The World Bank and transport

17 June 2008 | Inside the institutions

Given that the World Bank’s primary activity in its first decades of operation was financing infrastructure projects, the fact that transport is the single largest sector for Bank lending should come as no surprise. However with the prevalence of concerns about underinvestment in social sectors, transport lending was on the decline in the late 90s and early part of this century. Now the pendulum is swinging back and transport sector lending is on the rise in both the public and private sector arms of the Bank.

The transport sector is part of the energy, transport and water department which is within the sustainable development network headed by Kathy Sierra. Bank-wide coordination is provided by the Transport Sector Board (TSB). The TSB comprises the managers of transport development operations in each of the World Bank’s six regions and the manager of the central transport department based in Washington, as well as representatives of the Bank’s private sector arms, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).

The strategy for the transport sector has been in a process of redrafting since 2006 (see Update 56) and was finally published in May 2008 after considerable debate over the level of incorporation of climate change issues. The new strategy – which promises safe, clean and affordable transport – includes five strategic objectives: create the conditions for increased support for transport investment and governance, deepen engagement in the roads and highways subsector, increase engagement in the urban transport subsector, diversify engagement in transport for trade, and control the emissions from and mitigate the climate impact of transport while climate-proofing transport infrastructure.

The strategy proposes four adjustments to the Bank’s work: increase the amount of Bank lending that is programmatic rather than project-based, enhance the quality of policy dialogue and sharing of knowledge, improve monitoring and evaluation, and capture synergies across the sectors and different arms of the World Bank Group.

The most recent count of World Bank professional staff working in the sector at end-2007 showed that despite being the largest area of lending, transport, with 123 full-time people and 24 long-term consultants, was smaller than most other sectors. The overall number of transport sector staff has decreased from 141 in 2000, but the Bank is planning to hire more staff to cope with the increasing lending in this area. Forty per cent of the staff are based outside Washington.

Over the period 1996-2007, the transport sector averaged 15 per cent of all lending, larger than any other sector. When broken down by theme instead of sector, transport came second only to work on law, governance and the public sector. There were an average of 78 projects a year with some transport component. In fiscal year 2007 over $5 billion was committed to the transport sector and at the end of the year, the Bank’s active transport portfolio stood at $22.5 billion. The expects annual commitments to remain above $5 billion a year for the foreseeable future.

Road and highway projects account for 75 per cent of the active portfolio, followed by general transport (including urban public transit) and railways at 13 and 7 per cent respectively. However, the new strategy envisions reducing the percentage of commitments to road building and within the subsector spending more on road safety and transport services. The subsector accounts for only 62 per cent of lending committed between 2002 and 2007.

Broken down by region, there has been a clear shift in the countries doing transport projects. Between 1996 and 2001, 30 per cent of the commitments were made in Europe and Central Asia, with another 30 per cent in East Asia and the Pacific. South Asia was only four per cent of the total. But between 2002 and 2007, South Asia had rocketed up to 32 per cent of the total with Europe and Central Asia dropping back to three per cent. Sub-Saharan Africa, Latin America and East Asia each accounted for about 20 per cent in the more recent period.

The IFC has also increased its work in the transport sector, moving from financing just one project in 1999 to an average of 13 projects in each of the last 5 years. Between 1996 and 2007 IFC commitments in transport projects totalled $2.1 billion. The new strategy envisions much greater private sector involvement in transport projects, including identifying more than 90 areas where there are opportunities for increased private sector participation in transport activities.