecks of the transport network should be identified, as well These include the states of Chhattisgarh, Madhya Pradesh, as quantities of under-delivery of goods (freight). The result of the Orissa and Jharkhand, which border each other and are located calculation should be a list of goods (cargo) by type of economic compactly from the Bay of Bengal to the central part of Hindustan. activity and the volume of under-delivery for each bottleneck in The largest coal mines in these states are also quite compact and physical terms. When converting the volume of under-delivery cover the eastern part of the state of Madhya Pradesh, most of the into value terms, the value of output growth is obtained. states of Jharkhand and Chhattisgarh and the western part of the state of Orissa. This creates difficulties for the railway system, since The resulting output growth in output will signify the a large amount of coal is exported from a relatively small territory debottlenecking effect. To transform the results of evaluating the and must be delivered to the largest thermal power plants and effects into terms of GDP and budget revenues growth, we use industrial facilities, which are dispersed throughout the country. the values of the multipliers found on the basis of I/O model. Due to the lack of its own coal resources, India imports a rather large amount of this raw material. Coal is imported into a limited As a case study, we have selected the bottleneck problem on number of Indian ports, which are located closer to the southern Indian railway network, which is currently overloaded with coal21. and western parts of the country, due to the fact that the southern India today is the 3rd largest energy consumer after China and and western states do not have coal mines, and transporting coal the US, and the 2nd largest coal consumer in the world. Currently over long distances is expensive. For this reason, imported coal is India consumes almost 900 million tons of coal annually of which mainly consumed at stations and enterprises located at the greatest almost 700 million tons are produced in the country and the rest is distance from Indian coal mines. imported through several ports —India is the 2nd largest importer of thermal coal in the world. Coal consumption in the country will In general, coal is the main cargo transported by Indian railways remain the mainstay of energy production, one reason being path (50 %), but the network is also overloaded with passenger traffic dependency. All these facts indicate the continuing importance of due to the very high population density especially in the northern coal for India’s economy. part of the country. The growth of coal transportation in the future
21 This study was carried out by the authors of the report for a scientific article in The Indian Economic Journal—“Limited capacity of railways for coal transportation in India: Evidence from load flow study”, which is currently is under consideration for publication 30 INFRASTRUCTURE ECONOMIC CENTRE
due to increased consumption, both at the country’s industrial load index takes place, the model searches for the shortest and enterprises and thermal power plants, can lead to an increase nearest alternate route. If such route does not exist, that amount in the number of bottlenecks. As a result, this may affect the of coal is considered as under-delivery due to the rail capacity possibility of further industrial growth in the country if measures limits. That leads to negative effects (GDP underproduction) due are not taken to modernize the existing infrastructure or create to energy shortage in Indian economy. new railway lines. Possible under-delivery of coal is estimated at the amount of We built a model (see more in the upcoming article) and 200 million tons, which will correspond to about 15 % of total simulated coal freight in India in 10 years when total volume coal consumption in India in 2030. Of course, that amount is a of coal freight reaches 1300 million tons (with average rate of possible one, because we presume the current distribution of new 3.5 % per year from 2019 until 2030). We presume the current coal origin between mines and ports. If more coal is imported situation with capacity and network, so no investments in the through southern ports, less under-delivery could be observed. railway infrastructure are considered. Our main hypothesis was This 15 % short-supply of total coal in India could impact 7 % of that the maximum load index by coal could be “1”, so if that total electricity generation in India.
THE MAP OF COAL FLOWS IN INDIA IN TWO FORMS: MILLION TONS AND LOAD INDEX (2030) IEC
! (S!rinagar (! (Srinagar S(!rinagar Cargo flow, thousand tons Srinagar Cargo flow, thousand tons LLooadad in inddexex Jammu (! Jammu Jammu (! (! Jammu 0 3000 9500 20000 45000 100000 (! 0 3000 9500 20000 45000 100000 0 0 0,02,2 0,04,4 0,06,6 0,08,8 1 1 Amritsar (! Amritsar Amritsar (! Jullundur (! Amritsar (! Jullundur (! Jullundur (! (! Jullundur Ludhiana 4 (! 2 2 3 (! 6 4 Lu2dhia5 na Ludhiana 0 2 30 6 2 9 ! 3 (! ( 6 2 5 Ludhiana 0 230 (! 6 9 Chandigarh (! 3 2 (! ,2 (! Chandigarh 0 3Chandigarh ,2 (! 61 5955 0 Chandigarh 23 7 6 6 5 2 61 5955 5 0,2 7 4 8 9 23 6 0 6 5 5 2 , 0 54 0,2 14 8 Saharanpur 9 8 9 0 5 (! , 2 0 Saharanpur 0, 14 Saharanpur 5 9 2 1 8 (! 5 (! 1 2 1 6 0 0 4 2 , Saharanpur 0 2, 2 5 7 7 5 0 2 ! 9 1 7 ( 1 9 , 1 5 0 2 0 1 6 1 1 4 2 3 0 8 1 , 7 0 3 2 0 7 1 2 9 0 7 2 9 , 9 4 5 0 2 0 1 1 1 , 3 8 1 3 0 1 1 2 0
