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Asia-Pacific Transportation Infrastructure: Linking Food Sources
to Urban Centers
William
T. Coyle
William Coyle, USDA/ERSA century ago, the world's
population was largely rural; only 5 percent lived in urban areas.
But now, rapid growth in urban areas, particularly in developing
countries, is making this the century of the city, particularly
in the Asia-Pacific region, where half the population lives in urban
areas, accounting for barely 2 percent of the land mass. Made up
of countries on both sides of the Pacific Ocean—including
Australia, Brunei, Canada, Chile, China, Hong Kong-China, Indonesia,
Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru,
Philippines, Russia, Singapore, Taiwan, Thailand, United States,
and Vietnam—this region's urban areas are expected to grow
by more than half a billion people in the next 20 years, almost
three times the growth rate of the total population. Three-quarters
of the growth will be in the less-developed economies of the region,
with much of the growth arising from rural-urban migration. Urban
populations are projected to increase by 300 million in China, 75
million in Indonesia, and 25 million in Mexico.
National income is also increasingly concentrated in urban areas,
which are home to most of the middle and upper classes and the source
of a disproportionate share of the economy's output. Shanghai, for
example, accounts for 1 percent of China's population, but generates
12 percent of the nation's gross national product. Higher incomes
bring greater per capita food demand and diets richer in meat, fruits,
and vegetables than those in rural areas. In urban locales, demand
is also greater for food services, convenience, and eating away
from home.
These demand trends will profoundly affect food markets around
the region. Transportation infrastructure—roads, railroads,
inland waterways, ports, and airports—will play a critical
role in supporting the movement of raw agricultural material and
food from dispersed producing regions, either domestic or foreign,
to urban areas. However, while transportation infrastructure plays
an important role in providing affordable food to burgeoning urban
areas, other factors—agricultural, regulatory, and trade policies,
for example—play a role as well.
Food Demand Concentrated, Food Supply Dispersed
To meet growing urban-based food demand requires a sophisticated
food system to store, refrigerate, and deliver food to retail outlets.
Well-functioning roads and mass transit systems regularly bring
large numbers of people to these outlets. Strong linkages to food-producing
regions, both domestic and foreign, assure a steady flow into the
city of raw agricultural material, and processed and fresh food.
In the developing parts of the Asia-Pacific region, the rapid spread
of supermarket chains—characterized by centralized procurement
and distribution, a broader geographic range of operations, and
fewer but larger volume suppliers—reflects pressure to keep
food costs relatively low while coping with the complexity of urban
environments. Modern supermarkets account for a growing share of
retail food sales and are displacing traditional wet markets and
"mom and pop" shops.
While urbanization is leading to more concentrated food demand,
agricultural production capacity in the Asia-Pacific region and
elsewhere remains widely dispersed. With the exception of mountainous
and arid regions, food production is located throughout North America,
in pockets along the western coast of South America, throughout
much of Southeast Asia, along the eastern and southern coastal areas
of Australia, and in the eastern half of China. Nearly every state,
province, and prefecture of the region produces some food, yet many
food-producing areas struggle to be economically viable. Large areas
of Southeast Asia and Southern China, for example, have good soils
but suffer from lack of adequate infrastructure to profitably access
markets and yield-enhancing inputs, including seeds, fertilizer,
and pesticides.
Coastal Urban Areas Accessible to Foreign Suppliers
Many rapidly growing urban areas across the developing parts of
the Asia-Pacific region are concentrated along coastlines. These
cities, by modernizing their port facilities, can take advantage
of the low costs of ocean transport and thus facilitate linkages
with foreign food suppliers. They can also benefit domestic producers
who want to export.
Jakarta, Manila, Shanghai, Shenzhen, and Bangkok are among the
largest, most rapidly growing coastal urban areas in the Asia-Pacific
region. Beyond these major cities, populations lean toward living
in smaller cities and towns close to the major cities where the
infrastructure tends to be better developed. About 60 percent of
China's population lives in the 12 coastal provinces. More
than half of Indonesia's population lives on 10 percent of the land
area—the narrow island of Java—where many of the country's
largest coastal cities, including Jakarta, are located.
Many developing economies invest first in modernizing port facilities
and airports in or near large coastal urban areas, thus facilitating
global trade, including trade in food and agricultural products.
Part of this modernization may include privatizing government-owned
entities, with private interests both providing scarce financial
support for these expensive facilities and introducing market principles.
Private-sector involvement creates incentives to conform to international
standards of trade and adopt fast-changing shipping technology.
Private interests have played an important role in port development
in Malaysia, the Philippines, Mexico, Korea, Thailand, and Vietnam.
The extent of port modernization can be measured by growth in
container throughput or such productivity indicators as "moves per
crane per hour." A shipping container is a standardized box, typically
either 20 feet long, 8 feet high, and 8.5 feet wide (a 20-foot-equivalent
unit TEU) or 40 feet long, 8 feet high, and 8.5 feet wide (2 TEUs).
