Opening Ceremony - John Flora

IRU XXVIII^th World Congress
Under the Patronage of the President of Romania, Ion Iliescu

Opening Ceremony

John Flora
Director Transport and Urban Development, The World Bank

"Our dream a world free of poverty"

Mr. President, Mr. Laeremans, Mr. Ferrer, Minister Mitrea, Ladies and Gentlemen,

It is my pleasure to address you this afternoon at this, the opening of the IRU’s 28^th World Congress.  The World Bank has enjoyed a longstanding relationship with the International Road Transport Union and we look forward to deepening that partnership in the coming months and years. 

A brief glance at the agenda before us over the coming days, should remind all of us of the central role that road transport plays in shaping a global economy.  For the World Bank transport in general —and road transport in particular— is an essential element in our fight to eliminate poverty.

The World Bank’s mission — ambitious by any standards — is to realize “A world free of poverty”.  In practical terms, that means improving the lives and living conditions of the nearly 3 billion people that are poor, and the nearly 2 billion people that will be added to the world’s population in the next 50 years.

Two years ago, the international community reaffirmed their commitment to working towards this mission at the Millennium Summit.  The set of aims that were agreed then — the Millennium Development Goals — focus on securing for the world’s poor, access to fundamental services and resources: to food and health care; to primary education for boys and girls alike; to opportunities for greater economic and social development.  And to ensure that the progress we make does not come at the expense of the world’s precious environmental assets.

In none of these goals — or in the targets established to monitor our progress — is there a direct mention of the role of transport.  But there can be few of us in this room that would interpret this absence as evidence that transport has no role to play in meeting this global challenge.  In fact, transport’s contribution to this mission is well understood — not least by the poor themselves:

When the World Bank consulted with over 60,000 poor men and women from 60 nations in a study entitled “Voices of the Poor”, a man from Cameroon captured this complex concept elegantly when he stated, “Where a road passes, development follows right on its heels”

But the role of economic growth in the fight against poverty — and the role of transport in economic growth — is surprisingly controversial.  In a paper published in 2000, two World Bank economists David Dollar and Art Kraay surveyed the poorest 20 percent of the population in 92 countries over a period of forty years.  Their findings suggest that, contrary to popular wisdom, economic growth — and specifically a country’s openness to international trade — benefit the poorest in society just as much as everyone else.

Far from being at the periphery, transport is at the very core of poverty reduction efforts.  Transport affects and influences the economic opportunities of nations — and the lives and livelihoods of their poorest residents.

At a fundamental level, high transport costs — for transport services operating within the country and between the country and the wider world — represent a significant barrier to the wider participation of developing nations in international trade.  In recent years, the international community has focused increased attention on the effect of tariff barriers on poorer nations and while this is clearly an obstacle to international trade it is not the only one.

Although given a lower international profile, poorly functioning transport systems present a very real problem for developing countries seeking to access international markets.  Recent research indicates that out of 218 less developed nations that trade with the United States, over two thirds of them faced a greater impediment to trade from inefficient — and uncompetitive — transport services than they did from punitive tariff regimes.  Tariffs can range anywhere from 5 to 25 per cent whereas transport and logistics services can account for as much as 20 to 40 per cent of goods value.

In Benin, duties represent less than 1 per cent of the goods value of total exports whereas shipping accounted for almost 23 per cent of that total.  Although this West African nation is an extreme case, a similar picture can be found throughout sub Saharan Africa.  In Zambia, for example, it is cheaper to import maize from Zimbabwe than it is to transport it from the Zambian countryside.

These examples highlight the important linkage between transport and economic competitiveness.  International research makes this relationship explicit, finding that a doubling of transport costs was generally associated with a fall in national growth of as much as 0.5 per cent and can be largely responsible for holding down growth rates and stifling economic growth.

The message —complex economic analysis aside — is clear: Transport costs are a significant determinant of a nation’s ability to access — and compete — in foreign markets.  But to understand this more fully, we need to look beyond the figures and trends and concentrate on the effects that transportation has on the poor that are our clients. 

High transport costs in developing countries are very likely to translate into lower wages — with the clearest possible effects on the livelihoods of workers and those that depend on their income.  High transport costs are estimated to have a severe effect on Tourism (with effects for all the industries and individuals that rely on that sector) with a doubling in air transport costs said to result in as much as an eightfold drop in tourism demand. 

The positive effects of effective transport systems are equally dramatic.   I will give just two brief examples: The establishment of NAFTA in 1993 has seen cross border trade between the US and Mexico rise from US$81 billion to US$246 billion in only 7 years. 

The profound social effects of better transport also become apparent.  In a recent World Bank project in Morocco, all-weather roads, built in a rural area, were held to have lowered the cost of transport, helped farmers both improve agricultural practices — by allowing them better access to fertilizers and machinery— and their incomes by enabling them to grow higher value crops that are easier to get to market. 

Significantly, the roads also helped improve levels of girls’ attendance in school.  But not just because the school was made more accessible, but because the roads meant that supplies of propane could be brought into their villages regularly — so relieving women and girls of the daily chore of collecting the firewood essential for heating and cooking in their homes. 

But the provision of roads — of the infrastructure itself — is one thing.  The ultimate goal remains to ensure that the transport system is sustainable and that it operates effectively throughout the supply chain.  This requires both a comprehensive policy framework and regulatory regime on one hand and efficient, competitive transport operators on the other.

In the developing world, it is the second element of this equation that remains especially problematic.  Without greater knowledge, without greater understanding of the implications of the many complex legal and technological changes that govern international and cross-border trade, transport carriers cannot take full advantage of the opportunities of a global economy.  Building capacity by developing a cadre of trained and certified professionals is an essential first step in realizing the potential that transport has to play in facilitating international trade. 

In response, the IRU, the World Bank and a host of international partners came together to help developing countries to design and implement trade facilitation programs by launching the Global Facilitation Partnership for Transportation and Trade (GFP) in 1999.  Recognizing its comparative advantage, the IRU leads the Partnership’s Distance Learning Initiative (GFP-DLI).

Focusing on transition economies of South Eastern Europe, the IRU is helping to develop communities of qualified and recognized transport professionals able to provide critical, trade, transport and logistics know-how. 

In distance learning programs now underway in Macedonia and Bosnia Herzegovina, the IRU’s Academy is providing a certificate of professional competence for international truck drivers.  Building on this success, the Partnership looks forward to the IRU engaging with transport professionals in programs throughout the region:  in Albania; Bulgaria; Croatia and Romania, and with the prospect that Moldova and the Federal Republic of Yugoslavia will also become involved.

Earlier, I noted the daunting scale of the challenge represented by the World Bank’s mission.  But I also want to be clear that the World Bank remains committed to transport’s role in the reduction of poverty. 

Despite widely held belief, the World Bank’s commitment does not stem from an unhealthy obsession with “hard” infrastructure.  In fact, as I hope some of the examples illustrate, it is because transport investment provides such strong support to wider economic and social objectives — for greater mobility of goods and human capital, for greater access to health and education and other essential services — that it will remain an essential element of the World Bank’s poverty reduction activities.

I am grateful for the opportunity to address the IRU because of our history of cooperation in the past— and because of the prospects for our continued partnership in the future.  In many ways, it is difficult to overestimate the challenge of poverty reduction.  We cannot act alone  — nor should we try.  We recognize that real progress in transport —as in every area in which we are involved— will only result from the combined efforts of individuals and organizations that share this vision. 

We consider ourselves fortunate to have in the IRU, a partner that not only shares our vision, but a partner that is prepared to put in the hard work, the time, the money and the effort, to bring this vision closer to reality.

Thank you.

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