4 0 9 , 1 6 1 0
6 2 , 0 2
1 Meerut 6 8 0 1 5 8 0 6 (! 2 , 3 0 8 1 Meerut 2Meerut 3 8 0 (! 5 Moradabad 8 (! 3 ! 2 8 ( 8 Meerut 4 3 7 2874 8 Moradabad 2 ! Moradabad 3 (!(! ! ( ! 4 2 ( 1 ( 2 (! 6 8 , 0 7 4 3 Moradabad 6 4 5 Delhi ! 287 8 1 0 2 ! 0 4 4 3 ((! ((! (! 9 2 2 ! 6 1 ,2 ,1 ! ,1 0 7 (!(1 ( 5 8 8 Ghaziabad 3 6 4 4 D9 elhi 1 7 4 0 1 17 0 Delhi (!(! 5 0 3 2 , , 9 278 5 (!7 1 40 1 , 0 (!(! 1 4 1 8 7 G1 haz1 iabad 3 4 0 7 Delhi Ghaziabad 5 5 9 7 1 0 6 5 7 7 0 5 3 , , ! 0 2 ( 0 1 4 3 0 Ghaziabad 2 1 7 1 8 2 0 8 5 1 1 0 6 1 7 3 5 ,2 5 5 0 0 7 1 2 4 , 0 2 2 8 2 0 6 8 6 1 ! 1 1 (Aligarh , 4 3 5 5 4 2 7 5 9 7 0 7 1 0 2 6 3 6 (! , (! 4 Aligarh Aligarh 8 1 5 4 1 2 7 9 0 5 2 7 1 4 9 3 , ! 6 ( 4 4 Aligarh 3 8 1 2 1 4 5 2 6 9 4 4 9 5 1 1 9 6 0 3 2 4 1 6 3 4 ,1 6 9 4 5 5 7 5 9 1 7 1 0 2 402 Agra 1 , 3 6 3 J3aipur (! 1 5 15 7 13 402 Agra 7 ,12 Agra 3 3 0 2 9 ! 1 ! 3 07 (! Ja4i0pur ( 0,13 Jaipur ( 0 3 913 3 4 7 1 Lucknow 0,12 Agra ,2 5 4 6 2 3 2 ! 0 4 ! (! 07 ( 4 (! 2 0,13 ( Jaipur 6 0 5 3 3 7 4 0 1 8 7 7 2 0 , Lucknow 2 2 Lucknow 4 5 4 1 6 1 4 2 7 Jodhpur 2 1 1 4 , ! , ! 7 1 (! 0 ( 6 ( 5 5 1 0 6 2 1 2 7 6 0 8 7 0 2 0 3 8 8 2 Lucknow 4 1 5 1 4 7 0 2 1 , Jod7hpur 2 11 1 0 Jodhpur , , 0 (! (! 6 1 5 1 0 , 2 Gwalior 03 (! 8 8 6 8 0 1 6 0 2 62 Jodhpur 1 5 9 8 2 , 0 (! 9 2 (! 8 2 0 ,1 0 ! 0 ! 1 Gwalior ( 6 Gwalior 9 ( 5 , 7 6 (! 2 0 1 2 8 2 2 5 9 Kanpur 2 ! 6 ( 4 770 9 2 2 9 0 3 1 5 0 7 ! 4 1 Gwalior ( 5 3 5 , 3 7 0 3 1 8 ! ! 4 ( 4 ( 6 2 4 Kanpur 2 1 2 Kanpur 5 9 4 6 1 7 4 2 0 , 70 1 4 5 ,2 3 1 9 5 6 7 0 2 4 0 5 3 5 3 3 7 8 3 7 8 ! 4 4 ,2 ( 4 6 7 4 9 1 0 2 Kanpur 4 3 4 0 0 ,1 1 2 5 ,26 , 0 2 4 3 1 1 0 75 8 8 1 5 ,27 6 12 , 2 6 7 4 9 3 92 3 Patna 60 0 0, 0 2 9 ! 3 4 7 ( 1 1 5 0 6 1 2 0,1 8 1 6 5 1 , 3 , 2 6 9 3 1 6657 Patna 6 1 0 0 Patna 30 0 Bhagalpur 0 2 0 , 7 9 (! 5 2 3 (! 5 0 , 0,1 1 , 3 3 (! 6 8 0 1 4 1 1 6657 5 1 0 0,11 Patna Allahabad 0 2 1 3 5 7 8 8 8 7 005 Bhaga2 lpur 2 , (! Bhagalpur ! 228 (! , ( 0 , 5 1 5 6 3 ! 5 8 0 ! 1 (! 4 2508 18 Allahabad4(2 11109 Varanasi 0 5 Allahabad( 0,11 4 4 7 2 1 2 3 5 7 8 7 6 4 Kota 8 8 3 6 7 2 2 Bhagalpur ! 28 (! ! 2 (! 0 , ( 4 ( 0 0 5 1 6 2 5 2 0 6 8 40 4 Var1anasi 6 5 , (! Varanasi (! 2508 7 2 11109 5 0 (! 1 2 A,llahabad 7 4 3 4 7 1 2 33 6 0 4 Kota 4 1 3 6 7 0 7 Kota 0 4 0,2 , ! 2 (! 7 4 ( 0 0 0 4 2 6 3 2 2 0 1938 40 1 6 5 2 , , 1 27 Va,r6anasi 0 7 (! , 1 7 3 2 1 3 3 6 4 0 2 , 0 3 1 0 4 0 , 9 Kota , 2 7 4 5 2 14 5 7 5 0 24 0 061 3 6 2 8 2 1 0 93 8 , 27 0 , , 1 2 3 3 6 2 0, 6 0 4 3 , 3 0
8 , 9 8 2 0 5 5 14 5 5 , 0,2 1 0 061 6 1 4 2
9 8 7 0 , 2 2 2 9 0 5 85 1 3 8 0 2 3 , 0
8 ,
5 2 1 8 0 3 2 2 3 5 4 , 1 0 9 7 86 89 0 1 0,24 6 7 , 2 2 9 0 1 5 85 1 7 8 6 3 2 2 2 4 4
7 2 1 5 2 3 7 4 2 1 3 2 7 8 48 0 , 6 7 0 6 1 6 9 0, , 7 6 1 2 2 3 2 1 5 4 0 2 4 79 8 7 5 9 1 7 4 5 0 , 9 , 2 2 7 0 7 6 3 1 0, 5 ,5 1 2 4 2 0 , 0 3 1 1 8 5 0 0 1 9 8 5 0 9 0 8 1 5 0 , 9 43 7 5 , 5 7 3 5 1 2 6 5 3 , 1 6 6 4 0 , Asansol 5 8 13 1 0 81 3 5 1 1 4 0 5 0 8 1 10 4 9 , 43 5 0,4 3 , ! 5 , 1 ( 4 170 Dhanbad 0 6 3 5 1 6 6 0 5 13 6 Asansol 5 2 0,62 Asansol 81 5 0 5 1 8 ! 8 , 4 ( 5 0 1 4 9 7 3 0,49 3 , 8 ! , ! ( 4 0 ( 170 5 53 Dhanbad 0 0 4 Dhanbad 0 1 50 1 52 4 2 ,29 , Asansol 5 9 6 6 0,62 7 0 8 3 5 8 (! 8 , (! , 7 3 6 0 4 0 1 8 6 9 7 3 4 8 0 ! 3 3 0 ( 1 1 5 525 4 9 0,29 , ,4 Dhanbad 9 0 8 3 3 9 6 6 7 5 9 (! , 7 4 1 3 6 ! 4 4 93 1 9 0 0 1 8 ( 4 6 2 , , 6 1 5 Ranchi 3 2 9 0 , 9 3 7 53 6 6 9 0 5 9 1273 Ahmedabad 4 1 ! Jabalpur 2 40 1 4 3 1 9 6 4 2 ( 1 222 (! 3 1 ,9 0 , (! (!3 6 2 9 4 1 5 Ranchi 2 6 0 ,4 Ranchi 0 0 7 7 1 Bhopal 53 1 6 6 9 0 9 4 0 0, ! 1 9 , 1 Jabalp(ur 2 6 1 4 , Jabalpur 5 273 Ahmedabad 4 1 ! 1 40 7 Ahmedabad ! 1 6 ( 1 22 1 ( 6 3 2 6 4 2 3 2 0 0 0,7 (! ! 9 ! (3 3 ( 2 4 1 3 27 1 6 ,4 0 Ranchi 6 0 0 7 2 7 1 Bhopal ! 8 1 6 0 9 4 Bhopal ! ,9 ( 1 ( , 42 4 1 1 16 7 4 , 0 Ahmedabad 0 (! Jabalpur 5 4 6 1 4 3 12 2 6 2 4 3 2 0 ! ,9 0,7 1 6 3 ( 30 2 6 9 3 39 27 1 , , 0 6 2 2 7 3 8 (! 1 2 Bhopal (! 2 16 7 42 4 5 1 0 0 4 , 21 4 12 2 (! 2 3 Jamshedpur 2 0,21 3 ,9 0 0 671 9 96 , , 0 3 0 23 4 Indore 3 ! 1 2 2 ! 1 ( ( 1 5 1 , 6 1 7 1 3 ! , 2 21 2 ( 0, 3 ! ! 0 1 ! 7 1 0 ( 9 ( ( 7 4 Jamshedpur Jamshedpur 2 Rajkot 3 6 1 616 0 3 4 Indore Indore , 5 ! 1 4 1 8 4 ( 7 1 3 2 1 8 7 (! 1 7 1 3 7 (! , (! ! 0 8 ! 0 2 7 1 ! ( ( 9 4 0 ( Jamshedpur 24 Rajkot 7 3 4 6 1 616 1 Rajkot 5 3 Vadodara Indore , 1 6 4 4 5 5 7 8 4 3 2 1 3 8 7 (! 7 7 (! (! 8 0 2 0 (! 4 4 7 8 1 Kolkata 5 0 Vadodara 4 Rajkot Vadodara 6 5 4 5 0 3 4 1 9 0 0 ! 160 1 ( , 4 1 9 8 1 45 Kolkata 7 3 Kolkata 68 7 0 5 3 Vadodara 1 3 0 3 7 7 1 0 , 4 6 9 11600 1293 1 1 0 , 0,4 1 9 2 5 45 , 0 7 3 Kolkata 7 3 683 1 4 3 0 1 3 7 7 283 1 , , 6 4 1293 35 0, 1 4 0 0,4 0,22 5 2 7 5 , 0 1 4 3 0,8 8 0 28335 ,1 0 , 0 4 7 7 0 4 0,22 ,49 5 3 ,8 1 8 2 0 1 0 7 ,4 0,49 3 6 0 1 (!Surat 1 6 2 Bhilai 2 6 1 4 0 9 7 , 7 0 54 1 43 6 , 234S0urat 1 52 2 7 6 Surat ,2 0 0 5 ! 1 5 6 1 0 1 Bhilai ! 0 , Bhilai 0 ( 9 1 2 0 2 !(! ( 3 7 ( 7 7 0 4 (! 3 2293 9 , 23 1 5 15 4 6 2 5 40 5 1 20 12 Raipur 7 !Surat 0, ,36 0, Bhilai 1 0 2 ! 4 ( 0 ! 7 Nagpur (! 22936 (!( 1 16 (! 39 (!( 511 Akola 2544 2 36 2 Nagpur Raipur 1 64 Nagpur ! 0, (!(!Raipur 51 Ako6l7a 913 9 254 54 21 Akola ( 0,43 0,4 8 9 12 737(!7 100 7 184 4 11 Raipur 6 Nagpur 67 913 9 54 Akola 0,1 0 0,43 00,,4 8 9 , 1 9 0 1 0 737(!7 10 7 184 1 (! 6 2 9 3 6 9 (! Cuttack 0,1 1 0 0,1 9 1 , 2 0 (! 6 2 9 3 (! 1 (! 19 (! Cuttack 0 Cuttack Nasik 16 2 Bhubaneshwar ,5 27 (! 6 0 (! (! Cuttack (! 3 , Nasik 16 Aurangabad Bhubaneshwar Nasik 5 Bhubaneshwar 27 1 6 (!
