Road to the Future: Paving the BRIC Nations

Rapid economic growth in Brazil, Russia, India and China is driving a huge demand for improved road infrastructure. Frances Cook profiles the ambitious road projects central to the growth of each of these economic powerhouses.


Brazil, Russia, India and China, collectively known as the BRIC countries, are four rapidly emerging economic giants increasingly feeling the need for effective infrastructure to meet transport demands that have embarked on some of the most ambitious road construction projects in the world.

Increasing economic sustainability by removing bottlenecks and expanding networks is currently a massive target for road development and investment, not just from governments and organisations such as the ADB, but also through a gradual increase in PPP (public-private partnership) investment.

China: PRC's Shaanxi road development

The economic growth of China over the last 30 years has greatly increased the demand for transport infrastructure. Development in the coastal and hinterland areas increased demand for cost-effective and direct flow of freight and passengers. In order to manage this, the government backed a long-term road development strategy in the late 1980s - a 35,000km national trunk highway system (NTHS) and then embarked on the 11th five-year plan for 2006-2010 to create 380,000km of new roads that would expand the road network to about four million kilometres.

According to the Asian Development Bank (ADB) principal transport specialist Jamie Leather, "About 70% of all freight, even as recently as 20 to 30 years ago, was moved by the inland waterways so there has been an absolutely massive explosion in terms of freight-based movement away from the rivers and on to the roads.

"Another BRIC country well acquainted with the role of PPP financing is Russia."

"By allowing almost any location to be accessible via a road network, industrial centres can now be where they need to be, rather than where they have to be."

The Shaanxi road development project, completed in 2010 at a cost of $965.5m - of which the ADB contributed approximately $250m (the Ministry of Transportation $146m, The Shaanxi Provincial Government $200m and domestic banks $362.39m) - was devised to develop the interior region in the west of China.

As road links were poor and passenger and freight volumes were approximately one-third those in nations of a similar size or population, the Shaanxi project improved access to markets, economic opportunities, attracted investment and reduced congestion. The expressway, a 176km four-lane, access-controlled toll road was completed first and then the construction of local roads followed to complete the project.

Brazil's São Paulo State Feeder Road project

With Brazil due to host the 2014 World Cup and 2016 Olympic Games it is crucial that the country develop infrastructure to support demand and capitalise on the opportunities these events will supply.

To date, according to Business Monitor International's (BMI) latest 2011 Brazil infrastructure report, $11.3bn has been pledged by the federal government, state governments and municipalities to be invested in construction of stadia and transport links, and $14.4bn budgeted to prepare Rio de Janeiro for hosting of the Olympics, much of which is expected to be spent on improving infrastructure.

The government has already been investing in the improvement of its infrastructure as a whole and Brazil's accelerated growth programme (Programa de Aceleração de Crescimento) has estimated that approximately $800bn will be invested in this area between 2008 and 2013 - with a focus on transport-related development. The continuing need for infrastructure investment is substantial reports BMI, with, according to Banco do Brasil, $85bn of financing for infrastructure estimated to be required by 2020.

The Inter-American Development Bank (IADB) has been supporting the development and upgrading of road infrastructure. For example in December 2010 the $250m highway programme for the state of Espírito Santo III was approved, which will improve the transport of cargo and passengers in the state road network, rehabilitate sections and improve the accessibility to markets. The World Bank has also supported the development of Brazil's infrastructure and last year saw the approval of a $326.8m in additional financing for the São Paulo State Feeder Road Project, a large-scale development rehabilitating 12,000km of roads.

"Transport and logistics are integral for the development of the economy of the State of São Paulo," says Eric Lancelot, World Bank acting project manager.

"The World Bank has also supported the development of Brazil's infrastructure."

"The project will improve transport conditions for users state-wide, thereby improving accessibility, reducing logistic costs and enhancing traffic safety."

However, while Brazil is presenting many investment opportunities, the difficulties associated with Brazil's business environment means that the potential for international investors is limited as they are forced to rely on local partners due to a 'high level of bureaucracy and complex regulations' explains the BMI report.

