68746 World Bank SYRIAN ARAB REPUBLIC PROPOSED NATIONAL TRANSPORT ACTION PLAN April 7th, 2011 Draft Final CURRENCY EQUIVALENTS (Exchange rate effective January 31st, 2011) Syrian Pound (SYPs) 1.00 = US$0.02137 US$1.00 = SYPs 46.8 FISCAL YEAR January 1 – December 31 ii Table of Contents Introduction to the Transport Sector Action Plan .............................................................................. 1 Part I - Transport contribution to the economy.................................................................................. 2 Transport contribution to GDP................................................................................................................ 2 Contribution of the transport sector to the Syrian economy .................................................................... 3 International comparisons ........................................................................................................................ 5 Investment in the transport sector ............................................................................................................ 6 Contribution of transport sector revenues to the fiscal budget.............................................................. 12 Summary of transport’s contribution to the economy ............................................................................ 14 Part II - Estimate of available public investment budget for the 11th five year plan ..................... 14 Introduction............................................................................................................................................ 14 Performance 2000-2008 ........................................................................................................................ 15 Proposed surcharge on the price of transport fuel ................................................................................ 19 Estimate of current fuel consumption in transport sector ...................................................................... 19 Estimate of the revenues generated by a transport fuel surcharge ........................................................ 23 Projected transport sector public resource allocation 2011-2015 (11th five year plan) ...................... 25 Conclusions ............................................................................................................................................ 25 Part III - Prioritization and Investment Program ............................................................................ 28 Recommended method ........................................................................................................................... 28 Specification of projects ......................................................................................................................... 28 Projects .................................................................................................................................................. 30 Prioritization and scheduling of projects............................................................................................... 31 Summary of Prioritization method ......................................................................................................... 31 Part IV - Financing plan and financial equilibrium ......................................................................... 33 Part V – Main conclusions and Recommendations relating to investment and funding ............... 35 Part VI - Other components of the Transport Action Plan ............................................................. 36 iii Table of Tables Table 1: Contribution of transport sector to the GDP (in constant prices) of Syria (SYPs billion) ......... 4 Table 2: Transport share of GDP for a sample of countries .................................................................... 6 Table 3: Public investment ratios total transport output, total revenues, and total public investments ... 9 Table 4: Evolution of Fiscal budget in Syria (2003-2009) (SYPs billion)............................................. 12 Table 5: Evolution of transport sector-related revenues (2003-2009) (SYPs billion) .......................... 13 Table 6: Public Finances 2000-2008 (SYPs billion) .............................................................................. 16 Table 7: Allocation of public expenditures in Syrian Arab Republic, 2008 .......................................... 18 Table 8: Diesel and gasoline consumption in the transport sector ......................................................... 23 Table 9: Estimates of revenue from a transport fuel surcharge of 10% on retail prices ....................... 24 Table 10: Public Finances (2010-2020) (SYPs billion) ......................................................................... 27 Table 11: Transport Sector 11th five year plan proposal ........................................................................ 30 Table 12: Transport Action Plan and financial equilibrium (no user fee scheme)................................. 33 Table 13: Transport Action Plan and financial equilibrium (user fee scheme introduced) ................... 34 Table of Annexes Annex 1: Resources Allocation to Transport Sector main Scenarios .................................................... 38 Annex 2: Prioritization of 11th Five Year Plan projects main tables ...................................................... 43 Annex 3: Transport Action Plan financial Equilibrium-Scenarios ........................................................ 46 iv Introduction to the Transport Sector Action Plan The Action Plan presented here is intended as a contribution to the preparation of the transport section of the 11th Five Year Plan. It provides help in three areas. The first is on the financial resources that might be available from conventional public resources to finance the activities of the transport sector during the period of the Five Year Plan. Second, a suggestion as to how these resources could be supplemented from the revenues of a surcharge on the price of fuel used for transport activities. Third, how the funding from these two sources could be allocated between investment projects in such a way as to achieve the most efficient achievement of the objectives of the transport sector during the period of the Five Year Plan. However, making the most efficient investments will not in itself ensure the realization of the sector objectives. The investments are only the physical activities that are needed to support policy and strategic actions aimed at achievement of the objectives. This Action Plan does not include those policy and strategic actions, as these are determined more by political than technical considerations. To the extent possible within its own resource constraints, if so requested, the World Bank will be able to comment on the relationship between policies and strategic actions proposed in fulfillment of the transport sector objectives and the outcomes of the investment analyses described here. The Action Plan is therefore in four parts. The first is an assessment of the traditional public sector funding that, on the basis of information currently available, is most likely to be available to the transport sector during each of the years of the 11th Five Year Plan; the second is an assessment of the public funding available including the additional funding that could be available from a surcharge on fuel used for transport activities during each of the years of the Fiver Year Pan, and; a method for prioritizing the transport sector investment proposals made for the period of the 11th Five Year Plan. Finally the last part examines the conditions for a sustainable financial equilibrium. To some extent, the financial resources allocated to each economic sector will be a reflection of the importance of the sector to the national economy. This creates a difficult situation for the transport sector, as it a sector of derived demand. That is, it contributes little by itself to the economic wealth of the country, but it is an essential component of the contribution of all the other sectors. So the importance of the transport sector is dependent on the importance of the economic sectors to which it contributes and particularly those to which it contributes most. The first section of this Action Plan is therefore an assessment of the relative importance of the transport sector to the development and growth of the Syrian economy. 