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Development of the transportation sector as an
enabler of sustained economic prosperity
Ângelo CorreiaPresident, Arab-Portuguese
Chamber of CommerceKhartoum, November 27th 2005
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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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Demographic pressure and trade development will
increase mobility demand
Social and economic drivers
Market drivers
Development of the transportation sector

• Opportunity for attracting FDI
• and accessing specialized technology and know-how

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Population in the Mediterranean and Arab
countries will increase 40 by 2025
Population growth in Arab countries(2005-2025, )
Average 42,9
World Average 22,2
Saudi Arabia
UAE
Yemen
Comoros
Qatar
Somalia
Oman
Egypt
Algeria
Lebanon
Sudan
Palestine
Jordan
Mauritania
Iraq
Syria
Djibouti
Bahrain
Kuwait
Lybia
Morocco
Tunisia
Source United Nations Population Division
Roland Berger analysis
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1
Trade in the region should grow, requiring
implementation of some structural changes
Development of trade in the region faces some
obstacles
requiring some structural changes

• Small markets - Limited size of some internal
  markets
• High transaction costs Barriers to trade
  impeding access to some markets
• Fragmented markets - Intra-regional trade still
  accounts for no more than 5 of the total
• Low Foreign Direct Investment Investors still
  shy away and prefer to invest in Central Europe
  or the Mercosur

• Need for greater liberalization of trade and
  services
• Removal of key transport bottlenecks, namely
  administrative and sector policies
• Improvement of key transportation infrastructures
• Need for greater convergence of regulatory
  systems

Source European Commission Communication on
reinforcement of euro-mediterranean cooperation
in transportation and energy
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NON EXHAUSTIVE
Transportation infrastructures could be further
developed to support anticipated demand
Road Density (km/ 000 km2)
Rail Density (km/ 000 km2)
EU Average 48,3
Jordan
Jordan
United Arab Emirates
United Arab Emirates
Tunisia
Tunisia
Algeria
Algeria
Djibuti
Djibuti
Kingdom Saudi Arabia
Kingdom Saudi Arabia
Sudan
Sudan
Syria
Syria
Somalia
Somalia
Iraq
Iraq
Oman
Oman
Qatar
Qatar
Kuwait
Kuwait
Libya
Libya
Egypt
Egypt
Morocco
Morocco
Source The World Fact Book Eurostat Panorama
of Transport
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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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The transportation sector is moving towards
liberalization
Key trends in the transportation sector

• Increased liberalization as the sector moves from
  old state monopolies to regulated competition
• Increased presence of private initiative in key
  areas of the transportation sector, namely
  transportation infra-structures
• Focus in intermodality to achieve "seamless
  transportation" of people and goods (integrated
  management of the global transportation value
  chain)
• Change in relative importance of transportation
  modes to reduce road congestion and improve
  safety
• Greater customer orientation through greater
  attention to quality and service levels (e.g.
  punctuality, information to customer)

Source Roland Berger
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EXAMPLE
driven by legal and regulatory changes
Selection of EU transportation policy guidelines
Selected EU guidelines
Rationale

• Promoting transport by sea and inland water ways
• Revitalising railways
• Turning intermodality into reality
• Improve road safety
• Strike a balance between growth in air transport
  and the environment
• Build a trans-European transportation

• Development of short sea shipping and railways as
  more economic and environmentally friendly modes
• thus shifting the balance between modes to
  reduce road congestion and pollution
• Intermodality is key to achieve an economic and
  streamlined transportation chain, namely for
  containers
• Growth in air travel will have to be accompanied
  by improved integration of air traffic control
  systems, by an increase in airport capacity and
  new regulations to reduce noise and pollution
• The European network will contribute to reduce
  bottlenecks in some areas thus reducing pollution
  and improving flows

Source White paper European transportation
policy for 2010
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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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Sea and air transportation could be areas where
improvements could be faster
Sea
Air
Railways
Road

• External trade in some countries in the region is
  mostly done by sea

• Importance of air transportation is driven by the
  strong contribution of tourism to the economy of
  some countries in the region

• Unbalanced development of railways infrastructure
  in the region

• In some countries road connections could have a
  greater usage if external conditions improve

Rationale

• Development of short sea shipping
• Improve functioning of ports

• Development of airports, namely modernization and
  expansion
• Focus economic self sustainability of airports
  -Grow non aviation businesses (retail,
  advertising, real estate, others)

• Complete and interconnect rail networks and
  systems

• Complete and interconnect road networks

Key actions
Source European Commission Communication on
reinforcement of euro-mediterranean cooperation
in transportation and energy
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EXAMPLE
Aspects to be addressed to support development of
short sea shipping
Competitive prices Competitive prices for short
sea shipping
Simplification Simplification of customs processes
Key aspects to foster the development of short
sea shipping
Intermodality Intermodal transportation in the
destination
Incentives for investment Investment in specific
infrastructures for short sea shipping
Development of logistics Development of logistics
infrastructures and value added services
Commercial focus Proactive approach and creation
of partnerships
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EXAMPLE
Key trends affecting economic sustainability of
airports
A
D

• Sustained growth of air travel with changing
  traffic profiles (e.g. low cost carriers)
• Need for new service offerings from airports

• Continuous improvement of productivity and cost
  position of airports

Changing traffic profiles
Productivity improvement
B
E

• Global alliances give airlines a strong
  bargaining power
• Key success factor is a close relationship with
  airlines/alliances
• Develop regional hubs that will attract transfer
  traffic

