Transport, trade and tourism

ITF SummitTo mark the opening of the International Transport Forum’s Annual Summit, today’s post is by the Summit’s keynote speaker Pravin Krishna, Chung Ju Yung Distinguished Professor of International Economics and Business at Johns Hopkins University

We live in exciting times. Globalization is deepening at a very rapid rate. In the last decade and a half, international trade in goods has nearly tripled and international tourism has nearly doubled in magnitude. Increased connectivity has led to globally fragmented production processes.

We are now more internationally connected in our economic interactions. We have a better appreciation of the peoples of different countries and their cultures through our travels. We have greater economic prosperity and a greater civilization through these interactions. A large part of this is due to the availability of transportation systems and the increased efficiency of their operation over time.

I will address three broad issues of the complex and multidimensional triangular relationship between transport, trade and tourism.

First, the crucial importance of transportation in generating economic gains, and the concerns about the effects of globalization on poverty and inequality.

Transport networks have obviously provided the backbone for the process of globalization. And, study after study has shown that improved access to transportation infrastructure can be beneficial at the local, national and the international levels. Research from the World Bank has shown that reducing delays at borders in an exporting country by 1 day, through improved trade facilitation, increases exports by 1 percent and that a 10 percent improvement in the quality of transport infrastructure would result in a 10 percent increase in trade, which suggests a very significant impact of improved transportation logistics on trade.

Going beyond the straightforward consequence of lower transport costs for trade flows; there seem to be other productivity benefits as well. For instance, following the Golden Quadrilateral project, which upgraded a central highway network in India, we observe an increase in size of the most productive firms and reduction in the size of the least efficient firms, signaling improvements in allocative efficiency in the economy.

In my own research, I have investigated a rather different set of issues concerning trade, poverty reduction and the availability of transport networks. The claim is often made that exposure to globalization may lead to greater levels of poverty and inequality. However, by looking across various regions within India, comparing regions which are proximate to ports and transportation networks with those that are not, we actually found the opposite. Without trade openness, poverty reduction is actually lower in geographically remote areas due to their lack of exposure to international markets (Krishna, Mitra and Sundaram, 2010). This is important for countries where persistent poverty is a major policy issue. Access to transport networks should clearly be an important part of equitable progress and poverty alleviation strategies.

Second, despite the obvious infrastructure gaps in transportation in large parts of the world, the question of whether to invest more in transport and in what forms, can only be answered in its specific context.

While we generally believe that there is a positive effect of infrastructure on output and productivity, it is not always the case that the benefits of additional infrastructure outweigh the costs. It is, of course, only with productive spending that value is created. Indeed, after surpassing certain thresholds in infrastructure levels, the marginal productivity of infrastructure declines. And, there is some evidence that the productivity of public capital has been declining in advanced economies. As transport networks have become more complete, the average impact of additional segments has been lowered.

Furthermore, the link between infrastructure and growth is much weaker when we measure infrastructure supply using pecuniary measures such as public investment flows. And there is a good reason for this: namely the lack of a close correspondence between public capital expenditure and the provision of infrastructure services, owing to inefficiencies in public procurement and outright corruption (Pritchett, 2000).

Evidence of waste of public resources can cost governments dearly in terms of lost credibility and trust on the part of citizens, even for well-designed projects. In rapidly growing India, the intense struggles of the current government, which is attempting to push through legislation on land acquisition to advance its infrastructure agenda, against a backdrop of long-standing cynicism about public capital expenditure, bear testimony to this fact.

Third the nature of change is complex, and while trade and tourism have grown steadily, this has not taken place in a uniform manner.

Over the last few decades, the center of global production activity has begun to shift back from the West to Asia, and in recent years especially towards China, which has become an important venue for offshore production. But many variations and uncertainties remain. Businesses looking for low-cost export platforms in Asia are increasingly considering countries such as Thailand, Indonesia and Vietnam. Indeed, even Mexico is possibly returning back to favor for many US based manufacturers.

