Mega projects -- Why are they difficult and what can be done about it? - Dimitrios Dimitriou, Athens...
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Transcript of Mega projects -- Why are they difficult and what can be done about it? - Dimitrios Dimitriou, Athens...
Dr. Dimitrios J. DIMITRIOUPlanning, Management & Economics in Transport Infrastructure Development
Professor Asst, Dept. of Economics, DUTh, GreeceChairman BoD, Athens International Airport
2nd OECD Forum on Governance of Infrastructure and
10th Annual Meeting of the OECD Network of Senior PPP and Infrastructure Officials
Paris – March 2017
Session: Mega Projects - why are they difficult and what can be done about it?
Defining decision making equilibrium for mega transportation projects
Presentation outline
Key variables of transport demand growth
Transport trends and prospects
Transport economic footprint and decision making
Needs, objectives and methodology framework to estimate transport
infrastructure economic effects
Types, outputs and mechanism of economic development impact
Case studies and highlights on economic contribution of mega infrastructure
development in various regions
Discussion issues and concluding remarks to industry and investors
Further Research
22Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017
Professor Asst– Planning Management and Economics in Transport Infrastructure
Demand drivers
33
Source: OECD, 2012
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Source: Dimitriou, ACI 2016
World Airport Connectivity trend in EU-non EU in terms of airline capacity, (2005-2016)
Source: ACI , 2016
Connectivity in European hub airports (change 2008 vs 2016)
Connectivity trends and prospects - Europe
-6
-4
-2
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
Non-EU
19.7%
22.5%
26.8%
25.4%
21.1%
65.6%
39.5%
Intra-Europe
Europe-North America
Europe-Asia Pacific
Europe-Latin America
Europe-Africa
Europe-Middle East
Intercontinental
44Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017
ProfessorAsst– Planning Management and Economics in Transport Infrastructure
A. Transport Infrastructure Industry Expectations
Expectation differencing for Key Challenges- Carriers -Win-Win situation- Infrastructures -Power game - Authorities - Business/Social Equilibrium
B. Investments and Business Development
Key Strategies Key Challenges- Concession projects - Project financing- Attract investor’s - Condition of contracts- Market expectations - Regulation
Transport infrastructure industry challenges 1/2
555
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
C. Tools Influencing Demand
Key Strategies Key Challenges- Pricing policy - Supply – Demand dilemma- Connectivity - Capacity – peak hour problem- Demand patterns - Incentives
D. Mega infrastructures as a ‘private’ Company
Key Strategies Key Challenges- Efficiency (operation) - Competition- Demand growth (profitability) - Merge - acquisitions- CSR (sustainability) - Marketing
E. Management
Key Strategies Key Challenges- Risk sharing - Unit cost- Business control - Capacity/Utilization- System of System approach - Employees - talent
Transport infrastructure industry challenges 2/2
666
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
• Government
• Authorities
Strategic Planning
• Banks
• Investors
Financials
• Ministries
• Construction agents
Construction
Carriers
Operation
Ensure that the project is developed in a manner that promotes national economic development Promote financial Stability and compliance with laws and regulationPrevent monopolistic actions
Provide the best interests for tenants
Engineering and Construction contractor monitoring
Performance management of resources and cost
Promote safety and security
Operation efficiency and lab our stability
Ensure efficient operations
Earn high return on investment Appropriate balance between equity and debt to maximize returns
Maximize the value to all stakeholders
SoS for investment in transport infrastructure
77Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017
Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2016, IJCEE, 10(10)
Airports contribution in European Economy
62.7 million jobs supported
2.7 trillion USD Global economic impact
Represent the 3.5 % of global GDP
Aviation jobs 3.8 more productiive than other jobs
12.3 million associated jobs
674 bio Euro, European economic impact
Represent the 4.1 % of national GDP
Source: IATA, 2016
Source: ACI, 2015
88
Airports contribution in economy
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Airports contribution in Global Economy
Transport Infrastructure Corporate Decision Making Equilibrium
9
Competitiveness
Regulatory framework
Monitoring/Review performance
Analysis of the competition
Innovation
Products - services
ITS
Smart business
Research
Strategy
Development of Tourism market
Market regulation - protection
Funding - new investments
Social impact and CRS
Planning
New Infrastructure
Business Sustainability
Business Development
Social benefits return
Supply
DEM
AN
D
99Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017
Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2017, IJESRT, 6(1)
Business environment and investment conditions
Income per Capita
Transport business
Working conditions Expertize and product recognition
Working force capital
Inflation-Consumer Prices
Currency exchange rates
Import/Export Volume
De
man
d s
ide
V
aria
ble
s
A
Soci
oe
con
om
ic
valu
es
and
De
cisi
on
p
aram
eter
s
B
Sup
ply
sid
e
Var
iab
les C
Transport Cost
Travelers environment
sensitivity and awareness
Region attractiveness and
accesibility
Transport System Capacity
Network connectivity
Ligable assets and capitals Transport Assets Portfolio
Network efficiency and Productivity
Inligable and Natural capital
Cultural Capital
Environmental Capacity Constraints
Quality of life values and expectations
Stability –Security
Education and Health
Ecological sensitivity
Society Isolation
Demand /Supply variables influence decision making Social values Economy conditions
1010Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017
Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2016, IJSBEEBIE, 10(11)
INPUT EVALUATION - DECISION RESULTS (OUTPUT)
Operation characteristics
Operator performance
Travel Demand Drivers
Network Evaluation
→ Competition (carriers, fares)
→ Robustness (scheduled)
→ Saturation (new routes)
Business Sustainability
→ Carriers
→ Infrastructure Operator
→ Capacity / Efficiency
Economic Productivity
→ Demand patterns (expenditure at city)
→ Transfer pax
→ Contribution (regional economy)
Infrastructure projects
Social values
Economy conditions
Decision agents and Stakeholders and
perspectives
Operation characteristics
Operator performance
Network planning
Decision objectives
Taxonomy to evaluate transport infrastructure investment
1111Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017
Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2017, IJESRT, 6(1)
Activity Impact Assessment - General Framework
Socioeconomic Analysis
Risk Assessment
External Financial Analysis
Internal Financial analysis
121212
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2017, IJESRT, 6(1)
131313
Key question in strategic planning and decision making
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2017,Research Project
Financial analysis
Added value to Economic System
Equilibrium??
