The Role of Transport in Economic Development

by Sinethemba Mngqibisa, Director: Freight (2002-2005)

Transport systems involve mainly the infrastructure, the moving objects and all related activities. It is because of this simple reason that infrastructure improvements are taken as transport improvements. This was recognized as far back as 1776 by Adam Smith in his Wealth of Nations: "Good roads, canals and navigable rivers, by diminishing the expense of carriage, put remote parts of the country nearly on a level with those in the neighbourhood of towns. They are upon that account, the greatest of all improvements." As it is going to be shown below, there exists a direct relationship between transport improvements and economic development.

Economic development, as a concept, is frequently confused with that of economic growth. Whilst economic growth is concerned with establishing increases in the economy’s productive capacity and output, economic development, is a wider concept that is concerned with improvements in the quality of life of the people living in the area. As we can see from the definition, it is multidimensional and includes infrastructure development, economic growth and social, cultural, institutional and political change and human resource development.

There is strong evidence that transport improvements result in economic development. Market grows because of improvements in transport. The market is originally local and small. Demand is restricted by the cost of getting goods into the village; supply is limited by the cost of getting goods into the village. Under these circumstances, markets only grow through increases in transport. The expansion becomes cumulative. Increased outlets for a commodity give rise to increased real income, which in turn raises the demand for other products. As new supplies of these come on the market, in turn, incomes grow further. The linkage of markets by an improvement in transportation becomes part of a developmental process. In these circumstances, it is not surprising that economic development is correlated positively with transport facilities.

The linkages between transport and trade are so strong, and good transport is essential for competing in the modern global economy. Furthermore transport affects the efficiency of the labour market and labour participation rates. Other benefits from transport improvements may include increased trade and competition from imports, in turn leading to improved production efficiency, downward pressure on consumer prices and reduced seasonal price fluctuations.

3.1     ROAD TRANSPORT

This mode is considered to do more in furthering economic development than other transport modes. The general effect of road transport on location of industries is lower transport costs over short distances. A region with a large market, skilled labour, etc, but weak transport system may attract industry if proper roads are provided.

3.2     RAIL TRANSPORT

This is particularly suited to bulk transport of goods over long distances. Its primary economic impact is as an inter-regional transport system.

3.3     AIR TRANSPORT

This is the fastest mode of transport over long distances. It is particularly suited to remote industries. Adequate and suitable air transport to remote areas can, to some extent, contribute to centralization of activities in those areas.

Airfreight can have an impact on the decentralization of activities, especially, where high value products with low bulk are transported.

3.4     WATER TRANSPORT

This mode has the lowest distance transport costs. It is suited to bulk transport of goods over long distances. Its importance in the development depends largely on the presence of a harbour. Evidently, worldwide, cities with good harbours are the economic anchors of those respective countries.

3.5     PIPELINES

This specialized transport is especially significant in the transport of petroleum products, natural gases and water over long distances.

Transport infrastructure may be defined as that which is fixed, which enables the operation to take place. In the White Paper on National Transport Policy it is defined:

"Transport Infrastructure comprises all physical elements upon which transport operations take place. It includes roads, railways, airports, harbours, pipelines, interchange facilities and associated dedicated power and communication systems."(Department of Transport, White Paper, 1996:12).

Transport Infrastructure is vital to development within a country because it is necessary for a level of basic access to be provided. This means that transport infrastructure must be provided so that the population of the country has a certain level of access to basic amenities, which are fundamental to development and provide necessary foundation for further economic growth. Thus transport infrastructure is required for access to health facilities, places of work and for shopping or recreational purposes.

Transport Infrastructure is extremely important in facilitating economic activity. In this regard, transport infrastructure is necessary for production processes to occur in any modern economy. Also it makes possible, economic activities by giving access to resources and markets, which may not have occurred up to that point. Furthermore, transport infrastructure is essential in the optimization of the movement of raw materials and finished products in that it can provide producers of goods with routes to their markets, which are more direct, and therefore less costly in terms of time and operating cost. This shows that transport acts as a catalyst for the development in its role as a facilitator of economic activity.

WORLD DEVELOPMENT REPORT

According to the World Bank’s World Development Report, developing countries invest $200 billion a year in new infrastructure, i.e. 4% of their national output and a fifth of their total investment. This is a substantial amount of investment and one needs to look at the results. The results have been dramatic increase in infrastructure services for transport, which do much to raise productivity and improve living standards.

This report points out that good infrastructure raises productivity and lowers production costs. It helps determining one country’s success and another’s failure-in diversifying production, expanding trade, coping with population growth, reducing poverty, or improving environmental conditions. There is evidence of 1% increase in the stock of infrastructure associated with a 1% increase in the GDP across all countries. The per capita provision of infrastructure services has increased in all regions, the greatest improvements, reflecting the strong association between economic growth and the infrastructure.

Transport is an input for every commodity. Users demand infrastructure services not only for direct consumption but also for raising their productivity by, for instance, reducing time and effort needed to perform that activity. Studies linking infrastructure spending to growth of GDP show very high returns in a time-series analysis. There is definite evidence that a strong association exists between the availability of certain infrastructure and per capita GDP. Research has also shown that lower transport costs increased farmers’ access to markets and led to considerable agricultural expansion.

The report also reveals the fact that adequate quantity and reliability of infrastructure are key factors in the ability of countries to compete in international trade and, even in traditional commodities. Competition for new markets is especially dependent on high-quality infrastructure.

Evidently, there exists an indisputable relationship between transport development and economic development. Improvements in transport result in economic development. Transport infrastructure is an essential factor because of its role in facilitating transport activities. Warning however, should be sounded that transport must be planned and provided in conjunction with total system to ensure optimal promotion of overall development and general welfare.

Department of Transport. White Paper on National Transport Policy: 1996.

Department of Transport. A Future for roads in South Africa: 1996.

Department of Transport Economics. Transport Economics. Trabed, C. Pretoria : University of Pretoria.

World Bank. World Development Report. 1994.

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