Download Impact of Regional Road Infrastructure Improvement

Impact of Regional Road Infrastructure
Improvement on Intra-Regional Trade in
ECOWAS
BY
UDUAK AKPAN
Infrastructure Consortium for Africa
Content
Importance of Regional Road Infrastructure
Africa’s Infrastructure Deficit
ECOWAS
Dakar-Lagos Highway
The Gravity Model
Result
Impact
Conclusion
Importance of Regional Road Infrastructure
 Provides access
to key economic inputs e.g.
knowledge, resources, and technology
 reduces the barriers to free movement of goods and
persons
 increases access to the market for goods and
services.
 promotes cross-border trade and investment
 fosters regional integration.
Africa’s Infrastructure Deficit
Normalized units
2
Low-income
countries in sub- Other low-income
Saharan Africa
countries
Paved road density (km/km )
31
134
Total road density (km/km2)
Mobile density (lines per thousand population)
Electricity generation capacity (MW/1million people)
Electricity coverage (% of population)
Improved water (% of population)
Improved sanitation (% of population)
137
55
37
16
60
34
211
76
326
41
72
51
Source: Yepes et al. (2008)
Economic Community of West African States
(ECOWAS)
Benin, Burkina Faso, Cape Verde,
Cote d’Ivoire, The Gambia, Ghana, Guinea,
Guinea Bissau, Liberia, Mali, Niger, Nigeria,
Senegal, Sierra Leone, and Togo.
 15 Countries:
 ECOWAS trade liberalization scheme

elimination of customs duties and taxes having equivalent effect
on products from member states

abolition of non-tariff barriers between member state exchanges

organization of trade fairs etc.
Dakar-Lagos Highway
Source: AfDB (2003)
 Provides the most direct road connection between the capitals of the
countries along its alignment.
 Covers a total of 4010 km of which 3260 are paved in various areas.
The Gravity Model
 Describes
economic activities that have the
properties of the Newton’s law of gravity i.e.
contains some elements of volume and distance
e.g. trade and immigration.
 The volume of trade between two countries is
directly proportional to the economic size of the
countries and inversely proportional to the
distance between the countries
Model contd
 i: Originating country; j: Destination country
 Exportij: Export from i to j ; GDPi: GDP of i ; GDPj: GDP of j
 Distij: Road distance between i and j
 Qualij: Average road quality between i and j
 DGDPPCij: Positive difference between GDP per capita of i and j
 Lang.Fr: Dummy variable =1 if i and j are Francophone
 Lang.En: Dummy variable =1 if i and j are Anglophone
 CB: Dummy variable =1 if i and j are share a common border
Model Contd. – Road Distance
 measured
as
the
distance
between
the
capital/reference cities of the countries on the LagosDakar highway
Model Contd – Road Quality Index
 Qi : road quality index of country i.
 Ri : percentage of roads that are paved in country i
 Gi : GDP per capita of country i as a proxy for
capacity to maintain roads
 Ci : World Bank’s Country Policy and Institutional
Capacity (CPIA) index
 We specify a mildly increasing-returns function
(a1=0.8, a2=0.2, a3=0.2)
Road Quality Index by Country
Country
% of paved roads
South Africa
Gambia, The
Togo
Senegal
Nigeria
Ghana
Benin
Guinea
Core d'Ivoire
Guinua Bissau
Sierra Leone
Liberia
60.00
35.40
31.60
29.30
30.90
18.40
20.00
16.50
9.70
10.30
7.90
6.20
Road Transport Quality Index
Guys et al. (2010) Present study
100.00
100.00
41.60
43.34
37.00
34.11
36.00
38.07
32.30
41.61
27.00
26.51
25.10
26.48
23.10
20.35
14.40
15.24
13.20
13.87
9.60
12.07
7.10
8.49
Model contd.
 The road quality between i and j is measured
as the distance-weighted road quality index
for transit countries
 The model covers 110 observations
 Ordinary Least Squares
The dependent variable is truncated at zero
 OLS will produce biased and inconsistent results

 Tobit postulation is more appropriate
Result
Dependent Variable: EXPORT
Variable
Coefficient
C
-888.6383
LOG(GDPI)
68.7819
LOG(GDPJ)
40.9301
LOG(DIST)
-39.5187
LOG(QUAL) 101.8236
LOG(DGDPPC) -9.7858
LANG_EN
-20.9760
LANG_FR
31.2284
CB
-36.6205
Std. Error
539.1377
13.9106
13.6378
38.3979
100.4585
18.0272
56.8879
58.4328
71.3304
z-Statistic
-1.6483
4.9446
3.0012
-1.0292
1.0136
-0.5428
-0.3687
0.5344
-0.5134
Prob.
0.0993
0.0000
0.0027
0.3034
0.3108
0.5872
0.7123
0.5930
0.6077
Significance at 5%
significant
very significant
very significant
not significant
not significant
not significant
not significant
not significant
not significant
Impact
Completion of the
Lagos-Dakar highway
Increase in the average road quality between Lagos
and Dakar from its current level to the level of
roads in South Africa
The average road quality from Dakar to Lagos, relative to the index of
quality of road in South Africa (i.e. 100), is 20.38.
Increasing the Lagos-Dakar average road quality from 20.38 to
100 (i.e. 391% increase)
Increasing intra-regional trade
by US$397.80million
Equivalent to a 5.27
increase from its current
level.
Conclusion
 Improvement in the quality of road will increase
movement of factors of production which will foster
intra-regional trade in the short, medium, and long
terms.
 other “soft” infrastructures are needed to fast-track
the achievement of the objectives of the ECOWAS
trade liberalization scheme.
 However, increasing the quality of roads demands
huge financial investment, thus a cost-benefit tradeoff must be carefully considered.
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