NEWCASTLE UNIVERSITY

Essay question:

Good infrastructure is vital for the economic development of developing countries. However,
considerable damage can be done to informal housing and economies in a drive to improve transport
networks. With reference to one or more developing countries, discuss the social and economic
issues which should be considered when planning for new transport networks.

Issues concerning transport investments in

developing countries

2010-01-10

Olle Wiklund, Erasmus Student

Student Number: 099145965

Module: Planning in Developing Countries

Module code: TCP8921

Module Leader: Suzanne Speak

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Contents
Introduction................................................................................................................................2
The importance of transport investments...................................................................................2
Investing where it is needed.......................................................................................................3
Transportation issues in cities of India.......................................................................................4
The responsibilities of international construction companies....................................................5
Conclusions................................................................................................................................6
References..................................................................................................................................8

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Introduction

Facilitating transport is a key issue in many developing countries. On one hand, it is vital in
order to deliver basic necessities such as access to medical facilities and education. On the
other hand, it is also essential in order to increase economic growth and development through
improved possibilities of transporting goods and materials (Briceño-Garmendia, et al., 2004).
Investments in infrastructure are also recognised to be an effective tool in poverty reduction
(Zawdie & Lagford, 2006). Even though these are well known facts, many developing
countries still lack sufficient transportation possibilities to a great extent. These problems
exist both in rural and urban areas and are often most severe in low-income countries
(Briceño-Garmendia, et al., 2004).
Due to the very high socio-economic return being possible from transport investments in
developing countries, which will be further studied later in this essay, this is a matter of high
importance which should also engage members of the industrialised world. However, when
investments in transport in developing countries are made, there is also a risk of severe
negative impacts if these are done inappropriately. This essay aims on further examining this
matter in order to highlight and inform of potential mistakes. This will be done partly on a
general level but also through examples drawn from issues in India.
The essay will initially examine the possible benefits that can be achieved in developing
countries through transport investments. It will then move focus and consider possible
investment mistakes and which negative effects these might lead to. This will first be done by
reflecting on the importance of making investments where they are actually needed. Followed
by this, there will be an observation of transport investments in cities of India and also a
reflection regarding the role of international construction companies in developing countries.
Finally, a conclusion regarding these subjects will be conducted.

The importance of transport investments

There are a vast number of studies showing large positive socio-economic effects achievable
with infrastructure investments in developing countries. These observations have shown that
investments in transportation can be efficient in improving health and education matters.
Examples of this can, for instance, be seen in rural areas of India where it has been shown
that investments in transportation has contributed to reduced poverty rates and also to
increased access to schools and hospitals (Zawdie & Lagford, 2006).
Furthermore, the positive effect transport has on firms and industries must also be considered.
Through investments in transport, mobility for goods and people is made possible, both
nationally and internationally. It thereby furthers export and productivity which leads to an
increased economic growth and an improved welfare (Briceño-Garmendia, et al., 2004).
Studies carried out by the World Bank, using cost-benefit analyses, have shown that the
return from investments in transport in developing countries is approximately 43 percent
(Estache, 2004). Even if such economic measurements must not be taken for an absolute
truth, they clearly point to large possible socio-economic benefits from investments in
transport in developing countries.
Moreover, Estache (2004) also identifies that the return is largest in countries with low or
medium levels of income and also in poor regions within richer countries. Briceño-

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Garmendia, et al., (2004) support this statement and also declare that investments in
infrastructure are of highest relevance in the early stages of development when fundamental
networks are still lacking or needs improvement.
Despite of the evidence illustrating the obvious importance of infrastructure, numerous
developing countries still lack many basic factors within their transport network, with
problems being worst in the poorest countries and also often in rural areas. However, due to
major urbanisation taking place in many developing countries, the need for improved
transport within cities is also growing considerably (Briceño-Garmendia, et al., 2004).

Investing where it is needed

Failure to provide what is actually needed is a frequent problem in developing countries.
Zawdie & Lagford (2006) state that investments are often misdirected on large expensive
projects because these are found to be more prestigious than those which are actually needed
and which would benefit the many poor. A common mistake when making transport
investments in developing countries is also to neglect the rural areas in favour of large
investments in cities. These investments can even have negative impacts on a country’s
economic growth, for example due to the deteriorating conditions it leads to for the poor.
This will be further highlighted in next chapter on the matter of transport in major Indian
cities. Zawdie & Lagford further state that investments in rural areas often have much larger
return per invested unit that those in urban areas.
An important matter is also that investments must be done in a sustainable matter, with
regards taken to future maintenance. It is according to Zawdie & Lagford commonly
occurring in developing countries that when, for example, new roads are constructed, they are
then simply left to deteriorate with time. This matter is further supported by Briceño-
Garmendia, et al., (2004) who point at problems due to lack of repairs on the existing
transport system in developing countries. They state that many savings could be made if more
resources were allocated into these areas, such as extending the structures lifetime and
reducing operating expenses. This matter can be further illustrated by the fact that poor
preservation of roads in developing countries during the last two decades has led to a loss of
transport network worth over $45 billion (Gwilliam, 1997).
However, despite of the facts presented, maintenance is often underrated and focus is instead
misdirected on new constructions. An important reason for this misdirection of capital is
according to Briceño-Garmendia, et al., (2004) the difficulty of finding adequate resources
for maintenance. They state that investors are often much more interested in funding new
constructions. Another possible reason for the lack of maintenance is the poor administration
of many developing countries (Zawdie & Lagford, 2006). Further issues are also linked to
underdeveloped construction industries of many countries. This is a matter which leads to
problems such as poor standard and delays with supplying the demands on construction, often
due to lack of knowledge regarding technology and project planning, a subject that will be
further studied later on in this essay.
Furthermore, when making investments, it is false to simply assume that developing countries
would benefit from the same infrastructure projects as a developed country. While the
economy in a nation evolves, its demand for infrastructure also changes (Zawdie & Lagford,
2006). Investments therefore have to be fitted to the specific needs of each country,
depending on its current level of development, in order to maximise the benefits.

