Transport and the Economic Downturn: Opinions and Analysis
The International Transport Forum has invited a small number of opinion-leaders
within the transport community to share their views on the economic downturn and
the components of a successful recovery package.
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Policy Challenges for Railways in the Economic
Downturn
by Dr. Johannes Ludewig, Executive Director
of CER
The world is experiencing two fundamental crises: an economic downturn and a severe
threat from climate change. Both require urgent action in the transport sector
through investment in sustainable projects. This will stimulate the economy, provide
capacity when we emerge from the economic slump and make future growth more
environmentally sustainable. |
The economic downturn has had major impact on railways, particularly
the freight sector. There has been a progressive decline in rail freight traffic
throughout Europe since mid-2008. Similar trends have been experienced worldwide.
The financial outlook for rail freight is therefore poor. This is particularly so
in Central and Eastern Europe (CEE) where the financial situation of railways was
generally weak even before the crisis began. On average, rail freight companies in CEE
expect revenues to fall by 17% in 2009. Rail passenger operators in CEE are also
receiving less compensation from government for meeting public service obligations.
Railways throughout Europe are responding to the downturn by cutting or postponing
investment and trying new ways of financing investment. However, some railways,
especially in CEE, have only limited investment programmes to cut and are poorly placed
to find new sources of funding. They are therefore laying off staff, making further cuts
to already inadequate maintenance programmes or accumulating more debts. This could
accelerate the vicious circle of decline that CEE railways have already experienced
over the past few years.
The response of the European Union (EU) to the problems has been limited. The EU has
brought forward funds to 2009 for the Trans-European Transport network but, whilst
this is welcome, it does not address the key issue in some countries - that of
keeping the existing network going.
Most governments are currently focussed on balance of payment support and only a few
have increased their support for investments, least of all in rail. There is therefore
a risk that several railways will collapse or that there will be an irreversible loss
of traffic. Yet there are notable exceptions outside Europe: China plans to invest
US$90 billion in railways in 2009, much of this in infrastructure and, in the US, the
stimulus package included US$8 billion of government support for rail investment over
2009-10.
Economic growth must be anchored in sustainable transport solutions, capitalising on
the strengths of different modes. Governments need to take urgent action by creating
a more level playing field, and by providing their railways with more resources and
a clearer direction on priorities. These will vary, but would include renewal in
CEE and small, high return projects to remove bottlenecks in most countries. There is
a need for international bodies to help the railways make the case for this and,
where necessary, provide financial support. |
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by Spyros Polemis, International Chamber of Shipping
Following several years of incredibly buoyant shipping markets, for many trades
the best in living memory, much of the international shipping industry has fallen
prey to the worldwide economic downturn. Shipping is inherently the servant of the economy,
so the contraction in trade, following the
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beginning of the 'credit crunch' in late 2008, has translated into
a dramatic and abrupt reduction in demand for shipping.
Initially worst hurt were the containership trades. By the Spring of 2009 some 10% of the
fleet was already laid up, much of it too modern and expensive to go to recycling yards.
However, the dry bulk trades have also been severely affected, particularly by the
reduction in demand for raw materials from China, with spot market freight rates for
some bulk carriers being a fraction of the peak prices achieved in 2008. By April
2009, rates for crude, product and chemical tankers had also fallen very sharply. In
general most shipping markets present a rather bleak picture.
A major concern of ICS national shipowners' associations therefore is to discourage
governments from responding to the crisis with protectionist measures, which will
only damage world trade further. More particularly, governments must avoid measures
that restrict fair and open access to shipping markets. Although most shipping
today enjoys relatively liberalised trading conditions compared to the days of
national cargo reservation in the 1980s, shipping is unusual in that it is one of
the few major industries not yet covered by a global multilateral trade agreement.
