SCENES Deliverable D3b Drivers of Transport Demand -Central and Eastern European Countries (CEEC)SCENES - Contract No ST-97-RS.2277 Report co-ordinator: Niezalezny Osrodek Badan Ekonomicznych (NOBE), Warsaw, Poland Institut für Wirtschaftspolitik und Wirtschaftsforschung (IWW), Karlsruhe, Germany Project co-ordinator: Marcial Echenique & Partners LTD, Cambridge, United Kingdom Partners: CSST (Centro Studi Sui Sistema de Trasporto), Rome, Italy DLR (Deutsches Zentrum für Luft- und Raumfahrt), Verkehrsforschung, Cologne, Germany EPFL (École Polytechnique Fédérale de Lausanne), Lausanne, Switzerland INRETS (Institut National de Recherche sur les Transports et leur Sécurité), Arcueil, France ISIS SA, Lyon, France ITS (Institute for Transport Studies), Leeds, United Kingdom IWW (Institut für Wirtschaftspolitik und Wirtschaftsforschung), Karlsruhe, Germany KTI, Institute for Transport Sciences Ltd., Budapest, Hungary LT Consultants Ltd., Helsinki, Finland ME&P (Marcial Echenique & Partners Ltd.), Cambridge, United Kingdom Marcial Echenique y Compaña, Vizcaya, Bilbao, Spain NEA Transport Research and Training, Rijswijk, Netherlands NOBE (Niezalezny Osrodek Badan Ekonomicznych), Warsaw, Poland NTUA (National Technical University of Athens), Athens, Greece TIS.PT (Transportes Inovação e Sistemas a.c.e.), Lisbon, Portugal TNO Inro (Netherlands Organisation for Applied Scientific Research), Delft, Netherlands TRT (Trasporti e Territorio srl), Milano, Italy UG (University of Gdansk), Gdansk, Poland UPM (Universidad Politécnica de Madrid), Madrid, Spain
Date: 31 May 2000
THE SCENES PROJECT IS FUNDED BY THE EUROPEAN COMMISSION UNDER THE TRANSPORT RTD PROGRAMME OF THE 4th FRAMEWORK PROGRAMME
SCENES Deliverable D3b Drivers of Transport Demand -Central and Eastern European Countries (CEEC)-
Editors
Adam B. Czyzewski (NOBE) Witold M. Orlowski (NOBE) Leszek Zienkowski (NOBE) Eckhard Szimba (IWW)
Authors
Monika Bak, Barbara Pawlowska, Jan Burnewicz, Katarzyna Hebel (UG) Attila Všršs, G‡bor Albert, L‡szl— Czegeldi, ƒva Hingyi (KTI) Adam B. Czyzewski, Witold M. Orlowski, Leszek Zienkowski (NOBE)
Responsible institutes Niezalezny Osrodek Badan Ekonomicznych (NOBE)
UniversitŠt Karlsruhe (TH) Institut fŸr Wirtschaftspolitik und Wirtschaftsforschung (IWW)
NOBE
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
1
Table of Contents 1
EXECUTIVE SUMMARY
2
MACROECONOMIC FORECASTS
2.1
THE HORIZON AND CONTENTS OF THE FORECAST
5
11 11
2.1.1
COUNTRY COVERAGE
11
2.1.2
REGIONALIZATION
11
2.1.3
TIME HORIZON
11
2.1.4
LEVEL OF DETAIL OF THE FORECAST
12
2.1.5
SCENARIOS
12
2.2
METHODOLOGY
12
2.2.1
THEORETICAL BACKGROUND
12
2.2.2
FORECASTING MODEL: THE GROWTH RATE
13
2.2.3
STRUCTURAL CHANGES
14
2.2.4
POPULATION CHANGES
16
2.2.5
MOTORIZATION LEVELS
16
2.3
ASSUMPTIONS OF THE SCENARIOS
17
2.4
REGIONAL FORECASTS
18
2.5
STATISTICAL ANNEX
20
2.5.1
FIGURES
20
2.5.2
COUNTRYS’ FORECAST TABLES
20
2.5.3
REGIONAL TABLES
21
3
BREAKS IN TRENDS IN THE CEE COUNTRIES
22
3.1
INTRODUCTION
22
3.2
OUTPUT DECLINE IN POLAND
23
3.3
FREIGHT AND PASSENGER TRANSPORT INDICATORS
24
3.4
TIME SERIES
25
3.4.1
GDP PATTERN
25
3.4.2
FREIGHT TRANSPORT
26
3.4.3
PASSENGER TRANSPORT
31
3.4.4
SOURCES OF DATA
33
4
DEMAND-SUPPLY EQUILIBRIUM: DEMAND-SUPPLY INTERACTION IN THE
CENTRAL AND EASTERN EUROPEAN COUNTRIES
34
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
4.1
2
THE INTERACTION OF SUPPLY AND DEMAND AND THE GENERATED TRAFFIC IN THE CENTRAL AND EAST EUROPEAN COUNTRIES (CEEC)
34
4.2
THE IMPACT OF TRANSPORT INVESTMENTS ON SETTLEMENT STRUCTURES
35
4.3
AN ANALYSIS OF THE MIGRATION BETWEEN THE METROPOLITAN AREAS AND THE REGIONS
5
38
INSTITUTIONAL ASPECTS OF THE TRANSPORT SECTOR IN CENTRAL AND
EASTERN EUROPEAN COUNTRIES –
41
5.1
INTRODUCTION
41
5.2
THE INSTITUTIONAL ASPECTS OF ROAD ADMINISTRATION
42
5.2.1
MODELS OF ROAD MANAGEMENT IN EUROPE - UNIFORMITY OR DIVERSITY?