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Transportation issues in cities of India
A contemporary problem regarding transport in many developing countries is the rapid
increase of motorised vehicles in cities. This growth is largest in low-income developing
countries (Badami, 2005). Impacts linked to this phenomenon are for example felt on the
environment, both locally and globally, on health matters due to emissions, and on road
safety. It is also a fact that highly trafficked streets in cities lead to segregation, because of
the least favoured of society being left in the areas to cope with the problems, while those
who can afford to, move to quieter areas.
A country currently experiencing these issues is India. The growth of motorised vehicles in
the country has been significant since the beginning of the 1980s and has in addition to the
above mentioned impacts also had a negative effect on productivity due to traffic congestion
in many cities (Badami, 2005).
In cities of India, the low-income groups of society often have to rely on walking or
bicycling, due to it being the only transport the can afford. As a result of the vast number of
poor people in India, these modes of transportation therefore make up for a large proportion
of all trips made. In the inner city of Delhi for example, even though decreasing, it is
estimated to be as many as 300.000 rickshaws and 1.500.000 bicycles (Tiwari, 2002) which
together represent around 8 percent of all trips made in Delhi. Walking however, which is the
main way of transportation for the low-income groups, represents as much as 32 percent of
trips. Despite of this, non motorised vehicles and pedestrians have been largely neglected in
India, compared to other Asian countries (Pucher, et al., 2005). Furthermore, buses are also a
very important mode of transportation, representing around 42 percent of all trips made in
Delhi (RITES/ORG, 1994 cited in Badami, 2005, p.196). However, they are not only
important for the low-income groups. The upper parts of society also often travel to work in
contracted buses and they would therefore be benefiting from improved possibilities of public
transport as well (Badami, 2005).
Even though the poor groups of society in India contribute the least to the environmental
problems, as a result of their environmental friendly ways of transport, they are unfortunately
the group who suffers the most from the problems. This can be exemplified in the matter of
road safety. In 1994 in Delhi, pedestrians represented 42 percent and cyclists 14 percent of
the deaths in traffic, compared to only 2 percent for car drivers (Tiwari, 2002). In 2001 the
deaths in traffic accounted for approximately 80.000 people, making it the biggest contributor
to accidental fatalities (MORTH, 2004 cited in Badami, 2005, p.170).
Solving these problems in India is a complex task, especially considering the limited
resources available. Solutions therefore have to be affordable and at the same time solve
transportation needs of the majority of the population while also reducing the negative
impacts caused by transportation today. It is therefore clear that methods promoting other
types of transportation than personal motorised vehicles must also be implemented.
A problem with improving and enlarging roads in major cities in India, such as Delhi, in
order to address problems with motorised vehicles, is the lack of space. Since the poorer
groups of the population have less access to motorised vehicles and are more dependent on
walking, they are thereby often forced to live close to their place of work. As a result of this,
they often have to live in temporary and informal housing (Tiwari, 2002). If major
construction of highways and flyovers were to take place, in order to improve conditions for
motorised vehicles, a vast number of these informal settlements would be in the risk zone of
being moved or demolished. This is currently the case in many cities in India (Pucher, et al.,

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2005). In addition to this, the investments in major highways would create an even worse
situation for non-motorised vehicles and pedestrians in favour of motorised vehicles (Badami,
2005). The consequence from this would simply be an improvement on the situation of the
rich on the cost of the poor. It would also increase the dependence of motorised vehicles even
further and thereby lead to an increased number of vehicles in the cities.
From the discussion made above on the case of Delhi, it is evident that resources must not
only be directed on improving roads in favour of motorised vehicles. The reason for this is
that, in addition to those regarding the environment and health and safety, these solutions are
often very expensive and do not favour the low-income groups but instead make conditions
worse for them, evicting them from their homes, furthering segregation and increasing the
number of cars in the country. Considering the large number of poor people in India, new
investments have to be directed to their benefit. A solution to the problems could be,
according to Badami (2005) and Pucher, et al., (2005), dividing streets into different lanes,
giving bicycles, buses and pedestrian their own lanes which would create an inexpensive
solution leading to improved safety and efficiency. Furthermore, it would also make car use
less attractive, though still available. This is thereby an improvement that does not make
personal motorised vehicles indispensable, which is the case with many other solutions such
as constructing highways, and that favours all parts of society.
Problems of directing new investments and financing in this way are however expected
according to Pucher, et al., (2005). They state that it is most likely that new private transport
investments are directed at new constructions, for example in roads and railways. They
further state that the government in India is likely to be affected by powerful groups, such as
people from the car-industry and members of the upper-class. These are people that wish to
increase car-use in the country for personal and economical reasons, disregarding the vast
negative impacts this has on both the people and the environment.
To conclude the case of transport in cities of India, it is again a matter of directing
investments in the right way, which has been previously discussed. This must be done by
providing transport for the majority and not only for the car borne minority. Misdirected
investments can, as has been discussed, have severe negative impacts in India, both on its
economy and on its citizens.

