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EuropeAid Political Economy at Work Brussels - 11-12 January 2011 Paolo Ciccarelli Infrastructure Unit (Transport) Directorate for Development and Cooperation.

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Presentation on theme: "EuropeAid Political Economy at Work Brussels - 11-12 January 2011 Paolo Ciccarelli Infrastructure Unit (Transport) Directorate for Development and Cooperation."— Presentation transcript:

1 EuropeAid Political Economy at Work Brussels January 2011 Paolo Ciccarelli Infrastructure Unit (Transport) Directorate for Development and Cooperation

2 EuropeAid The development chain in Transport Transport Cost Reduction Transport Price Reductio n Socio- Economi c Growth

3 EuropeAid Analysing Transport Prices and Costs Transport Prices Transport Costs Profit Margin Administrative Costs Logistics Costs Vehicle Operating Costs

4 EuropeAid How to reduce Vehicle Operational Costs? Historically (project approach): Infrastructure rehabilitation projects; Concentration on a single transport mode (roads); Last 10/15 years (sector approach): More focus on maintenance and Road Funds; Capacity building for transport infrastructure management (Road agencies, procurement, concessions); BUT For Road Funds, a levy of at least 10 USD cents is necessary, but only achieved in 4 countries; For roads alone, under-maintenance leads to excess capital spending of 2.4b USD a year;

5 EuropeAid How to reduce Logistics Costs? Favour Regional Integration and Trade: Joint Border Posts Trade Facilitation Agreement in Regional Integration BUT Including all delays, the speed on international corridors is on average 10km/h (AICD) Logistic Chain Productivity in West Africa (toward Bamako)

6 EuropeAid How to reduce Administrative Costs? Facilitate Transport Investments Import Licenses Vehicles registration BUT Truckers are racketed along transport corridors

7 EuropeAid By reducing Transport Costs, have we reduced Transport Prices? Large investments together with other sector intervention: o Some reduction of transport cost (not much as expected); o Minimal or no reduction at all of transport prices. Cost of providing services in Africa is higher than elsewhere o Road freight tariff ($ per T/km): o Africa = ; o Other countries = 0.01–0.04;

8 EuropeAid High Transport Prices: Cartels in the Road Freight Excessive Profit Margins in West and Central Africa due to cartels and «freight sharing»

9 EuropeAid Addressing the New Challenges Profit Margins Administrative Costs Logistics Costs Vehicle Operating Costs Rehabilitation Maintenance Infrastructure Management Trade Facilitation Cartels and protectionism Trade Conventions not applied « Tracasseries » Not enough maintenance funds Policies and Strategies inadequate Budget not executed properly Deregulation

10 EuropeAid Focusing on Governance in the Transport Sector The Logical Chain can only hold if Governance is taken into account Transport Cost Reduction Transport Price Reductio n Socio- Economi c Growth Sector Governance

11 EuropeAid Moving forward Promote a sector wide approach: o Coherence of policy and strategy framework; o Realism and predictability of financing; o Restructured and reinforced institutions; o Efficient monitoring system; Support fiscal reforms: o Fuel levy, registration fees, import taxes; Enforce national and regional regulations: o Trade facilitation and axle load; Support competitive transport markets: o Policy dialogue; o Break the chain – coalition of interests; o Compensation schemes, social costs of reforms; Support intermodal transport: o Balance of investments roads/rail; o More transport interchanges.


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