Transcript Crane(presentation)

Accelerating Growth in
Southeast Europe:
The Role of Roads
Road Congress for Southeast Europe
September 18, 2000
Dr. Keith Crane
Director of Research
1
PlanEcon, Inc.
Outline
 After Difficult Decade, Southeast Europe
Poised for Growth
 Higher Incomes Resulting in More Cars, More
Driving
 Rapid Growth in Trade to Drive Transport
Demand
 Road Transport to Dominate
 Shift to Heavy Trucks Necessitates Better
Quality Roads
2
PlanEcon, Inc.
Southeast Europe Primarily Composed of
Small Economies with Low Incomes
GDP in Billion 1995 USD
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
7.1
31.2
67.1
37.6
6.2
3
Albania
Bosnia
Bulgaria
Croatia
Macedonia
Romania
Per Capita GDP
Al
ba
ni
a
Bo
sn
ia
Bu
lg
ar
ia
C
ro
at
ia
M
ac
ed
on
ia
R
om
an
ia
5.3
PlanEcon, Inc.
After Difficult Decade, Bulgaria,
Romania Recovering
Annual Change in GDP (in%)
8
6
4
2
0
-2
-4
-6
-8
-10
-12
1994
1995
1996
1997
1998
1999
2000
FORECAST
Bulgaria
4
Macedonia
PlanEcon, Inc.
Romania
Albania, Bosnia, Experienced Very
High Growth, But From Low Base
Annual Change in GDP (in%)
20
68%
28%
15
10
5
0
-5
-10
-15
1994
1995
1996
1997
1998
1999
2000
FORECAST
Albania
5
Bosnia
PlanEcon, Inc.
Croatia
Lower Inflation Key to Recovery
Average Annual Inflation Rate
350
579%
300
250
200
150
100
50
0
1994
1995
1996
1997
1998
1999
2000
FORECAST
Albania
6
Bulgaria
PlanEcon, Inc.
Romania
Despite Economic Difficulties, Southeast
Europeans Are Buying Cars
Car Parks
 Regional car park has risen
7
Million Cars
6
5
4
3
2
1
0
1992
1996
Bulgaria
Macedonia
7
2000
2004
Croatia
Romania
60% between 1992 and 2000
 Most of the increase stems
from imports of used
vehicles from Western
Europe
 Dacia sales added to
Romanian total
 Increased park has
dramatically increased road
use, especially in cities
PlanEcon, Inc.
New Car Owners Have Different Road Use
Patterns
 Executive
— Drives D, E segment vehicles less than 3 years old
— Averages 30,000 kilometers per year
 Mid-level manager
— Drives C segment vehicle
— Averages 15,000 to 30,000 kilometers per year
 “Middle income” driver
— Drives to conduct personal errands and vacations
— Less than 5,000 kilometers a year
 Retirees and farm workers: Sunday drivers
8
PlanEcon, Inc.
Road Use to Rise Rapidly
 Rising incomes result in
Bulgarian Annual Driving
Distances
greater personal use of cars
— Shopping
— Vacations
7000
6000
levels in Central Europe,
southeast European usage
will gravitate to these levels
 Usage concentrated in
cities, ring roads, improved
urban corridors needed
9
Kilometers
 Car usage double Bulgarian
5000
4000
3000
2000
1000
PlanEcon, Inc.
0
1995
2000
2005
2010
Transport Activity Collapsed in First Years
of Transition
% Fall 1990 - 1996
 Output of heavy
0
10
-10
-20
-30
-40
-50
PlanEcon, Inc.
Romania
-70
Macedonia
-60
Bulgaria
industry plummeted
 Disintegration of
Yugoslavia reduced
trade
 Increased tariffs
reduces demand
 Profit motive
improves rationality
Transport Industry Transformed
 Shift to market economy transforms transport
industry
—Explosive growth in small private businesses increases
demand for frequent, reliable deliveries
—Growth in international trade in manufactures spurs
demand for freight forwarding
 Fall in output of bulk goods reduces demand for
rail, barge services
 Demand shifts from industry to consumers, heavy
manufacturing centers to capital cities
 Costs, not bureaucrats, determine mode
11
PlanEcon, Inc.
Transport Volumes Destined to Rise Again
 Economic growth to boost
300
Billion Tkm
250
200
150
100
50
0
1997 2000 2003 2006
Croatia
12
Romania
transport of manufactured
goods
 Croatia to benefit from
boom in transit trade
 Continued declines in bulk
commodity production in
Romania slows transport
volume growth
 Interregional trade growth
to be major contributor to
increases
PlanEcon, Inc.
Exports Key Driver of Economic Growth,
Transport Demand
Million USD
Southeast European Exports
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
1995
Albania
13
Bosnia
1999
Bulgaria
2003
Croatia
PlanEcon, Inc.
