Transport infrastructure needs to adapt to growing trade and climate change

Transport infrastructure links the world economy and is an important determinant of growth for business opportunities, employment, industrialization and rural-urban linkages. Road networks, railways, airports, inland and sea ports, cross-border facilities and other facilities are critical elements for trade competitiveness and integration into the world economy. They enable market access by bringing together consumers and producers, connecting global supply chains, increasing market size, promoting regional integration and attracting investment (African Development Bank et al., 2014).

But not all transport infrastructure brings equal benefits. In this context, building more sustainable and resilient transport infrastructure is vital. There is growing pressure to promote economic efficiency, resource conservation, social inclusiveness and environmentally-friendly solutions when building transport infrastructure. Climate change challenges maritime and inland infrastructure to support low-carbon activities (see Signs of a greening economy?) while staying resilient to climatic factors and weather events.

For this reason, SDG target 9.1 seeks to improve infrastructure that supports economic activity and human well-being while promoting sustainability. Specific to transport infrastructure, SDG indicator 9.1.2 measures “passenger and freight transport, by mode of transport.”

Maritime freight keeps expanding, driven by global trade

Transport services handle passengers and freight domestically and across borders. There are several major modes of transport (road, rail, air, sea and other waterways) and they all have important interactions with other sectors, and they contribute to economic activity and human well-being.

This section covers seaborne freight transport as one of the main supports of international value chains and global trade. Indeed, maritime transport handles over 80 per cent of global trade by volume (UNCTAD, 2018a). This mode of transport can be seen as the network that meets the world’s consumption and production needs by delivering energy, intermediate inputs and final products.

According to UNCTAD estimates shown in figure 1, the volume of international maritime trade grew by four per cent in the year 2017, taking the total to almost 10.7 billion tons (UNCTAD, 2018a). This represents a 50 per cent increase on the volumes transported in 2005. Major dry bulk commodities accounted for the largest share, almost reaching one third of total cargo. This was closely followed by fuels.

Containerized trade volumes reached 1.8 billion tons in 2017, accounting for 17 per cent of total maritime trade. This segment, closely associated with the globalization and fragmentation of global production, has been the most dynamic sector, registering a growth of 5.8 per cent in 2017.

Developing economies continue to account for most international seaborne cargo flows, as shown in figure 2. In 2017, this group of economies was responsible for 60 and 63 per cent of total goods loaded (export volumes) and goods unloaded (import volumes), respectively. Developed economies, by contrast, saw their share of both flows decline over recent years, so that they now only represent about one third of world seaborne imports and exports. Transition economies continue to be reliant on the export of bulky raw materials and commodities (about six per cent of total goods loaded), but they only hold a marginal share of global seaborne imports (less than one per cent of total goods unloaded in 2017).

Map 1 highlights the leading influence of Asia in maritime transport. In 2017, this region shipped 42 per cent and received 61 per cent of world maritime cargo. Corresponding figures for Europe were 17 per cent of total goods loaded and 20 per cent of total goods unloaded. The other regions were responsible for smaller shares of worldwide maritime cargo flows.

Map 1. International maritime cargo flows by region, 2017

(Billions of tons)

Source: UNCTAD (2018b)
Note: Europe includes the Russian Federation and the French overseas departments.

Demand for maritime transport infrastructure and services is a derived demand, impacted by demographic factors, consumption needs, industrial activity, trade and economic growth. Maritime cargo volume is, therefore, expected to rise in line with expanding economic activity. UNCTAD projects maritime freight to increase at an annual growth rate of 3.8 per cent over the next five years (UNCTAD, 2018a). At this pace, global seaborne trade volumes are expected to double in less than two decades. Large infrastructure projects, such as China’s Belt and Road Initiative, are expected to further boost maritime cargo flows.¹

Efficiency goes hand in hand with connectivity

The projected expansion of maritime cargo volumes and the growing role of developing countries in seaborne activities will test the capacity of existing infrastructure. To support increased cargo flows, countries must continue to develop new infrastructure and optimize the use of existing networks. To remain competitive and avoid the risk of marginalization, ports and terminals must find effective ways to embrace sustainability and resilience.

Enhancing port infrastructure and service quality is crucial for reducing transport costs, and this in turn can increase connectivity, facilitate trade and boost trade flows. Figure 3 shows country scores for efficiency of seaport services and linear shipping connectivity in 2018. The two variables are positively correlated, with some of the more connected countries also registering high port efficiency, namely Singapore, the Netherlands, Hong Kong, Special Administrative Region, the United States and the Republic of Korea. Some exceptions include countries with very efficient ports but that, being located away from the main maritime trading routes, are relatively weakly connected, such as Finland, Estonia, Iceland, Norway and New Zealand. China’s maritime transport sector is a special case: it is by far the most well-connected country, but its port efficiency is close to the world average. Thus, not all countries are equal from the perspective of efficiency and connectivity in maritime transport infrastructure.

Logistical bottlenecks and insufficient investment are some of the key challenges in maritime transport infrastructure. They raise costs, extend delays, reduce access, constrain connectivity and undermine effective participation in regional global supply chains and transport networks. Beyond ports, road and rail networks are necessary for the door-to-door transport of goods. These additional services can render transportation costly, especially for LLDCs. According to UNCTAD estimates for the period from 2005 to 2014, total freight costs (including all modes of transport) in Africa reached 11.4 per cent of the value of imports. These costs amounted to 9.6, 9.0 and 8.0 per cent of the import value in developing economies in Oceania, Asia and the Americas, respectively. The equivalent rate for developed economies was only 6.8 per cent (UNCTAD, 2015).