1 Part I - Transport contribution to the economy 1. From a macro economic perspective there are three ways of looking at the importance of the transport sector. First is to consider the transport sector contribution to GDP, to compare with that of other countries and to see how and why it is changing over time. Similar considerations can be made in respect of investment in the transport sector, perhaps the converse of its contribution, and the contribution of transport sector revenues to the national budget. Transport contribution to GDP 2. In most countries a reliable starting point for a measure of the contribution of the transport sector, and for any other economic sector, is the national accounts1. These provide various measures of the total size of the national economy and of the contribution of each economic sector to that size. This is usually the first place where the role of transport as a sector with derived demand becomes apparent, as much transport activity is hidden in the data of other sectors. Only activities undertaken specifically for transport companies, or for personal transport needs, appear in the transport sector total. Any transport undertaken by companies for their advantage (such as industry‟s transporting their own products to their customers or farmers delivering their own products to markets) appears as an activity of that sector (in the examples, industry and agriculture respectively) and not of the transport sector. 3. However this problem is common to all countries that use the standard methods of public accounting and is not particular to Syria. Although the use of this standard method significantly underestimates the contribution of transport to national economies, since the underestimate is common to all countries, it has less impact on cross country comparisons (although the under- estimation error is not proportionally the same for all countries). 4. A second problem common to all countries using the standard accounting method is that transport is considered as part of a sector that includes communications and storage. Again, since this is a problem common to all countries, it should not significantly impact on cross-country comparisons. This problem can to be overcome with a detailed disaggregation of the data for the “transport, communications and storage� sector into its three component parts, and this is currently being attempted for Syria. 1 The System of National Accounts, 1993 http://unstats.un.org/unsd/sna1993/introduction.asp 2 5. However, a particularly Syrian problem is the uncertain reliability of the basis statistics that are used to compile the measures of the total size of the national economy and the contribution of each sector to that total. In discussions with the National Accounts staff and an IMF consultant in the CBS, that the database on which the total GDP of Syria is calculated, in both constant and current prices, is under revision. Of equal concern to the transport sector, it seems that output of the transport sector is underestimated, for reasons additional to those described in the two paragraphs above. Although it seems intuitively obvious that a higher contribution of the transport sector to total GDP represents a more dynamic transport sector than a lower contribution, this is not necessarily the situation. The intuitive thought that an expanding economy requires more transport and so a higher transport contribution to total economic output is a sign of a growing economy is in part correct. But it fails to take account of the efficiency of the transport sector and changes in that efficiency. If the efficiency of the transport sector does not change over time, an increasing transport share of the economy does not necessarily show a growing economy; it might be that the structure of the economy is changing to one that requires more transport to produce each unit of output. This is sometimes referred to as the transport efficiency of the economy, and often measured by the ton-kms per U$ of GDP. Usually the transport efficiency of the economy increases over time, with less basic industry that requires the transport of large volumes of basic commodities and with a greater service sector that requires very little transport. Perhaps ironically, if the efficiency of the transport sector or of the economy as a whole increases, then the percentage contribution of transport to GDP will inevitable reduce. 6. So the size of transport contribution to GDP is a combination of two counter activity trends – the increasing size of the economy and the increasing efficiency of the transport sector. Which of these two trends will have the greatest impact at any point it time is as dependent on the changes in the size and structure of the national economy as it is on the transport sector. For most countries the contribution of transport to total GDP is falling over time and this is because the efficiency of the transport sector itself is improving faster than the economy is growing, and the changing structure of the economy with more of total output being provided from sectors that require less transport, For these reasons, the contribution of transport to GDP as a measure of its importance and as a criterion for allocation of public resources to the sector is misleading Contribution of the transport sector to the Syrian economy 7. The figures presented in Table 1 present the evolution of GDP since 2002 as well as the estimated contribution of transport sector to the GDP of Syria. It indicates that the share of transport sector in total GDP (in constant values) declined from about 9.7 % in 2002 to about 6% in 2008. In current values, it has been now estimated by CBS that it went down from 6.7% in 3 2005, to 6.6% in 2006, 6.1% in 2007 and finally 5.7% in 2008 (last figure computed by CBS at this stage). This contrasts with the target of the 10th FYP which was to reach 16% of GDP by 2010, an infeasible and undesirable outcome. 8. For a more reliable estimate of the impact of the transport sector it is necessary to look at both growth rate of the total GDP and growth rate of transport sector GDP, and then assess the share of transport sector GDP in total GDP growth rate. Table 1 shows that the growth rate of the transport sector during the studied period was very volatile; it reached about 7% in 2003 while the share of transport sector in total GDP in that year was 10.2%; then, the growth rate was negative in 2004 (-24.9%) while the transport share in GDP was 7.25%; and the growth rate was negative in 2008 (-11.6%) whereas the transport share of GDP was 6%. For better assessment of the contribution of transport sector in Syrian economy, it would be useful to look at the contribution of transport sector in annual GDP growth rate. 9. The transport sector share in total GDP growth rate in 2003 was 60.8%, this led to 10.2% share of transport sector output in total GDP. In comparison, the share of transport sector in the growth rate of 2008 was negative (-18.3%), this led to a low share of transport sector in the total output of Syria in 2008 (6%). In conclusion, it seems that it is the growth rate of the sector that determines the magnitude of this sector in the GDP of Syria. Table 1: Contribution of transport sector to the GDP (in constant prices) of Syria (SYPs billion) 2002 2003 2004 2005 2006 2007 2008 Total GDP 1,006.4 1,017.6 1,086.1 1,151.4 1,211.3 1,288.0 1,333.3 Transport sector GDP 97.5 104.2 78.3 79.4 81.4 90.6 80. 0 Share of transport sector in 9.7 10.2 7.2 6.9 6.7 7.1 6.0 total GDP (%) Growth rate of transport 1.3 6.9 -24.9 1.4 2.5 11.3 -11.6 sector GDP (%) Share of transport sector in 2.3 60.8 -29.5 2.3 3.3 12.4 -18.3 GDP growth rate (%) Growth rate of total GDP 5.9 1.1 8.6 4.5 5.2 6.1 4.5 Source: World Bank estimates based on CBS data. 4 10. This analysis raises the question whether the figures of the total GDP and of the transport sector GDP presented in Table 1 reliable, and do they reflect the volatile evolution of transport sector activities in the Syrian economy during recent years? The answer to this question is ambiguous. Observations of the performance of the economic sectors with high transport intensity and of the transport sector itself indicate that both increased in recent years following the liberalization of Syrian economy. The construction and tourism sectors, among the most transport intensive, were two of the most flourishing during the 10th Five Year Plan. Figures of Syrian ports` traffic indicate a huge increase in the volume of shipping inwards and outwards. Transit freight to and from Syria, which is also very transport intensive because of the long distances involved, also grew fast during this period. Since the fastest growing economic sectors were the most transport intensive, with high ton km or pass km unit of production, logically, the output of the transport sector would also be expected to be above average. The only counter indications were the high growth of banking and financial sectors, with very low transport intensity. 