India's West Bengal Corridor development

While India and China have similar goals for their road networks, there is a big difference in the way that the governments have developed the road infrastructure. "While China has built primarily new road infrastructure parallel to their smaller existing road network, India's strategy has been to widen the roads already in existence," explains Leather.

The Indian Government's road infrastructure strategy involved creating a 'golden quadrilateral' connecting Delhi, Mumbai, Chennai and Kolkata. This made up the first phase of the National Highways Development Project (NHDP) - almost 6,000km of express highways at a cost of around $13bn. Once in place, some existing roads were widened, some required replacement of aging infrastructure and in other areas new roads were created to improve the network and create connectivity across the country. As with China's expanding road network this means that trade is increased around the country as well as with other nations.

Back in 2001 the ADB approved a $210m loan for India's West Bengal Corridor project, which would support the development of a transport corridor to promote subregional economic activities and improve trade possibilities. This loan made up 65% of the financing, the rest of which was provided by the government.

Completed in 2010, the project links West Bengal's southern ports of Kolkata and Haldia with eastern India, Bangladesh, Bhutan and Nepal and eases a critical bottleneck. Along with an increase in trade, this road network will alleviate capacity constraints and improve the income of local people in rural communities.

For the ADB, transport is its biggest sector for lending. "We lend about $5bn a year in transport, of which about 80% has gone toward road development over the last ten years," says Leather - although this is expected to reduce to 50% over the next decade due to other transport requirements. India's economic growth has meant that demand for the roads is greater than the supply, which has caused congestion and compromised trading.

This need for greater infrastructure has obviously meant a demand for finance and the increasing involvement of public-private partnership (PPP) financing. "While traditionally road construction in India was entirely undertaken and financed by the government, budgetary constraints have resulted in alternative models for road projects," reports Thomas White. According to the PPP India Database from the Indian Government's Department of Economic Affairs there are now over 350 road projects that have implemented PPP, a mixture of BOT toll and annuity types.

"The infrastructure requirements running across the whole of Asia, run into trillions of dollars," says Leather. "Government resources and assistance from organisations such as the ADB and bilateral organisations is insufficient to provide the level of infrastructure required - that financial gap has to be met somewhere or it will impact on the economic sustainability of the countries." According to Thomas White, private investment in roads is estimated to be 34% of the total investment required in the period from 2007-2012 while in the period 2002-2007 it was less than 5%.

A road through Russia

Another BRIC country well acquainted with the role of PPP financing is Russia.

"Back in 2001 the ADB approved a $210m loan for India's West Bengal Corridor Project."

According to market intelligence provider PMR, April 2010 saw the financial closure of several concession projects, including the first section of the 700km Moscow-St Petersburg motorway, the Odintsovo Bypass, which is due to be completed in 2013. "In July 2010, the concession law was amended in order to meet the expectations of potential investors," states its Transport Infrastructure Construction Market in Russia 2011 report going on to explain how there are many regions preparing their own PPP laws which should bring greater flexibility for the future financing of projects.

In Russia road development is essential if its transport system is to cope with large-scale looming public events - its 2010-2015 transport infrastructure development programme envisages a total investment of approximately $450bn over the next five years say PMR. "Major events such as the 2012 APEC Summit in Vladivostok, the 2014 Sochi Olympics and the 2018 FIFA World Cup have prompted and will foster the much-needed renovation and development of Russia's ailing transport infrastructure," says Robert Obetkon, a senior construction analyst. "The multibillion investment in roads, railways and airports will create many opportunities for both local and international companies interested in the market."

Last year saw the completion of a new highway, the M58 Amur highway, between the cities of Khabarovsk and Chita, the first ever to link Siberia and Russia's far east. Between 2000 and 2010 around $2.5bn was invested in this project. Another notable road construction project that is currently ongoing is the M53 Baikal highways, which aims to construct bypass roads around Novosibirsk and Irkutsk.

According to Prime Minister Vladimir Putin at a road construction meeting in August of last year, road construction and repair issues have now been made a top priority. "The federal road fund will contain 377bn roubles [$13bn], over 80bn roubles [$2.8bn] more than what has been budgeted for roads in 2010," stated Putin. "The amounts allotted for these purposes will increase annually, reaching almost 500bn roubles [$17.5bn] by 2015."