28-29 June 2018

Emerging Trends on Demand & Mode Choice –Belt & Road Initiative (BRI) and Indian Ocean Rim Association (IORA)

Nora Nezamuddin

PPT Presentation

1- KEY POINTS

2- CURRENT TREND

3- EFFECTS OF THE BELT & ROAD INITIATIVE + INDIAN OCEAN RIM ASSOCIATION

4- IMPLICATIONS

5- CONCLUSIONS

3

- The change in economic production to higher value-added goods, population growth, and economic growth in developing countries (China, India, and KSA) is having a number of implications on modal choice and fuel demand.

- Long-term objectives to shift from road to rail can be aided by investment in infrastructure and economic policies that showcase rail as an economically viable option.

- In the short-term, relieving urban air pollution can be done via efficiencies in vehicles and logistics.

Key Points

4

Changing the energy consumption demand and freight demand in ‘fast growing’ economics are caused by:

1) Growth in population

2) Changing production towards ‘higher’ value-added goods has lead to an

2.1) Increase in per capita income (and more demand)

2.2) Leading to demand for higher transport speeds and accessibility

3) Investment in national infrastructure and global connectivity (Belt & Road Initiative + Indian Ocean Rim Association)

4) Advancement in Technologies

Current Trends in Fast Growing Economies

5

This growth is also related to the shift in these ‘fast growing economies’ towards higher value-added goods

Current Trend:

Movement towards higher value-added goods

Source: OECD.stat

6

Current Trend:

China’s freight movement by final demand 1995 - 2011 (billion TKM)

66%

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

19%

41%

31%

Household Consumption

Gross Fixed Capital Formation

Exports

Government Consumption

Inventory Change

7

Current Trend:

India’s freight movement by final demand 1995 - 2011 (million Ton)

66%

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

35%

28%

28%

Household Consumption

Gross Fixed Capital Formation

Exports

Government Consumption

Inventory Change

8

Current Trend:

China’s freight movement by final demand & mode (billion TKM)

66%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

HH Con Gov Con GFCF Inventory Change Exports

1997 2002 2007 2011

9

Current Trend:

India’s freight movement by final demand & mode (million Ton)

66%

0

1000

2000

3000

4000

5000

6000

7000

8000

HH Con Gov Con GFCF Inventory Change Exports

1997 2002 2007 2011

10

• China’s investments underway in BRI involved countries are an estimated $900bn loans underwritten.

• An estimated 71 countries involved in the project along the route, including some:

• Pakistan, Kazakhstan, Georgia, among others

• Move parts of manufacturing value chain to participating countries

• Active move towards Producing higher value-added goods

Indian Ocean Rim Association (IORA)Belt & Road Initiative (BRI)

• IORA inter-governmental organization which aims to strengthen regional cooperation and sustainable development within Indian Ocean region

• 21 member states & 7 dialogue partners

• Not an active creation of economic routes but rather a forum for dialogue on common issues, including:

• Maritime safety & security

• Trade & investment facilitation

• Fisheries management

• Disaster risk management

• Tourism & cultural exchange

• Academic, Science.& technology

• Blue Economy

• Women’s. Economic Empowerment

Effects of BRI & IORA:

11

Mode Choice Implications

Rail

Economic Flexibility

Road

Dedicated freight corridor

Fuel Efficiency

Road Improvements

Vehicle Technology Improvements

Co-modality

12

Conclusion

- The change in economic production to higher value-added goods, population growth, and economic growth in countries growing developing countries (China, India, and KSA) is having a number of implications on modal choice and fuel demand.

- Long-term objectives to shift from road to rail can be aided by investment in infrastructure and economic policies that showcase rail as an economically viable option.

- In the short-term, relieving urban air pollution can be done via efficiencies in vehicles and technologies.

- Co-modality is key to rationalizing the use of mode choice (rail+road).

13

Given the difference in regulations and legislation in countries, can China’s BRI create an environment for co-modality?

Will new technologies in road transport continue the reverse modal shift in international trade and local movement?

How will the economic repositioning of Chinese and Indian firms have an effect on global and national movements of goods and will it favor road even more?

Questions

Nora Nezamuddin

Research Associate

Nora.Nezamuddin@kapsarc.org

T 11 290 3949

Kapsarc.org

Thank You!

PPT Presentation

Appendix

16

China’s freight movement by final demand & mode (billion TKM)

66%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

HH Con Gov Con GFCF Inventory Change Exports

1997 2002 2007 2011

17

India’s freight movement by final demand & mode (million Ton)

66%

0

1000

2000

3000

4000

5000

6000

7000

8000

HH Con Gov Con GFCF Inventory Change Exports

1997 2002 2007 2011

18

China’s freight movement by actual sectoral demand (billion TKM)

66%

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

13000

14000

1997

Construction

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

13000

14000

international shipping coastal shipping

inland water truck

rail

2002

Construction

0100020003000400050006000700080009000

1000011000120001300014000

2007

Construction

0100020003000400050006000700080009000

1000011000120001300014000

2011Construction

19

India’s freight movement by actual sectoral demand (million Ton)

66%

0

1000

2000

3000

4000

5000

6000

1997

Construction

0

1000

2000

3000

4000

5000

6000

international shipping coastal shipping

inland water truck

rail

2002

Construction

Mining

0

1000

2000

3000

4000

5000

6000

2007ConstructionMining

0

1000

2000

3000

4000

5000

6000

2011ConstructionMining

20

Driving forces of China’s freight movement by final demand (billion TKM)

66%

0

5000

10000

15000

20000 HH Con Gov Con GFCF Inventory Change Exports Total

Total

51%

22%18%

45%

37%

37%

34% 10%28%

1997-2002 2002-2007 2007-2011

Total

1997 - 2002 2002 - 2007 2007 - 2011

GFCF Cons 29% Cons 25% Cons 36%

Mach 4% Mach 5% Mach 5%

Tran 2% Tran 4% Tran 4%

Exports Electronics 11% Electronics 14% Mine 10%

Mine 8% Mine 8% Electronics 1%

BaseMet 4% BaseMet 4% PetProd 1%

HH Con Text 3% Food 4% Food 4%

Mine 3% Heal 2% Agri 2%

RestHotl 3% Tran 1% Text 1%

21

Driving forces of India’s freight movement by final demand (million Ton)

66%

-1000

0

1000

2000

3000

4000

5000

6000

7000

8000 HH Con Gov Con

GFCF Inventory Change

Exports

Total

Total

-9% -61%

126%

34%42%45%

21%

3%

42%

1997-2002 2002-2007 2007-2011

Total

1997 - 2002 2002 - 2007 2007 - 2011

HH Con Tran 15% Food 4% Agri 30%

PetProd 9% Agri 3% Food 26%

Food 5% Cons 2% Tran 25%

GFCF Cons 15% Cons 33% Tran 10%

BaseMet 3% BaseMet 3% OtMFG 4%

Electron 1% Tran 3% Cons 3%

Exports Mine 31% Mine 11% OtMFG 29%

BaseMet 4% BaseMet 7% Electron 9%

Chem 2% OtMFG 4% Tran 8%

22

Freight movement and economic structural change

66%

freight movement by economic sectors in China and India

US benchmark: Commodity flow survey, Freight analysis framework

Economic structural change among the most important determinants

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Ton

TKM

Development of light industries

1. Housing market reform2. Infrastructure development3. Reform of SOEs

Entry into WTO

4 Trillion stimulus package

million Ton billion TKM