11. More evidence of the possible under estimate of Syria‟s transport sector contribution to GDP in provided in an Annex to this Action Plan. The next approach to assessing whether the apparent transport share of GDP in Syria is plausible is to compare it with the share in other countries. International comparisons 12. The transport sector contribution to GDP was for a long period considered an important indicator of the importance of the sector to the national economy. But its high variability with a large number of external factors that are also unpredictable have made it less favored. In particular, the use of GDP as the denominator in the value has caused problems. Many of the economic sectors that are fast growing in the developing world are less transport intensive that those that they are replacing – typically service sectors are replacing basic agriculture and mining sectors. So the transport component of total GDP is increasing being replaced by the transport component of the non-service part of GDP as the denominator. 13. The following table of some typical values of the conventional ratio of transport contribution to total GDP illustrates this problem and the difficulty in explaining why some countries have a higher value than others. The countries are shown with increasing shares of transport in GDP, with those in the first two columns having less than a 5% share and those in the second two columns having a greater than 5% share. While it is not surprising that the three countries with the highest shares – Argentina, China and Brazil – are developing counties and have rather large 5 land areas (leading to long transport distances to transport goods and so high transport costs for a given level of GDP), the high shares of the other countries with a higher share than Syria is more difficult to explain. Syria‟s current share of 6% appears to be rather lower than expected, perhaps because of some of the under-estimation described above, but the 2002 share of over 10% would appear to be rather higher than might be expected. 14. Achievement of the target share of 16% of GDP included in the 10th Five Year Plan would have put Syria as by far the most transport intensive economy in the world. Table 2: Transport share of GDP for a sample of countries Transport % Transport % of Country of GDP Country GDP Greece 2.1 Sweden 5.0 Ireland 3.0 Netherlands 5.0 Australia 3.2 Italy 5.1 Austria 3.2 UK 5.5 Germany 3.8 India 5.6 Canada 3.8 SYRIA 6.1 Luxembourg 4.1 Finland 6.1 US 4.6 Singapore 6.5 France 4.7 Belgium 7.5 Vietnam 4.7 Hong Kong 7.5 Spain 4.8 Denmark 7.5 Japan 4.8 Brazil 8.8 Portugal 4.9 China 9.2 Argentina 9.8 Source: World Bank analysis of data from Boston Logistics Group Investment in the transport sector 15. Investment is often considered the “engine of growth� so a measure of investment in a sector can be a second indicator of the importance of the sector to the economy or at least to growth of the economy. Unfortunately, data on private investment in transport sector for the past years are still not available, so we are left with only 5 years (2000-2004) to compare the private and public sectors‟ shares of investment in the transport sector in Syria. Graph 1 shows that over this period the public sector retained and even slightly increased its larger share of sector investments. 6 Graph 1: Structure of investment in transport sector 100% 90% 80% 46% 40% 50% 51% 49% 70% 60% 50% 40% 30% 54% 60% 50% 49% 51% 20% 10% 0% 2000 2001 2002 2003 2004 ratio of public investment in transport sector ratio of private investment in transport sector Source: the 10th FYP of State Planning Commission 16. The inability to disaggregate the private investment in transport from that of transport, communications and storage is a reflection of the same issue in relation to transport‟s contribution to GDP. In neither situation could CBS perform a disaggregation of the data, so the World Bank has attempted its own assessment of sector investment. 17. Graph 2 shows the evolution of public investment in transport sector in constant prices of 2000, the figures of public investment in transport sector (current prices) are taken from the fiscal budget figures of Ministry of Finance, deflated by the CPI. The volume of public investment in transport sector can be seen to have been declining since 2002, reaching its lowest value in 2008. 7 Graph 2: public investment in transport sector ( constant prices, SYPs billion) 25.0 20.0 15.0 10.0 5.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Public investment in transport sector (constant prices) 5.7 14.3 20.3 19.9 17.8 15.2 13.7 13.4 7.9 Source: Ministry of Finance 18. Table 3 shows that the ratio of public investment to the output of transport sector has noticeably declined from 21% in 2004 to 10% in 2008. It also shows that the ratio of public investment to the total budget revenues and the total public investment significantly declined between 2002 and 2008 (note that public investment term refers to the capital expenditure or development expenditure in the annual government fiscal budget). It seems that although transport sector services are becoming more important for Syrian economy since the beginning of the open- door policy in 2004-2005 as it facilitates trade and other activities however, less funding is being allocated out of the annual fiscal budget to this sector. 8 Table 3: Public investment ratios total transport output, total revenues, and total public investments In % 2000 2001 2002 2003 2004 2005 2006 2007 2008 Public investment in transport sector / transport sector output 6 15 20 21 21 18 16 15 10 Public investment in transport sector/ total revenues 2 5 7 7 6 5 4 4 2 Public investment in transport sector / total public investment 6 13 15 14 13 12 10 10 6 Source: CBS, and Ministry of Finance 9 19. To fulfill the increasing demand on transport sector services and to achieve the quantitative objectives set in the 11th Five Year Plan and to utilize the geographical location of Syria as a connecting point in international trade, either more funding needs to be allocated to the transport sector, or the sector needs to find additional sources of funds. One option could be the establishment of a Road Fund that can be financed through several types of user fees including a transport fuel price surcharge. Before looking at this option in detail, we provide an assessment of the revenues that are currently generated through transport activities. 20. The standard criterion for comparing transport investment between countries and considering whether a particular countries transport investment is sufficient, is the percentage of GDP that is investment by the public sector in transport infrastructure. The generally accepted level is about 2% of GDP, but what is appropriate for a particular country at any point in time could be quite different to this. Four national characteristics have the greatest impact on the share of GDP that is needed for the transport sector: where the economy is growing rapidly there will be a need to invest in additional infrastructure to provide for the additional freight and passenger transport; where there is a migration of population from rural to urban areas, there will be a need to invest in new urban transport infrastructure (and vehicles if services are operated by the public sector), and; where there has been previous under-investment in transport infrastructure, a higher level of investment than the standard twill be needed to make up for this deficiency; where there has been a long history of investment in transport infrastructure, the need to link new production areas to the transport systems is less. 21. Most of the original members of the European Union have been investing between 1% and 2% of their GDP in transport infrastructure. These levels of GDP are what have actually been invested, not what needs to be invested to achieve any particular targets of connectivity. An estimate by the European Council of Transport Ministers in 20022 was that the accession countries would need to invest about 1.5% on upgrading and expanding their international transport infrastructure, with “several more percentage points� on urban, local and regional transport. Our own estimate is that these „several more percentage points� are of the order of 4% 2 Sustainable Transport: The Investment Challenge, Jack Short, ECMT, European Transport Conference, 2002 10 to 6% for middle income countries anticipating an economic growth rate of about 6% (as were the accession countries in 2002). 