Strategic planning and DSS
What will be the ripple effects across the Regional Economic
System?
What is the Region Economic Base
How many jobs will be gained?
How much total Output will be gained?
141414
Key questions in strategic planning and decision making
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
15
`
Direct Indirect
Induced
SectorMultiplie
Income per sector
SectorsTransaction tables
Wages per sector of activity
Macroeconomic features of the project
catchment area
Jobs per sector Catalytic
Direct
Multiplied impact
Indirect Induced Catalytic
New demand from additional capacity
Jobs distribution for each project phase
Project financial features and technical characteristics
New Jobs
New Income
1515
Methodology framework
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al.2015, IJAE,47(40)
0
1
2
3
4
5
6
7
8C
YPR
US
MA
LTA
GR
EEC
E
LUX
EMB
UR
G
PO
RTU
GA
L
SPA
IN
IREL
AN
D
DEN
MA
RK
NET
HER
LAN
DS
CR
OA
TIA
SWED
EN
FIN
LAN
D UK
FRA
NC
E
BU
LGA
RIA
BEL
GIU
M
PO
LAN
D
GER
MA
NY
ITA
LY
AU
STR
IA
SLO
VEN
IA
CZE
CH
LATV
IA
RO
MA
NIA
SLO
VA
KIA
LITH
UA
NIA
ESTO
NIA
HU
NG
AR
Y
DIRECT/INDIRECT/INDUCED
CATALYTIC
161616
Contribution of Air Connectivity in European Countries as share of National GDP
Highlight on Economic contribution of air connectivity in EU-28
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Source: ACI, 2016
3.94 9.94
17
88,700
271,700
2.2%National
GDP
Direct/ IndirectInduced
Catalytic
Employment Direct, Indirect and Induced Catalytic
GDP(Billions)
5.5%National
GDP
GREECE
3.11 7.46
PORTUGAL
84,200204,100
Direct/ IndirectInduced Catalytic
1.9%National
GDP
4.5%National
GDP
GDP(Billions)
Direct, Indirect and Induced Catalytic
1717
Case Study: Air Connectivity Economic Impact in Remote tourist destinations
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Source: ACI 2016, Author analysis
18
-10
-5
0
5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ann
ual
gro
wth
rat
e(%
) Real GDP forecast, annual growth rate (%), 2009-2018
OECD GREECE EA15
-30
-20
-10
0
10
20
30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ann
ual
gro
wth
rat
e(%
) Investment forecast, annual growth rate(%), 2005-2018
OECD GREECE EA15
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Source: OECD, 2016
Source: OECD, 2016
Case studies: Τransport Infrastructures in Greece
19
8.3 8.5 7.5 6.8 7.5 7.3 8.4 9.6
35.3 36.131.9 28.9 31.9 31.0
34,538,5
223.2233.2
231.1 222.2
208.5
193.7181.1 181.2
100
120
140
160
180
200
220
240
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011 2012 2013 2014
Euro
Bio
GDP
Direct Income by Tourism
Income contribution of Tourism
Current prices
19191919
Case study: Αir Transport Economic Impact in Greece
Air Transport economic impact in Greece
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Dimitriou et al., WCTR 2016
20
Hub airport
New airport investmenrt
EUROPE
2020
Case Studies: Mega transport infrastructures in Greece
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure
Concession Motorways
Rail line upgrade in
North Greece
Ports privatization 14 concessioned
airports
21
Why to estimate mega transport infrastructure impacts in national/regional economy?
Estimate the overall contribution in an economic system (regional – national scale)
Estimate the economic impacts on other economic sectors
Provide essential economic and social outputs for a variety of stakeholders
involved in decision process (such as Government; authorities; NGOs, etc)
Monitoring the productivity and the efficiency of transports in economies
How to estimate mega transport infrastructure impacts in national/regional economy?
I-O and CGA methodology approach
High need for data
Outputs in terms of income and jobs
212121
Concluding Remarks 1/2
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017ProfessorAsst– Planning Management and Economics in Transport Infrastructure
22
How significant are the transport infrastructure impacts in national/regional economy?
Quick and HIGH impacts in unemployment and business growth
Income multiplier 2 ÷ 5
Act as un FDI providing additional economic benefits to the poorest regions
GDP contribution up to 15 %
Significant higher (direct/indirect effects) if investments are implemented
Other sectors of development?
Tourism, Energy, Real estate, Trade and Commission services are the top sectors
of growth + construction
Provide new opportunities to other economic sectors (e.g. education)
Ensure social stability and culture exchange
222222
Concluding Remarks 2/2
Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017ProfessorAsst– Planning Management and Economics in Transport Infrastructure
Dimitrios J. DIMITRIOUPlanning, Management & Economics in Air Transport
Professor, Dept. of Economics, DUTh, GreeceChairman BoD, Athens International Airport
2nd OECD Forum on Governance of Infrastructure and
10th Annual Meeting of the OECD Network of Senior PPP and Infrastructure Officials
Paris – March 2017
Thank you