However, the prospect of a new agreement under the auspices of the World Trade
Organization (WTO) looks increasingly uncertain. The industry must therefore be
extremely vigilant in reacting to any moves towards protectionism in maritime trades,
especially those using safety and security as a
pretext. In May 2009, as ICS Chairman
Il will make this point at a meeting of the world's transport ministers in Leipzig,
which is being organised by the OECD International Transport Forum, and which will
focus on the implications for transport because of the economic downturn.
The shipping industry does not expect special treatment, or the billion dollars of
support being granted by some governments to the likes of the banking and
automobile industries. However, to operate competitively and efficiently in very
difficult circumstances, shipping requires the maintenance of a regulatory 'level
playing field', and continuation of the certainty now provided by the tonnage tax
regimes that apply to shipowners in many countries.
Shipping is notoriously volatile, and its more experienced practitioners are
familiar with the cyclical boom and bust nature of maritime freight rates. However,
the contraction resulting from the general global downturn could well be exacerbated
by the large number of new buildings due to come into service during the next few
years, notwithstanding efforts by many shipowners to cancel or renegotiate contracts.
Many of these ships were ordered at high prices at the top of the market.
In the face of this two-way pressure, there is likely to be a considerable increase
in the number of older vessels that will be sent for dismantling and recycling. In
view of the expected adoption, in May 2009, of a new IMO Convention to address
concerns about working and environmental conditions in ship recycling yards, the
need for governments to identify facilities that are acceptable for use will become
all the more pressing.
As the IMO Secretary-General has forcefully identified, financial pressures on the
industry must not be allowed to result in any reductions in standards. Much has been
achieved in the last 20 years with regard to safety and environmental performance,
and no one is suggesting a moratorium on new regulations that genuinely improve
safety, which is always the industry's overriding priority. However, governments
need to understand that any immediate regulatory and policy decisions they take must
avoid impacting negatively on shipping as it struggles to deal with the current
economic situation.
Notwithstanding the current gloom and doom, the longer term outlook for the industry
remains very good. The world's population continues to expand, and emerging economies
will continue to increase their requirements for the goods and raw materials that
shipping transports so safely and efficiently. In the longer term, provided the
politicians make sensible decisions, the fact that shipping is the most fuel efficient
and carbon friendly form of commercial transport should work in favour of an even
greater proportion of world trade being carried by sea.
It is to be hoped that Ministers at the International Transport Forum will deliver a
strong statement in support of the maintenance of open shipping markets, and, more
generally, promote an early conclusion of the WTO negotiations for a new global
trade agreement. |
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by Ivan Hodac
As we prepare for the important ITF conference in Leipzig, the economy is
still coming to terms with a gripping and damaging recession. The global
automobile industry was one of the first and hardest to be hit and European
manufacturers have been shaken by the speed and magnitude of the downturn.
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Commercial vehicle manufacturers, in particular, experience a
market decline that has not seen its equivalent over the last 60 years.
Production is set to decline by up to 50% in 2009 in response to the faltering
demand for goods transport and, subsequently, for the trucks to deliver.
The current downturn is all but a 'normal' cycle. Its magnitude is exceptional,
and the fall out of the crisis has put viable businesses at risk. Industry and
EU leaders have been forced to respond in an extraordinary manner. At EU level,
the sustainment of manufacturing and employment are of top priority. Low-interest
loans, EIB funds for 'green' technology, market incentives, fleet renewal schemes,
and the use of the European Social Fund are just a few examples of the package
that has and still is being put together to support the sector in bridging
difficult times.
However, more is necessary, and the overall policy framework should become much
more comprehensive to emerge from this crisis in the best way possible.
From an early stage, it was clear that the crisis threatened more than merely
jobs and growth. The deep, unsettling turmoil also raised questions about
momentum and continued progress towards sustainable mobility goals. This
challenge, presenting itself on two fronts, raises issues for industry chiefs
and policy leaders alike.
European auto makers are ready to confront this double-challenge head-on. Their
commitment to solutions that tackle issues like climate change and road safety
remains at the heart of manufacturers' strategies. Modern trucks, vans and
buses already set the global benchmark in terms of safety, efficiency and
environment. Pollutant emissions such as NOx and particulate matter have been
reduced by as much as 85% and 95% respectively since the late 1980s. The
commercial vehicle industry has cut the fuel consumption of its products by
more than a third since the 1970s.