22. Developing countries have been investing between 3% and 5% on national transport infrastructure (excluding urban infrastructure), and the rapidly growing developing economies have typically invested between 6% and 8% of GDP in non-urban transport infrastructure. A recent World Bank study3 used a statistical analysis of the data to provide a simple formula for providing an initial estimate of how much a country would need to invest in transport infrastructure (a detailed estimate can take several months to reach a reliable result). The formula has four components, one each for road maintenance, maintenance of other transport infrastructure, expansion of transport infrastructure to accommodate increasing demand, and for urban transport infrastructure. % of GDP to invest in transport = 1% of GDP to maintain the road infrastructure +1% of GDP to maintain the infrastructure of all other transport modes + 25% of the growth rate of GDP expressed as a % of GDP (for example, if the GDP is growing at 6%, then 6% x 25% that is 1.25% of GDP needs to be added) + 1% of the urban population as percentage of the total population (for example, if the urban population is 40% of the total, then 1% of 40% that is 0.4% of GDP needs to be added to the total) 23. So the minimum needed just to maintain the existing transport infrastructure is about 2% of GDP. These estimates do not take account of making up for previous underinvestment as this is such a variable amount. An approximation can be made by applying the above formula to the last ten years and comparing the resulting % of GDP for the same period with the actual share of GDP that has been invested in transport. The difference is a measure of the deficit, but since it cannot be recovered in one year, the difference needs to be spread over perhaps five or ten future years, depending on the financial possibilities. 24. If the formula is applied to Syria for the period of the 10th Five Year Plan, the result is that about 3.9% of GDP should have been invested by the public sector in transport infrastructure. The actual investment was about 1.1% of GDP. Estimates for investment needs during the 11th 3 Africa Infrastructure Country Diagnosis, World Bank, 2009 11 Five Year Plan are slightly higher as the projected economic growth rate is higher than that achieved under the 10th Five Year Plan. In addition, the cumulative under-investment of the 10th Five Year Plan needs to be made up, and if this is planned over a period of twenty years, the annual percentage of GDP that needs to be invested in transport during the 11 th Five Year Plan is about 5%. Contribution of transport sector revenues to the fiscal budget 25. For decades oil sector revenues have been the main source of government revenue. However, the depletion of oil in 2004-2007 led to a significant decrease in oil-related revenues as Table 3 shows. Nevertheless, the exceptional and unprecedented increase in oil prices in 2008 and 2009 resulted in an increase in oil - related proceeds, and this smoothed the budget deficit in those years. 26. The reduction of customs duties on imported vehicles from 240% to 50% on average in 2004; the reduction of corporate tax rate to 26%; and the unprecedented reduction of customs duties on most of the imported inputs for the industrial sector were expected to increase the budget deficit over the period 2003-2007. However, in reality, the improvement of non-oil revenues over the same period particularly in 2006-2007 reduced the size of the budget deficit; this along with the rise in the volume of oil revenues minimized the magnitude of budget deficit in 2008. 27. Diversifying the sources of treasury‟s revenues through implementing different types of user fees and through the enhancement of the efficiency of tax collection would help in mobilizing the necessary fund needed to finance upgrading and modernization of transport infrastructure. Table 4: Evolution of Fiscal budget in Syria (2003-2009) (SYPs billion) 2003 2004 2005 2006 2007 2008 2009* Total Revenues 322.0 342.5 356.2 434.9 458.8 407.8 458.9 (percentage of GDP) 30 27 24 26 23 21 19 Of which: Oil-related proceeds 161.1 141.1 98.1 127 99.6 90.2 85.7 (percentage of GDP) 15 11 7 7 5 6 4 Of which: Non-oil revenues 160.9 201.4 258.1 307.9 359.2 359.5 373.2 (percentage of GDP) 15 16 17 18 18 15 15 12 Total Expenditure 353.7 405.1 431.4 493.7 520.5 548.4 685 (percentage of GDP) 33 32 29 29 26 23 28 Of which: Current expenditure 200.8 248.5 277 217.2 225.7 275.3 310 (percentage of GDP) 19 20 18.5 18.7 16 15.8 16.8 Of which: Development 152.9 156.6 154.4 176.5 194.8 230 expenditure 275 (percentage of GDP) 14.3 12.4 10.4 10.3 10.4 9.6 11.3 Overall balance -31.7 -62.6 -75.2 -58.8 -61.7 -192.2 -226.1 (percentage of GDP) -3 -5 -5 -3.4 -3 -9 -9 GDP 1.067.3 1.263.0 1.494.0 1.698.5 2.019.8 2.242.2 2.443.0 Source: Ministry of Finance, CBS. 2009 figures are estimated 28. There are currently five main sources of transport sector revenues; car registration fees; transit fees; traffic-related revenues; Baghdad- Damascus transit fees, and; a very small fuel tax. The share of the total transport-related revenues to the total budget revenues has averaged only about 3% over 2005-2008 as it is shown in Table 5. Out of this small share, the size of fuel tax is very small to the extent that it is not worth mentioning. Therefore, imposing fuel consumption tax is expected to generate more revenues that can be used to finance government investment in transport sector (see discussion below). Table 5: Evolution of transport sector-related revenues (2003-2009) (SYPs billion) 2003 2004 2003 2006 2007 2008 2009* Total budget revenues 322 342.5 356.2 344.9 458.8 407.8 458.9 Transport sector- related revenues 6.08 8.2 10.6 3.82 18.81 7.0 7.8 Transport sector- related revenues 2% 2% 3% 3% 4% 3% 4% /total revenues Source: Ministry of Finance- * 2009 are budget figures (expected not actual). 13 Summary of transport’s contribution to the economy Transport‟s share of GDP currently at 6% but possibly underestimated is a little below what might be expected, but not dramatically so. Caution is needed in interpreting transport‟s importance using this parameter, as an increase in the share could represent a larger transport task that is being undertaken, or that the same size task is being undertaken less efficiently. Transport investment has been a balanced mix of public and private, but the public total has fallen dramatically in that later part of the 10th Five Year Plan. The current level of public investment, about 1.1% of GDP is not enough and would need to almost double to prevent the condition of transport infrastructure declining further. Total investment to take account not only of maintaining current assets but providing capacity for economic growth and continued urbanization, is about 4% of GDP. If previous under-investment is also to be recovered, the total investment would need to be about 6% of GDP. Transport makes a relatively small contribution to public revenues, but this could increase significantly if a charge were made for the use of transport infrastructure in the form of surcharge on the price of transport fuels. Part II - Estimate of available public investment budget for the 11th five year plan Introduction 29. In part the estimate of funding available to implement the transport component of the 11th Five Year Plan, is based on an analysis of past trends. The past trends that have been analyzed include4: GDP and its main economic sectors (agriculture, mining and manufacturing, trade, transport and communications, finance, construction) GDP and total investment GDP and public revenue Total investment and public investment Public revenue and public investment Public investment and government transport investment Total transport investment and investment in each transport sub-sector. 