3 (! (! Aurangabad7 1 Na(!sik Aurangabad Bhubaneshwar 1 2 2 4 1 ! 7 1 (! ! 5 ( ( 1 2 Aurangabad 2 1 4 1 1 1 4 ! 0,1 5 ( 7 9 06 8 1 7 1 3 9 1 1 4 91 6 0, 2 9 0 7 2 7 17 1 2 6 Nanded 4 8 9 1 3 9 9 1 , 3 6 2 7 2 0 1 2 Nanded 4 4 9 1 Nanded , 0 ! 5 ! 0 3 838 , ( ( 0 1 4 Nanded Mumbai 0 5 6 1 ! 5 ! 0 ! ! ( 838 ( ( ( , 2 1 2 1Mumbai 8 Mumbai , , 3 5 0 7 6 1 (! 0 (! 0 1 2 2 2 13 7 8 Mumbai , , 0 7 3 Pune 1 0 0 (! 7 1 2 130 9 3 4 7 Pune 4 7 Pune 5 ! 1 1 ! ( 7 4 ( 0 130 9 4 4 3 7 3 4 , 4 7 Pune 0 4 5 1 ! 1 4 7 4 ( 0 3 , 4 1 , 3 0 3 4 0 4 76 1 4 6 0, 31 0 , 30 , 1 6 1 6 ,7 0 1 4 2 0 0 9 , 3 9 1 0 9 4 2 0 ! 3 4 9 (! , ( 5 0 9 8 7 1 9 Vishakhapatnam 6 0 Sholapur ! 0 3 7 4 (! ! , (! ( 5 5 0 8 ( 8 2 1 672 Vishakhapatnam 6 Vishakhapatnam Sholapur 13 70 1 7 2 Sholapur 4 ! 0 (! 67 (! 25 28 (! ,4 2 ( 1 24 267 0 4 0,9 Vishakhapatnam 30 (! 49 671 (! Sholapur (! ,42 (! ,4 278 24 2 0 0 0,92 Gulbarga 9 Hyderabad 6 (! ,42 (! 784 1 2 0 0 Gulbarga2 2 Hyderabad 0 6 Gulbarga Hyderabad ,4 7 0 1 5 0 9 44 (! 2 0 18 Gulbarga Hyderabad ,4 7 7 7 0 8 0 0, Kolhapur 9 44 , 5 (! 9 818 (! 4 ,7 Kolhapur 7 Kolhapur 8 0 0 9 (! (! ,4 Vijayawada (! Kolhapur 8 (! 4 Vijayawada Vijayawada 3 (! 8 4
2 Vijayawada 8 3
3 8 1 , 2 8 0 3
1 , Hubli 0 941 (!Hu94b1 li Hubli 941 941 8 Hubli (! 15 9 (! 83 7 8 1 9 15 4 (! 0,5 8 5 7 31 4 0,37 1 4 0 1 ,5 1 6 6 5 4 0,37 7 1 41 0 0 13 ,2 1 6 64 8 7 1 0, 0 3 280 ,33 1 0 9 ,33 0 1 8 9 2 0 8 6 8 7 0 , 2 4 6 8 0 0 7 5 2 0 2 4 , 2 10 0
5 7 2 3 2
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, , 0 1 3 9 Bangalore 0 8 4 713 ! , Bangalore 12 ( 1 Bangalore ! (! 5276 18 Chennai 8 Mangalore( 83 12713 (! Bangalore 0,22 (! ! (! 5276 8 18 Chennai ! (! Chennai ( 1 83 ( 0,22 (! Mangalore 3 Mangalore 8 8 (! (! 4 Chennai 1 Mangalore ,1 3 0 4 8 1 3 , 1 (! 8 6 0 2 Mysore 1 , 8 3 1 0 1 (! 6 8 2 6 (! 2 Mysore 1 Mysore , 5 8 1 1 0 3 6 2 (! 2 5 !1 Mysore 1 3 Salem ( Pondicherry 2 ! ! 1 Salem ( Pondicherry 0 Salem ( Pondicherry (! ,1
9 ! 7 0 Salem ( Pondicherry ! 5 ! 22 ( (,1 9 7 9 7
5 6 1 ! 22 ( (! Coimbatore 9 7 4 Kozhikode 6 1 (! Coimba55t2ore 1 (! Coimbatore Kozhikode 1 4 Kozhikode (! 52 4 1 (! 0 5 428 1 Coimbatore ,2 (! 0 4 Kozhikode (! 1 5 552 4 (! 0 7 2 , 80 (! 21 5 6 552 (!Tiruchirappalli (! 7 1 2
6 9 17 Tiruchirappalli (!Tiruchirappalli 1 2 6 79 Tiruchirappalli 5 1
3 6
1 5
(! 3 Kochi ! (!M1 adurai ! Kochi ( (!Madurai Kochi ((! (!Madurai 6 Kochi !Madurai 5 (
3 6
1 5
3
5 1 7 6 5 1 7 6 6 1 101 6 0 101 ,21 0 (! ,21 Thiruvananthapuram (! (! Thiruvananthapuram Thiruvananthapuram (! Thiruvananthapuram
0 75 150 300 0 75 150 3к0м0 0 0 7575151050 303000 км кмкм TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 31
3.6 Effects of Increasing the Reliability of Freight Transport (Reliability Effects)
Many transport projects lead to an increase in the average transportation, which is reflected not in lower average travel time, speed of freight transport. In the Methodology of the Ministry but in the reduction of the uncertainty (scatter) of the possible total of Economic Development, this effect is taken into account time of the route. The figure below schematically illustrates both by reducing working capital expenditures. The Rosavtodor effects. Roughly speaking, the left shift of the peak top indicates Methodology also contains formulas for accounting the effects that the average travel time has decreased by 2 minutes. And the of reducing operating expenses for freight transport —driver’s “narrowing” means that the entire set of possible total values of wages, fuel, and depreciation of vehicles. World literature travel time has become smaller, which means that predictability often considers another effect of increasing the reliability of and reliability have increased.
TRAVEL TIME AND ITS FREQUENCY IEC
Before the project After the project
60 Observation frequency
40
20
0 96 97 98 99 100 101 102 103 104 105
Time, minutes
The increase in time spread can be caused by factors such as labor productivity. Sometimes operations of a huge factory accidents, local traffic jams (traffic difficulties), poor traffic lights, can be dependent on the rapidity of delivery of a single part, repair works, and so on. All these factors lead to unpredictability and in some cases, low reliability of transportation can lead to of travel time, which means that the beginning and the end of significant economic losses. the next stage of freight transportation are unpredictable. These unpredictable time increases are expressed in minutes or hours, This type of effect in world practice is normally assessed using two depending on the total length of the route. Increased logistics principal approaches. In the first one, the key components are certainty reduces the need for manufacturers to store large stocks “reducing time spread” and “cost of minute”, and in the second, of raw materials and supplies needed for their operations. This “reducing the number of late deliveries’ and “conditional cost of leads to the reduction of expenditure on working capital and one late delivery”. We will follow the approach where the time warehouse expenses. This also leads to downtime reduction spread is estimated. Then our formula for estimating the effects of in the manufacturing, which ultimately leads to an increase in increasing the reliability of freight transport will look as follows:
Effectreliability = (TimeReserveprevious – TimeReservenew) × CostOfMinute × VOR where: 32 INFRASTRUCTURE ECONOMIC CENTRE
Effectreliability is the effects of increasing the reliability of freight transport, EUR or other currency;
TimeReserveprevious is the previous time period, which freight carriers laid down for unforeseen circumstances, minutes;
TimeReservenew is the new time period, which freight carriers laid down for unforeseen circumstances, minutes;
CostOfMinute is the cost of one minute, EUR or other currency;
VOR is the indicator of the “cost of reliability”.
The formula uses the value of reliability indicator. For Russian parameters. Various combinations of technical parameters of scientific literature, this concept is still relatively new. In simple the road, through factors, determine the likely additional time words, VOR defines the value of transport predictability for different that needs to be laid down during transportation. As part of our audiences. For example, when a family goes to the countryside, research, we used a different approach, which is also common in travel time plays a much smaller role than when transporting goods world research on this topic. with high added value, where every hour for business means expenses. Therefore, a lot of research is devoted to this concept. Using available public services for determining the state of traffic In American study of high-speed road construction, Cambridge on highways, we measured the estimated travel time between Systematics conducted a meta-analysis of the global experience two cities in both directions every 10 minutes, every day for in calculating VOR for passenger and freight transport. As a result, 4 weeks. For the pilot study, pairs of cities, Tula and Moscow, it was recommended using in the CBA analysis a value of 0.8 for Tver and Moscow, Moscow and Vladimir, Nizhny Novgorod passenger travel and 1.1 for freight. VOR assessment, based on and Kazan, Yekaterinburg and Chelyabinsk, Saint Petersburg Russian data requires a separate study, where sociological surveys and Veliky Novgorod, Samara and Tolyatti, Stavropol and of shippers, consignees and carriers about the importance of Mineralnye Vody, were selected (statistical analysis showed transport reliability are supposed to be conducted. It is highly likely that the distribution characteristics are almost identical for the that in the Russian reality, the importance of transport reliability directions “there” and “back”, so the average results for each may not be so great in most remote areas, but it may be of critical pair are given below). As a result, we have built bar graphs of the importance in large agglomerations. travel time distribution for each pair, based on data from more than 6.5 thousand observations. It is quite difficult to estimate the time that cargo carriers set for unforeseen circumstances. Cambridge Systematics offers The following distribution characteristics were obtained (all a unified approach that is based on a set of technical road values are given in minutes):
Upper bound Extra time Route / parameter Average value Standard deviation Extra time of the 95 % interval (percentage of average)
Tula–Moscow 157.1 18.4 191.5 34.4 21.9 %
Tver–Moscow 171.3 23.0 210.5 39.2 22.9 %
Vladimir–Moscow 198.6 31.2 254.5 55.9 28.1 %
Nizhny Novgorod–Kazan 327.0 21.6 360.5 33.5 10.2 %
Yekaterinburg–Chelyabinsk 163.8 9.5 180.0 16.2 9.9 %
Saint Petersburg–Veliky 169.6 17. 2 200.5 30.9 18.2 % Novgorod
Stavropol–Mineralnye Vody 129.1 5.4 138.5 9.4 7. 3 %
Samara–Tolyatti 90.2 9.8 106.0 15.8 17. 6 % TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 33
Various studies suggest using the standard deviation, or the is quite risky in terms of travel time. High volatility also affects difference between the upper bound of the 95 % confidence travel time between Saint Petersburg and Veliky Novgorod, as interval and the average value, as an indicator of uncertainty. We well as between Samara and Tolyatti. suggest using exactly the second approach, which determines what time the carrier should additionally lay down in order to Let us note, however, that for the Moscow–Tver route, we considered have a 95 % probability of arriving on time. It is obvious that the free M10 road, which we had a long series of observations there will always be a certain spread, since on any road the on. Now that the M11 high-speed toll road has been introduced travel time at night is always much lower than during the day, and almost along its entire length, more than 60 % of trucks traveling certain accident frequency is inevitable. Therefore, we propose from Moscow to Saint Petersburg have switched to the new road, to set as the maximum limit of “acceptable uncertainty” 15 % of which confirms the significance of the transport reliability effect. the average travel time and consider the effects of reducing the spread below this limit. From the above examples, it is clear that The cost of one minute for business we estimate both on the basis the transport connection between Moscow and regional centers of direct operational direct costs of frozen working capital.