42
5.2.2
ROAD NETWORK SYSTEM ORGANISATION AND MANAGEMENT IN CEE COUNTRIES
43
5.2.3
TRANSITION FROM CENTRALISED MODEL OF ROAD MANAGEMENT TO DECENTRALISED MODEL - CASE OF POLAND
5.2.4 5.2.5 5.3
TRANSITION FROM CENTRALISED MODEL OF ROAD MANAGEMENT TO DECENTRALISED MODEL - CASE OF HUNGARY
48
CONCLUSIONS
49
INSTITUTIONAL ASPECTS OF RAIL TRANSPORT
5.3.1
46
49
NECESSITY OF IMPLEMENTING RAILWAY REFORM IN CEEC’S IN LINE WITH EU REGULATIONS
51
5.3.2
RESTRUCTURING PROCESS OF CEEC RAILWAYS
54
5.3.3
CONCLUSIONS
57
INSTITUTIONAL ASPECTS OF AIR TRANSPORT
5.4 5.4.1
57
AIR TRANSPORT ORGANISATION IN CEE BEFORE MARKET TRANSFORMATION (AIRLINES, AIRPORTS, AIR TRAFFIC CONTROL)
58
5.4.2
ADJUSTING AIR TRANSPORT OF CEE COUNTRIES TO EUROPEAN UNION
59
5.4.3
INSTITUTIONAL CHANGES
61
5.4.4
CONCLUSIONS
61
6
OVERVIEW OF DYNAMICS OF THE MARKET / REGULATIONS IN THE CENTRAL
AND EASTERN EUROPEAN COUNTRIES
63
6.1
INTRODUCTION
63
6.2
TYPES OF TRANSITIONAL CHANGES IN TRANSPORT REGULATIONS IN THE CEEC
63
6.3
REGULATORY CHANGES IN TRANSPORT IN THE CEEC
65
6.3.1
GENERAL REGULATORY CHANGES IN TRANSPORT SECTOR
6.3.2
RESULTS OF POLL ON ORGANISATIONAL AND INSTITUTIONAL CHANGES IN CENTRAL EUROPEAN TRANSPORT
65 66
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
6.4
3
OVERWIEW OF REGULATORY AND ORGANISATIONAL CHANGE IN COLLECTIVE PASSENGER TRANSPORT
6.4.1 6.4.2 6.5
67
DRIVERS OF REGULATORY AND ORGANISATIONAL CHANGES PASSENGER SECTOR IN CEEC
67
DEMONOPOLISATION AND DECENTRALISATION
68
PASSENGER EXAMPLES
68
6.5.1
INTRODUCTION
68
6.5.2
BUDAPEST CASE STUDY
68
6.5.3
TRICITY GDANSK-SOPOT-GDYNIA CASE STUDY
72
6.6
OVERVIEW OF REGULATORY AND ORGANISATIONAL CHANGE IN FREIGHT TRANSPORT
6.6.1
75
DRIVERS OF REGULATORY AND ORGANISATIONAL CHANGES FREIGHT SECTOR IN CEEC 75
6.6.2 6.7
DEREGULATION
76
FREIGHT EXAMPLES
77
6.7.1
INTRODUCTION
77
6.7.2
FREIGHT ROAD IN POLAND
77
6.7.3
FREIGHT ROAD TRANSPORT IN HUNGARY
80
6.8
GENERAL EFFECTS
82
6.9
CONCLUSIONS
84
7
REFERENCES
86
8
CONTENTS OF THE ANNEXES
88
List of Figures and Tables Figure 1: Typical patterns of growth in the real convergence process __________________________________ 6 Figure 2: Typical patterns of the growth in the real convergence process ______________________________ 14 Figure 3: Estimation of results: motorization ____________________________________________________ 17 Figure 4: Real GDP Index __________________________________________________________________ 25 Figure 5: Transport intensities referring to rail freight transport performance __________________________ 26 Figure 6: Transport intensities referring to road freight transport performance _________________________ 27 Figure 7: Transport intensities referring to total freight transport performance__________________________ 28 Figure 8: Road freight transport performance to rail freight transport performance ______________________ 28 Figure 9: Trucks per 1000 inhabitants _________________________________________________________ 29 Figure 10: Relative change of transport intensities (total freight transport performance) and GDP __________ 30 Figure 11: Relative change of transport intensities (rail freight transport performance) and GDP ___________ 30 Figure 12: Relative change of transport intensities (road freight transport performance) and GDP __________ 31
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
4
Figure 13: Rail passenger transport performance to GDP per capita _________________________________ 31 Figure 14: Road passenger transport performance to GDP per capita_________________________________ 32 Figure 15: Motorization ____________________________________________________________________ 33 Table 1: Factors influencing regional GDP per capita disparitities ..........................................................................20
List of Abbreviations ADR
Accord europen relatif au transport international de marchandises dangerous par route BKV Budapest Transport Limited, the public transport company BMW Bayrische Motorenwerke CD Czech railway company CEE Central Eastern European CFR Romanian railway company CIS Commonwealth of Independent States CMEA Council of Mutual Economic Assistance COMECON Council of Mutual Economic Aid/Assistance, same as CMEA EBRD European Bank for Reconstruction and Development ECAC European Civil Aviation Conference EIB European Investment Bank EVR Estonian railway company GDP Gross Domestic Product GYSEV Hungarian railway company HUF Hungarian Forint IATA International Air Transport Association ICAO International Civil Aviation Organisation ICAA International Civil Airports Association ITA Institute of Air Transport LDZ Latvian railway company LG Lithuanian railway company MAV Hungarian railway company MPS Material Product System NUTS Nomenclature des UnitŽs Territoriales Statistiques OECD Organization for Economic Cooperation and Development p.c. per capita PKP Polish railway company PPP Public private partnership SKLC Standing Committee for Civil Aviation SNA System of National Accounts TACIS Technical Assistance to the Commonwealth of Independent States TIR Transport International Routier USD US Dollar UN United Nation ZSR Slovak railway company