Containerized shipping is commonly used for perishable and other
processed food products but is even making inroads with bulk commodities,
like grains and oilseeds.
The Asia-Pacific region has the world's three busiest container
ports—Hong Kong (China), Singapore, and Shanghai. In 2003,
the region's overall container throughput grew 13.5 percent. Shanghai's
growth was the most spectacular, expanding from half a million TEUs
in 1990, when the port ranked 40th in the world, to 11.3 million
in 2003, when it became the world's third-busiest port. China's
top 10 ports grew 24 percent between 2002 and 2003; Ningbo (near
Shanghai) and Chiwan (1 of 3 Shenzhen ports near Hong Kong), both
grew more than 40 percent. Ports in Korea and Malaysia are also
growing rapidly.
While customs regulations and other barriers might slow down port
clearance in the less developed parts of the region, the port facilities
themselves are approaching "best practices" and are
equal in "moves per crane per hour" to ports in the
more developed economies. Shanghai averaged 28 moves per crane per
hour in 2003, Manila International Container Terminal averaged 32,
and Malaysia's Tanjung Pelapas, 32, comparing well with Sydney
at 27, Southern California ports at 25-26, and Rotterdam at 30.
The low cost of ocean shipping, the cheapest of all transportation
modes over long distances, enhances linkages between urban port
cities and foreign suppliers. Containerized shipping also conforms
well with the standards and product volumes that modern cost-conscious
supermarkets prefer. Thus, in some instances, foreign suppliers
may be more competitive in these coastal markets than are domestic
producers.
The ability of domestic producers to penetrate urban, coastal markets
and compete with foreign suppliers depends on the quality and extent
of roads, railroads, and other infrastructure that connect these
markets with food-producing areas in the country. In the Asia-Pacific
region, the quality and extent of road and rail systems vary greatly.
As measured by length of road or rail per square kilometer, transportation
infrastructure is generally more developed in the higher income,
densely populated economies of East Asia: South Korea, Taiwan, and
Japan. In terms of length of road or rail per capita, infrastructure
is more developed in Australia, Canada, New Zealand, and the United
States. By both measures, the less developed economies in China,
Southeast Asia, and Latin America significantly underinvest in road
and rail infrastructure.
This underinvestment results in higher domestic shipping costs
and slower delivery times. For example, the overland shipping cost
of a container from Chongqing in central China to Shanghai is more
than double the maritime transport cost from Los Angeles to Shanghai,
even though the distance is about one-seventh as great.
In Southeast Asia, the fragmented geography of Indonesia and the
Philippines and poorly developed infrastructure increase shipping
times and the possibility of spoilage. Fruit delivery by truck from
Manila to Davao on the southern island of Mindanao requires two
ferry crossings and 3 days to cover 850 kilometers (510 miles).
(See "Examples of Infrastructure Development
in the Asia-Pacific Region.")
Transportation Infrastructure Affects the Economy
The transportation infrastructure within a country facilitates
competition in food products and services, which promotes more efficient
resource allocation and lower food costs. Thus, maintaining, upgrading,
and expanding the infrastructure plays an important role in supporting
economic growth. For farmers, new or upgraded infrastructure has
a similar effect as the removal of a general tax. It can lower transaction
costs for marketing products and purchasing inputs, reduce the likelihood
of post-harvest losses by increasing the quantity and quality of
transport services, and ultimately bring higher returns for the
producer and lower food costs for the consumer.
A simple example illustrates these dynamic food system impacts.
With construction of a dirt road and a few bridges to connect a
poor isolated rural area with a main highway, farmers can reach
markets more quickly even using traditional transportation modes,
such as foot, bicycle, or animal-drawn cart. Eventually, farmers
can take advantage of motorized vehicles to bring in production
inputs and deliver harvested produce to local markets more quickly,
in larger volumes, and with less spoilage. Rural households gain
better access to health care and schools, contributing to higher
labor productivity on the farm. When the road is paved, costs decline
even further, as marketing times diminish and weather is less of
an obstruction to travel.
While transportation infrastructure is needed to lower food costs
to urban consumers by connecting surplus food-producing areas with
cities, it may not be sufficient. For example, a country's agricultural,
regulatory, or trade policies can negate the benefits from new or
upgraded infrastructure. Sometimes investments are made in infrastructure
to alleviate bottlenecks, when the real problem lies in regulatory
policies that support certain economic interests. For example, traffic
congestion at the U.S.-Mexico border results from policies requiring
reciprocal truck access and inspection, not lack of adequate transportation
infrastructure. Tariffs and other import restrictions affect the
flow of food products from domestic and foreign sources. Other laws
and regulations, such as cabotage, which requires national flag
vessels to provide domestic intercoastal service, affect the cost
of transportation services. Governments also impose duties on transportation
through licenses, tolls, and fuel taxes that ultimately get passed
on to agricultural producers and consumers.
