Economic impact of road sector investment for selected projects in Bangladesh

Abstract

An efficient investment in transportation sectors is essential to facilitate economic growth in Bangladesh. Effective investment pattern in transportation sectors can help to reduce poverty by ensuring a balanced development and by adding positive economic benefits to national economy. In this study. a methodological framework is developed to analyze economic impacts of investment in transport infrastructure sector by identifying different entities affected by transport measures. The understanding is developed by analyzing data of a number of selected large transportation infrastructure projects in Bangladesh. Economic effectiveness is assessed for these projects through estimating the impacts on affected entities. Economic impacts are analyzed by estimating and comparing all relevant entities (increase in traffic volume, changes in vehicle operating cost savings, passenger travel time savings) before and after the project implementations. Traffic growth rate for different vehicle categories are estimated after improvement or development of different road sections under different projects. The quantifiable benefits are estimated as the vehicle operating cost (VOC) savings, passenger travel time savings for the existing (normal) and increased (generated) traffic within the zone of influence of upgraded roads. The economic costs are derived from the actual annual financial costs for the individual roads, including an allocation for the project support costs. The Economic Internal Rate of Return (EIRR) is calculated on the basis of estimated costs and benefits for different time intervals to assess pattern of benefit accumulation. The applicability of the framework is then examined by using It 111 the selected major road infi'ilstructure development projects. Economic Analysis of the projects demonstrate that vehicle operating cost constitute the major share of benefit. Also, EIRR of the projects range between 20 and 50 percent. which is much higher than the estimated value, reported in the corresponding feasibility studies (after 15 years of usc, the economic internal return of Feeder Road Improvement Project is 34.30 percent, which is higher than the estimated EIRR (18 percent) reported in the feasibility study). Investigations reveal that by improving or rehabilitating the existing road section, economic benefits become higher. From the analysis it is found that economic impacts are higher for road rehabilitation projects (EIRR 57.63 percent for Southwest Flood Damage Rehabilitation Project and 42.53 for Road Overlay and Improvement Project) than new construction projects (EIRR 27.55 percent for Southwest Road Network Development Project, 32.88 percent for Jamuna Bridge Acccss Road Improvement Project) after 20 years of use. From this study it can be concluded that improvement of existing road sections should get priority than constructing new roads. As our country always face some difficulty in allocating limited budget in transport sector, to invest in efficient way, the rehabilitation projects should get higher priority. Obviously, new roads are required for higher accessibility and improvement of road network capacity. But before constructing new roads, existing roads are to be improved first. The government should upsurge transport investment policy in such a way that sustainable and balanced investment solution can be achieved by prioritizing existing road rehabilitation before investing for new road construction.