4 Syria Transport Action Plan Model April 2010 version 4.0 14 30. By building up a consistent set of projections from past trends (2000-2008) of the above relationships, analysts can develop a feasible forecast of the transport budget. The projections are subject to large uncertainties however as they cover a period over ten years and much could change during the next ten years. Performance 2000-2008 31. The main financial features of the public sector related to Transport are presented in Table 6. Total Government revenue (including grants) rose from SYPs 245 billion in 2000 to a SYPs 459 billion in 2007 and an estimated SYPs 408 billion in 2008, an increase of more than 87 percent in nominal terms followed by a contraction of some 11 % between 2007 and 2008. Government revenue averaged 23 percent of GDP during the last five year period (2004-2008). Most public revenues were spent on current expenditures, accounting for an average of 77% percent of revenues. As already mentioned, the fiscal year 2008 shows a drop in revenues (about 11%) as well as an increase in current expenditures, those accounting for more than 90% of public revenues. 32. Public sector gross domestic fixed capital investment rose steadily from SYPs 99.3 billion in 2000 to SYPs 188 billion in 2006 but SYPs 178.5 billion in 2007 and some SYPs 158.4 billion in 2008. Gross domestic fixed capital formation (public and private) averaged 22 percent of GDP during the period. The public fixed capital investment represents some 9.5 percent of GDP in average while the transport sector benefits from a low 11 % of the public sector gross domestic fixed capital formation representing only 1 % of GDP on average over the last five year period. 15 Table 6: Public Finances 2000-2008 (SYPs billion) Public finance, 2000-2008 (SYPs Billion) 2000 2001 2002 2003 2004 2005 2006 2007 2008 Five -ye ar GDP at current prices 903.9 974.0 1,016.5 1,067.3 1,263.2 1,493.8 1,698.5 2,019.8 2,291.5 1,753 GDP growth (% change over the previous year) 0.6% 7.8% 4.4% 5.0% 18.4% 18.3% 13.7% 18.9% 13.5% GDP at constant prices 903.7 950.2 1,006.4 1,017.7 1,086.1 1,151.4 1,211.3 1,288.0 1,333.3 1,214 GDP growth (% change over the previous year) 0.6% 5.1% 5.9% 1.1% 6.7% 6.0% 5.2% 6.3% 3.5% GDP Transport at current prices 94.4 98.9 103.0 103.6 96.4 101.9 112.0 123.5 130.6 113 Percent of GDP 10.4 10.1 10.1 9.7 7.6 6.7 6.6 6.1 5.7 6.4 GDP Transport at constant prices 94.4 96.2 97.5 104.2 78.3 79.4 81.4 90.6 82 Percent of GDP 10.4 10.1 9.7 10.2 7.2 6.9 6.7 7.0 - 6.8 Ce ntral gove rnme nt Revenue including grants 245.6 305.3 301.7 322.0 342.5 356.2 434.9 458.8 407.8 400 Percent of GDP 27.2 31.3 29.7 30.2 27.1 23.8 25.6 22.7 17.8 22.8 Total expenditure 246.2 274.8 314.1 353.7 405.1 431.4 493.7 520.5 600.0 490 Percent of GDP 27.2 28.2 30.9 33.1 32.1 28.9 29.1 25.8 26.2 28.0 Percent of revenue 100.2 90.0 104.1 109.8 118.3 121.1 113.5 113.4 147.1 122.5 Current expenditure 151.3 164.8 178.3 200.8 248.5 277.0 317.2 325.7 370.0 308 Percent of revenue 61.6 54.0 59.1 62.4 72.6 77.8 72.9 71.0 90.7 76.9 Capital expenditure 94.9 110.0 135.8 152.9 156.6 154.4 176.5 194.8 230.0 182 Percent of revenue 38.6 36.0 45.0 47.5 45.7 43.3 40.6 42.5 56.4 45.6 Budget Equilibrium (0.6) 30.5 (12.4) (31.7) (62.6) (75.2) (58.8) (61.7) (192.2) (90.1) Percent of GDP (0.1) 3.1 (1.2) (3.0) (5.0) (5.0) (3.5) (3.1) (8.4) (5.1) Gros s dome s tic fixe d capital formation Public sector 99.3 117.1 125.2 160.1 141.3 167.2 188.4 178.3 158.4 167 of which transport 10.1 15.3 12.6 15.9 22.5 16.8 17.7 20.0 13.4 18.1 Other sectors 89.2 101.8 112.6 144.3 118.8 150.3 170.7 158.3 145.0 149 Private sector 56.8 81.0 81.4 88.6 159.7 192.8 175.2 233.9 250.3 202 Total 156.1 198.2 206.6 248.8 301.0 359.9 363.6 412.1 408.7 369 Total as percent of GDP 17.3% 20.3% 20.3% 23.3% 23.8% 24.1% 21.4% 20.4% 17.8% 21.1% Public sector fixed capital formation at 2000 prices 156.1 178.1 196.4 234.8 281.4 309.6 273.4 294.9 266.3 285 Public capital investment as percent of GDP 11.0 12.0 12.3 15.0 11.2 11.2 11.1 8.8 6.9 9.5% Transport public capital formation as percent of GDP 1.1 1.6 1.2 1.5 1.8 1.1 1.0 1.0 0.6 1.0% Transport as percent of public capital investment 10.2 13.1 10.1 9.9 15.9 10.1 9.4 11.2 8.5 10.9% Source: Data are from the Central Bureau of Statistics (CBS), except for sectoral breakdown of gross domestic fixed capital formation, which are from the Ministry of Transport 16 33. Transport‟s share of gross fixed capital formation fluctuated during the period 2000-2008 from a low of 10.2 percent in 2000 to a high of nearly 16 percent in 2004, to get back to a low of 8.5 % in 2008, averaging nearly 11 percent during the past 5 years (see table above). 34. Public spending in Syria on transport in relation to GDP and total expenditures should be similar to that in many other countries, including both industrial and developing countries. While public expenditures on transport vary widely in relation to total public expenditures, they vary much less in relation to GDP, reflecting differences across countries in the role of the private and public sectors in providing transport services. Figure 1 presents data for a sample of countries over a period of 12 years. This shows the wide variation in transport investment by year, and also the larger share of GDP for transport investment in the Russian Federation and Eastern Europe than in Western Europe and the United States. None of the investments exceed 2% of GDP. Figure 2 show the investment shares for road, rail and inland waterway for the Central and Eastern European countries. The road share has increased from about 70% to about 80% over the twelve year period, and the rail share has reduced from over 20% to about 15%. The inland waterway share has also reduced, from over 10% to less than 3%5. Figure 16 Transport investment Figure 2 Transport investment by mode for as a share of GDP for groups of Central and Eastern European countries countries7 5 Caution is needed in comparing investments between countries as the method of calculation is different between them. Some exclude urban transport, most but not all exclude private investment and some exclude port investment. Also, the EU definitions of investment changed in 2001 so there is only limited compatibility of data before and after this date. 6 http://www.internationaltransportforum.org/statistics/investment/invindex.html 7 WEC Western European Countries CEEC Central and Eastern European Countries 17 35. Data for other countries public expenditure on transport, whether as a % of total GDP or as a percentage of total capital expenditure is not easy to find. A recent paper8 on four major European countries indicated that total gross capital formation by the public sector fell in all countries over the period 1970 to 2000. Gross public sector capital formation dropped from an average of 4% of GDP in 1997 to about 2.2% by 2000. The fall was greatest in the UK (from 5% to 1%) and least in France (from 3.8% to 3.0%). Public investment in transport as a percentage of GDP reduced less significantly, but most in Germany, from 1.7% of GDP to 0.6% of GDP. Although the shares in the other countries reduced less, this was from a lower starting point. In all four countries there was a convergence towards a rate of about 0.5% of GDP. By the year 2000, public investment in transport as a share of gross public capital formation reached about 23%. 