Summary TRL3702 STUDY GUIDE

Trl3702 Study Guide - TRANSPORT PLANNING Bachelor of Commerce in Transport and Logistics (University of South Africa) lOMoARcPSD| Downloaded by Thomas Mboya () lOMoARcPSD| © 2018 University of South Africa All rights reserved Printed and published by the University of South Africa Muckleneuk, Pretoria TRL3702/1/2019–2021 S images used InDesign PR_Tour_Style Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . iii T R L 3702 /1 CONTENTS Page FOREWORD V LEARNING UNIT 1: TRANSPORT AND DEVELOPMENT 1 LEARNING UNIT 2: TRANSPORT PLANNING 17 LEARNING UNIT 3: SUITABILITY OF TRANSPORT INFRASTRUCTURE 37 LEARNING UNIT 4: COST/BENEFIT ANALYSIS 50 LEARNING UNIT 5: MULTI-CRITERIA ANALYSIS AS A PROJECT APPRAISAL TECHNIQUE 75 LEARNING UNIT 6: INVESTMENT IN ROAD INFRASTRUCTURE 80 LEARNING UNIT 7: PLANNING AND INVESTING IN SEAPORTS 103 LEARNING UNIT 8: PLANNING AND INVESTING IN AIRPORTS 119 LEARNING UNIT 9: PLANNING AND INVESTMENT IN RAIL TRANSPORT 132 LEARNING UNIT 10: POLICY AND REGULATIONS GOVERNING TRANSPORT PLANNING AND TRANSPORT INFRASTRUCTURE INVESTMENT 141 Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . iv Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . v T R L 3702 /1 FOREWORD You are most welcome to this applied discipline in which you plan transport facilities and infrastructure for all the transport modes. You have to know how to invest in these and how to make sound transport policy judgements. You are expected to evaluate the existing transport policy and refl ect on its suitability in the South African and African context. You will have to strive to achieve the outcomes below and we will assess you on the assessment criteria that follow: Specific outcome 1: Analyse the relationship between transport and development on a local, regional, national and international scale. Assessment criteria • Analyse the linkage between transport and economic development • Illustrate the infl uence of transport on less developed countries • Analyse the infl uence of transport costs on international trade • Distinguish between the developmental roles that transport can play in a regional versus an urban area Specific outcome 2: Illustrate reasons for government involvement in transport and explain the transport planning process. Assessment criteria • Illustrate the necessity for government involvement in transport planning • Indicate the cyclical nature of the urban transport planning process graphically • Plan transport infrastructure and facilities for an urban or metropolitan area by following the seven steps of urban transport planning • Analyse the different models that can be used in simulation of the transport system Specific outcome 3: Understand the methodology to be followed in determining the suitability of transport infrastructure and the techniques used to determine the suitability and economic justification thereof like cost/benefit analysis and multi-criteria analysis. Assessment criteria • Analyse what is meant by the technical and economic suitability of infrastructure • Illustrate when the optimal period for investment will theoretically be Downloaded by Thomas Mboya () lOMoARcPSD| FOREWORD . . . . . . . . . . . vi • Apply the suitability theory • Understand project evaluation • Analyse the various criteria techniques and apply it to a transport investment Specific outcome 4: Analyse how effective transport infrastructure in each of the four modes of road, sea, air and rail transport can be provided so that the investment in these fixed structures will be operationally and economically efficient. Assessment criteria • Illustrate the main characteristics of modal infrastructure like roads, ports, airports, stations and rail infrastructure • Analyse the planning of the provision of the infrastructure; including the role played by the government, international trade and ownership of the infrastructure • Analyse the issues that play a role in the investment decisions of the infrastructure provision of these modes • Distinguish between the different types of fi nancing and cost recovery methods available to the providers of the infrastructure • Interpret the role played by ownership of the infrastructure in decisions on the planning and investment in the infrastructure Specific outcome 5: Analyse the need for a national transport policy, government involvement in transport, legislation and transport regulation. Assessment criteria • Debate reasons for government involvement in transport through the formulation of a transport policy • Critically explain the development of a transport policy with reference to the objectives thereof, the factors that need to be considered in formulating it, its elements, the instruments available for implementation and the levels on which the policy are formulated. • Evaluate the existing South African transport policy The purpose of this module is to enable you to do transport planning in the correct chronological order. We address transport planning according to different approaches. We explain investment decision making, and guide you how to interpret these approaches correctly so that you can choose the correct options in a practical situation. To provide further clarity, we consider the uniqueness of each mode, namely road, water, air and rail transport, with a view to planning and investment. Finally, we explain transport policy in South Africa, which should be taken into consideration at all times in respect of transport planning and investment. The following is an overview of the study guide: For a long time now, the effect of transport patterns on the economic development in the environment in which transport operates has been a Downloaded by Thomas Mboya () lOMoARcPSD| Fo r ewo r d . . . . . . . . . . . vii T R L 3702 /1 topical issue among transport economists. There is consensus that transport plays a crucial role in economic development, but transport economists are also beginning to realise that we should periodically re-examine the impact of the role of transport. The first thing to do is to consider the underlying problem, namely how an economy