These shifts raise important questions.

For instance, how is freight demand expected to evolve over time? On the one hand, demand could increase dramatically due to rising wealth and rising trade. On the other hand, changes in energy prices, in trade patterns and in economic geography, could affect the origin, destination and mode of traffic, possibly decreasing demand in particular segments and modes. Are our transport networks capable of flexibly adapting to these changes in demand and usage? Are there alternative infrastructure strategies that allow both efficiency and flexibility of response to changing demand?

The demographics of the planet are rapidly changing. A decade or two from now, populations in the United States, Japan, Europe and even China are likely to be significantly older than today. This may, in turn, alter demands for tourism and transportation. However, enhancements in information and communication technologies and other trends such as the movement of aging citizens to urban, pedestrian-friendly areas may mitigate the need for changes to be made in supply. It is unclear which way this will go and by how much.

Interestingly, other parts of the world will be getting younger. For instance, it is estimated that over 30 percent of India’s population, roughly 400 million people, are under 15 years of age and that, going forward, about 1 million young Indians will join the labor force each month, many in urban areas.

These are big trends and they are relatively easy to forecast. But how well do we understand the impact they will have on transportation? And how prepared are we for those challenges?

In addressing these issues, institutional gaps may be as large a problem as infrastructure gaps. Lack of co-ordination between transportation and tourism ministries, for instance, may yield mismatches in mutual expectations of both supply and demand. Similarly, with international trade, infrastructural improvements need to go hand in hand with other behind-the-border reforms, as bottlenecks may lie as much, for instance, in poor customs facilitation, as in poor transport infrastructure.

Long range planning has an outlook of 20-30 years, but is often largely a linear projection based on current relationships between economic and demographic patterns – much like the Times of London forecast in 1894, that given the growth rate of horse carriages, every street in the city of London would be buried under nine feet of horse manure by 1950! These linear projections may be the single greatest weakness of policy making for transport today. A wide range of technological, demographic, social and economic changes will likely affect demand and supply patterns in the future.

These changes and their impacts are not as well understood as we would like. But I am sure that the collective talent of the ITF Summit audience is very well equipped to address them, today and in future research.

Useful links

Pravin Krishna, Devashish Mitra and Asha Sundaram, 2010, “Trade, Poverty and Lagging Regions in South Asia,” in The Poor Half Billion in South Asia, Ejaz Ghani, ed., Oxford University Press

Lant Pritchett, 2010, “The Tyranny of Concepts: CUIDE (Cumulated, Depreciated,Investment Effort) is Not Capital”, Journal of Economic Growth, 5 (4): 361–84

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Stop “AIDS orphan” tourism

Good intentions may end up harming them

Today’s contribution is from Professor Linda Richter of South Africa’s Human Sciences Research Council and the Global Fund to Fight AIDS, Tuberculosis and Malaria, based on a paper she has just published with Amy Norman of Queen Mary, University of London

The global perception that sub-Saharan Africa is experiencing a burgeoning AIDS orphan crisis, coupled with growing trends in volunteer tourism has produced a potentially high-risk situation for already vulnerable young children.  “AIDS orphan” tourism is one aspect of the global “voluntourism” industry selling an emotional connection with needy young children.

Programmes which encourage or allow short-term tourists to take on primary care-giving roles for very young children are misguided for a number of reasons.

Voluntourist contributions are often brief, so the work they can do is usually low-skilled. As a result there is a real danger of crowding out local workers, especially when people are prepared to pay to volunteer. These opportunities should be given to local youth, many of whom would be grateful for regular meals, some training and a testimonial to their work experience.

Further, volunteer work is costly to host organisations because of the large overheads needed to host voluntourists. Institutions frequently provide accommodation and meals, and staff are allocated to guide volunteers around and organise their activities.