Progress will continue with improved combustion engines, hybrid trucks and
buses, other innovative drive-trains and the use of alternative fuels. As part
of the manufacturers' 'Vision 20-20', a further 20% improvement in fuel
efficiency is strived for by 2020, coupled with an integrated approach to
tackling man-made CO2 emissions.
Developing technological solutions is, of course, not enough to address all of
the traffic-related concerns worldwide. Political leaders, the fuel industry,
the hauliers, vehicle operators and drivers must all do their part to help
shape sustainable mobility.
The most important lever to push efforts in terms of sustainable transportation
is political support. We need governments as allies to address bottlenecks in
infrastructure, promote transport efficiency, harmonise regulatory standards
and test cycles, and to enhance the market acceptance of new vehicle technologies.
Technologies are our industries core business. However, innovation relies on a
vibrant and competitive sector. A supportive policy framework is essential, and
only more so in times of crisis. Such a framework does more than just protect a
sector that is vital to Europe's economy; it ensures the sectors vital contribution
to Europe's well-being as a whole.
Creating a 'new deal' for sustainable mobility, means accepting a thriving
economy as the foundation to underpin a more healthy environment tomorrow. That
is the opportunity that our industry sees for Europe. For sure, it is work in
progress and the road will be long. But there is no alternative.
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by Sybille Rupprecht, Director General, IRF
Geneva
"Our wealth did not create our transport infrastructure; it is our transport
infrastructure which created our wealth". These words of John F. Kennedy should
inspire our sector as it adjusts to a time of unprecedented challenges
and critical transition. Roads are, indeed, the circulatory system of our |
planetary economy. It is not by neglecting investment
in these vital arteries that we can effectively heal the ills brought about by the
global financial crisis.
On the contrary, the continued development of sustainable roads and infrastructure
needs to be given enhanced policy emphasis as a key catalyst for stimulating recovery.
It is no coincidence in this respect, that several countries have already earmarked
significant sums from their stimulus packages to boosting infrastructure projects.
But, whilst current stimulus packages are welcome in the short term, we must not be
lulled into viewing them as a substitute for the development of sustainable funding
mechanisms with the capacity to promote qualitative, long term investment in
improvements or infrastructure.
In this respect, the current economic crisis can be turned into an opportunity, as
it will call for prioritising infrastructure investment and rationalising projects
through focus on those that contribute to quality infrastructure investment. The
downturn provides an occasion for many industries, not least the road construction
sector to set the new standards and sustainable practices needed to prosper as an
integral part of the ‘green economy’ currently being promoted by administrations
throughout the world.
This will necessitate placing the policy emphasis on providing a comprehensive and
fully integrated suite of incentives to encourage efficient management of road
infrastructure in harmony with environmental and social imperatives.
To optimise this, there is a priority need for the sector to establish common
baselines and benchmarks for monitoring ‘carbon footprint’ at every stage of
planning, construction, maintenance and operation.
In this spirit, the IRF has developed a unique Greenhouse Gas Calculator, aimed at
harmonising the procedures for calculating CO2 and other emissions from road
construction projects. This will transparently enable the quantification of
achievable reductions in carbon emissions as well as serve as an authoritative
basis for offsetting those impacts that cannot be avoided.
Through such initiatives, we seize the opportunity to dynamically affirm our
industry’s credentials as a potential lead sector in the green economy – quite
literally the initiator of ‘roads to recovery’.
Efficient finance and environmentally friendly construction and maintenance
methods are critical elements on the path to economic recovery. Our industry is
committed to working towards this objective.
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by Martin Marmy, IRU Secretary General
The International Road Transport Union (IRU), representing truck, bus, coach
and taxi operators through its 180 members in 74 countries on the 5 continents,
considers that in today's globalised economy, professional road transport is no
longer merely a mode of transport but a vital production
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tool, interconnecting every business to all world markets and
providing safe, environmentally-friendly and affordable mobility for all.