The calculation of the overall effects of infrastructure construction Russia still has an extremely low level of road safety compared to and modernization should take into account the improvement other countries in the world, but over the past 5 years, Russia has of transportation safety, primarily through the effect of reducing seen a steady decline in the number of accidents with an average accidents, as well as the number of fatalities and casualties in them. annual rate of 4.22 %. In the previous years of 2009–2014, the Traffic safety largely depends on the properties and characteristics number of incidents remained approximately at the same level. of the infrastructure, control and monitoring systems ensuring compliance with transport safety rules, and other factors. The To assess the effects of increased safety due to implementation effects of improved safety can occur both as a result of switching of an infrastructure project, the optimal algorithm is proposed part of the traffic to safer modes of transport (with fewer accidents), in the Methodology developed by the Ministry of Economic and by improving the quality of the infrastructure for this type of Development of Russia. The essence of the approach is to assess the transport. Looking ahead, it should be noted that in the total volume non-received losses for the economy as a result of road accidents. of monetized effects from infrastructure development, improving Their calculation is based on the potential contribution of a person transport safety has an extremely small contribution. The same to the economy if they had not been involved in an accident (and applies to the effects of improving the environmental friendliness had not been killed or injured). of transportation. The authors of the Report stick to the position that human life and health are priceless, and the monetization of this The general formula is quite difficult and includes several type of effects does not fully reflect the positive consequences of parameters, both for road tech characteristics, current and improving transport infrastructure. forecasted traffic volumes and some social-economic value of lives.
Road transport accounts for the largest number of accidents. If This approach, of course, is somewhat one-sided, since it does we also take into account those who died in road accidents, it not include multiple socio-psychological aspects, important for becomes obvious that the insufficient level of road infrastructure relatives and friends. But at the same time, it is no longer subject development (both in quantitative and qualitative terms) leads to to monetization. the greatest reduction in the contribution of people affected by car accidents to GDP among other modes of transport. There is also a decrease in their income and overall living standards. The state, in turn, bears additional costs: from a decrease in tax revenues associated with a decrease of the payroll budget (as a result of disability and indirect consequences of an accident), an increase in the cost of helping victims and caring for them. 34 INFRASTRUCTURE ECONOMIC CENTRE
3.7 Projects of integrated territorial development
If investment projects are being implemented in territories PITD, not only to the transport part of it. It should be noted that have improved transport accessibility, that would not be that if an infrastructure project is carried out in the interests possible or economically unprofitable without the creation of of specific companies that are implementing the PITD, new or reconstruction of transport infrastructure, then the socio- then, regardless of the effects assessment, the decision to economic effects from these investment projects can be attributed allocate state funds should be made only, when proved, to the project for the development of the corresponding transport that the infrastructure cannot be built at the expense of the infrastructure. In this case, we can talk about the so-called project initiator. projects of integrated territorial development (PITD). However, there are a number of nuances. If the transport infrastructure is primary in relation to the PITD and performs other functions, besides providing Assessment of socio-economic effects for projects of integrated conditions for the implementation of the PITD (for example, territorial development should be carried out for the entire range when the PITD appears as part of the development of of activities, including construction and operation of infrastructure territories next to a new highway), then the effects of facilities and economic activities of the main subjects. For various creating new enterprises under the PITD can be fully types of integrated development projects, the method of effect attributed to the transport project. calculation has significant specifics. In general, there are three basic types of projects for integrated development of territories: Assessment of the effects resulting from projects of integrated territorial development includes a number of – projects of integrated territorial development in terms constituents: of construction of residential areas, office centers and shopping and entertainment infrastructure; – effects of investment demand that are caused by the organization of construction and installation works as – projects of integrated territorial development in terms part of the implementation of side investment projects of creating new production facilities; (business centers, residential areas, etc.);
– projects of integrated territorial development in – effects that occur at the operational stage within the terms of creating transport and logistics infrastructure economic activities of established enterprises (that is (railway stations, transport logistic centers, etc.). another example of direct effects).
At the same time, the question remains: in which case and in what Effect assessment at the operational stage is based on the part should the effects from PITD be “attributed” to the effects available preliminary data on the number and structure of from the implementation of a transport project, and how can they jobs created. be separated from the effects of other infrastructure, for example, social or engineering? We suggest using the following principles The implementation of projects for the development depending on the type of PITD: of surrounding territories also leads to such a specific effect as increase in the cost of real estate, especially If PITD is “primary” in relation to transport projects, and commercial property. In general, real estate cost is the new or reconstructed infrastructure is functional in inversely proportional to the distance to a certain center terms of service only, in relation to it (e. g., entrance to of transport links (multimodal connection hub, railway a new production field or industrial park), the effects station, etc.), with a fast-paced environment, and is from creation of new enterprises within PITD should be graphically represented as follows: attributed to the entire infrastructure that is created within
INFLUENCE OF THE TRANSPORT CONNECTIONS CENTER ON THE REAL ESTATE VALUE IEC
Transport connections center (railway station, hub)
Center influence boundary Center influence boundary TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 35
Currently, we have an extensive experience in assessing creating commercial infrastructure; the effectiveness of projects for the development of surrounding areas, especially the effects from construction price changes for residential and commercial property. and modernization of railway stations. In general, this kind of projects leads to a number of socio-economic effects, The last two points are usually directly connected to including: railroad complexes.
growth of urban and intercity mobility, as well as tourism We shall now demonstrate several cases. development;
creating social infrastructure and improving the living standards;
ZARAGOZA
Zaragoza is a city with a population of more than 660 thousand 98.5 ha. Meanwhile, the existing railway station building in the people (the 5th largest population in Spain), located on the Central zone was taken out of circulation, which, together with the Madrid–Barcelona HSR line at a distance of 310 km from adjacent territory made it possible to create a new development Madrid. High-speed service was established here in 2003. zone with an area of 9.3 ha. Meanwhile, the railway tracks were taken to the periphery in order to implement large-scale urban space reorganization During the period from 2005 to 2014, the CaixaForum cultural projects, as well as to provide increased capacity for both events building and the city railway station building were built passenger and freight trains. in the new development zone. At the same time, the residential development proposed by the 2005 project was not implemented. Distinctive feature about development of Zaragoza after introduction of HSR is really the fact that the new urbanistic project According to the plans of the City Council of Zaragoza, (Ebropolis) and master plan of the city were thoroughly conceived additional effect of the project implementation was the promotion before the commissioning of HSR line, back in 1998–2001. In of digital technologies development, through the creation of a addition to the development of the city itself, other construction «Digital Mile» between the old and new railway stations and and communication projects were implemented by the time of the construction of office buildings for headquarters of IT companies, opening of the transport link (the plan for the regeneration of the research institutes and business incubators, on the territory of 107 floodplain of the Ebro river, Expo 2008, creation of Plaza large ha. In fact, two buildings have been completed: the Digital Mile logistics hub). It was decided to combine passenger and cargo Business Incubator and the Science and Technology Center. The infrastructure on the periphery, to relieve the Central zone and main obstacle to the full-scale implementation of the project was get a certain synergistic effect. the financial and economic crisis.
