Do transport corridors help the economy?
1 min read . Updated: 19 Nov 2019, 09:18 PM IST
PremiumThe effects of transport corridor projects on local economies depend on initial conditions and project characteristics, says a new study
Mumbai: The clamour for transport corridor projects, such as the Grand Trunk Road and the still-in-the-works Belt and Road Initiative, as a way to promote regional cooperation and stimulate economic activity, has grown in recent years. Such projects, however, are often judged based on their potential even as the immediate economic benefits on local economies are more uncertain.
A new World Bank study by Muneeza Alam and others, using data on 47 transport corridor projects across 16 countries, finds that the effects of transport corridor projects on local economic activity differ from country to country.
The effects of these projects, financed by international organizations such as the Asian Development Bank, Japan International Cooperation Agency and World Bank, depends on certain initial conditions and project characteristics. These conditions and characteristics include the location of the projects and the extent of involvement of the private sector.
For instance, the authors find that large transport infrastructure investments in countries that have direct access to the sea are more likely to spur economic activity. Factors like country size, terrain, and the level of development have no notable influence on the economic impact of the projects.
Similarly, greater involvement of the private sector in designing the project could generate higher benefits but involving the private sector in project implementation may have the opposite effect. This finding, the authors suggest, highlights the complexities involved with effectively engaging the private sector in corridor projects for greater socioeconomic benefits. Without a well-thought rationale, these type of investments could end up being white elephants, warn the authors.
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