Due to the financial crisis which has turned into an economic crisis, the demand
for vital road freight transport services has slowed down dramatically, up to
(-)50%. Coach tourism is also expected to suffer a decline. The forecasts for
2009 are equally pessimistic.
At the same time, costs for the road freight transport sector are expected to
rise by at least 3-4% in comparison with 2008. Higher user charges in a number
of countries are a key driving force for this rise. Unstable oil prices could
exacerbate this situation. These increasing costs cannot always be entirely and
immediately passed on to clients.
Road transport existed to serve the economy long before banks. Yet most governments
are bailing out banks, arguing that they are vital for the economy. If banks cease
to exist, trade will continue, as it did before their existence. If road transport
were to cease to exist, trade would come to a grinding halt. So governments are
also urged today to further facilitate road transport, to ensure that it can
continue to drive progress and prosperity around the
globe.
How should Governments ease the situation for this industry?
They should intensify efforts to eliminate neo-protectionist barriers to
international road transport; reassess and reduce current taxes; stop creating
new taxes and charges and prevent any discriminatory road user charges anywhere;
induce financial institutions to provide adequate credit lines and to implement
moratoriums on the interest to be paid, so that transport operators can continue
to finance their investments and operations, including innovative and clean
vehicles, through appropriate incentive measures, use economic stimulus packages
to invest in road infrastructure, including in the removal of bottlenecks, by
implementing, according to Annex 8 of the UN Border
Control Harmonisation Convention (1982), the IRU TIR Electronic Pre-Declaration (EPD) and the IRU
Border Waiting Times Observatory to prevent border waiting times; adopt a
business-friendly 12-day driving derogation for international coach tourism
both in the EU driving and rest time rules and in the UNECE AETR Agreement;
create a legal and administrative framework which would allow the road
transport industry to place skilled personnel temporarily on inactive status,
without having to lay them off, in order to maintain skilled professionals in
the sector.
The IRU urges also road transport operators to transport only if a profit can
be made, if additional costs are absorbed by customers and empty trips can be
avoided; to stabilise market prices by reducing transport capacities and to
place skilled personnel temporarily on inactive status without losing them,
as they will be needed when the crisis is over.
All players should work together to contribute to economic recovery!
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by Hans Rat, UITP Secretary General
A sharp increase in the demand for public transport
has been recorded in many countries for the last
five years. For instance, in France, even outside
Paris, ridership increased by 12% between 2006 and
2008. The issue of capacity increase has made its way to the
top of the strategic agendas of public transport operators and authorities. |
There is no doubt
that high fuel prices played an important role but it seems that shifting to public
transport is also part of a new life style, with a greater consciousness of the
environmental footprint of mobility. The deterioration of traffic conditions in
cities, with increasing congestion and parking difficulties, also promises the
end of the love affair with the private car. In parallel, the role of public
transport as a major driver of economic and sustainable development has been
increasingly acknowledged. In many cities and countries, modal shift has become
part of the development strategy: Geneva set out to double public transport
ridership by 2020, Toronto to increase it by 130% within 25 years, and Beijing
to raise the modal share of public transport to 45%.
Then came the financial and economic crisis. Although its impact on public
transport has not been as abrupt as it has been on other sectors of the economy,
figures show that the growth in demand has slowed significantly in the last six
months in some countries and that most expect that demand will stagnate in 2009.
This situation is reflected in companies' accounts and serious financial strains
are appearing progressively. Some public transport operators are even reluctantly
considering cutting some services or increasing fares. Some developments projects
are stopped, others postponed. The implementation of PPP projects has been slowed
considerably. However, getting through the crisis is not the biggest challenge
for public transport but it is rather to be able to play its role in the longer term.