develops. Transport and its spatial interaction reflects the socioeconomic, spatial and political dynamics of a community. During the 1960s in Europe, a period characterised by little economic growth, transport policy was aimed at network and capacity expansion. However, from the 1970s onwards, the emphasis shifted to the effective use of existing infrastructure as opposed to its physical expansion. The 1980s were characterised by environmental awareness and consequently questions about the negative side effects of transport for general quality of life. From the 1990s onwards, interest in the potential of modern technology to improve networks increased. Global warming and the longterm sustainability of transport provision have increasingly been put under the spotlight. Planning, and hence transport planning, is under increasing scrutiny. This is because the traditional characteristics of planning, as a discipline with a strong normative character, are changing rapidly. These changes stem from profound changes in the context and environment of planning. In the past few years transport planning has also changed in respect of its context and the environment in which it operates. Before we make investment decisions, it makes sense that we should consider the existing situation, also known as the zero alternative. It is not enough to have a transport infrastructure. The infrastructure must also be suitable for the purpose for which it is used. Improved technology plays a vital role in this regard: at the time of construction it may have been suitable for the purpose for which it was planned, but improvements in technology might have made it obsolete. The necessity of planning transport infrastructure according to economic selection criteria stems from the fact that the transport infrastructure uses productive resources (factors of production) for long periods, and during that time, these resources cannot be used for other purposes. Planning errors cannot be rectified in the short term, while medium-term adjustments can only be made at a high cost. This aspect of investment is especially important when the factors of production in infrastructure construction are scarce. The method used to control investment is to allocate the available factors of production to the best alternative. The optimal allocation of scarce factors of production is very important to ensure economic efficiency. Analytical methods such as social cost/benefit analyses, economic impact studies, environmental impact evaluation and traditional multicriteria analyses are sometimes regarded as exclusively value assessment methods. A social cost/benefit analysis measures the economic (monetary) welfare effect of a project, while an economic impact study measures economic development in terms of value added, the creation of job opportunities and economic growth. An environmental impact study, in turn, measures the influence of the project Downloaded by Thomas Mboya () lOMoARcPSD| FOREWORD . . . . . . . . . . . viii on the specific environment, while a traditional multicriteria study determines the most acceptable or optimal solution according to a number of criteria. When considering planning and investment for specific modes, it is important that we take the various operating and economic characteristics of the specific mode into consideration. In the case of road transport, investment in and upgrading of infrastructure such as roads are important, while harbours, airports and runways, and railway lines and stations are of decisive importance in sea, air and rail transport respectively. In learning unit 1, we analyse the link between transport and development. Transport planning is the topic of learning unit 2. Learning unit 3 deals with the suitability of infrastructure. Learning unit 4 addresses cost/benefit analysis as an evaluation method to interrogate transport infrastructure investment. In learning unit 5 another evaluation method common in infrastructure evalauation, namely multicriteria analysis is analysed. The planning of and investment in the various modes (road, water, air and rail transport) are interrogated in learning units 6, 7, 8 and 9. Finally, in learning unit 10 we critically debate reasons for government involvement and the general principles of transport policy. These principles are compared to the existing South African transport policy. An evaluation flowing from this comparison is used to conclude whether the policy is in line with good practices. Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 1 T R L 3702 /1 1L e a r n i n g u n i t 1 1Transport and development 1.1 Introduction 1.2 The link between transport and economic development 1.3 Sustainable development through investment in transport 1.4 Transport economy in developed countries 1.5 Transport economy in developing countries 1.5.1 Introduction 1.5.2 Social overhead capital as opposed to the total cost of productive activities 1.5.3 Provision of transport 1.6 Transport and regional development 1.6.1 Introduction 1.6.2 Regional investment 1.7 Transport and urban development 1.7.1 Introduction 1.7.2 Modern trends 1.7.3 Improving the urban core 1.8 Conclusion 1.9 Self-evaluation questions U N I T O U T C O M E S After working through this learning unit, you should be able to • explain the link between transport and economic development • analyse the influence of transport in developing countries • explain regional development and the role of transport in this regard • analyse transport and the improvement of the urban core • elaborate on the link between transport and development • indicate how transport can lead to development and how transport is needed when development takes place K E Y C O N C E P T S • transport planning • economic development Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 2 • sustainable development • regional investment • urban core PR E S CR I B ED R E A D I N G: • Banister, D & Berechman, Y. 2001. Transport development and the promotion of economic growth. Journal of Transport Geography 9:209–218. • Ikioda, F. 2016. The impact of road construction on market and street trading in Lagos. Journal of Transport Geography 55:175–181. 