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
1
5
Executive Summary
The present deliverable focuses on the issues of long term macroeconomic development in Central and Eastern European countries. Forecasts of macroeconomic aggregates such as GDP, investment, inventories, householdsÕ consumption, government consumption, net export, gross value added in agriculture, industry (including construction) and services have been generated for 2040 at national level and for 2020 at regional level. For the same years forecasts have been prepared for population and employment. Those are the main external factors influencing the demand for passengers and freight transport. Three scenarios have been constructed: base, high and low. Research on breaks in transport trends present the result of analysis with subdivision of transport services into freight and passengers transport with further break down into rail and road transport. Results of the research on demand supply interactions and on the effects for transport services of changes in the regulatory systems as well as impact of institutional aspects of transport sector are presented together with case studies. Forecast of macroeconomic aggregates has been based on the endogenous growth theory, which links the long term economic growth theory not only with investment, but also with such factors as the development in the field of education and human capital in general, good legal framework for economic activity, the private entrepreneurship etc. This theory predicts also the process of convergence. The result of our studies shows that it is possible to distinguish five groups of countries (out of 19 countries studied) that have similar development problems and similar development patterns. The countries of Central Europe (Poland, Hungary, Czech Republic, Slovakia, Slovenia) are those in which the process of economic reform and of transition to market economy has been relatively developed already for some time (perhaps with the exception of Slovakia). In those countries the share of agricultural gross value added in GDP is relatively low (however higher than in EU countries) and the share of services relatively high (however much lower than in EU countries). The level of GDP per capita in the countries of Central Europe is (2000) relatively high, equal to about 45% of the EU 15 and the economic performance in the last five years, measured by the growth rates of GDP, the best in the region. As a result the difference between forecasted and actual rates of growth of GDP is rather negligible. At the same time the growth rates in the period 2000 Ð 2010 are relatively high (over 5%) in comparison with growth rates in other countries of Central and Eastern Europe (below 5%) and fall after 2010 (to about 3% in 2030 Ð 2040) below the level reached by other countries of the region. The main reason is the disappearance in time of the "catching up" factor. As far as the Balkan countries (Croatia, Yugoslavia, Romania, Bulgaria, FYR Macedonia) and CIS countries (Russian Federation, Ukraine, Belarus) are concerned the progress in the process of reforms has been slow and the economic performance measured by growth rates of GDP has been unsatisfactory. The share of agricultural value added in GDP has remained relatively high and the share of services generally speaking relatively low. The level of GDP per capita was equal (in 2000) to about 20% of EU 15 ranging from 12% (Ukraine) to 31% (Croatia). It should be noted that results for individual countries and inter-country relations are of low reliability. Assuming that the process of economic reforms in both groups of countries will take place in the incoming years the formula of the model leads to acceleration of growth in 2010 Ð 2020 and lower growth only after, but distinctly higher than in Central European Countries (in the period 2030 - 2040 between 4 and 5% average per year while in Central European Countries it will be ca 3% average per year). Such differences between
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
6
growth rates of the groups of countries are a characteristic feature of the convergence process according to which the growth of a country is the faster the lower the development level is. The pattern of development in the Baltic countries (Lithuania, Latvia, Estonia) is similar to that of Balkan and CIS countries. The progress in the process of economic reforms may be described as moderate. The level of GDP per capita (the highest in Estonia) is (in 2000) distinctly lower than in Central European countries. The growth rates of GDP increase to over 5% per year in the period 2010 Ð 2020 and slow down afterwards (to between 3 Ð 3,5% per year) in the period 2030 Ð 2040. We have also distinguished two other groups of countries: countries endangered by war/conflicts (Albania, Bosnia Ð Herzegovina) and, as a separate country outside any group, Turkey. The results of forecast for those groups are not referred to in this summary.