While the car industry has been strongly affected since the beginning of the crisis,
the relative resilience of public transport has put it out of the spotlight in
recovery plans. Some limited support was included in plans developed at regional
level but there is little or no mention of public transport in national plans,
except in the US ($8bn for public transport).
The lack of trust in the financial markets makes it more difficult to obtain
commitments for long periods as required by public transport investment projects.
If both public and private sources of financing for public transport are strained,
the risk is that public transport will not be able to absorb the increasing demand
in the coming years. While the car industry is currently facing overcapacity, public
transport critically needs to build up its capacity. Policy decisions must echo these
emerging trends towards more sustainable mobility patterns. Failing that, the interest
shown in public transport will fade away, leading to more congestion, higher fuel prices,
worsening climate change. Support to public transport in urban areas will help slow
urban sprawl and make cities more dynamic.
My message for Ministers of Transport is that supporting public transport is supporting
a long term sustainable vision for society, in line with the Global Green New Deal, but
that it can also help short term recovery efforts. A lot of public transport projects are
"shovel ready". Planned projects could be accelerated and other projects, for instance
to support intermodality, could be implemented fast. Investment in public transport
creates jobs more quickly than the restructuration of the car industry. In addition, a
recent study confirmed that public transport creates about 20% more jobs than the same
investment in building roads or motorways. Developing public transport is not only about
the recovery but it is also about the future.
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by Hermann Meyer, CEO ERTICO-ITS Europe
We are currently facing a worldwide crisis with tremendous effects on the
automotive and transport industry. The challenge for the transport sector
will now be how to turn this crisis into opportunities, coming up with short
and long term solutions, which can address the economic downturn in an acceptable
way, both socially and environmentally.
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The transport sector is, in fact, facing today a dual challenge: companies have to
survive in an unprecedented economic downturn, whilst they need to develop innovative
solutions to improve mobility, safety and environmental performance.
At ERTICO-ITS Europe, a public-private partnership organisation promoting Intelligent
Transport Systems and Services across Europe, we strongly believe that "Intelligent
Mobility" can play a role in transforming the current crisis into new opportunities,
making our transport system safer, cleaner and, above all, more efficient.
We believe that the wide deployment of and investment in innovative Intelligent Transport
Systems and Services across Europe will be a driver for growth and competitiveness for
the European Economy.
The provision of real time, accurate traffic and travel information services is an
example of a short-term opportunity for many businesses in the sector.
After decades of research and development, the necessary technologies are available
today, and are already deployed in various EU Member States. One major challenge is
now to create EU wide harmonised traffic and traveller information services, which
must be seamless, real time and provide all appropriate information for a "fully
aware traveller". These issues can be addressed in the current economic crisis,
because quick and low cost actions can lead to fast and large economic benefits.
There is currently a real need for the individual traveller to have access to
relevant, targeted and accurate traffic and travel information. Real time, reliable
traffic and travel information services will give the individual citizen the means
to plan his/her journey in a safer, greener and more comfortable way, using all
modes of transport efficiently. This means having real-time access to weather
conditions on the road, accurate and up-to-date information on traffic status for
the whole journey, most efficient transport modes for a particular itinerary,
ecological footprint of various travel modes and itineraries and location based
services such as parking spaces, hotel availabilities, etc.
In order to deploy these kinds of services across Europe, the role of public private
cooperation is crucial. Companies and public authorities also need to work in a coordinated
way to ensure that platforms and technologies are standardised appropriately, without
harming competitiveness of an already weakened European economy. The European
Commission and EU Member States need to provide the necessary policies and infrastructure
concerning service interoperability, information delivery channels such as digital
broadcast, data processing facilities and automatic service discovery.
We believe that the deployment of real-time traffic and travel information services
across Europe can prove to be extremely cost-effective, providing many new creative
and innovative business opportunities in Europe.
ERTICO-ITS Europe will play a leadership role in these developments and to optimise
the future potential of Intelligent Mobility. In a common effort with all our
Partners, our ambition is to find the best solutions to keep people and goods
moving freely and for Europe to lead the world on this issue. |
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