1.1 INTRODUCTION In this module we deal with Transport Planning and Investment. There are two main reasons why transport is planned and investment is made in transport infrastructure. The first is to increase the efficiency and flow of the moving units (vehicles, vessels and aircraft) in the transport infrastructure. Secondly, transport infrastructure is planned and investment is made to increase economic development and growth. The latter goal will be investigated in this learning unit. How changes in transport patterns influence economic development in the environment in which the transport is operating has long been a topical issue among transport economists. It is generally accepted that transport plays a significant role in economic development. Therefore the impact of the role of transport needs to be reviewed periodically. This impact of transport is quite clearly evident in that areas with better transport infrastructure are better developed and experience economic prosperity. Yet the issue remains complex. Docherty & MacKinnon (2013:226) referred to Leinbach, who indicated that it is not easy to understand “the rich complexity of the transport-development interface”. Button & Reggiani (2011:3) elaborated on this challenge when they said: “The challenges involved in defining transport strategies that positively stimulate economic growth remain large despite the energies some of the greatest minds have exercised on the topic.” The traditional view that economic development is the main advantage of transport improvement, is not carrying as much weight as before. Economic development, as a positive consequence of transport improvement, should also be sustainable. It should therefore not only be advantageous to the present generation, but also to future generations. This is emphasised by Golinska and Hajdul (2012:vi). Economic development is at present regarded as positive only when it is sustainable economic development. Economic development at the expense of social and environmental sustainability is no longer acceptable. Transport is seen as having negative externalities, like air and noise pollution as well as the severance of communities. You will recall that the severance of communities occurs when infrastructure, like a freeway, breaks an existing community in two parts. These externalities may contribute to environmental degradation and social ills. The development created by transport, or the type of transport provided due to economic development should therefore be sustainable in terms of the environment and society in Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 3 T R L 3702 /1 general. The crux then is that economic development should always be seen as “sustainable economic development”. We will return to the concept of sustainability later in this learning unit, in section 1.3. It is traditionally held that transport has a strong positive influence on economic development and that an increase in production is directly related to improved transport. Goetz, in Button & Reggiani (2011:50–61), evaluated empirical studies over a long period, which indicated a positive correlation between transport infrastructure and economic growth. In this module we are investigating the theme of transport planning and investment. One of the main reasons why governments are prepared to provide and invest in transport infrastructure is that they are convinced that it will improve the economic development in the area where they construct the transport infrastructure. Let us now turn to this link between transport and economic development. 1Ac tivit y 1.1 Go to Discussion Forum 1.1 and discuss the transport infrastructure in your local environment. Do you see a relationship between the infrastructure and economic development? 1.2 THE LINK BETWEEN TRANSPORT AND ECONOMIC DEVELOPMENT The link between transport and economic development is the result of direct and indirect inputs arising from transport. This leads to the question asked by Banister and Berechman (2001:214), “Does transport investment promote economic growth or does growth encourage more demand for transport, and thus further investment?” We have here what is usually referred to as the active and passive roles of transport. The active role pertains to the first part of Banister and Berechman’s question, while the passive role comes into play in the second part of the question. We also distinguish between the direct and indirect effects of the active role of transport. The direct effect may be explained as follows: The shipping costs for the transportation of goods are generally low, which means that markets can be dispersed over a wide area and that large-scale production involving a variety of activities can take place. In such circumstances, the transportation of goods has a direct effect on the establishment of markets and the production process. The Industrial Revolution, for example, was successful because it was preceded by the revolution in transport technology. Furthermore, for a variety of geographic, economic and historical reasons, undeveloped countries are reliant on international trade which, in turn, is a requirement for growth. In such circumstances, efficient port facilities are of vital importance. The indirect effect of the active role of transport in economic development relates to the job opportunities generated by the development of infrastructure and the operation of transport services. Moreover, the use of, say, steel, wood Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 4 and stone, which are required for the construction of transport infrastructure, has a multiplier effect. However, the causal approach to transport and economic development has lost popularity. Haynes & Button (2001:256) motivate this by referring to Fogel’s econometric research in which Fogel (1964) showed that the growth in the American economy during the 19th century would in fact have been possible without the development of railways, because waterways could have established an intensive transport system at a comparable cost. Nowadays, economic development is regarded as a complex process, and transport is viewed as the means to utilise and exploit natural resources. Transport is no longer necessarily seen as a driver of effective development. Improved transport can prevent a bottleneck in production processes and therefore promote economic expansion, while inadequate transport (from a socioeconomic point of view) can prevent development and national integration. For example, inadequate transport hampers the establishment of infrastructure for, say, educational and medical services, which has a social impact. The link between transport and economic development is very well explained by Banister and Berechman (2001). 