Average growth rate of GDP
Typical patterns of the growth in the real convergence process (Base scenario) 7.0 6.0 5.0
2000-10
4.0
2010-20
3.0
2020-30
2.0
2030-40
1.0 0.0 Central Europe
Balkan count ries
CIS
Figure 1: Typical patterns of growth in the real convergence process
Regional forecast have been constructed for Poland, Hungary, Czech Republic, Romania, Bulgaria, Russian Federation. The model used has been in principle consistent with the endogenous growth model used to forecast economic growth at country level. As the result of the forecast the regions with higher GDP per capita tend to grow slower than regions with lower GDP per capita. It should be noted that due to lower reliability of basic data at regional level than at national level and to certain simplification of the model, the result show only general tendencies and should be interpreted with some reservation. The purpose of the analysis of breaks in trends of GDP and transport services was to find out, if the economic transition resulted in breaks in long term trends in CEE countries. The following sample of countries was covered in the analysis: Poland, Hungary, Bulgaria, Czech Republic and Russia. Factors determining development of transport services were restricted to one variable only, the volume of GDP. In our opinion GDP can be regarded as the most significant factor in this respect. The available basic data did not allow us to construct long term series comparable in time (e.g. change in the methods of GDP estimates from MPS to SNA system). Due to the short period of time comparable data are available, it is difficult to draw definite conclusions concerning changes in previous trends. However, it seems to be certain that already in the eighties and especially as the result of transition ratio of total volume of rail and road cargo transport per unit of GDP declined in the first years of transformation (1989 Ð 1992) and stabilised afterwards. With the relative growth of services in CEE countries in future, which are less "transport consuming" than industry, further rationalization (logistics)
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
7
and increasing general efficiency, one can expect further decline in the ratio of the volume of rail and road cargo transport per unit of GDP. Road to rail cargo ratio increased dramatically after 1990. This was partly due to the "statistical effect", but it is also the result of real change in the use of different mode of transport during the transition. One can expect however, certain saturation of this process in the future years. As far as passenger transport by rail is concerned it seems that despite stabilization in the period 1980 Ð 1990 (after decline in 1960 Ð 1980) and differences between countries after 1990 one can expect general slow decline in the ratio to GDP. Passenger transport by road (public transport) to GDP ratio decreased sharply in Poland and Czech Republic after 1990 (increased in Russia). We have no data for Hungary and Bulgaria, but the increase in the number of passenger cars per 1000 inhabitants suggests that also in those countries passenger transport by road (public transport) to GDP ratio were decreasing after 1990. There seem to be a general tendency in CEE countries to use private cars instead of public transport modes. The transport sector in the Central and Eastern European countries has seen radical changes in previous ten years. They have followed and sometimes preceded economic development but, in any case, reflect the transition process. As a sector supporting the economy, transport has a crucial role in playing this transition. Changes are underway in the sector at every level. Broadly speaking, the very nature of mobility has altered, with changes in the pattern of flows, the reasons for travelling and the role of transport itself. At the same time, the economic system has been transformed. The former planned economies - which were based on integrated relations and monopolistic principles, on both the domestic front and in the international division of labour within the eastern bloc's foreign trade grouping, the Council of Mutual Economic Assistance (CMEA) - have been opened up extensively to a much more competitive system in which the marketplace has replaced planning. Even if the microeconomic transformation is by no means over, the new economic rules governing the economy have been adopted in most sectors. The very structure of the economy and the type of production are changing, thereby modifying the type of goods carried. Accordingly, there has been a change in what economy and society expect from the transport system. Like the economy in general, the transport sector has moved from an integrated, supply-driven, goal-oriented system to a decentralized system driven by demand. The choice of trade relations/quantities and destinations and the actual type of goods (and therefore of transport demand) are no longer dictated by planning, but by the market. In the same way, the choice of a transport mode is no longer subject to goal-oriented policy rules, but rather to market laws, with the customer selecting the carrier offering the best service at the lowest price. These comprehensive changes in transport demand have occurred in a context of deep economic recession, which has had considerable effect on total demand for both freight transport (evident reduction in volumes) and passenger transport (decrease in daily mobility as a result of unemployment, cuts in personal transport budgets). The process of organisational and institutional changes in CEE countries covers not only rendering services in various transport modes but infrastructure administration as well. The process brings about a new quality: the infrastructure becomes real public property with unlimited access. However, the modification is that the user will bear the costs for the usage of the infrastructure. It pertains both to the road network and railway lines, waterways, airports and seaports. Making transport infrastructure accessible involves the problem of an appropriate system of administration that would guarantee equal rights to all users, at the same time stimulating effective use of funds allocated to its maintenance and development. The problem is specific