36. During their period of rapid expansion, many developing countries appear to have invested between 5% and 8% of GDP for periods of up to five to seven years. China has been investing more than 6% of is GDP for about a decade, but its economy has been growing at between 8% and 10% per year and there was a large compensation to be made for the previous decade when investment was less than 2% of GDP although the economy was expanding just as fast. 37. Table 7 shows the allocation of public expenditures across categories of expenditure. Mining and manufacturing, Agriculture, wholesale and retail trade, Transport and communication together comprise over 70 percent of GDP. Table 7: Allocation of public expenditures in Syrian Arab Republic, 2008 Sector Percentage of GDP Social and personal services 4 Building and construction 4 Wholesale and retail trade 21 Finance and Insurance 5 Agriculture 17 Mining and manufacturing 24 Transportation and communications 12 Government services 12 Other expenditures 1 Source: CBS 8 Financing of transportation investment: a macro-economic approach, http://dinamico2.unibg.it/highways/paper/valila.pdf 18 Proposed surcharge on the price of transport fuel 38. Managing fiscal budget and finding different sources of revenues is a major challenge that faces the governments in transition economies. This challenge becomes even more difficult when the whole world goes through economic and financial crisis as it is the case now. Therefore, the Government could look for other possible sources of revenues that generate income, on one hand, and do not have distorting impacts, on the other hand. One possibility is to introduce a user fee (surcharge on the fuel price) for using transport infrastructure in general but more specifically and mostly for the commercialization of roads covering in the medium and long term both maintenance and investments in the road sector. The concept is, "bring roads into the market place, put them on a fee-for-service basis and manage them like a business." In other words, move roads closer to the boundary between the public and private sectors and manage them like a public enterprise. 39. These arrangements are designed to be budget neutral - a major consideration for the Ministry of Finance - to ensure that extra spending on roads is financed though extra payments by road users. Based on experience of other countries, additional elements to be considered at a later stage could include: (i) managing the funds through an independent road fund administration; (ii) generating revenues primarily from charges related to road use; (iii) having a broad-based, stakeholder driven, Board of Directors to supervise the funds; (iv) delegating day- to-day management to a small secretariat; and (v) introducing regular technical and financial audits. The following section aims to assess the expected impact of introducing a surcharge on fuel price on; (i) the level of additional revenues it could generate; and (ii) the general price level in Syria. 40. An estimate of the potential revenue from such a surcharge is made in three stages. First, an estimate is made the quantity of fuel used in the transports sector; second an estimate of the price elasticity of transport fuel consumption, and third; an assessment of the impact on fuel consumption of a proposed surcharge, and the net revenue resulting from that surcharge. Estimate of current fuel consumption in transport sector 41. There were significant increases in the total consumption of fuel in Syria during the period 1995-2009. As it is the case in any newly liberalized economy where access to goods and commodities become easier and demand on fuel increase for several reason, total consumption of diesel and gasoline continues to witness significant increases from 2003-2004 up to 2007 (Graphs 3 and 4). This increase resulted from the increase of the activities in many economic sectors in Syria following the liberalization and reform policy; whereas domestic demand on diesel for industrial and trade activities increased and domestic demand on gasoline as a result of 19 the unprecedented increase in number of Automobiles in Syrian also significantly went up (graph14). However, much (between 30% and 40%) of the diesel sold in Syria was smuggled to neighboring countries like Lebanon, Jordan and Turkey where retail prices were much higher. 42. In 2008, consumption of diesel fell by a significant 25 percent as a result of price reform policy which resulted in an increase from 7 SYP per Liter to 25 SYP per Liter in May 2008, then a reduction to 20 SYP per Liter at the end of 2008. While such a price increase can explain much of the fall in consumption, there were other factors active at the same time. 2008 was the year of the financial crises which affected the real economy and therefore the demand for fuel. The reduction in the price of diesel at the end of 2008 and the beginning of the recovery from the crisis in 2009 explain the slight increase in diesel consumption in 2009 relative to 2008. Graph 3 : Total consumption of diesel in Syria (000 of Tons) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: General establishment for fuel distribution in Syria (Mahrouqat) 20 Graph 4: Total consumption of gasoline in Syria (000 of tons) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: General establishment for fuel distribution in Syria (Mahrouqat) Graph 5: Evolution of the number of Automobiles in Syria 600,000 500,000 400,000 300,000 200,000 100,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: CBS 21 43. The consumption of Diesel and Gasoline in 2008 and 2009 was exceptional and does not provide a very secure basis on which to forecast the pattern of consumption over the period of the next Five Year Plan. There are some indications that consumption of Diesel will increase in the near future mainly because of the expected recovery in industrial and transport activities and the new activities of manufacturing sector particularly in the four industrial estates. Similarly, the consumption of gasoline is expected to continue its rising trend as the Syrian economy continues to recover from the consequences of the financial crisis and with increasing personal incomes, demand for and the use of private vehicles is expected to increase. 44. Graphs 6 shows that the forecast consumption of Gasoline and Diesel over the period 2010- 2020 according to “Mahrouqat.� will continue to increase over the next 10 years. Similarly, estimating the total amount of fuel consumption in transport sector is a complex issue as transport services are inputs for mostly all other economic activities. Based on evidence and expertise from the energy sector, it has been estimated that 50% of the total “Diesel� consumption comes from the transport sector, the remaining 50% being used by the industry and agriculture sectors. About 95% of the transport sector Benzene consumption is for cars, taxies and private transport means. Graph 6: Forcast of diesel and gasoline consumption in Syria ( 000 of Liters) 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Mazout consumption Benzine consumption in Transport sector Source: General establishment for fuel distribution in Syria (Mahrouqat) 22 45. In Working Paper No.1 of this series, the World Bank provided some estimates of the impact of a 10% increase in transport fuel prices on the prices of final consumer goods and on the overall level of transport fuel consumption. Based on extensive evidence of the elasticity of fuel demand to its price from other developing countries, the analysis of WP1 indicated only a very small impact (a price elasticity of less than 5%) of a 10% transport price increase on the level of demand for transport fuel. In the present analysis the price elasticity is assumed to be zero. The estimates of transport sector fuel consumption for the period 2010-2020 are shown in the following Table: Table 8: Diesel and gasoline consumption in the transport sector Diesel consumption in transport sector Gasoline consumption in transport sector Year (000 Liters) (000 Liters) 2010 4,633.9 2,136.7 2011 4,865.6 2,239.5 2012 5,108.9 2,347.5 2013 5,364.4 2,460.8 2014 5,632.6 2,579.8 2015 5,914.2 2,704.7 2016 6,209.9 2,835.8 2017 6,520.4 2,973.8 2018 6,846.4 3,118.4 2019 7,188.7 3,270.3 2020 7,845.2 3,429.8 Source: World Bank, based on “Mahrouqat� data Estimate of the revenues generated by a transport fuel surcharge 46. The current retail prices of Diesel and Benzene are 20 SYPs and 40 SYP per liter respectively. At these prices a 10% fuel surcharge would putting the level of the surcharge at 2 SYPs per liter of Diesel; and 4 SYPs per liter of Benzene9. The annual revenues generated by this level of surcharge on the projected sales of the fuels are shown in the following Table 9 bellow: 9 Some US$5 cents at the exchange rate of 1US$=46 SYP for Diesel and US$8.5 cents for Gasoline. 