2Ac tivit y 1. 2 Now read through Banister and Berechman’s (2001) article and write a short, substantiated answer to the question: “Does transport investment promote economic growth, or does growth encourage more demand for transport, and thus further investment?” Some important concepts emanate from this article. They are, amongst others, agglomeration benefits, economies of scale and how development differs on a national, regional and local scale. 1.3 SUSTAINABLE DEVELOPMENT THROUGH INVESTMENT IN TRANSPORT What is sustainability? Hutton (2013:1) defines it as follows: Sustainability means “(e)nsuring that development meets the needs of the present without compromising the ability of future generations to meet their own needs.” If the principle is accepted that a link between transport investment and economic development exists, what economic development should be the result? How do we measure economic development? I am sure that you will have encountered the concept of Gross Domestic Product (GDP). Downloaded by Thomas Mboya () lOMoARcPSD| LE AR N IN G UN I T 1: Tr ansp o r t an d d eve l o p m ent . . . . . . . . . . . 5 T R L 3702 /1 DEFINITION Gross Domestic Product (GDP) is a measurement indicating all the goods and services produced in a country. An increased GDP means that more goods and services are produced. The increase in GDP is thus used to measure economic development. It is more difficult to measure how the economic development of a region is affected by an investment in transport infrastructure. There are the direct benefits of a decrease in travelling times, increased mobility and accessibility, and savings in direct transport costs like fuel and maintenance. The indirect benefits are increased job opportunities, new industries and houses being built. Although externalities like noise and air pollution, increased traffic congestion caused by construction and degradation of the natural environment were previously included as “costs”, they were not seen as long-term consequences. They were viewed as necessary evils flowing from investment in transport for the purpose of economic development. It was a case of the end justifying the means. This whole attitude changed when sustainability, the green environment, and global warming became issues of increasing concern. Transport and the resources used in providing it were being questioned. “Is the way transport is being provided sustainable in the long run?” was the question on everybody’s lips. On the political level, environmentally conscious parties like “GroenLinks” in the Netherlands, and “Die Grünen” in Germany gained political power. Even before that, international conferences on the environment, like the Rio Conference and the Kyoto Protocol started addressing this question on a global level. The first of these produced “Agenda 21” (Hutton 2013:2), and the latter followed on both the Brundtland Report and the Rio Conference. All of these initiatives affected transport, as fossil fuels used by especially road and air transport emitted greenhouse gases (GHG). Transport infrastructure based on the premise of providing unlimited infrastructure for unsustainable transport leading to economic development was not acceptable. This might create the impression that economic development and sustainability of the environment are mutually exclusive. However, it is not an “either/or” question. Perrels et al (2012:3) maintain that sustainability has three pillars: sustainability means that an action should be sustainable in economic, environmental and social terms. The conclusion may then be drawn that transport investment should lead to economic development, environmental protection and social improvement. All three of these should be achieved when investing in transport. What does this mean in practice? Infrastructure for transport should contribute towards economic development and increase the wealth of the people. Transport infrastructure should protect the non-renewable environment for future generations and contribute to the social well-being of the community. This means accessible, liveable and socially integrated cities, regions and countries. Golinska and Hajdul (2013:4–5) identify the following negative effects, which should be minimised in Europe: congestion, oil dependence, accidents, GHG emissions, noise, and land fragmentation by infrastructure. They then mention infrastructure that is incompatible with these goals as the Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 6 first barrier to sustainable transport. Such transport infrastructure should be re-evaluated and infrastructure should be provided in sustainable modes. Defi nition Infrastructure is the fi xed parts in a transport system. 3Ac tivit y 1. 3 An example of infrastructure would be a freeway for private cars and noisy freight trucks. Another example could be a railway line on which high-speed electric trains run. Consider which one of these types of transport infrastructure would be sustainable in the long run. Explain why you came to this conclusion. Go to the Discussion Forum and discuss this further with your fellow students. 