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
8
with respect to each mode. The administration is more complex in respect of road infrastructure where there are many users and various formal and legal categories involved. Institutional changes in road administration in the CEEC seem to be one of the most important factors influencing conditions of development of road transport sector. Moreover, new institutional framework allows to take advantages of new financing methods, especially public-private partnership. Before transformation the road administration system in the CEE countries was characterised by totally centralised road network management and financing system. Changes in respect of road administration in the CEE countries consisted in: • •
decreasing the scope of powers of state agencies in the area of the management of specific production and service activities relating to the renovation and maintenance of road and bridge surfaces; modernisation of facilities and new investments, decentralising activities in the area of road financing and management (decentralisation processes have been carried out only in some CEE countries).
The changes, that have taken place are at a different level of development in various countries. The process of decentralisation is advanced in Poland and Hungary, therefore the situation in these two countries has been analysed in the report more deeply. Also, decentralisation of road management took place in Romania. A two-tier management level can be found in Estonia and Lithuania (national + local levels). In other countries, particularly in the states of the former Soviet Union there have been no changes aimed at decentralisation. The general problems for the railways in CEE countries do not vary considerably compared with the railways in EU. The magnitude and intensity of the problems are, however, larger and there is a necessity to solve them in shorter time than that which the EU railways have granted themselves. All railways in CEEC have common problems: • • •
the railways financial situation is bad, the technical and operational standards of the railways are insufficient and this results in bad transport quality, the commercial freedom of the management is restricted.
To adapt to EU Directive 91/440 will not solve these problems, but it will make it easier for parties concerned to develop sustainable rules of the game. A majority of the CEE countries have or will adapt their legislation to the Directive. There is also a clear trend to clarify relations between the State - as a buyer of transport services - and the railway through contracts. The railways' public service obligation will continue to exist during a foreseeable future. On the basis of our analysis of an institutional evolution of the air sector in the CEE countries in the years 1990-2000 it is possible to say that the process of adjusting the structures and procedures to European and international solutions has occurred (regardless of aspirations for EU membership). The role of public authority becomes limited to a necessary minimum resulting from the necessity of ensuring safety control, non-discrimination, fair competition and consumer protection. Privatisation of state-owned transport and airport enterprises has been carried out in different forms and at various pace. Traffic control agencies start to operate in a way ensuring better co-ordination on European scale. The task "dynamics of markets, regulatory systems" was to analyse regulatory changes in the CEEC and demand implications of the changes. The background of the analysis in the CEEC
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
9
differs from the situation in Western European countries due to the fact that we deal with transformation of economies from centrally planned systems to market oriented structures. The transformation started at the turn of the 80Õs and 90Õs in the whole CEE region. It should be stressed that because of numerous ideological, cultural and political reasons the starting point towards the reforms is different in various countries. The process of market transformation encompassed all spheres of life and economic practice inclusive the transport sector. The inefficiency of the old structures of transport organisation and administration and considerable technical backwardness determined low efficiency of transport. Transport operations in the CEE countries in late 80s uncovered features like: • • • • • •
technological backwardness, lack of innovativeness, considerable technical, technological and organisational insufficiency, economic inefficiency, rationing of transport services, non-existence of transport market in the strict sense of the word .
The restructuring was to be carried out twofold by way of: • •
internal changes Ð consisting in starting the market mechanism and stabilisation, external changes Ð aimed at forming institutional frameworks of cooperation on domestic and international scale.
