1 Islamic Development Bank Funding priority road transport projects for economic prosperity IDB Vision and Programmes for Asia, Africa and Europe Salim Refas Transport Economist Islamic Development Bank November 28, 2012

2 Islamic Development Bank Agenda Introduction Roles of IDB Drivers of change in the road transport sector The way forward

3 Islamic Development Bank Introduction (i) Roads lead to prosperity Roads are expected to spur economic growth through three main channels Transport Infrastructure Capital accumulation Productivity gains Spatial impacts More infrastructure capital leads to more production Better infrastructure improves the productivity of other factors Quality infrastructure attracts investments

4 Islamic Development Bank Introduction (ii) but not all roads lead to prosperity Need to understand demand patterns and better prioritize road investments (from accessibility paradigm to mobility paradigm) Need to systematically complement physical investments by trade and transport facilitation activities to tackle non- physical barriers especially at border crossings Need to adapt the evaluation of road projects to better assess the spatial impacts, network effects and indirect economic benefits (understand the economic geography of transport)

5 Islamic Development Bank Roles of IDB (i) IDB at the crossroads of Africa, Asia and LAS regions 22 countries in 1975 → 56 countries in 2009 A Unique Model of South-South Cooperation 56 members spreading over 4 continents Africa: 27 Asia: 26 Europe: 2 Latin America: 1

6 Islamic Development Bank Roles of IDB (ii) Infrastructure financing by IDB Group in US$ Mn funding priority road projects –More than $4bn of financing for the road transport sector since inception –Significant scale-up since IDB Group reform –Scale-up with other development banks and private sector participation through PPPs –Identification of 107 priority transport corridors in Asia, League of Arab States and Sub-Saharan Africa (Study on Transport Corridors in OIC Member Countries, 2011) Infrastructure for Growth & Sustainable Development, 2 nd pillar of IDB Group new Mid-term business strategy

7 Islamic Development Bank Roles of IDB (iii) facilitating regional integration –Funding of priority regional corridors in Africa, Asia and LAS, such as the CAREC corridors in Central Asia, the Trans-Saharan route in Africa, etc. –Intra-OIC trade promotion and Trade and Transport facilitation activities –Development of cross-border infrastructure and SEZs ECOWAS Economic Community of West African States ECOWAS Economic Community of West African States UEMOA West African Economic and Monetary Union UEMOA West African Economic and Monetary Union AMU Arab Maghreb Union AMU Arab Maghreb Union LAS League of Arab States LAS League of Arab States GCC Gulf Cooperation Council ECO Economic Cooperation Organization ASEAN Association of Southeast Asian Nations COMESA Common Market for Eastern and Southern Africa And more ( SAARC, IGAD, CEN-SAD, etc.)

8 Islamic Development Bank Roles of IDB (iv) generating knowledge Knowledge products financed in part by IDB in in road transport sector –ECO Priority Road and Rail Routes and Infrastructure Projects Study –Road Transport and border crossing facilitation in the LAS region –League of Arab States Truck Accident Causation Feasibility Study –Program for Infrastructure Development in Africa –Sub-Saharan Africa Transport Policy Program … promoting cooperation Landmark developments in Creation of the Cooperation and Capacity Development Vice-Presidency -Expert Group Meeting on inter-regional cooperation to enhance trade -Scale-up of the reverse linkages activities

9 Islamic Development Bank Drivers of change in the road transport sector (i) Transportation systems Policy Demography & society Energy & Environment Technology EconomicsFinance Fin. Mechanisms PPP Economic growth Global trade ICT Transport equipment Energy availability Climate change Pop. growth Urbanization Governance Regulation Source: adapted from ICF International (2008), Long Range Strategic Issues Facing the Transportation Industry

