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.



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.

Spyros Polemis

Responding to the Global Downturn

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

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.

Ivan Hodac, ACEA

ACEA Statement for the International Transport Forum

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.
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.

Sybille Rupprecht, Director General, IRF Geneva

Roads to Recovery

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.

Martin Marmy, IRU Secretary General

Policy Measures to Fight the Economic Downturn
in the Domain of the Road

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
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!

Hans Rat, UITP Secretary General

UITP Statement for the International Transport Forum

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.

Hermann Meyer, CEO ERTICO-ITS Europe

Bringing Intelligence into Mobility

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.

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.