As a result, the development of the area around the HSR station has acquired the look of cluster-type development on an area of
VALLADOLID
The Madrid–Valladolid HSR construction project was initiated in (at the time of the project, the city’s population was 130 1987, but its implementation was not completed until 2007. Just as thousand people, so housing construction would cover +15 % in the case of Zaragoza, the HSR project itself included a section of of the population; the population of Valladolid in 2017 was urban redevelopment coordinated by Valladolid Alta Velocidad. 299 thousand, so the entire volume of housing was used); And just like in Zaragoza, the project provided for the extension of the railway service to the periphery with over-track construction 170,200 m2 of office and hotel space were built; in the city, which allowed for the allocation of significant areas of land for housing, offices, trade and service centers. 6,000 m2 of retail space;
As a result: 181,200 m2 of service development zones were built, resulting in service delivery growth by more than 21 %. construction of more than 6,000 housing units to accommodate about 20 thousand residents was provided 36 INFRASTRUCTURE ECONOMIC CENTRE
LYON
In Lyon, one of the most developed areas after the opening of the take over the local market, but in reality, the Paris market opened first HSR in France was the Business Park near the new station, the up for them, with its more developed infrastructure and greater total area of which increased by 43 % from 1983 (the year of the opportunities for advertising and consulting. Major companies HSR launch to Paris) to 1990. Today, this business Park contains in Lyon did not move their head offices to Paris. Moreover, some more than 40 % of all office space in the city. Many companies companies had moved back from Paris, since it was no longer moved from nearby cities to this Business Park, which even led to necessary to pay expensive rent in order to be closer to the Paris some negative effects there (for example, in Grenoble or Mâcon). market. In total, trips from Paris to Lyon increased by 52 % in the Initial negative expectations in Lyon, concerning the HSR outlooks, early years, and from Lyon to Paris by 144 %. were exactly the opposite of what it turned out to be. Many small and medium-sized firms feared that companies from Paris would
SHEFFIELD
In 2001, the city administration decided to develop a large- Implementation of the Program has led to significant socio- scale Program of reshaping the city, the main economic profile of economic effects of various kinds. First, passenger traffic at the which until then was metallurgical industry. Due to the fact that this station itself increased by 77 % from 4.2 million to 7.5 million industry has significantly degraded in recent years, the obvious people in the first three years. The overall image of the city has solution was to re-orient the city’s economy to the service sector. changed, evidenced by the ranking of UK cities according to A key project under the Program was the complete modernization various criteria conducted in 2008 (2 years after the opening). of the Central railway junction, which began in 2003 and ended at the end of 2005. With a total cost of £81.9 million, the project Within a radius of 400 meters from the renovated station, the combined several components: total property value increased from £8.7 million to £14.7 million, that is, by 68 %, with the main increase in commercial real estate. new shopping district near the station to replace the old industrial premises and a parking lot;
reshaping of surrounding territories and opening of parks;
practically brand-new station with commercial areas and state-of-the-art control system;
a new inner-city transport system, that included a new tram entrance and a new taxi rank.
3.8 Environmental effects
More than 40 billion tons of carbon dioxide, formed as a result part of the passenger traffic from personal automobile to a more of anthropogenic activities, is released into the atmosphere every environmentally friendly mode of transport (HSR). Various types year. The largest sources of these emissions include industrial of transport have different specific values of emissions of harmful production, construction, power generation, transport, etc. substances into the atmosphere. Therefore, the calculation of this According to various estimates, the share of transport in total type of effect requires building a forecast model of passenger greenhouse gas emissions is about 15–25 %. traffic on different modes of transport, taking into account the switching of passenger traffic between them in case of an The implementation of an infrastructure project in the field infrastructure project implementation. of transport may lead to changes in the future structure of the modes of transport, which are still in use. For example, the Currently existing approaches for environmental effects construction of a high-speed railway can reduce the number of assessment are numerous, some of them are sophisticated models automobile trips on the route under consideration by switching that take into account chemical processes in the atmosphere as TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 37
a result of harmful emissions. We use an approach based on The next step in assessing environmental damage is the use of estimating the negative impact of each mode of transport by the models that assess the effects of air pollution on human health. amount of emissions. Examples of such models include CAFE CBA (developed in 2005) and HEATCO (developed in 2006). These models assess The key methodological task is to determine the value of the cost the risk of various types of diseases, depending on the increase in factor of harmful emissions from vehicles. Many studies have the concentration of harmful substances in the atmosphere. already been conducted on this topic, especially in the European Union. In particular, the guidelines of the European Environment Then the cost estimation is made for the following items: Agency provide detailed data on the amount of emissions for different types of vehicles, as well as data on the amount of expenses for medical treatment of diseases —mainly emissions from enterprises that generate electricity for railway of the respiratory system; rolling stock. Modern methods allow us to make estimations of emissions, not only of the amount of carbon dioxide, but also of damage to GDP from the reduction of human life other substances, such as air suspensions, which, according to duration; recent surveys, are no less dangerous to human health. In addition, there are methods for estimating the cost of other Key emissions from transport activities include: indirect effects caused by the atmospheric pollution:
air suspensions (particle materials, PM); cumulative damage to nature and the biosphere associated with climate change, primarily as a result
nitrogen, carbon and sulphur oxides (NOx, COx, SOx); of CO2 emissions and the greenhouse effect;
volatile organic compounds (VOC). reduced agricultural yields;
To assess the impact of emissions on the air state, the so-called damage to buildings and structures; dispersion models are used (allowing to assess the physical and chemical change of the atmosphere as a result of pollutant cost estimation of noise pollution. emissions), as well as impact models (used in the studies of atmosphere state changes, depending on the types of terrain — All these models were integrated into a single calculation model urban agglomeration or rural area). These types of models allow in a study 22, commissioned by the European Commission in 2014. us to establish the relationship between the amounts of emissions The result of the study was the cost assessment of environmental from transport activities and changes in the physical and chemical damage from transport activities. The results of this study are composition of the air. being applied in the EU today. You can read more about formulas and approaches in the primary source.