10 Islamic Development Bank Drivers of change in the road transport sector (ii) Some drivers of change in OIC countries - Huge demographic pressure 1.51 billion total (22.8% of global population), growing 5 times faster than OECD (2% AGR) -Fast-paced urbanization (42.3% in 2000, 47.4% in 2010) -Increasing reliance on imports (6.1% of total world imports in 1999, 9.2% in 2008) -Sustained economic growth (5.3% in 2010) -Fast-growing car ownership rates -Slow adoption and harmonization of transport regulations (e.g. only 19 MCs ratified TIR convention and 18 ratified Convention on Road Signs and Signals) -Low participation of private sector in road financing and O&M -Slow professionalization of the freight transport sector and slow development of modern logistics (with some exceptions) Growing demand Policy challenges

11 Islamic Development Bank Drivers of change in the road transport sector (iii) but change with the same fundamentals -With around 80% of passenger-km and over 50% of freight-ton km. roads will remain the backbone of the transport sector in OIC regions -Road transport remains capital-intensive sector with long-term financing needs -Closing the infrastructure gap and sustaining quality and safety of roads is still the main challenge for most developing countries ► Need to scale-up and adapt

12 Islamic Development Bank The way forward (i) Scale-up investment in the road sector Network expansion Road density in OIC MCs is much lower than global averages. Investment don’t keep pace with demand growth Network upgrading and maintenance Out of a total road network length of 3.6 million km, only 43% is paved. Financing road Maintenance is a major challenge Network interconnection OIC MCs take advantage of their geography to develop air and maritime transport hubs but they are poorly connected to their hinterland Source: SESRIC, 2011 Source: Rodrigue, 2010

13 Islamic Development Bank The way forward (ii) Adapt to changing context (i) adapt to socio-economic priorities *with a view on enhancing human capital productivity and innovation capacity Employment Generation Sustainability & Inclusiveness Enhancing “Software”* for Economic Growth Value-Adding Productivity Connectivity: Physical & Knowledge Arab states SSA Asia+Surinam CIT & Albania IDB Differentiated regional approaches

14 Islamic Development Bank The way forward (iii) (ii) adapt to changing patterns of global trade Focus on projects and activities to improve logistics performance of member countries and integrate global supply chains The supply chain of hard drive assembly in Thailand, Source: Chen, 2009 Source: SESRIC, 2011

15 Islamic Development Bank The way forward (iv) (iii) adapt to local challenges using international best practices and experience of other member countries Ex1: Bus Rapid Transit Curitiba, Brazil Istanbul, Turkey (2007) ? Ex2: Trade and transport facilitation Experience of Turkey in the management of modern border posts Experience of Malaysia and Senegal in Single-Windows Curitiba, Brazil (1974)

16 Islamic Development Bank The way forward (v) (iv) Integrate !! ► integration within and between different modes of transport for optimal efficiency port-hinterland connections and rail-road intermodal transport ► integration with the environment for optimal sustainability green transport and land-use planning ► integration with industrial/trade strategies for optimal impact national logistics strategies ► integration between all stakeholders for optimal synergies role of the private sector in financing roads and providing trucking and logistics services, role of regional and international institutions

17 Islamic Development Bank The way forward (v) Insights on IDB strategy Effective delivery Knowledge generation and Innovation Connectivity Scale-up Sustainability Growth of activities at 10-15% p.a. Scale-up financing through partnerships and resource mobilization (e.g. from private sector) Operational excellence and results-based management Development of a new IDB transport policy Mainstreaming of innovation in IDB activities Development of knowledge-based services Strengthening of partnerships with expert institutions and global initiatives (e.g. road safety) Institutionalization of Capacity Development and Reverse Linkages Enhanced dialogue with regional institutions and promotion of inter-regional cooperation Strategic focus on sustainability issues

18 Islamic Development Bank Conclusion The two-way road -Roads spur production, increase productivity and attract investments -But roads also kill, pollute and crowd-out resources -Successfully developing and maintaining road infrastructure is a major socioeconomic development challenge that requires sound strategic planning and economic evaluation, efficient resource mobilization, effective delivery and adaptation to international best practices and changing context. IDB at the service of its member countries to face together these challenges

19 Islamic Development Bank Thank you شكرا Salim Refas <>