• Select evaluation of investments and a assessment
  of their value creation potential
• Comprehensive and structured project management

Global airline alliances
Management of investments
F
C

• New legal and regulatory framework, namely on
  what concerns environmental and safety aspects

• Development of non aviation businesses is key for
  airports revenue growth and profitability

Legal framework
Non aviation business
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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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Transportation and infrastructures are keys
element in a virtuous circle of development
Increase in mobility demand (people, goods)
Development of the transportation sector and
infrastructures
Social and economic development
Virtuous circle of development
Attraction of foreign direct investment (FDI)
Trade Development
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being a key factor in the decision process of a
foreign investor
Key criteria to locate an investment Non
Exhaustive
Criteria
Importance

• Overall costs
• Quality of the workforce
• Transportation and logistics
• General business environmental
• Raw materials and support services
• Quality of life

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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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Private participation in transportation projects
in the Arab world can be improved
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Private Participation in Transportation
Infrastructure (PPI) Projects Low and middle
income countries
Transport PPI projects (1990-2004 projects)
Investment PPI projects (1990-2004 US millions)
Latin America Caribean
East Asia Pacific
South Asia
Sub-Saharan Africa
Europe Central Asia
Middle East North Africa
Source The World Bank Private Participation in
Infrastructure Database
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But changes in the institutional and regulatory
framework are necessary

• Greater role for private initiative
• Create an adequate and stable regulatory
  framework
• Enforcement of regulations (technical,
  environmental, safety) and control by national
  authorities to prevent competitive distortions
• Improved interfaces between various stakeholders
• Transportation services
• Customs
• Banking and insurance

Development of the transportation industry
Source The World Bank Private Participation in
Infrastructure Database
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Presence of private initiative in transportation
has clear benefits
Benefits of private sector presence
For the Government
For Customers
For Private Investors

• Source of financing for investments
• Freed Government capital
• Risk sharing with investors
• Increased operational efficiency in the sector
• Improved competitiveness

• Efficiency gains reflected in prices
• Improved service levels to passengers
• Improved transportation infrastructures and
  operation

• Historical returns above market average
• Investment in a regulated industry guaranteed
  returns
• Risk diversification

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Government benefits of private involvement will
be visible in other sectors
Benefits for the Government
Financing

• Financing of important investment programs
• Improved Government abilility to develop public
  investment programs in other industries
• Operational and financial risk sharing of private
  investors
• Improved operational efficiency due to na
  increased focus on profitability
• Optimization of operational processes with
  improved service levels
• Promotion of a competitive environment that
  stimulated private initiative
• Optimization of the value chain in related
  industries

Freed Capital
Risk Sharing
Operational efficiency
Competiti-veness
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Contents
Development of transportation is key to support
the anticipated increase in mobility
demand Trends in transportation sector are being
driven by legal and regulatory changes Sea and
air transportation could be areas of fast
improvement Access to transportation and
logistic infrastructures is a key enabler of
economic development Presence of private
initiative in the transportation sector in the
Arab world can be improved Investments in the
transportation sector can be an excellent source
of knowledge transfer
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2
3
4
5
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Five mechanisms are commonly used for knowledge
transfer in transportation
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Selected Knowledge Transfer Mechanisms

• Trade in goods and services
• All exports bear some potential for transmitting
  information that can be studied

• Public-Private Partnerships
• Combining entrepreneurship and efficiency of
  private firms and the service orientation of
  public institutions

• Financing of technology transfer
• Financing technology-transfer activities such as
  the purchasing and/or licensing of technology by
  developing countries

Knowledge Transfer

• Joint Ventures
• Partnerships with international companies where
  these provide technical/ management skills and
  local partner provides market know-how

• Foreign Direct Investment
• Foreign affiliates may bring new skills and
  technologies that may improve efficiency and/ or
  ability to compete

Source Facilitating Transfer of Technology to
Developing Countries (UNCTAD) Encouraging
International Technology Transfer (UNCTAD)
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PPP1) are increasingly common for financing
transportation infrastructures
ILUSTRATIVE
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Contractual framework for a PPP project
Government
Construction company/ Joint Venture
Sponsors
Equity / Debt contracts
Concession Contract
Design and construction contract
Other investors
Concessionaire
BEI

• Financing contracts
• Guarantees

Insurance policy
Operation and Maintenance Contract
Banks
Insurance companies
Operating and Maintenance Company
1) Public-Private Partnerships
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Some examples
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Mechanism
Example

• Trade in goods and service

• Acquisition of capital intensive equipment (e.g.
  involving training by the supplier)
• Contracting of maintenance services

Public Private Partnership

• Investments in important transportation
  infrastructures (e.g. airports, ports, highways)

Foreign Direct Investment/ Joint Ventures

• Aircraft maintenance companies investments
  outside their home markets to take advantage of
  opportunities of lower cost labour and high
  growth in air travel in some markets (e.g.
  Lufthansa Technik investment in China in
  partnership with local companies)

Financing of technology transfer

• World Bank programs on transfer of technologies
  to developing countries in order to address
  global environmental problems (e.g. energy
  efficient transportation)

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Final remarks

• Development of the transportation sector has to
  be a priority
• There are benefits deriving from greater
  involvement of private initiative
• but a clear legal and regulatory framework has
  to be in place (clarify rules of the game)
• Investments/partnerships for the transportation
  sector should be structured having in mind the
  need to promote knowledge transfer

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THANK YOU FOR YOUR ATTENTION!