23 Table 9: Estimates of revenue from a transport fuel surcharge of 10% on retail prices Revenues from Diesel Revenues from Gasoline Total Revenues from surcharge on Year surcharge surcharge fuel consumption 2010 9,268 8,547 17,815 2011 9,731 8,985 18,689 2012 10,218 9,390 19,608 2013 10,729 9,843 20,572 2014 11,265 10,319 21,584 2015 11,828 10,819 22,647 2016 12,420 11,343 23,763 2017 13,042 11,895 24,936 2018 13,693 12,474 26,166 2019 14,377 13,081 27,459 2020 15,096 13,719 28,815 Source: World Bank Estimates 47. Introducing a 10% surcharge on the retail price of transport fuel would generate gross income of about SYP 18 billion in 2010 increasing to SYPs 29 billion by 2020 and an aggregate income of about SYPs 100 billion for the period of the 11th five year plan (2011-2015). 48. If the full amount were to be dedicated to financing the public sector contribution of the transport sector investment program that would sum up to some SYPs, some SYPs 22.5 billion in 2015 and some for a total aggregate and/or SYPs 250 billion for the 2010-2020 period. It could exceed SYPs 40 billion from 2025 on. This would cover by itself the yearly public investment funding required forecasted as per the table above. On another hand, it has been estimated that the introduction of a 10% surcharge on fuel price would have a very little impact on the price level (probably below 1% considered not significant). 49. The introduction of a surcharge on fuel price of some 10% has been discussed with the Government and it has been established that it would enable the Government to finance important public investment in the transport sector, which would consequently enhance the role of transport sector in Syrian economy. It would, also, probably help compensate the expected decrease in private sector investment as a result of the recent world financial crisis expected to impact substantially the Syrian economy. It is expected that it will contribute to the reduction of the budget deficit that is rising following the recent financial crisis; and in particular; it should, also, compensate the expected decrease in other transport related-revenues, such as for example the duties on imported vehicles and vehicle registration fees. Therefore, the introduction of the proposed surcharge of 10% on the fuel price has been recommended and has also been 24 considered for the computer assisted Excel financial model on the public resources allocation side of the Transport Action Plan. Projected transport sector public resource allocation 2011-2015 (11th five year plan) 50. Assuming capital investment continues to grow roughly in line with revenue (and hence with GDP) the target being 11% of GDP starting 2011 (as per Government proposal during the August 2010 mission-see scenario N), and that transport gets a share of 15 percent of the public investment budget (as per Government proposal during the August 2010 mission), investment in transport will rise in real terms (at 2009 constant prices) from some SYPs 25 billion estimated in 2010 to some SYPs 72 billion in 2020 (or SYPs 87 billion if the introduction of the user fee scheme is successful). Table 10 shows the projections for the period 2010-2020 for public finances in 2009 constant values. The projections reflect also (Table 10 B) the revenues generated with the introduction of the user fee scheme (surcharge on the fuel price), and take into account the discussed ceiling of 15 percent of total capital expenditures to be spent on transportation. However, public capital investment in transport would still be only 1.65% of GDP (that is 15% of 11%) and this is only about the average for the countries of Eastern Europe (see Figure 1) and is much less than necessary to make up for previous under-investment and to provide capacity for economic growth. 51. Government revenue (including grants) is projected at 23 percent of GDP. It is assumed that government expenditure, having risen steadily in proportion to revenue, will stabilize at 110 percent of revenue, and that fixed domestic capital formation will comprise 11 percent of GDP. This implies that the government will have to continue to borrow, both internally and externally, and look for new Public Private Partnership scheme to finance the investment considered as priorities in the next 5 year Investment Plan. Conclusions 52. Public funds for investment in transport will depend largely on the actual growth of the economy and on the will of the government to set the transport sector as a priority for the future development of Syria, taking advantage of its strategic and geographic location, and focusing the economic strategy of the country towards trade and transit activities. 53. If the anticipated stable growth (forecasted at this stage at an average 5.5% per year for the next 5 year period as per Government proposal during the August 2010 mission ) materializes for the medium and long term, and government decisions modify past trends for the future, then the public finance budget for transport would rise from nearly SYPs 31 billion foreseen in 2011 to 25 some SYPs 55 billion in 2015 for a total estimated public financing investment budget in the transport sector of some SYPs 235 billion over the period of the 11th Five Year Plan. An additional 22% of investment funding would be available, giving a total of SYPs 287 billion for the whole 11th Five Year Plan, if 50% of the resources generated by the fuel surcharge scheme were available to finance the 11th Five Year Plan. Under more pessimistic assumptions, that the 11th Five Year Plan period is characterized by the same low average growth rate and contribution to the transport sector as occurred during the 10th Five Year Plan, then the aggregate resource mobilization for the period would remain at between SYPs 145-215 billion. See various scenarios (A and B in particular) in the Transport Action Plan model version 11.0 and presented in Annex 1. 26 Table 10: Public Finances (2010-2020) (SYPs billion) Table 10: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario N 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 GDP at market prices 2,560 2,701 2,850 3,006 3,172 3,346 3,530 3,724 3,929 4,145 4,373 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 269 297 313 331 349 368 388 410 432 456 481 11.0% of GDP 10.5% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% Of which Transport Sector 25 31 47 50 52 55 58 61 65 68 72 15.0% of public sector fixed capital formation 9% 11% 15% 15% 15% 15% 15% 15% 15% 15% 15% Other sectors 244 266 266 281 297 313 330 348 367 388 409 Transport recommended allocation ceiling From public fixed capital formation 24.8 31.2 47.0 49.6 52.3 55.2 58.2 61.4 64.8 68.4 72.2 0% Share of new surcharge going to capital investment for road maintenance - - - - - - - - - - Total 24.8 31.2 47.0 49.6 52.3 55.2 58.2 61.4 64.8 68.4 72.2 Table 10 B: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario N 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 GDP at market prices 2,560 2,701 2,850 3,006 3,172 3,346 3,530 3,724 3,929 4,145 4,373 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 269 297 313 331 349 368 388 410 432 456 481 11.0% of GDP 10.5% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% Of which Transport Sector 25 31 47 50 52 55 58 61 65 68 72 15.0% of public sector fixed capital formation 9% 11% 15% 15% 15% 15% 15% 15% 15% 15% 15% Other sectors 244 266 266 281 297 313 330 348 367 388 409 Transport recommended allocation ceiling From public fixed capital formation 24.8 31.2 47.0 49.6 52.3 55.2 58.2 61.4 64.8 68.4 72.2 50% Share of new surcharge going to capital investment for road maintenance 9.4 9.8 10.4 11.0 11.3 11.9 12.4 13.1 13.9 14.7 Total 24.8 40.5 56.8 60.0 63.3 66.5 70.1 73.8 77.9 82.3 86.8 27 Part III - Prioritization and Investment Program Recommended method 54. It is unlikely that the estimates of available funding will be sufficient to cover the cost of all the proposed investments, so some system of prioritization is needed to ensure that the projects actually funded are those that best satisfy the government‟s objectives. 55. The many potential methods of prioritizing investment projects can be categorized into three groups – those dependent on cost benefit analysis, those derived from a cost efficiency perspective, and those that are based on the achievement of transport planning and other objectives. While there are many examples of how each of these methods have been applied to the prioritization of projects within a particular mode of transport, there are many fewer examples of where they have been applied to the prioritization of projects throughout the transport sector of the economy. 