[sustran] Infrastructure Oversupply

[Sudhir]

Unfortunately.. other countries are also pushing the same agenda in
intercity transport. Massive highways are being built across Asia. India is
trying hard to build 20km a day of intercity national highways and the
impact of such intercity highways are huge and we need to look more actively
at intercity solutions.
http://online.wsj.com/article/SB10001424053111904060604576570084262352852.html
and
see
http://www.livemint.com/2011/06/17150418/India-eyes-record-road-network.html

September 14 (The Wall Street Journal): Lu Dadao has long warned about the
risks of highway, railway and airport overbuilding in China. Now people are
listening.
ons.
The 71-year-old Mr. Lu, president of Geographical Society of China, is
China's leading economic geographer and a member of the state-run Chinese
Academy of Sciences. He headed a team of government researchers that last
year issued a report criticizing the nation's vast transportation-building
program for excessive investment.

He says he "faced great pressure" from officials unhappy with the report.
But attitudes toward the infrastructure boom have shifted somewhat since the
July 23 collision of two high-speed trains near Wenzhou that killed 40
people.

Mr. Lu spoke with Yue Zhen, a reporter for Caixin Media, a business and
financial media group in China. Excerpts:

Caixin: What's the status of China's transportation initiative?

Lu Dadao: It's mainly about excessively big, redundant construction and
unfair competition, as well as a lack of coordination between different
modes of transport.

First, look at expressway construction. In 2008, the nationwide total
mileage plan was adjusted up to 100,000 kilometers. That year alone we built
6,433 kilometers and invested a total of 600 billion yuan ($93.79 billion).
Nationwide expressway mileage is expected to grow to a staggering 180,000
kilometers, if we add provincial and national building plans.

Personal vehicle traffic levels are too low on some expressways built over
the past five years. Considerable stretches of expressway completed in
central and western regions are usually empty, simply basking in the sun.
Thus, expressway construction has suffered from excessive expansion. It's
gotten out of control.

Second, overexpansion of coastal-port development and construction has
clearly led to excessive competition between ports. China's port throughput
capacity reached four billion tons in 2008, yet coastal communities continue
to compete in the race to build large-scale berth and shipping-container
ports. Every port authority makes lofty claims about becoming a coastal or
international hub for commercial shipping.

Additionally, many regional airports are being built blindly, with huge
investments but no feasibility studies. This has led to major losses. In
2008, national subsidies to small and medium-size airports reached 9.3
billion yuan ($1.45 billion). But by 2020, we'll have added another 100 or
so airports, mainly regional airports. Every year recently, construction has
begun on about 20 regional airports, and more are waiting to be approved.

Moreover, there's been a surging wave of railway-construction projects,
including intercity rail linking big cities, suburbs and small cities in
some provinces, regions and municipalities. Our research group found there
will not be enough traffic to support the big, city-centered railway
transportation systems after they are completed.

Caixin: But supply sometimes still can't meet demand. For example, during
the Chinese New Year, railway tickets are extremely hard to get.

Lu: This relates to the problem of current demand versus long-term demand.
Over the past few years, some medium- and long-term plans drafted by
national and regional authorities have touched on the long term. But in
terms of implementation in recent years, many projects have been running far
in advance of demand.

In fact, most of our medium- and long-term plans are very backward because
they do not take into account the regional particularities of
passenger-traffic concentration. In provinces that are exporting manpower,
transportation planning and construction can't keep up.

The future national framework transportation plan should be built on
analyzing and forecasting traffic volume and direction. Too many highways
have complicated socioeconomic systems in regions along their paths,
fragmented the land and even destroyed socioeconomic ties. In a sense,
expressways benefit the rich. There is no country like ours that builds
expressways between every county, that violates the development pace of
transportation systems and that skips stages of societal development.

Currently, China's expressway network accounts for 1.62% of total road
network mileage, which is higher than in either Europe or America. In
eastern regions, the expressway ratio is as high as 2.4%, and in the west it
has reached 1.16%. This sort of road network clearly reflects one fact:
Expressways, which play a backbone transportation role, are mismatched
against other kinds of roads. The total expressway length is too great. A
reasonable expressway mileage ratio is around 1.2%.

Caixin: Profit-driven but unrealistic "leapfrog" development has been widely
mentioned in official documents. Is the pursuit of GDP growth and
performance stars for government officials driving the transportation
campaign?

Lu: Of course. Some local leaders think a big highway investment will play a
large role in boosting the local economy. The search for profit and returns
on short-term investment is prominent. Wild enthusiasm among local
governments for transportation development often forces central government
plans to be adapted to local plans. Plans for some local government
transportation networks may be redone after new leaders are appointed.

In addition, the limitations of current management authority have led to
fragmentation among various modes of transport, which relevant government
departments have a hard time coordinating.

Caixin: How should we prepare for the next stage of transport-infrastructure
construction?

Lu: There should be three areas of focus. First, optimize the transportation
composition by rationally planning the density and composition of
transportation networks in different regions, based on differences in
population and economic density.

Second, enhance the efficiency of the overall transportation system and
promote integrated transport development. The basic concept should be that
highways are for short-distance transport and railways for long-distance,
while aviation is for long-range and ultra-long-range transport. At the same
time, this effort should be consistent with passenger- and cargo-flow
direction and growth forecasts.

Third, accelerate construction of the primary road network in rural and farm
areas. Particular attention should be paid to adjusting the scale of
transportation-construction investment. With regard to the scale in recent
years and problems with excessive expansion in recent years, we recommend
holding transportation investment at 3% to 4% of GDP after the period of the
12th Five-Year Plan (2011-16).

Caixin: After the Wenzhou train crash, everyone has been concerned about the
next step for high-speed rail. What kind of plan should high-speed rail
construction follow?

Lu: Our view is that high-speed-railway development in China has only begun.
We still lack practical experience in safety and economic efficiency, as
well as coordination with civil aviation and expressways, and we need to
consolidate existing domestic and international experience.

Internationally, the rational operating range for a high-speed railway is
considered to be between 180 and 800 kilometers. On either end of this range
are the operating ranges of expressways and aviation, respectively.

Caixin: There is a lot of talk about reforming various government
departments. How do you see relations between transport authorities and
other institutions?

Lu: Transport-related departments are currently too strong. Each has its own
strong planning and design institutions. But authorities in charge of
comprehensive coordination are too weak and cannot negate the plans of
functioning departments, such as the transportation ministry.

There is no overall coordination for transportation construction, and
department goals are neither unified nor coordinated. In this atmosphere,
enthusiasm is stoked inside various departments, and the result is that each
department launches individual, large-scale projects that greatly increase
the overall scale and contribute to imbalance in the transport structure.

Thus, in the next phase of transportation planning, the National Development
and Reform Commission, as a comprehensive coordination department, must
bravely say "yes" or "no," and speak honestly, particularly when saying
"no."

In addition, the government should, through public hearings and other
methods, continue listening to people's views when planning projects. There
must be a mechanism that gradually establishes a platform for people to
participate and speak their minds.