1.4 TRANSPORT ECONOMY IN DEVELOPED COUNTRIES An important term that was coined in the debate about the link between transport investment and economic development is “new economic geography” (NEG). This emanated from the work of Paul Krugman. NEG basically says that cheaper transport costs (as a consequence of better transport infrastructure) will concentrate the economic development in favoured locations. Examples cited by Docherty & MacKinnon in Rodrique et al (2013:230) are that London in England, and Silicon Valley in California are seen as the financial capitals of the world. This means that in the developed world, better transport has increased specialisation and economic development and growth, but to the advantage of the developed world. Production activities like research and development, skilled production, assembly and testing, and routine assembly may, however, be spatially separated. Good transport infrastructure may allow the research and development of electronic components to be carried out in Silicon Valley (USA), skilled production in Scotland, assembly and testing in Hong Kong and Singapore, and routine assembly in the Philippines or Indonesia. The advantage of this is that different parts of the world may be involved in producing a single product. But although the last two countries may be viewed as developing countries, it may be argued that the economic benefits still accrue primarily to developed countries. Even though the basic assumption might be accepted that transport infrastructure in developed countries caused their development, another question arises. Is further investment to expand transport infrastructure justified? Docherty & MacKinnon in Rodrique et al (2013:231–232) contest this. They refer to research done by Eddington (2006:9–10), which found that a 1% increase in public investment may lead to a 0,2% increase in GDP. And this might not even be directly related to transport investment, as the research investigated public investment in general. The wider economic, social and environmental aspects were also not considered. Docherty and MacKinnon (2013:238) also Downloaded by Thomas Mboya () lOMoARcPSD| LE AR N IN G UN I T 1: Tr ansp o r t an d d eve l o p m ent . . . . . . . . . . . 7 T R L 3702 /1 refer to a study in Germany in the 1980s, which found that the construction of national roads did not lead to economic development and spatial integration. Docherty and MacKinnon in Rodrique et al (2013) identify four reasons why additional transport infrastructure investment might not lead to regional economic development in developed countries: (1) In developed countries accessibility is already high, and more investment will only lead to minor improvements in accessibility. (2) In the new service-sector economy, transport is not important for the location decision, but may be important for just-in-time (JIT) freight transport. (3) Locations closer to economic centres have an economic advantage. The provision of new transport infrastructure will not give peripheral and remote regions this advantage. The new infrastructure may even further disadvantage the remote regions, as their inhabitants will now have access to the economic centres. The remote areas will not experience any economic growth and they might even deteriorate further. (4) The NEG principle leads to already developed areas being more advantaged by new transport investments, and will only cause peripheral areas to deteriorate further, as it only allows their residents better accessibility to the already developed areas. 1.5 TRANSPORT ECONOMY IN DEVELOPING COUNTRIES 1.5.1 Introduction Transport investment is a principal component of the capital formation of developing countries and transport expenditure is usually the single largest item of the national budget. Contributions to transport expenditure are received from international organisations, such as the World Bank, or in the form of direct support from individual countries. However, it is important to determine whether this kind of support is practical and efficient, and what effect it has on the development of individual transport systems. Bonfatti and Poelhekke (2017) argue that Chinese road investment in African countries is geared more toward export than to the internal development of these countries. They found that the majority of the roads were constructed from the countries to the coast, instead of linking landlocked African countries together. That is what the African Development Bank (ADB) wanted to achieve through the Chinese investment, but it did not materialise. It might thus be asked whether these transport investments are geared to the economic development of the countries themselves, or whether they are catering for the import needs of the countries to which they export. It is important that this colonial type of transport infrastructure investment not be repeated after the independence of these countries. These considerations will now be discussed. 1.5.2 Social overhead capital as opposed to the total cost of productive activities Transport economists have made important contributions by determining in detail the support role that transport can play in economic development. At Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 8 the microeconomic level, techniques have been developed to determine the costs and benefits of individual transport projects, according to a scientific approach (cost-benefit techniques are discussed fully in learning unit 4). These techniques for appraising investment possibilities are applied in both developed and developing countries. In developing countries, the local situation sometimes requires that adjustments be made in the application of a technique. In certain countries, for example, canoes are still used to transport goods, while the cost-benefit technique may not provide for such a mode of transport. Reliable information is also not always available. At the macroeconomic level, the focus is on the contribution that transport in general can make to economic development. While one can argue that transport can be extended to balance development in other sectors of the economy, this is not always the case. The balanced approach is based on the assumption that if transport is inadequate, it will cause a bottleneck in the production process, but that if the transport capacity is excessive, then scarce resources will be wasted, because those resources could earn a better return in another sector of the economy (Unisa 2012:3). This macroeconomic approach is explained by Goetz in Button and Reggiani (2011:45–46). It relates to the fact that improved transport infrastructure reduces the costs of production inputs in terms of labour, material and land. It expands overall economic output by means of the production function, which expands. 