COST ESTIMATION OF ENVIRONMENTAL DAMAGE FROM VARIOUS TYPES OF VEHICLES IN THE EURO ZONE COUNTRIES PER 1 KM, IN EUR CT Update of the Handbook on External Costs of Transport
Type of vehicle Amount of environmental damage per 1 km run
Passenger car 0,2–4 (depends on engine)
Intercity bus 0,4–50 (depends on capacity and engine)
Diesel-powered train 100–300 (depends on train type and territory type)
Ordinary electric train 1–160 (depends on train type and territory type)
High speed train 28
Aircraft for medium-haul flights 75–648 EUR (per 1 flight, depends on range)
22 Korzhenevych A., Dehnen N., Bröcker J., Holtkamp M., Meier H., Gibson G., Varma A., Cox V., Update of the Handbook on External Costs of Transport. 38 INFRASTRUCTURE ECONOMIC CENTRE
3.9 Effects of increasing transport accessibility to global markets
In our master version of the report in Russian, we also considered both geographical distance and speed of transport and the cost several additional types of effects, in particular, the effects of of cargo delivery. Such an approach allows for evaluating the increasing transport accessibility to global markets. effects of reducing delivery time or transportation costs. Second, we endeavor to factor in the complexity of cargo delivery both The methodology that we have developed is aimed at assessing the within the country and abroad and the involvement of many effects of increasing transport accessibility to global markets; it is types of transport. That is why the integral indicator of transport quite specific and is applicable primarily for countries with a global accessibility to global market (hereinafter the “TAGM”) takes reach (Russia, Kazakhstan, Mongolia, Belarus) and insufficient into account the costs of transportation when various modes of current level of transport infrastructure. This type of effect is based transport are involved. on the assumption that there is a direct link between transport capabilities, export volume and, ultimately, economic growth. Transport accessibility of Russian regions to global world trade The implementation of transport projects therefore contributes to centers is indicative of the transport and geographical position the country’s export potential increase, among other things. The of the territory in relation to the key trading partners of the topic was repeatedly researched into by Frankel, Romer and other Russian Federation, namely Europe and Asia (primarily China). economists, including in the framework of gravity models studies. Consequently, the TAGM can be estimated in terms of the distance to hypothetical transport and geographical centers of Western We have attempted to come up with several approaches to Europe and Northeast Asia: Rotterdam and Beijing (Tianjin). assessing the transport situation of regions amid export potential. For this purpose, we have developed an integral indicator As far as the methodology itself is concerned, our approach is as entitled Transport Accessibility of the Region to Global Markets. follows. For each region of the Russian Federation, we calculate First, when developing the integral indicator, we are mindful of a unique value of the TAGM using the following formula:
raileu railasia autoeu autoasia GlobalAccessibilityj = SUMM (min (TotalCostj ; TotalCostj ); min (TotalCostj ; TotalTimej ); seaeu seaasia min (TotalTimej ; TotalTimej )), where:
GlobalAccessibilityj is transport accessibility to global markets for region j, expressed as the total transport costs for transporting 1 ton of cargo to the nearest global market;
raileu/asia autoeu/asia TotalCostj , TotalCostj is total cost of transporting a ton of cargo from region j by road or rail to global markets;
seaeu/asia TotalTimej is the total cost of transporting a ton of cargo from region j by road or rail to the nearest seaport.
In this case, total costs include both direct costs (tariff) and indirect Speed Roads in Russia on the TAGM. The strategy involves the costs, which are expressed in terms of the cost of travel time construction and reconstruction of at least 12 thousand km of (taking into account the time spent on passing borders, customs roads of the first category, with at least 3 thousand km serving or loading on sea vessels). We estimate the cost of travel time as new high-speed roads (the total cost amounting to over $100 through frozen working capital. billion). As a result, we found that a significant improvement in transport accessibility to global markets (more than 1 %) will be Next, we calculated elasticity coefficients that show how a 1 % received only by 28 of the 81 evaluated regions of the Russian change in the TAGM affects exports in terms of value for groups Federation with an average value of 3.1 %. The total effect is an of products that are particularly sensitive to delivery time. On increase of about 1.33 percentage points from non-resource and average, the coefficient of elasticity amounted to some 2 % non-energy exports, which in monetary terms will amount to an for various industries. To understand the scale of the findings average of $7.2 billion per year. We find that result appropriate obtained, we evaluated the impact of the Strategy of High- relatively the initial volume of CAPEX. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 39
TRANSPORT ACCESSIBILITY TO GLOBAL MARKETS OF RUSSIAN REGIONS IEC 40 INFRASTRUCTURE ECONOMIC CENTRE
Conclusion
As a conclusion, we present formulas developed to estimate the final project efficiency coefficient based on the BCA approach.
As the main indicator of the social and economic efficiency of an infrastructure project, we can use the integral indicator of the project’s economic efficiency (Eec), which describes the part of the total projected real GDP23 of the economy over all the years of the calculation period that can be provided by the implementation of the project in question.
The integral indicator of the project’s economic efficiency is calculated as the ratio of the sum of annual real GDP surplus volumes (or the sum of GVA surpluses) and the sum of annual real GDP volumes, reduced to a comparable form using real dynamics indicators:
∑T GDP + ∑T GDP × t=1 base t=1 surplus Eec = 100 T ∑t=1 GDPbase where:
Eec is an integral indicator of the economic efficiency of an infrastructure project;
T ∑t=1 GDPbase is the sum of the base projected GDP for all years when the effects of the infrastructure project are estimated (where t is the first year, T is the last year);
T ∑t=1 GDPsurplus is the sum of GDP surplus for all years when the effects of the infrastructure project are estimated (where t is the first year, T is the last year).
All things being equal, a project that has a high integral indicator is more preferable when it comes to implementation.
Along with the integral indicator of the economic efficiency of an infrastructure project, an indicator of the specific efficiency of investments is also calculated; it describes the GDP surplus per unit of investment made in an infrastructure project:
T ∑t=1 GDPsurplus E = 100 × inv Inv where:
Einv is an integral indicator of the investment efficiency of an infrastructure project;
T ∑t=1 GDPsurplus is the sum of GDP surplus for all years when the effects of the infrastructure project are estimated (where t is the first year, T is the last year);
Inv is the total amount of investment in the implementation of an infrastructure project (it can fac- tor in both investments in fixed assets, i.e. investments for the construction/modernization/recon- struction of transport infrastructure facilities, and total expenses, including financial expenses).
23 In this case, GDP refers to the sum of all GVA surpluses. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 41
As the main indicator of the budget efficiency of an infrastructure project, the integral indicator of the budget efficiency of the project (Ebudget) can be used; it describes the ratio of total budget expenditures for the implementation of the project to total additional revenues:
T ∑t=1 Budgetsurplus
Ebudget = 100 × Invbudget where:
Ebudget is an integral indicator of the budget efficiency of an infrastructure project (the cost benefit principle);
T ∑t=1 Budgetsurplus is the sum of budget revenue surplus for all years when the effects of the infra- structure project are estimated (where t is the first year, T is the last year);
Invbudget is budget expenditures for the implementation of an infrastructure project.
All things being equal, a project that has a high integral indicator is more preferable when it comes to implementation.