Regulatory changes in transport in the CEE countries are to a large extent related with the restructuring of the whole economies. It should be remembered that under the conditions of a centralised economy with a predominant state ownership it was only one enterprise that had a dominating position on the market frequently dealing with both passenger and freight transport. Because of those factors the foundations and general achievements in the area of regulatory changes in transport should be analysed simultaneously in both passenger and freight sectors. In the socialist economy transport services were fully rationed. Thus, a natural transformation goal in the road transport sector was market deregulation. Regulatory changes, to a various extent in various countries, were focused on adjusting the rules to the major road transport market principles applicable in the European Union countries, especially in the field of access to the market. At present, access regulation in the domestic freight sector is characterised by its liberal nature. Once companies are authorised to transport freight by road, they have total control over their transport capacity. They are not obliged to respect quotas in order to acquire the vehicles and they may travel freely within the country. The national laws applicable to road transport operators who are to provide international services appear to be generally more restrictive than in the EU countries. The systems implemented in the majority of the CEEC differ quite markedly from that of Community criteria, without the issuing department checking that the company meets the other transport performance requirements. In the CEEC, international transport licenses are only delivered if the company proves that it fulfils all the necessary conditions when it makes its request (proof of prior experience of one, two or three years in domestic freight transport; proof that the drivers employed have the necessary competence to carry out international transport operations; proof that the vehicles used for international transport are in good condition, complying with the standards in the countries of destination and have TIR approval; proof that the transport company has a TIR guarantee) .
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
10
All the CEEC have developed regulations concerning access to the domestic passenger transport markets that are similar to the regulations in effects in the European Union countries. In all the CEEC, the criteria demanded of resident transport operators wishing to provide international passenger transport services are similar to those specified for international freight transport. In the range of rail transport, it should be remarked that for many decades the situation of railways in Central and Eastern Europe was different compared to Western Europe. Most of the countries with planned economy were showing 2-2.5 times larger transport intensity per capita and per 1 USD of GDP than EU countries did. The irrationality of many market links enterprises had and bad organisation of freight transport contributed to this. In those countries railways did not compete with other modes of transport in fact. The railways were assigned specific transport flows "on schedule" which led to an inter-modal division of freight transport that was different than in Western European countries. An inter-modal division of traffic was formed on a non-market basis also in passenger transport. The progressive integration of CEEC railways into EU network has to be in line with EU directives, which is already effective in EU countries. In preparing the gradual integration of European transport markets, and in particular of the European rail market, careful account must be taken of such directives as: the Council Directive No. 91/440 two further directives: No. 95/18 and No. 95/19 of 19 June 1995. In many CEE countries such adjustment have been started but the pace of restructuring process vary from country to country. As a conclusion it could be mentioned, that in the transition period, major organisational and regulatory changes, also in the transport sector were determined by transformation of the economy in the CEE countries. Generally speaking, regulatory changes in most of the countries were aimed at creating a market-Šoriented system and harmonisation with Western European and EU conditions. The advancement of demonopolisation and deregulation changes depends on the starting point at the beginning of transformation, which differs from country to country. Most generally the types of changes that have occurred in the CEE countries may be defined in the following way: • • •
intercity passenger transport Ð demonopolisation, urban public transportÐ decentralisation, freight sectorÐ deregulation.
Moreover, it can be said that deregulation in freight transport has been achieved quicker and on a wider scale in comparison with regulatory changes in passenger sector. It is very difficult to estimate the implications of regulatory changes on transport demand. Particularly in CEE countries, where almost the whole economy has been transformed, there are many different determinants of changes in transport demand. But one can identify regulatory changes, which are very closely connected with changes in transport demand. The most important example seems to be deregulation and privatisation of freight road transport. In the case, when the processes have been well prepared and realised, one can observe the strengthening of the carriers leading to the growth of the sectorÕs share in the total volume of freight transport.
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
2
Macroeconomic forecasts
2.1
The horizon and contents of the forecast
2.1.1
Country coverage
11
The forecast of the economic development of the Central and Eastern European accession countries, and selected non-accession countries covers the following 19 countries: Poland, Hungary. Czech Republic, Slovakia, Slovenia, Croatia, Yugoslavia (Serbia and Montenegro), Romania, Bulgaria, FYR Macedonia, Lithuania, Latvia, Estonia, Russian Federation, Ukraine, Belarus, Albania, Bosnia-Hercegovina, and Turkey For the presentation needs, the countries are divided into 6 sub-regions. The sub-regions comprise countries that share similar development patterns and development problems. Sometimes, however, the inclusion of a country into a given sub-region may be subject to controversy (e.g. Croatia shares some characteristics with the Central European countries, some with the Balkan countries; Yugoslavia can be included either into the group of Balkan countries, or countries damaged by conflicts). The sub-regions are: Central Europe: Poland, Hungary. Czech Republic, Slovakia, Slovenia Balkan countries: Croatia, Yugoslavia, Romania, Bulgaria, FYR Macedonia Baltic countries: Lithuania, Latvia, Estonia CIS: Russian Federation, Ukraine, Belarus Countries damaged by wars/conflicts: Albania, Bosnia-Hercegovina Turkey: Turkey 2.1.2
Regionalization
The regional forecasts (GDP per capita growth) are generated for the big and medium-sized accession countries and Russia. Therefore, the regional forecasts are made for: Poland, Hungary. Czech Republic, Romania, Bulgaria, Russian Federation. The classification of regions is coherent with the calssification used in the SCENES Internet Database1. Thus the accession countries are subdivided into NUTS2 regions, and Russia into twelve regions, which are reported by the national statistics. 2.1.3
Time horizon
The forecast starts with base year data (1996) and estimations for the year 2000 (based on the SCENES Internet Database and updated by the up-to-date information from the domestic sources and the EBRD projections).