1.5.3 Provision of transport The type of transport provided which will be suitable for a developing economy is generally not as important as the total provision of transport. Some developing countries tend to use their limited development funds for prestigious transport projects, such as expensive international airports, so that in the eyes of the world, they appear just as important as more developed countries. In other words, efficiency is sacrificed for a superficial image. However, it is more important to spend money on internal transport provision, to ensure that benefits can be generated through the application of the limited capital resources for road and rail transport. (In the case of developing countries, air and sea transport are defined as external sources of transport, because they are related to international trade.) The suitability of specific transport modes for a country is mainly determined by the geographic and demographic nature of the country. As a rule, less developed countries can be characterised as follows (Unisa 2012:5): • densely populated tropical countries • tropical countries with a low population density • mountainous temperate countries with a low total population density concentrated in the coastal area • desert areas in which the low-density population is concentrated along irrigated channels The suitability of various transport modes changes according to the type of country. Thinly populated tropical countries, for example, have different problems from countries with densely populated urban areas. Downloaded by Thomas Mboya () lOMoARcPSD| LE AR N IN G UN I T 1: Tr ansp o r t an d d eve l o p m ent . . . . . . . . . . . 9 T R L 3702 /1 It is also important to realise that the benefits of new road infrastructure may be unevenly distributed. In a study conducted by Asomani-Boateng et al (2015:255–266), it became clear that in Ghana, road transport was used as the main mode for economic development. Therefore, a lot of investment in roads ensued. The authors evaluated the Transport Sector Program Support (TSPS-2) implemented in Ghana in order to determine whether it had a socio-economic benefit. The results showed positive and negative effects. The productivity in terms of output of agricultural products and increased income and expenditure was positive. Also the accessibility of educational facilities was improved. Yet, access to medical facilities did not really improve. The negative effects related to higher transport costs. This contradicted the generally held belief that improved transport infrastructure should lower the costs. The rational explanation for this anomaly was a drastic increase in fuel prices during the study period. However, a disadvantage of road development is that urbanisation could polarise the spatial economy, and this could have social and economic disadvantages. New infrastructure in a developing country, like Nigeria, may benefit the existing higher and middle-income group and adversely affect the livelihood of the poor, making them poorer. The idea that investment in transport infrastructure will lead to economic development for all does not hold true in all cases. Investment in transport infrastructure in developing countries should thus be carried out with circumspection. The article by Ikioda (2016) is a case in point. 4Ac tivit y 1.4 Study the article by Ikioda (2016) and answer the following questions: (1) What would you say are the usual economic benefi ts being considered when transport infrastructure is constructed? (2) Do you think that these benefi ts were suffi cient to make the decision to construct the new infrastructure in Lagos? (3) What other important considerations should transport planners and investors bear in mind when providing new transport infrastructure? We will discuss the answers to these questions in Discussion Forum 1.4 . Internal transport While rail development was vital for economic and colonial development in the 19th century, in the past few years the emphasis in developing countries has shifted to the development of an appropriate road transport infrastructure. The advantages of doing this are as follows: • In countries with an existing basic road network, it is possible to upgrade and extend this network. • Remote agricultural areas can be linked. • New development, which depends on transport, is generated. External transport For the purposes of our discussion, external transport in developing countries refers primarily to sea transport, because air transport is more Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 10 geared to passenger transport, which is less important for the development of the economy than the transportation of products is. Improved port and shipping facilities can result in developing countries exporting their products to a greater variety of markets. However, the costs involved in improving or constructing a port should be measured in terms of international exchange, because the production costs of products (of which transport costs constitute a major portion) differ from one country to the next, as do the monetary units of different countries (Unisa 2012:5). 