Benefits of transportation infrastructure

Published in The Freeman (Philippine Star), April 12, 2012

Many people can say a many things about this but for purposes of determining whether we go ahead with a project or not, all things accounted for, there are certain benefits which we must measure.  Our Secretary, Mar Roxas, always tells us to do our best to serve the Filipino traveler and ensure that DOTC CARES. Of course, the department does care, but in this case, “CARES” also characterizes the kind of transportation system that we provide the public – comfortable, affordable, reliable, efficient, and safe/secure.  These we strive for but quantifying everything in measurable elements maybe a bit difficult.  Usually it’s qualitative.

Determining the project viability of a transport infrastructure is a different matter, however, and has definite standard measurements, generally accepted all over the world.  Well, not only for transport but all other development projects as well – it’s simply a measurement of the benefits and the costs, and making sure that the former exceeds the latter, taking the cost of money over time into consideration.  The technically-minded sees this in three forms – benefit-cost ratio (BCR), Net Present Value (NPV), and the Internal Rate of Return (IRR).  The last term is often the determining parameter for decision-making.

Many other projects sum up benefits in terms of things that are “added” to one’s well-being.  A water supply project will give you – water – of course, something which everybody needs. It also has health benefits, as well as fire prevention benefits. A school project will give you education – another thing maybe difficult to quantify, but decisively beneficial just the same.  An irrigation project will decisively give the farmers more yield, and the rest of the population, increased food security.  What about a road project?  Or a bridge, a highway, an expressway or a mass transport facility such as a train or Bus Rapid Transit (BRT) system?

Transport projects are different from others in the sense that there are actually no benefits which are “added” to one’s self, in financial or economic terms. Well, of course, we can cite comfort, affordability, reliability, efficiency and safety/security, but oftentimes these were not considered in the equation because, for one, they’re difficult to quantify, and second, their gross contribution to the “benefit stream” is quite minuscule compared to what are considered the primary benefits of transport, which are not benefits “added” but costs “saved.”  In a transport project benefit-cost analysis, what are considered benefits are actually costs that are saved due to the project as compared to some original costs if the project is not done.

There are only two main benefits considered here – “time savings,” and “vehicle operating costs savings.” Note that time spent in traffic is time lost (and wasted). The economic value of that wasted time in a city’s transport network is easily computed. For example, a study done in year 2000 showed that the economic costs of traffic congestion in Metro Manila exceed P100 Billion a year!(NCTS for NEDA-LEDAC). Both time savings and VOC savings are dependent on time spent and distance traversed in traffic. Thus, the two most common parameters used in evaluating transport are “travel time” and “travel speed.”

Of the two, travel time is the better determinant because it incorporates “waiting time” (say, when waiting for a jeepney, for example) and “transfer time” (when you need to transfer from one mode to another, such as from an LRT to a jeepney or taxi). One reason why many of my friends don’t use the LRT/MRT in Manila is that, while the train indeed is fast, it takes time to go up and down the stations and to get the next ride. In the end, people will generally prefer the transport mode(s) which will bring them to their destination the fastest! Of course, as well as the most comfortable, affordable, reliable, efficient, and safe/secure.