Investment requirements in the transport sector will likely accelerate

According to recent projections, global infrastructure investment needs up to 2040 could reach US$94 trillion, in 2015 prices. A scenario in which current investment trends are maintained implies that only US$79 trillion will be invested, leaving a global infrastructure investment gap of US$15 trillion (Oxford Economics and Global Infrastructure Hub, 2017). This estimate is based on data from seven sectors in 50 countries. Available estimates specific to the transport sector also reveal high investment needs over the coming decades.²

The public sector has traditionally played a key role in financing transport infrastructure. However, investment requirements are large and there is a growing gap between needs and actual investment. In many countries, financing infrastructure needs is challenged by competition with other high-priority areas for public funds, by constrained opportunities for domestic resource mobilization and by limited ability to borrow domestically or internationally. Alleviating the persistent transport infrastructure gap requires further mobilization of domestic resources and complementing them with additional sources, including foreign direct investment, international debt finance, development aid, hybrid public-private sector solutions, among others.

Adapting transport infrastructure in times of climate change

UNCTAD has worked on the implications of climate change for maritime transportation since 2008, with increasing focus on climate change adaptation and resilience building for seaports and other key coastal transport infrastructure. In keeping with the global momentum of the 2030 Agenda for Sustainable Development and the Paris Agreement on climate change, UNCTAD is intensifying its efforts to promote sustainable and resilient freight transport infrastructure and services.³

Transport infrastructure is affected directly and indirectly by climate change, with broader consequences for international trade and the development prospects of the most vulnerable nations.⁴ Climate-related extreme events and disasters can result in significant economic costs. They are considered among the top global economic risks, with implications for additional infrastructure investment needs and climate adaptation (World Economic Forum, 2019).

Figure 4 summarizes the probability that a disaster leads to damage on infrastructure, based on occurances in the past. The figure suggests that, within economic infrastructure, transport is the sector that is most vulnerable to disasters. On average, transport facilities have a 20-30 per cent probability to be impacted by geological, hydrological and meteorological events. Some of these events are expected to increase in frequency and intensity as a result of climate change, with severe consequences for infrastructure. Indeed, a recent study estimated that global damage due to sea-level rise and related extreme events might amount to US$10.8 trillion per year, about 1.8 per cent of global GDP, for a scenario of 1.5°C warming by 2100. If warming is not mitigated, the costs could reach even higher levels (Jevrejeva et al., 2018).

Adaptation and resilience measures are essential since they can contribute to reducing the negative impacts of climate change. However, a recent UNCTAD survey on climate change impacts and adaptation for ports shows important gaps in data on resilience and preparedness among seaports worldwide UNCTAD (2017). Relevant information and adequate climate adaptation efforts are urgently needed for effective climate risk-assessment and adaptation planning of coastal transport infrastructure, especially for ports in developing regions.

Adaptation is a particularly urgent imperative for small island developing states (SIDS). These countries are often particularly exposed and vulnerable to the impacts of climate change while, at the same time, they are more dependent than other countries on coastal infrastructure for external trade, food, energy and tourism. Climate-related events, that are expected to increase in frequency, may cause major disruptions to the connectivity of SIDS to international markets as well as to related economic sectors, such as tourism (UNCTAD, 2014; IPCC, 2018). UNCTAD has recently conducted vulnerability assessments in two SIDS in the Caribbean, Saint Lucia and Jamaica (UNCTAD, 2018c, 2018d) as part of a wider technical assistance project in climate change adaptation for coastal transport infrastructure (UNCTAD, 2019d).

While central to development, transport can also have detrimental effects on the environment through air pollution, greenhouse gas emissions, soil contamination, waste, noise, threats to land and water ecosystems and biodiversity, and others. Each mode of transport could lead to a different combination of negative impacts on the environment. While maritime transport is relatively less harmful to the environment than other modes of freight transport, the large volumes handled by this sector and its projected expansion in the coming decades make it priority. For instance, according to different scenarios, CO₂ emissions from maritime transport are expected to increase by 50-250 per cent in the period to 2050 (International Maritime Organization, 2015; OECD, 2010). Urgent solutions are needed to reach transport infrastructure, services and operations that are energy efficient, safe, climate-change resilient and environmentally friendly (OECD, 2011; UNCTAD, 2018e).

Notes

1. This initiative pursues infrastructure development within and outside China and seeks to improve physical connectivity through enhanced transport networks. It will require large amounts of materials in the form of dry bulk commodities, steel products, cement, heavy machinery and equipment. The resulting infrastructure improvements could increase total trade among partner economies by between 2.5 and 4.1 per cent (Baniya et al., 2019).
2. For example, OECD (2012) forecasts global investment needs (for airports, ports, rails and energy transportation) of US$585 billion per year from 2015 to 2030. PwC and Oxford Economics (2015) estimate that investment requirements in transport infrastructure will increase from US$557 billion in 2014 to US$900 billion in 2025 globally. Finally, McKinsey Global Institute Woetzel et al. (2016) projects cumulative investment needs in the sector over the period from 2016 to 2030 to amount to US$18.7 trillion.
3. For additional information, see UNCTAD (2019b, 2019c).
4. For some recent studies on these topics, see UNCTAD (2011); Asariotis and Benamara (2012); Becker et al. (2013) and UNECE (2013).

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