1.6 TRANSPORT AND REGIONAL DEVELOPMENT 1.6.1 Introduction The distribution of economic activities among the various regions of a country is an important issue for any government. Geographical differences relating to employment, income, migration and industrial structures are significant because they can handicap welfare and in many cases the total operation of the national economy. Governments therefore endeavour to follow a policy that stimulates economic activities in underdeveloped areas, while excessive economic growth in a developed area, which may have detrimental results in the long term, may have to be curtailed. Hence direct financial support is often made available in an underdeveloped area, and mobility of labour improved. The economic structure of developed areas is supported by improving existing transport facilities. FIGURE 1.1 Market areas served by regions A and B Source: Adapted from Button (2010:240) 1.6.2 Regional investment The effectiveness of a policy favouring transport investment in underdeveloped areas has been questioned, especially in developed countries. In developed countries, where an infrastructure has already been developed fairly extensively, transport is seldom a factor that is used to explain inequalities in the economic performance of regions. A transport policy supported by regional policy objectives should therefore be approached cautiously, because improved transport may be counterproductive. The following simplified hypothetical example (see fig 1.1) illustrates this problem: Downloaded by Thomas Mboya () lOMoARcPSD| LE AR N IN G UN I T 1: Tr ansp o r t an d d eve l o p m ent . . . . . . . . . . . 11 T R L 3702 /1 Take two regions, namely A and B, which manufacture a single homogeneous commodity. The centres of the regions are K kilometres apart, and the commodity that is manufactured can be transported at a fixed cost per kilometre of t per ton. The markets serving the area differ because the cost per ton to produce the product in region A is Ca , and in region B, it is Cb . Thus a distribution boundary can be drawn between the two regions (the assumption being that there are no production centres between the two regions). This boundary, which is indicated by the dotted line in figure 1.1, is ka kilometres from the centre of region A, and kb kilometres from the centre of region B (ka + k b = K). The regional boundary is determined by the relative production in the specific region and the cost of transport – that is, a C+ tk a = C b + tk b . Mathematical manipulation of this equation (you need not learn it) gives the following equation: ka = k b + (Cb – Ca )/t This equation shows that if the production costs in region A are relatively cheaper, the distribution boundary (ka ) will increase if improved infrastructure reduces the cost of transport. In other words, if region A is underdeveloped, an improvement in the transport infrastructure can help to expand the region’s potential market and generate an increase in revenue and jobs. However, if region B is underdeveloped, investment in transport infrastructure will exacerbate the regional problem, because the market area will be curtailed. An extreme case would be if region B were to be forced out of the market as a result of the expansion of the low-cost region. Bear in mind that this example is rather simplistic. For example, as a rule, regions do not specialise in a single product, but manufacture a variety of products. An improvement in the transport infrastructure may be detrimental to some industries, while increasing competition in others. The ultimate influence of transport investment will depend on the relative production costs in the regions and on the significance of transport costs compared with production costs in the total cost function of the products. This skewed development between different regions is confirmed by Chengri Ding (2013), who found that regional roads between remote regional areas and the urban concentrations were more advantageous to the urban concentrations than to the remote regional areas. 1.7 TRANSPORT AND URBAN DEVELOPMENT 1.7.1 Introduction Over the years, changes in transport technology have had a profound influence on the shape and patterns of urban areas. The development of the steam engine in the 19th century considerably improved interurban transport and stimulated urban growth. However, local distributional services developed at a slower pace, because activities tended to develop in concentric patterns around rail/sea terminals. Affluent people lived on the outer limits of the area because they could afford to use the appropriate transport, while industries and the lower-income groups tended to be concentrated around the urban Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 12 core where interurban transport was available. In South Africa we have had the opposite situation, where many of the less affluent lived far from the central business districts (CBDs). The introduction of motorised local public transport, initially in the form of trams and later buses and motorcars, resulted in the axial development of urban areas with the origin in the CBD. The axial patterns of development extended the earlier concentric circles of housing into ribbon-like developments along the main arteries (see fig 1.2 below). Finally, the universal use of motor vehicles and improvements in road systems (and therefore more efficient road freight transport) have led to the development of numerous urban cores and their extensions. FIGURE 1.2 Transport and urban development Source: Adapted from Button (2010:454) 1.7.2 Modern trends Nowadays, problems in respect of transport and urban development revolve not so much around the development and control of transport modes, but rather the degeneration of urban areas. A case in point is Johannesburg’s CBD. The Carlton Centre, which has office facilities on 50 storeys, has become obsolete because businesses are moving to the suburbs. This trend is also common in Europe and the USA. The depopulation of urban cores, which goes hand in hand with the rapid exodus of industries to the outskirts of cities, has led to the degeneration of the economies of city cores. There is escalating unemployment and as a result, the tax revenue required for services and development has to be obtained from the Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 13 T R L 3702 /1 older and less affluent residents of these areas. The reasons for the degeneration of urban cores are complex and can be ascribed to the following, inter alia: • The urban lifestyle becomes less attractive as incomes increase. • Improvements in personal transport, particularly the increase in ownership of private motor vehicles, has promoted commuting to and from the suburbs. Since the beginning of the 1970s, the focus on transport problems in urban areas has shifted to the redevelopment of urban areas. Also in South America, in cities like Bogota and Santiago, this regeneration has led to the coining of the phrase: “A living city” (Sagaris 2010:275–288). 