Non-family residential group care (“orphanages”) in southern Africa has expanded, perversely driven by the availability of funds, and the glamour that media personalities bring to setting them up. However, many orphanages are not registered with welfare authorities as required by law, and most face funding uncertainties and high staff turnover, making them unstable rather than secure environments for children. Moreover, children taken in by orphanages are usually from desperately poor families rather than orphans – as seen in the case of David Banda in Malawi, adopted by Madonna.

Aside from economic and employment questions, there are serious concerns about the impacts of short-term caregivers on the emotional and psychological health of very young children in residential care facilities. The formation and dissolution of attachment bonds with successive volunteers is likely to be especially damaging. Unstable attachments and losses experienced by young children with changing caregivers leaves them very vulnerable, and puts them at greatly increased risk of psychosocial problems that could affect their long-term well-being.

Institutionalised children tend to manifest the same indiscriminate affection towards volunteers. After a few days or weeks, this attachment is broken when the volunteer leaves and a new attachment forms when the next volunteer arrives. Although there is little empirical evidence on children’s reactions to very short-term, repeat attachments over time, evidence from children in temporary or unstable foster care indicates that repeated disruptions in attachment are extremely disturbing for children, especially very young children.

Every available resource should be utilised to support families and extended kin to enable them to provide high quality care for their children. Out-of-home residential care should not be an option when support can be given to families to take care of their own children.

Children out of parental care have a right to protection, including against experiences that are harmful for them. In particular, they have a right to be protected against repeated broken attachments as a result of rapid staff turnover in orphanages, exacerbated by care provided by short-term volunteers.

Welfare authorities must act against voluntourism companies and residential homes that exploit misguided international sympathies to make profits at the expense of children’s well-being.

Lastly, well-meaning young people should be made aware of the potential consequences of their own involvement in these care settings, be discouraged from taking part in such tourist expeditions, and be given guidelines on how to manage relationships to minimise negative outcomes for young children.

Useful links

Statistics on aid in support of HIV/Aids control from OECD

Tourism Concern “fights exploitation in tourism and campaigns for more ethical, fairly traded forms of tourism” and is currently promoting a code of practice for international volunteering organisations.

OECD Tourism Trends and Policies 2010

Meta-Analysis of Development Cooperation on HIV/AIDS

There’s money in tourism …

Tourism is an important player in the worldwide economy: In 2009, it accounted for just over 9% of global GDP and employed about one in twelve workers, according to the World Travel and Tourism Council.
As a sector, international tourism has been growing at a slightly faster pace than the world economy. Despite the recession and the downturn in tourism numbers,
that trends looks likely to continue over the long-term. Employment in tourism is also growing relatively strongly: Between 2000 and 2007 in OECD countries, the growth rate for employment in hotels and restaurants was over 2% per year, more than a percentage point ahead of the total employment growth rate. (more…)

France still No. 1 for tourists

If the beaches seem a little less crowded in the last couple of years, don’t be too surprised. International tourism took a knock during the global recession, as our charts show, with annual growth slipping to just 1.9% in 2008, or 5.2 percentage points lower than the growth rate registered during the previous four years. By the time figures for 2009 are finalised, they may show an actual decline of over 4%. That’s to be expected: International travel tends to respond quite sharply to economic slowdowns, while domestic tourism (people holidaying in their own countries) is more resilient. In OECD countries, about three out of four tourists are domestic. There have been some signs of growth in the first half of 2010, though whether this spells a recovery or reflects a particularly weak 2009 remains to be seen.

Despite any recent declines, tourism remains one of the world’s great growth industries. According to the UN’s World Tourism Organisation, just 25 million people travelled abroad for holidays in 1950. Today, the figure is more than 800 million, representing an annual growth rate of about 6.5%.
Just as it’s been for the past 15 years, France remains the world’s favourite destination, attracting just under 80 million visitors in 2008 (the most recent year for which full data is available). The United States is second, with about 58 million visitors from abroad, while Spain is third, with just over 57 million.