1. Using Road Investments to
Stimulate the Economy
Christopher R. Bennett
Senior Transport Specialist
The World Bank

2. Transport and Development2

3. The Rural Transport Trap
Source: Raballand, G., P. Macchi, and C. Petracco, Rural Road Investment Efficiency. Lessons from Burkina Faso,
Cameroon, and Uganda, Directions in Development, Infrastructure, the World Bank, Washington DC, 2010. 3

4. Transport Helps Development When It
Facilitates trade
Makes cities work better
Opens rural economies
Gives access to health, education & social services
Is safe, clean and affordable
Goal 1: Eradicate extreme poverty and hunger
Goal 2: Achieve universal primary education
Goal 3: Promote gender equality and empower women
Goal 4: Reduce child mortality rates
Goal 5: Improve maternal health
Goal 6: Combat HIV/AIDS, malaria, and other diseases
Goal 7: Ensure environmental sustainability
Goal 8: Develop a global partnership for development 4

5. The Global Financial Crisis
Exacerbated by food and fuel crisis– 2008 ; thus becoming a triple crises– this had not happened in earlier global financial crises. 5

6. GFC and Capital Flows 6

7. Government Revenues Crashed
Source: Oxfam 7

8. Some Countries Hit Hard: Armenia

9. Exacerbated Poverty: Armenia

10. Government Responses:
Economic Stimulus
Build Infrastructure
Support R&D and Innovation
Invest in Human Capital/Education
Energy Efficiency/Green Technology
Innovation/Entrepreneurship 10

11. Stimulating the Economy
Identify Suitable Investments
Mobilize Resources
Maximize Employment Opportunities
Move Quickly 11

12. “Shovel-Ready Was Not as Shovel-Ready as We Expected”
Suitable Investments
“Shovel-Ready Was Not as Shovel-Ready as We Expected”
President Obama – June 2011 12

13. Not China’s Ghost Towns13

14. Mobilizing Resources Government revenues plunged
Private sector lending almost stopped
International donor lending increased 14

15. World Bank Transport Lending
South Asia
US$ m
Middle East North Africa
Latin America
Europe Central Asia
East Asia Pacific
Africa

16. Maximizing Employment
Opportunities 16

17. Employment Primary Direct project work Secondary
Indirect work through supply of materials and equipment
Tertiary
Induced from primary and secondary 17

18. Distribution of Road Construction Costs
Wages Small Component
Georgia 2009
Distribution of Road Construction Costs
Wages
Other
Construction Materials 18

19. (Selective Use of Equipment)
Wages Never Dominate
Technology Option
Percentage of Cost
Materials
Wages 2/
Equipment
Total
Labour-Intensive 1/ 60
35-40
0-5
100
Intermediate
(Selective Use of Equipment)
25-30
10-15
Equipment-Intensive
5-10
30-35
1/ Applicable to tracks and uncompacted roads; materials include tools, such as picks, shovels, axes, etc.
2/ Skilled labor requirements (number and range) increase with increasing equipment intensity in construction
Source: NRRDA, 2007 19

20. Example: Armenia Lifeline Roads Project
Construction
Financing (US$ million)
Season
Number of Contracts
Km. Improved
World Bank
Govt. of Armenia
Total
Original
2009 25
100
25.0
5.4
30.4
Original Cost Savings 5
18.5
n.a-
Additional Finance 1 34
121.5
36.6
9.1
45.7
Additional Finance 2
(Est.)
190
(Est.,)
40.0
10.0-
50.0- 89
430
101.66
24.5
126.1

22. Armenia Job Creation - 2009 2800 workers hired by contractors
Local contractors survived:
9 of 23 contractors had no other contract during the project period
Project contracts made up of 22 – 27% of their revenue
$5.2 million received by locals as wage
Unskilled workers gained $2–2.5 million
Producers of construction materials – local firms – received about $500,000
US$ 2000/month cost of employment generation - $4400/month in Georgia

24. Move Quickly Accept Uncertainty in Designs and Quantities
Expect Variation Orders
Update Designs At Mobilization 24

25. Lessons Learned Have pre-identified investments Try new solutions
Maximize labour – but manage expectations
Prepare quickly – but do walkover survey before construction starts
Major review mid-way through works

26. Questions