1
SCENES Deliverable D6: An Information System for Regional Socio-Economic and Transport DemandInfluencing Factors: The SCENES Internet Database. IWW, Karlsruhe, 1999.
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
12
The forecast is made for the period 2000-2040 and presented in 10-year intervals (2000, 2010, 2020, 2030, 2040). For the calculation of the GDP value according to Purchasing Power Parities constant 1997 prices are used. 2.1.4 • •
• •
Level of detail of the forecast
All the forecasts are made in constant prices. Forecasts on the national level include: National accounts: GDP, private consumption, government consumption, gross fixed capital formation, net exports Structure of value added and real growth rates: agriculture, industry, services Population and employment: population, labour participation rates, unemployment rates, employment Motorization: personal cars per 1000 inhabitants. The regional forecasts include GDP, employment, and population. The forecasted key variables (GDP per capita at the Purchasing Power Parity) are presented both in US dollar values (as done by the EBRD and the World Bank) and as a percentage of the EU-15 average. For the EU a stable 2.5% yearly growth rate was assumed for the whole period 2000-2040.
2.1.5
Scenarios
The forecast is made for three scenarios: • • •
Base scenario, Low scenario, High scenario
The Base scenario can be seen as a generally optimistic, but realistic scenario. The scenario assumes a relatively smooth process of the Eastern enlargement of the EU, and a successful process of real convergence. The assumptions of the Low scenario are more pessimistic, and those of the High scenario more optimistic than those of the Base scenario.
2.2
Methodology
2.2.1
Theoretical background
The forecast of the economic development of the Central and Eastern European accession countries, and selected non-accession countries is based on the endogenous growth theory. The endogenous growth theory is a leading school of the economic growth theory of the 1990s (the overview of the theory can be found in: Barro R.J., Sala-i-Martin X., Economic Growth, McGraw-Hill, 1995). This theory links the long-term economic growth mainly with such factors as the human capital development, economic and political stability, economic freedom and the good legal framework for the economic activity, the private entrepreneurship and the growth-supporting policies of the State. The theory predicts the process of the conditional real convergence. Real convergence means an ability of a less developed economy to develop faster so that, over time, the initial gap in GDP between the less developed country and the richer countries
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
13
diminishes. This principle has been observed and then empirically proven many times in history, i.e. 50 states of the United States, Japanese prefectures, and regions within the EU. In all these cases the index of convergence was at about 2% level. This means that over a longer period of time, the growth rate in poor regions is higher than the growth rate in rich regions, and the gap in economic development decreases by an average of 2% annually. From the point of view of the neoclassical economy, this can be easily explained by the following mechanism: in poor regions labour is cheap and capital relatively expensive because it is scarce (poor regions have low income, and therefore, small savings). If the capital is expensive, the marginal return resulting from its use - equal to its price - is high. That means that capital investments in a poor region bring higher returns, than in a rich region, where the capital is relatively cheap and abundant. This constitutes an incentive to move the capital from rich regions to poor regions, which in turn, leads to higher growth rates in poor regions. In fact, high growth rates in poor regions do not require imports of capital. In the traditional models of economic growth, the neoclassical production function representing the process of transforming production factors (labour and capital) into goods and services exhibits the property of diminishing marginal productivity of production factors as their amount increases. This means that in the economy that does not have much capital, each saved and invested unit of capital gives higher production growth than in a developed economy. Therefore, there is no need to borrow capital from abroad; given the same savings rate, a less developed economy will be growing faster than a well developed economy. A characteristic feature of the real convergence process is that the growth of a country is the faster, the lower the development level is (which is rather obviously, if the right policies are applied). This leads Ðover timeÐ to a slowdown of the growth rates when the countries approach the level of the developed countries. 2.2.2
Forecasting model: the growth rate
The core of the forecasts Ð GDP per capita growth rates - are based on the endogenous growth model of Barro, adjusted for the specifics of the transition economies. The model is described fully in: Barro R.J., Sala-i-Martin X., Economic Growth, McGrawHill, 1995. The estimations were based on the cross-country sample of 97 countries, for a 10years period. The following formula was used for calculating the average yearly growth rates of the per capita GDP in the years 2010, 2020, 2030 and 2040: GDP growth = = Ð0.025 ln GDP-1 +0.0138 ENRsec +0.055 ENRtert +0.058 ln LEXP Ð0.315ln (GDP/HC) +0.06 GEdu/GDP +0.07 Inv/GDP Ð0.06 G/GDP Ð0.03 INSTALecon Ð0.03 INSTABpol where: GDP-1 ENRsec ENRtert LEXP GDP/HC
GDP per capita level at the beginning of the period (log), net enrollment rate, secondary education, net enrollment rate, tertiary education, life expectancy at birth (log), GDP to the human capital ratio (log, human capital measured
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
GEdu/GDP Inv/GDP G/GDP INSTALecon INSTABpol
14
according to the UNIDO Human development Index, excluding the GDP per capita level), government spending on education as % of GDP, investment as % of GDP, governmental consumption as % of GDP, economic instability indicator (measured by the Economic Freedom Index of the Heritage Foundation) political instability indicator (constructed by NOBE).
