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Editor's Note Share

Maintenance Deficit Hampers Road Networking Plan; Bumpy Streets Ahead!




An ever growing technological advance in the transportation industry is evidence of the sly modernisation that surpasses imaginations. Expeditions up in the skies or down in submarines prove the unrivalled genius of human beings. Apparently, mass transport technologies swivel contemporary civilisations.

As they feed all sectors, roads remain the backbone of economies. Competitive trade and marketing has become impossible without reliable road networks. Systemically, free market operations take transportation infrastructures for granted. Yet, the scale of spatial networking defines comparative advantage in commerce.                    

Expanding the road network had been the nucleus of economic policy for the Revolutionary Democrats. Reducing transaction costs and opening up potential markets had been the pillars of their policies on competitiveness. While Prime Minister Meles Zenawi headed to China last week to mobilise financing for the large infrastructure projects of the GTP, the startling debate on infrastructure maintenance has haunted the policy discourse.

The gulf between construction and maintenance budgets persists. Whereas the face of the government has turned towards opening rural areas up, high transaction costs continued to eat away economic competitiveness.   

The construction of new roads and opening up new markets necessitates preferential resource allocation, claims the government. Aggressive network expansion fuel accelerated economic growth. Since the economy had been structurally constrained by infrastructural deficit, meaningful economic takeoff demands equivalent investment on networking, the claim goes. Opting for networking expansion is not a matter of choice, it argues, but of necessity.

The resource skewness is deeply political, argues the opposition. Disproportional ignorance of maintenance shows public investment disequilibrium in the roads sector that in turn proves policy mismanagement. In prioritising construction, the EPRDF led government is putting its hands where its political mouth is, they claim. In so doing, the argument goes, it discourages private investment through increasing transaction cost.

Absence of systematic policy level attention for rising transaction costs inflicts huge burden on export competitiveness. Viable pricing of export commodities, which are primarily agricultural, depends on abridged transaction cost lines. Rough roads would increase vehicle operating cost (VOC) that drives prices up. As could be evidenced from the numerous turnarounds of motorists across the capital, dilapidated roads remain a major challenge for trade and investment.

All available evidence suggests that public investment on road maintenance remains meagre. The ratio of maintenance budget to total federal road sector budget has been 8.4pc between 1997 and 2010. For the regional states, it varies around five per cent. During the third phase of the Road Sector Development Program (RSDP), spanning from 2007 to 2012, the ratio of urban road maintenance expenditures to total sectoral budget averages is 0.4pc. Over the past five years, average yearly maintenance performance was limited to 732Km, as compared to an average yearly new construction of 2,250Km roads.

Certainly, the sector has witnessed a sizeable public investment boost since 1997. The five-year budget has increased from 9.7 billion Br for the first plan to 33.1 billion Br for the third plan, growing by 172pc. Yearly average investment has also jumped from 1.9 billion Br to 6.6 billion Br. Yet, the maintenance budget has declined from 8.9pc to 8.4pc.

Utter ignorance of maintenance remains a weak link between road sector investment and economic growth. Compounded with rampant construction quality problems, it shrivels the hard earned paybacks of market opening up. It pushes general prices up, resulting in structural inflation, through the transaction cost element. No doubt that it adds up for the inflationary cycle that the Revolutionary Democrats are fighting with, ever since 2006.

Arguably, the deficit would build up with the increase in the motorisation of the country. The level of motorisation has, for instance, increased by two vehicles for every 1,000 people between 2004 and 2009, currently standing at 4.8 vehicles for every 1,000 people. Despite these low levels, as compared to Kenya and Tanzania, which have a motorisation rate of 18 vehicles and 27 vehicles for every 1,000 people, respectively, the growth in fleet size demands proportional augmentation in road maintenance budget.

With an average yearly maintenance budget oscillating around 25pc and 30pc for least developing countries (LDCs) and developed countries, respectively, according to the Organisation for Economic Cooperation and Development (OECD), the challenge for Ethiopia is vivid. Avoidance of maintenance from the consolidated government budget has made the challenge worse.

Backlogs of maintenance increase the cost of investment. It aggravates regional inequality and progressive marginalisation. It would cause arbitrary economic concentration, and breeds inefficiency. Uneven investment regime drives unbalanced growth. In the long term, it instigates internal migration and societal chaos.                 

Besides the forgone benefits of timely maintenance, it would increase the future costs of present use. Much of the future undertaking would demand capital investment, building up the national debt burden. Eroding competitive advantage would, however, reduce the value of future productivity, bringing about a rising cost of debt service.

In the short term, dilapidated roads fuel inflation. An increase in VOC would be internalised within the price of commodities. Besides the price element, rutted roads would make efficient transportation a pipe dream. For a country that has considerable regional disparity in production, inefficient transportation would translate into distributive injustice. Distributive balancing of food production, for example, would be very costly, if ever possible. Certainly, such a structural inflation would be sacrosanct.

Low fleet size would make self financing maintenance of roads far off. Accelerated economic growth underpinned with expanding road network worsens the challenge. Compounded with low traffic size, financing options such as axle load charge and overloading fines would be unreliable. Thus, the gulf between new construction and maintenance could expand. As long as the consolidated government budget continues be get devoid of maintenance, the financing gap would be a huge burden for the economy.

Back in the process, construction quality remains poor. Quality monitoring and evaluation by relevant federal and regional authorities is underserved. Technical capacity amongst authorities, contractors and consultants stays stumped. Price based bidding system squanders quality. As the whole decision making process is driven by economic viability, quality indicators would inherently be marginalised.

Poor construction quality amplifies maintenance costs. It pushes heavy maintenance demand higher. Many of the roads would become dilapidated before serving their due time, causing resource wastage. No doubt that such wastage would result is enduring disequilibrium.

As the debate goes on, the economic competitiveness of the country erodes. Providing sufficient attention to maintenance would be essential to preserve economic resilience.

Incorporating maintenance within the consolidated sectoral budget is urgent. So far, as other financing sources of the Road Fund, the resource pool for road maintenance, are undeveloped, it is imperative to stream sufficient funds. Transcending the populist policy of opening new markets up, strengthening the competitiveness of existing productivity through reducing transaction costs would be essential.              

Optimising self financing sources should be another option. Innovative financing schemes such as a spare part levy, road tolls and vehicle-kilometre taxes should be tested. Marginal increment in fuel levy could also be considered. Car import duties should be disaggregated with manufacturing years and incorporate a maintenance factor.

Adequate policy level attention should be drawn towards reducing transaction costs. Since this affects trade and investment, it should be endowed with systemic considerations.  Certainly, it should go beyond institutionalisation.   

The challenge for the Revolutionary Democrats, however, is to disentangle politics from investment decision. As exigent as it would be, it is crucial. No proper time for it than the era of transformation.                                  





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