1.7.3 Improving the urban core Figure 1.3 depicts a typical urban situation. The central business district (CBD) is the focal point of employment and dominates the suburban centre, which is linked to it by road. FIGURE 1.3 The infl uence of transport on the CBD Source: Adapted from Button (2010:250) The urban core is served by efficient public transport and people up to point B use the bus service. Equilibrium is maintained – in other words, each household has the same utility level. Workers can choose one of three main employment/residential locations: • They can live within the urban core (radius B) and use the bus to commute between the workplace (inside the CBD) and home. • They can live outside the immediate bus transport area and travel by car to the workplace inside the CBD. • They can travel by car to the suburban centre. In the third situation (excluding city residents who may choose a fourth option, namely working from home), the boundary U will separate individuals working in the urban cores from those working in the suburban centres. This means that no household can improve its utility by changing its workplace, place of residence or transport mode. Downloaded by Thomas Mboya () lOMoARcPSD| . . . . . . . . . . . 14 We shall now examine the effect of two possible transport strategies to improve the economy of the urban core. (1) The fi rst strategy is to generate more income for the urban core by means of transport. Here parking tariffs can be increased or a road usage tariff imposed. However, there will be a rapid decline in activities in the urban core because increased motoring costs will cause the immediate commuting boundary belt to increase (say, to B’ in fi g 1.3). The real income of people living B’ – B kilometres from the CBD will decline, because a bus transport service is not available, and as mentioned earlier, because of the higher motoring costs. This strategy will encourage more people to work from home or to withdraw from the labour market, with the result that the supply of labour in the CBD will decrease. Similarly, motorists who have to contend with increased transport costs will start working in the suburban centre, which will shift the employment boundary to, say, 1U. Increasing competition to work in the suburban centre will place real income under pressure, which in turn will lead to a general decrease in the overall supply of labour in the urban core. It should be clear from the above that transport restraints in the CBD tend to make labour conditions less favourable, while (in the long term) making suburban centres more attractive for the establishment of industries. The empirical fact that skilled labour is more mobile between home and work than unskilled labour intensifi es this effect on industrial location. (2) A second strategy is to use a subsidised express bus service in bus lanes. The service is provided between depot b and the urban core, without any stops in between to take on or offl oad passengers. This strategy should not have a major impact on the transport patterns of existing bus commuters in the CBD, although it may result in fewer car trips (the cost of bus transport may be lower than that of motor transport) and therefore less congestion, which should make the labour market in the CBD more accessible. Previous car travellers from as far as S2 will fi nd that travelling by car to depot b and then taking the express bus service to the CBD will decrease the total transport cost to the CBD. Thus the boundary demarcating labour for the CBD will shift to U2 . People to the left of U2 will notice an increase in their real income as a result of the lower transport cost. The supply of labour in the CBD will also increase, which will make the establishment of industries in the CBD more attractive. People who previously worked from home or stopped working may now fi nd it attractive to work in the CBD. The supply of labour will therefore have decreased in the suburban centre and salaries in this area will have to be increased to attract workers to the area. In the long run, the suburban centres will become less attractive for employees. This theoretical analysis shows that although one common result of both the traffi c restraint policy and the public transport improvement policy is to increase use of the bus transport service, the long-term effect on the population and economic activities will probably be different. Thus, although transport cannot solve the deterioration of the urban core, it can at least delay the process. Downloaded by Thomas Mboya () lOMoARcPSD| LE AR N IN G UN I T 1: Tr ansp o r t an d d eve l o p m ent . . . . . . . . . . . 15 T R L 3702 /1 1.8 CONCLUSION In this learning unit we have discussed the effect that changes in transport patterns can have on economic development in the environment in which transport operates. There is no doubt that transport plays a vital role in economic development. However, the impact of this role on transport should be reviewed periodically. It is important to understand how economic development occurs, because it is closely intertwined with the impact of transport. 1.9 SELF-EVALUATION QUESTIONS (1) Analyse the linkage or relationship between transport and economic development. (2) Analyse the concept of sustainability and the effect this has on the link between transport investment and economic development. (3) Compare transport investment in developed countries with transport investment in less developed countries. (4) Explain why a transport policy supported by regional objectives should be approached with caution. (5) Discuss two possible transport strategies that can be used to improve the economy of the urban core.