Examples
of Infrastructure Development in the Asia-Pacific Region |
Infrastructure development is best examined
on a case-by-case basis because it plays a central but varied
role in different parts of the region. Three examples illustrate
how the development of transportation infrastructure is improving
the connections between agricultural areas and consumers in
the Asia-Pacific region, creating a more seamless food system.
Greater
Mekong subregion's
road development |
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Asia Development
Bank
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China is making a major effort to connect interior
provinces with populous coastal areas. This effort includes
a $42-billion program to add 10 percent to China's rail system
by 2006 and extensively developing and enhancing inter-Provincial
road systems. As a result of the construction of the Three
Gorges Dam, navigability of the Yangtze River now extends
over 1,000 miles from Shanghai to Chongqing. This, along with
other infrastructural development, is making the Yangtze River
basin, a potential rival to the Guangzhou-Pearl River delta
area adjacent to Hong Kong in southern China, currently one
of the most important manufacturing centers in the country.
Collectively, these developments are making food delivery
to urban areas faster and cheaper, raising returns to farmers,
and lowering consumer costs. They are also making domestic
products (e.g., citrus, semitropical fruit, and certain vegetables)
more export competitive.
The North American Free Trade Agreement (NAFTA),
which includes the U.S., Mexico, and Canada, has focused on
developing infrastructure in the north-south corridors to
better integrate Mexico, which is less developed than the
other two members. Infrastructure development in Mexico has
been rapid, with road systems expanding 30 percent during
1990-2000. Privatizing Mexico's rail system in the late 1990s
and forming joint ventures with other North American rail
companies has improved service and raised the share of freight
transported by rail.
Border constraints, protectionist policies, and concerns
about illegal immigration and sanitary and phytosanitary issues
continue to hamper intra-NAFTA trade. A reciprocal U.S.-Mexico
truck agreement still has not been implemented, and cabotage
policies constrain the freedom of truck and marine shipping
by allowing only domestic companies to transport goods within
a country. These constraints, however, are offset by advances
in information technology, pre-border clearance, and expanding
intermodal systems (involving more than one form of transportation
service—rail, truck, marine, or air—during a single
journey). Improving roads and rail systems are reducing the
cost of transporting U.S. grain to Mexico's industrial heartland
(the area outlined by Mexico City, Monterrey, and Guadalajara)
and Mexican horticultural products to U.S. and Canadian markets.
A major project in the Greater
Mekong subregion is underway to better integrate five
Asian countries (Vietnam, Laos, Cambodia, Thailand, and Myanmar)
and China (Mekong River watershed). The project, supported
by national governments and the Asia Development Bank, is
designed to, among other objectives, link remote agricultural
areas with urban centers and ports. Three major road or economic
corridors are being developed: one between southern China
and Bangkok, Thailand, and southern China and Hanoi; a second
between Myanmar and Da Nang, Vietnam; and a third between
Bangkok, Thailand, and Ho Chi Minh City and other parts of
Vietnam. Customs procedures are being streamlined to reduce
time spent at border checkpoints. The project potentially
will benefit 70 million people living in the Mekong basin,
many of whom are subsistence farmers. Travel times and transport
costs have declined, and food produced in remote rural areas
can now more easily reach major urban markets and, through
ports, export markets.
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Investment Is Key, but Not Sufficient
Keeping food costs low for growing urban populations poses a major
challenge in this century of the city. A key component is investment
in streamlining domestic supply chains, including expensive transportation
infrastructure to connect urban centers with food-producing areas;
in facilitating food imports through trade-liberalizing measures;
or in some combination of approaches.
Most infrastructure is a public good. Once the initial investment
is made, many interests can use the good, often without payment.
The potential for free riders means that market forces alone tend
to result in underinvesting in infrastructure. Hence, governments
are crucial in encouraging and funding infrastructure investments.
The largest share of financial support comes from local and national
governments and private investors. International financial institutions
(Asia Development Bank, World Bank, Inter American Development Bank)
have played modest roles, about $5 billion per year in loans of
the estimated $100 billion needed for new investment and maintenance
of rail and road infrastructure in developing countries, according
to the World Bank. And bond markets need to be further developed
to allow governments to tap into the high savings rates of Asia-Pacific
economies for funding expensive long-term infrastructural projects.
Investing in transportation infrastructure alone cannot create
an efficient food supply system. An efficient supply system also
requires appropriate economic incentives, competitive transportation
and logistic services, and policy reforms. Discussions about agricultural
market reform across the region, which tend to focus more narrowly
on commodity and farm policies, must be expanded to include these
broader issues.
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