The responsibilities of international construction companies

It is of great importance for developing countries to have a well developed construction
industry. It would, as has been demonstrated previously, for example, improve countries’
possibility to maintain existing roads to a greater extent and thereby increase the construction
projects’ length of life. Moreover, it would also lead to the possibility of local construction
firms to compete with international companies regarding large projects and thereby reduce
the country’s dependence (Zawdie & Lagford, 2006). This would result in benefits for the
economy by increased job opportunities and by making investments stay within the country.
However, Zawdie & Lagford (2006) state that many developing countries still need to
improve their construction industry to a great extent. Even though governments in many
developing countries would prefer using domestic companies to perform the majority of
transport projects, this is not always possible due to low levels of experience, management
skills and technological knowledge within domestic companies. As a result of this,
governments are often forced to depend on large international companies when performing
big and complex projects.

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A problem caused by the lack of large competent domestic firms is that the international
firms receive a form of monopoly, excluding local firms from the market and also making
them able to affect decisions regarding new investments. The consequence from this can be a
favouring of large projects, further worsening the misdirection of investments discussed
earlier (Zawdie & Lagford, 2006).
An additional problem, and one of great importance, is the risk of reduced growth and
evolution of local construction firms. Due to this recognition, it is sometimes demanded from
governments in developing countries that local construction firms must be involved in these
large projects. The international construction companies however do not always recognise
this importance but rather look at efficiency and profit, leading to a minimum of cooperation
with local firms.
Zawdie & Lagford further state that an effective tool for successfully achieving a technology
and knowledge transfer to local firms would be to make them sub-contractors and part of the
construction process. It is important that they are well integrated in the projects in order to
evolve and receive as much experience as possible (Zawdie & Lagford, 2006). In addition to
this, it is also essential that international construction firms, conducting work in developing
countries, understand that this comes with a good possibility to contribute to the country’s
development by the transfer of knowledge and skills.

Conclusions
In the discussion conducted throughout this essay, it has been shown that investments in
transport are a vital component of the evolution in developing countries. It has however also
been made clear that while these countries evolve, their need for investments varies, leading
to the important matter of directing investments and measures to where they are needed the
most. Furthermore, this is often not the case in developing countries. In the matter of cities of
India for example, misdirected investments has led to, and is still leading to, poor people
being evicted from their houses in favour of road construction. The neglect of the needs of
the many poor in India has also led to reduced living conditions and mobility for the poor
citizens, all in favour of the car borne minority, and to severe negative impacts on the
environment.
The example of India further illustrates that it is not possible to simply copy solutions from
the industrialised world and implement them in developing countries. It might be necessary to
apply temporary solutions that are needed at the time, considering the present stage of
evolution and the current needs in the country. These solutions might be known to be far
from the final goal but can still be unavoidable, much due to lack of resources forcing
development to happen in stages. A clear example of this matter is again displayed in India
where investments are currently made to favour motorised vehicles, even though the majority
of the population currently would benefit more from measures promoting pedestrians and
bicycles, which in addition to this would also be less expensive. From this it is clear that
investments must be done appropriately in order to favour the country and its economy
instead of hurting it.
The important role of international construction firms in evolving the construction industries
in developing countries has also been discussed. Due to the lack of large domestic
constructions firms in many developing countries, big construction projects are often given to
international companies. It has however been shown that by involving local firms, for
example as sub-contractors, in large building projects, a technology and knowledge transfer

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could be possible. This would create the foundation of more sophisticated building industries
in the developing countries. Consequently, it would lead to positive effects on achieving a
sustainable infrastructure in developing countries and thereby increase growth and
productivity.
Thus, considering the large misdirection of resources, in combination with the lack of large
domestic construction companies, the possibility of contracting domestic firm to perform
smaller but well directed projects must be further evaluated. This would have several positive
effects, such as a growing domestic building industry and investments staying within the
country, resulting in an economic growth. The importance of this matter must be recognised
by investors and authorities in order to stop the misdirection of transport investments.
Reducing poverty must achieve a higher status while investments in prestigious, disserving
and costly projects should be minimised.

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References
Badami, M., G., 2005. The urban transport challenge in India: considerations implications
and strategies. International Development planning Review, [Online], Vol. 27, p.169-
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Available at: http://policy.rutgers.edu/faculty/pucher/FINALarticleTransportPolicy.pdf
[Accessed 29 December 2009].
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