Macedonia
2007
Romania
Interregional Trade Forecast to Increase
Bulgarian Exports
 Interregional trade relatively
—
—
—
—
Similar export mix
Low per capita incomes
Poor transport links
Tariffs and other trade
barriers
 Recent policy change
triggering expanded trade
— CEFTA membership, free
trade agreements
— Improved border crossings
— Growing economies
14
Million USD
underdeveloped
600
500
400
300
200
100
0
1997 2000 2003 2006
Albania
PlanEcon, Inc.
Macedonia
Romania
Road Dominates in Tons Lifted
Romanian Transport
 Common hauliers’ share
of tons hauled has
remained high
 But rail dominates in
terms of ton-kilometers
 Barge has lost ground to
rail
 Despite low wages, sea
transport has suffered as
state-owned fleets have
deteriorated
15
Road
River
Sea
PlanEcon, Inc.
Rail
Pipeline
Despite Shift to Road, Southeast European
Rail Still Major Player
Percent
Share of Road in Romanian
Surface Transportation
50
45
40
35
30
25
20
15
10
5
0
1992
16
1995
1999
 Subsidized rail tariffs has
delayed shift
 Freight traffic most
profitable rail operation,
commercialized railroads
concentrate on retaining
freight customers
 Private hauliers account for
most road traffic, face
difficulties in financing
operations
PlanEcon, Inc.
But Railroads Will Continue to Lose
Market Share
 Railroads have responded to declines in traffic,
revenues by reducing maintenance, investment
 Railroads remain heavily overstaffed
—Traffic less than 1/2 former levels
—Employment down by far less than traffic declines
 Major customers often insolvent
 Passenger service still treated as social
obligation
 Railroads seek more investment, but no
economic need for capacity expansion
17
PlanEcon, Inc.
Road Haulage Going Private
 Over 50,000 trucking
Private Share of
Romanian Truck Park
companies active in
Romania
 Bulgarian road haulage
sector privatized
40
35
— Large state-enterprise,
SOMAT, sold to German
firm
— Thousands of small
companies
Percent
30
25
20
15
10
 Most companies focus on
5
0
1992
18
1994
1996
1998
domestic hauling
 Bulgaria, Macedonia center
for transit traffic
PlanEcon, Inc.
Expanding Small Business Sectors
Rely on Road Transport
 Retailing recovering
throughout the region
 Stores remain small,
need frequent
deliveries
 Capital-poor small
business sector
focuses on low-cost
LCVs
 Sector needs improved
city streets, local 2lane highways
19
LCV Sales
30000
25000
20000
15000
10000
5000
0
1996
Bulgaria
PlanEcon, Inc.
1997
1998
Croatia
1999
Romania
Transport Industry Moving to Heavy Trucks
 Economic expansion
Bulgaria
20
PlanEcon, Inc.
Romania
2004
2002
2000
1998
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
1996
'000 units
increases demand for longdistance hauling
 Decrepit truck park makes
renovation imperative
 Subsidiaries of MNCs need
just-in-time deliveries
 Expansion of retail,
wholesale networks
increases heavy truck
demand
Heavy Truck Sales
Who Buys Heavy Trucks in Southeastern
Europe?
 Heavy truck buyers fall into five groups:
— Formerly state-owned international hauliers
— Privatized domestic regional trucking companies
— New, incorporated international truckers
— Small, domestic companies
— Distributors, manufacturers that operate their own fleets
 International truckers, distributors key customers
for Western trucks
 Domestic tariffs generally still so low that used
imports, domestic vehicles remain attractive
21
PlanEcon, Inc.
Old East European Makes Finally
Being Scrapped
Hungarian Registrations
60000
1990
1995
1998
50000
40000
30000
20000
10000
0
Barkas
22
Csepel
IFA
PlanEcon, Inc.
Multicar
Robur
Operating Costs Rising
Average Monthly Wages
700
600
USD
500
400
300
200
100
0
BUL
1997
23
CRO
1998
FYROM
ROM
1999
2000
 Diesel prices up
sharply in 1999,
2000
 Repair costs rising
as devaluations
push up parts
prices
 Tolls, taxes up
 Drivers wages stay
low, little growth
since 1996
PlanEcon, Inc.
But Capital Costs Falling
Interest Rates in
Southeastern Europe
 Domestic interest rates
down sharply in Bulgaria,
Macedonia, Romania
 Bulgaria, Romania cut tariffs
 Stable currencies in
Bulgaria, Macedonia result in
substantial real effective
appreciation, making heavy
trucks more affordable
 Improved commercial codes
leading to use of leases,
credit sales
24
25
20
15
10
5
0
PlanEcon, Inc.
BUL
1995
CRO
FYROM
1999
Despite Rising Heavy Transport Fleet,
Operators Face Limited Ability to Pay Tolls
 Easy entry makes competition fierce, domestic
rates too low to finance new vehicle
 Low per capita incomes preclude rapid rise in
haulage rates
 Few retailers, manufacturers willing to pay
premium for guaranteed delivery times
 Hauliers take longer routes to avoid tolls
 “Chargeable” tolls unlikely to completely cover
road construction costs
25
PlanEcon, Inc.