Other indicators of budget investment efficiency, including BNV, BNPV, BIRR, BPBP, BDPBP, BPI, BBCR, etc., are calculated in accordance with approved methods and guidelines. 42 INFRASTRUCTURE ECONOMIC CENTRE
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Quantitative analysis of socio-economic effects. The Yekaterinburg–Chelyabinsk high-speed railway (HSR)
The transport location of two major developed cities of the being actively developed. The train speed is expected to be 350 Urals —Yekaterinburg and Chelyabinsk —is unique for Russia. Two km/h. The agglomeration effect will be the key effect of the project. cities, located so close geographically (at about 200 km, which is comparable to the distance between Moscow and Tula) with The agglomeration effect in the case of Urals HSR is shaped up by a total population of about 2.5 million people, have in fact only “merging” two agglomerations into a single space (conurbation), an insufficiently developed road connection (more than 95 % of by reducing the travel time between the centers of Yekaterinburg the mutual passenger traffic) with a travel time of about 3–3.5 and Chelyabinsk from 3–4 hours on existing modes of transport hours, while the railway link is completely uninteresting to the to 1 hour 10 minutes. population due to slow speed and indirect connection.
As a result of this state of affairs, a project for the construction of the Yekaterinburg–Chelyabinsk high-speed railway (HSR) is currently
INTEGRATION OF AGGLOMERATIONS AS A RESULT OF MODERNIZATION OF A COMMUTER RAIL LINE IEC
Agglomeration Agglomeration population growth population growth
After acceleration of transport connections
Center 1 Before acceleration Before acceleration Center 2 of transport connections of transport connections Economic indicators of urban urban of indicators Economic development agglomeration urban of indicators Economic development agglomeration
Suburban areas of two agglomerations (areas within 2-hour travel time to the city) TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 47
Чусовой Верхняя Тура Кушва Красноуральск
Лысьва
Нижняя Салда MUTUAL AGGLOMERATION RADIUSВер OFхняя YEKATERINBURG Салда AND CHELYABINSK. THE MAP SHOWS COLORED TIME Туринск INTERVALS OF 15 MINUTES (ISOCHRONES), WHERE A RICHERВерхняя COLOR Синячиха INDICATES A CLOSER LOCATION TO THE CENTER IEC Нижний Тагил Алапаевск
Pionerskiy Irbit
Nevyansk Kirovgrad Verhnij Tagil Rezh Shalya Staroutkinsk Artemovsky Verkh-Neyvinskiy Novouralsk
Malysheva
Asbest Sredneuralsk Verkhnyaya Pyshma Pervouralsk Pyshma Талица Bisert Beryozovsky Ачит Sukhoy Log Zarechnyy YYEKAEKATERINBURTERINBURG Bogdanovich Revda Beloyarskiy Kamyshlov Atig Degtyarsk Nizhniye Sergi Verhnee-Dubrovo Aramil Uralskiy Verkhnie Sergi Натальинск Kadnikovo Arti Mikhaylovsk Polevskoy Kashino Sysert
Verkhnyaya Sysert Kamensk-Uralsky
Kataysk Dalmatovo
Vozdvizhenka Nyazepertovsk Snezhinsk Verkhniy Ufaley Vishnevogorsk
Kasli Ozyersk Kyshtym Kunashak
Novogornyy Karabash Smolnoe Argayash
Kusa Dolgoderevenskoe
Мишкино Suleya Zlatoust CCHELHELYAABINSKBINSK Shuche Shumikha Satka Усть-Катав Miass Chebarkul Kopeysk
Юрюзань Roza Korkino Pervomayskiy Катав-Ивановск Zauralskiy Emanzhelinsk Krasnogorskiy
Yuzhnouralsk
Isochrones of transport accessibility, minutes Plast 15 30 Uchaly45 60 75 90 105 120
Car roads federal highways others Troitsk Белорецк Railroads
Regional boundaries Verkhneuralsk 48 INFRASTRUCTURE ECONOMIC CENTRE
Growth of economic indicators in both centers and adjacent The greatest positive agglomeration effects are observed areas is under way. Besides, localities on the way of high-speed in areas with high added value, such as R&D, the financial connection become “closer” to each of the centers and receive sector, wholesale trade, IT and communications, logistics, food additional benefits. In fact, the population doubles within 2-hour production and high-tech industries. travel time zone; formation of the third largest agglomeration in Russia, after Moscow and St. Petersburg, is in progress. As Calculations have shown24 that in the Chelyabinsk Region, a result, growth of the labor market and market of goods and more than half of the volume of agglomeration effects will fall services, growth of productivity and economic activity in the on manufacturing, owing to the industrial structure of the city’s agglomeration is projected, leading to an increase of production economy. At the same time, in Yekaterinburg, about 2/3 of the and consumption, growth of wages, investment and the cost effects will fall on the wholesale and retail trade, as well as on the of housing. The described processes lead to an increase in tax type of activity called “real estate, rent and services”. deductions to the budgets of the constituent entities of the Russian Federation and the Federal budget.
GVA GROWTH STRUCTURE AS PER TYPE OF ECONOMIC ACTIVITY FROM AGGLOMERATION EFFECTS, % OF THE TOTAL AMOUNT (GRP)
Wholesale and retail trade Manufacturing Real estate, rent and services Financing activities Transport and communications Construction Hotels and restaurants
Sverdlovsk Region 36 27 19 8 7 2 1
23 52 10 5 16 2 1
Chelyabinsk Region
And total economic impact (including other types of effects, other Currently, several major projects are planned to be implemented than agglomeration effects, which account for about 75 % of the in the area of Urals HSR influence in the Sverdlovsk and effects) will amount to 2.3 trillion rubles of GDP growth and 0.5 Chelyabinsk Regions, which already have a high degree of trillion rubles of budget revenue growth for the period from 2021 development, and the implementation of which is likely subject to to 2035. the availability of HSR.
24 The impact assessment was based on the assumption that construction will start in 2021, with commissioning planned for 2025. TRANSPORT INFRASTRUCTURE AND ECONOMIC GROWTH 49
EFFECTS FROM THE INCREASE IN INVESTMENT ATTRACTIVENESS OF THE TERRITORIES IEC
Reconstruction of existing railroad Tourist and entertainment zone, Localization of a carrier company Localization of an infrastructure and station complexes, including the including a natural park, festival park, (or its branch) producing operating owner’s company, producing operating creation of commercial real estate linked sports park, and recreational hotel revenue and providing a significant revenue and providing a significant to the station, including restaurants, number of jobs and a high tax return number of jobs and a high tax return shops, offices, leisure, business halls, bank branches
1:10—travel time, 0:30—rush hour headway
Yekaterinburg Chelyabinsk
Creation of a multi-modal transport Construction of new manufacturing Several major development projects Agro-industrial park, comprising and logistics center, combining facilities, meeting the demand for in and around Transport Interchange a wholesale and distribution center, 3 types of transport, large container construction materials, mechanical Hub: construction of new residential greenhouse facilities, farmers’ market, and piggyback terminals, a customs engineering, chemical products, services areas (including rental housing), business production of premium agricultural clearance center, terminals for handling necessary for the construction and centers, recreational enterprises, and products and food products perishable and oversized cargo, and operation of the line, maintenance and shopping centers a business center repair of the rolling stock infraeconomy.com