In the case of the most advanced countries comparable with the EU-15 GDP in the period 2030-2040, the formula leads to the slowdown of the growth rates, as the GDP at the beginning of the period reaches high levels. For example, in the Base scenario the projected GDP growth rates of Central Europe fall from over 5% in 2000-10 (the initial p.c. GDP at 46% of the EU-15) to 3% in 2030-40 (the initial p.c. GDP at 89% of the EU-15). As the transition is not over yet, the forecast for the years 2000-10 is a weighted average of the growth rate forecasted with the model (75%) and of the actual rate recorded in 1996-2000 (25%). In the other words, it means that the transition will still matter over the next ten years: the economic performance of the countries that were unable to achieve a successful transformation will be still biased. One may note that for the Central European countries the difference between the forecasted and actual rates is negligible, while for the other countries it is quite substantial. Therefore, the growth pattern of the less advanced reformers is different: acceleration of growth until 2020, and lower growth rates after. As the other countries are generally less developed that the Central European countries, higher growth rates may be expected after the transition is concluded (see Figure 2).
Average growth rate of GDP
Typical patterns of the growth in the real convergence process (Base scenario) 7.0 6.0 5.0
2000-10
4.0
2010-20
3.0
2020-30
2.0
2030-40
1.0 0.0 Central Europe
Balkan countries
CIS
Figure 2: Typical patterns of the growth in the real convergence process
2.2.3
Structural changes
The most important changes in the GDP structure, measured in current prices, are included in the model assumptions. In particular, the share of fixed investment in GDP is set according to the assumed development pattern. Generally speaking, it is assumed that the optimistic development scenario requires investment to GDP ratios of 30% or more at the take-off for the fast growth. When a country reaches the development level comparable with the EU-15, the share falls to about 20% (as in the EU). The shares of the net exports are based on the assumed current account developments differentiated accordingly to low, base and high
SCENES Deliverable D3b: Drivers of Transport Demand -CEEC-
15
scenarios, but in general rather optimistic. The consumption expenditures are calculated as a residual. As far as the structure of value added (in current prices) is concerned, we assumed that the countries would follow the general direction of changes observed in the OECD countries over the period 1960-95. Under the optimistic development scenario the share of agriculture in GDP should fall from todayÕs level of 4-6% in Central Europe and 50-60% in the countries damaged by conflicts to 2% and 20%, respectively. The share of the industry in GDP, which is quite high by the OECD standards in the majority of the countries, for which the forecasts have been made, was assumed to fall to the level of between 25 and 30% (at current prices). The share of services was calculated as a residual. The real growth rates of the national accounts categories and the value added components can be calculated only, if the changes in relative prices over the period of 40 years are taken into account. For example, it is a normal phenomenon that the real growth rates of the service sector are below those of the GDP. Therefore, the share of services in value added measured in constant prices should be falling. However, as the relative prices of services have been growing in all the OECD countries, despite slower growth rates the share of services in current prices was actually growing. A different picture can be seen in the case of industry (growth rates above those of GDP, falling relative prices, therefore falling share in value added in current prices). In the forecast we assumed that changes in relative prices of various sectors of the economy and national accounts aggregates would follow the general direction of changes observed in the OECD countries over the period 1960-95 (ISB, International Sectoral Database of the OECD was used as a source of data). Like in the OECD countries, the relative prices of the agriculture were assumed to fall from 1 in 2000 to 0.70 in 2040, the relative prices of industry from 1 to 0.66, and the relative prices of services were assumed to raise from 1 to 1.25. The relative decline of prices of investment goods, which is stronger than in the case of average industrial prices, gives as a result a situation of relatively high rates of growth of investment volumes, above those of GDP volumes and at the same time falling shares of investment in GDP. Coherent assumptions, based on the average shares of the branches of the economy in satisfying the final demand, were made about the relative prices of the national accounts aggregates. Therefore, the share of the industry (demand component) i in GDP in constant prices was calculated by following formula: shareiconst.prices = shareicurrent.prices/ (Pi/PGDP) where: shareiconst.prices shareicurrent.prices Pi/PGDP
share in constant prices, share in current prices, relative prices measured against the GDP deflator.
If the industry (demand component) had falling relative prices (Pi/PGDP
