Aerial view of Mumbai city.
A street in New Delhi

For people living in developed economies the sheer volume of road traffic can be a daily nuisance. But for those in developing nations, the matter of having a decent road to travel on should not be taken for granted.

This infrastructure is often dependent on obtaining funding. But according to the Bank Information Center (BIC), there is now more funding being invested in road projects across developing nations, particularly those in Central Asia, than ever before.

New Silk Roads

The International Road Federation (IRF) is a not-for-profit organisation promoting the development and maintenance of better, more sustainable roads and networks. It is involved in several international projects, including the Black Sea Highway Programme, the South East Europe Programme and the Silk Road Programme.

Over the last decade the IRF has promoted the 20,000km rehabilitation of the ancient Silk Roads from China to Europe through to Central Asia – a vital trade link with important geopolitical ramifications. Here, infrastructure improvements are essential to cater for growth in international traffic.

"The number of containers entering the EU from China increased from 660,000 twenty-foot equivalent units (TEUs) in 1995 to 1.3 million in 2000 and 2.7 million in 2004," says Sibylle Rupprecht, director general of the IRF. "According to various scenarios this number will reach 12 to 15 million TEUs in 2020, with the trade between Europe and China being multiplied three to four times between 2004 and 2020."

“Over the last decade the IRF has promoted the 20,000km rehabilitation of the ancient Silk Roads from China to Europe through to Central Asia.”

At the end of 2007 the Central Asia Regional Economic Cooperation Programme (CAREC) agreed to a $18.7bn plan, supported by the Asian Development Bank (ADB), to rebuild the deteriorating infrastructure on the Silk Road.

"The new transport corridors being proposed under the plan of the ADB do not follow the traditional routes taken by the Silk Road," says Rupprecht. "They will not only run from east to west, but from north to south as well, connecting Central Asian republics, Russia and China with seaports in South Asia and the Arabian Sea. These ‘new Silk Roads’ have enormous potential for the entire Eurasian continent, and especially for the countries of Greater Central Asia, which they will traverse."

The upgrading will cut travel times and reduce transport costs. "This highway is essential for enhancing regional integration and economic growth in Central Asia," says Rupprecht.

The CAREC alliance also includes major international financial institutions active in the region, such as the International Monetary Fund (IMF), the European Bank for Reconstruction and Development (EBRD), the World Bank (WBG), the United Nations Development Program (UNDP) and the Islamic Development Bank (IsDB). Between 2006 and 2008, these institutions provided more than $2.3bn for over 40 projects across transport, energy and trade industries.

According to the BIC, WBG loans to countries in Europe and Central Asia increased by 30% between the 2007 and 2008 financial years. In 2008, WBG gave $8bn in loans for projects in Europe and Central Asia, which totalled $2bn more than in the previous year. The spend for 2008 reached $4.9bn, which amounts to 20% of the World Bank’s commitments for the year.

Practical spending

One of the most recent contributions is for a sum of $250m to India’s Orissa State Roads project via the International Bank for Research and Development (one of the five institutions making up WBG), which aims to complete in 2014. With the total cost at $322.5m, the rest will be provided by the Government of Orissa. The majority of the project (95%) will support the widening and realignment of about 461km of road and around 5% of the project will help the government to introduce private sector involvement in the road sector. Consultancy services for this project have been undertaken by PricewaterhouseCoopers and Lea Associates South Asia.

The International Development Association, another institution of the WBG, is a further source of finance for developing nations. Over the last few years its investment has totalled $10bn with around 50% of this going towards African projects with a significant portion for the construction of Bangladesh’s Jamuna Bridge. Completed ten years ago, it shows how fundamental infrastructure connection is for economic growth.

“Over the past year, it has been the private sector of the World Bank that has committed to the biggest jump in lending, with a growth of nearly 50%.”

The Jamuna Bridge project involved the construction of a 4.8km bridge, including a four-lane road, a railway line, a gas pipeline, telecommunication facilities and two approach roads, according to the IDA.

Since opening in 1999, a bus journey from Dhaka to Bogra takes four hours instead of eight and a truck driver’s journey of 20 hours has been reduced to six. Traffic over the bridge has increased by 11.5% and according to truckers the distribution of non-leafy vegetables from the north to the east has increased by at least 50%.

The total project cost is $754m, with $204m invested by the IDA, $154m by the government, $198m by the ADB and a further $198m by the Japanese Overseas Economic Cooperation Fund (now the Japan Bank for International Cooperation).

Revenues from tolls are expected to recover the cost of the project within 30 years. Over the 2006 and 2007 financial years, $24m was collected and this should continue to rise year-on-year.

Engineering for the project was provided via a joint venture with Rendel Palmer & Tritton (UK), NEDECO (Netherlands) and Bangladesh Consultants. The bridge contractor was Hyundai Engineering and Construction with Samwhan Corporation taking responsibility for the approach roads. The extensive river training works were carried out by a collaboration of two Dutch companies, HAM-VOA Joint Venture.

Road investment increasing

Over the past year, it has been the private sector of the World Bank that has committed to the biggest jump in lending, with a growth of nearly 50%. In 2008, $2.68bn was given by the International Financial Corportation, up from $1.79bn in 2007. It also reported that most of the transport activity was road sector funding with a total of 59 out of 90 projects, or an investment in 6,400km of roads.

Although investment into the road sector is dominated by the ADB and WBG other international financial institutions make significant contributions to infrastructure development across the arena of developing nations. According to the BIC, EBRD is the largest single investor in Central and Eastern Europe and has invested more than $27bn in 28 countries in the region since its establishment in 1991 – in 2005 it committed $1.22bn (22% of it infrastructure funding).

WBG has stated that over the next 35 years, the world population of 6.5 billion will increase by 2.5 billion and in developing countries much of this growth will be in urban areas. This growth, along with globalisation and trade demands, will continue to increase the world’s transportation requirements. With a year-on-year increase in road sector investment from global financial institutions, more stable growth for developing nations looks more promising.