56. The method proposed here is a combination of the Cost Effectiveness and the Planning Method that gives an approximation to Cost Benefit analysis. We do not propose use of cost benefit analysis itself as the necessary data, time and analytical skills are not available. We do not propose the use of cost effectiveness itself, as the objectives of the various projects are too different to be assessed using a single objective. We do not advocate use of the Planning Method because of the many deficiencies in its application. We have attempted to combine the advantages of each while avoiding their principal deficiencies. 57. The method proposed is a development of one first used by the World Bank to assess transport infrastructure investment needs for China in the mid-1990s and most recently (2009) for44 African countries. Specification of projects 58. In all three methods, the prioritization approach is used to rank projects using the appropriate parameter for the method used (such as the cost benefit ratio, the cost effectiveness ratio or the maximum objective achievement score) until the available budget is used up. The use of available budgets highlights another characteristic if prioritization methods, that is the scheduling of projects. Prioritization does not necessarily imply that the projects with lower ranking are not to be implemented, but that they would be best scheduled for later rather than earlier in the investment program. 28 59. Some projects are very specific (such as the construction of an expressway between one location and another) while others are more like programs than specific projects (such as maintaining all national roads to a minimum specified standard). All prioritization methods work better and produce more efficient and practical results the more specificity there is in the definition of the projects. Quite often a program that would have a low prioritization has some components which, if considered separately would have a much higher ranking. So the prioritization process would produce a more efficient result if the program were considered in two or more components. The more developed is the concept of a project, it is easier and more precise to estimate its potential outcomes and the more reliable are the estimates of its cost. If the concepts of the projects being prioritized are at different stages of development, it is more difficult to prioritize among them. 60. The first task is to define the several different objectives of investments in each transport mode. In the prioritization method used for transport projects in the Tenth Five Year Plan there were only three Objectives and they were considered as alternatives. Learning from the problems of that experience, the proposed method requires more Objectives to be determined, as they as considered as parallel rather than alternatives. So far as is possible the Objectives should be mutually exclusive, otherwise there will be some double counting of some of the benefits of the projects. For the proposed method to be used, all the Objectives need to be capable of quantification. 61. Next, the method requires that the relative importance of the Objectives be assessed. There are various ways in which this can be done, but we believe that one of the simplest is to give each Objective a relative importance score out of 100. So the most important Objectives, or those that have a priority in the next Five Year Plan, should have a score of closer to 100 than Objectives that might be desirable to achieve but not with the same priority or urgency. 62. The method also requires a measurement of the extent to which each of the Objectives is currently met. The Objectives are defined in quantitative terms, as is the extent of their achievement, although the latter are eventually expressed as percentages. For example, if the Objective for inter-urban roads is that 65% be in good or regular condition and there are currently only 45% in good or regular condition, then the achievement of this Objective is currently 45%/65% that is 69%. The more that each Objective is divided, the more precise will be the prioritization, see the later example. 29 Projects 63. There are currently (December, 2010) 203 transport projects proposed for inclusion in the 11th Five Year Plan. Their cost totals some SYPs 284 billion over the 5 year period and their net present value in SYPs 2010 is estimated at some SYPs 224 billion. It needs to be specified that these total value represent only the public finance estimated contributions to the total amount of investments anticipated. 64. While most of them are conventional investment projects others are more policy oriented actions, such as to increase training of staff in the transport sector institutions. Table 11 below presents the summary by sub-sector and by year of the results of the prioritization process and of the final proposal for the Transport Sector 11th Five Year Plan (2011-2015). Table 11: Transport Sector 11th five year plan proposal POINTS NPV COST No. of In SYPs millions Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of PER POINT Projects Priorities by subsector 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total Total Total AIR 5,991,000 14,404,700 15,902,900 20,327,500 16,286,500 72,912,600 56,546,803 9.71 5.8 25 ROADS 11,220,145 13,150,330 15,159,250 14,437,750 14,248,400 68,215,875 54,006,612 10.53 5.1 83 RAILWAYS 13,276,750 16,480,250 18,889,350 22,452,700 23,002,200 94,101,250 73,575,736 5.16 14.3 26 PUBLIC TRANSPORT 4,390,150 5,731,948 948,532 395,810 360,060 11,826,500 10,268,133 8.42 1.2 14 MARITIME & PORTS 6,348,100 9,026,750 9,253,200 5,288,200 5,937,000 35,853,250 28,889,949 11.74 2.5 45 MOT 240,000 255,100 234,200 245,300 275,400 1,250,000 994,580 7.18 0.1 10 TOTAL 41,466,145 59,049,078 60,387,432 63,147,260 60,109,560 284,159,475 224,281,814 52.73 4.3 203 TRUE TRUE POINTS NPV COST No. of In SYPs millions Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of PER POINT Projects Priorities by type 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total Total Total MAINTENANCE 12,501,400 12,118,850 12,424,000 11,397,150 10,932,850 59,374,250 47,645,862 5.32 9.0 16 ONGOING PROJECTS 25,748,245 39,397,628 37,545,132 41,450,510 42,472,110 186,613,625 146,795,786 39.45 3.7 126 NEW PROJECTS 3,216,500 7,532,600 10,418,300 10,299,600 6,704,600 38,171,600 29,840,165 7.95 3.8 61 TOTAL 41,466,145 59,049,078 60,387,432 63,147,260 60,109,560 284,159,475 224,281,814 52.73 4.3 203 TRUE TRUE 65. Whether they are conventional or unconventional projects, they all have a cost and can have a measured outcome towards one or more of the Objectives. So the next stage is to assess the net present value of the cost, based on the remaining total cost of the Project (which is not 30 necessarily the same as planned expenditure during the next Five Year Plan). Also can then see how far each proposed Project goes towards meeting each of the Objectives. 66. For example, if one of the Objectives is to facilitate transit trade and this requires about 1,700km of road, then a project that would add 400km of these would provide 400/1600 % (that is 0.235* 100%) of the needed capacity and would score 23.5 points. These points are then weighted by the relative importance of the Objective. If the importance score for the transit trade Objective is 75%, then the final points for this project would be 23.5 * 75% that is 17.6 points. 67. The fourth stage is to estimate cost of proportionate reduction, for the example above, the cost of the 400km of new road might be U$6 million. This cost might be incurred equally over a period of perhaps six years, so it will be possible to calculate the net present value of the costs of the project using a standard discounting procedure. This discounted net cost is the measure of the Cost of the project. With a discount rate of 8% the net present value would be U$5 million. Prioritization and scheduling of projects 68. For each project it is now possible to calculate a ratio of the measure of Benefit to the measure of Cost. It is this ratio that is used to rank the projects and give them their priority until the available transport budget is used up. For the transit road example above, the cost per point would be U$0.5b/17.6 that is U$28,409 per point. 69. Projects are chosen for inclusion in the Five Year Plan according to this ratio, but with a check on the annul availability of funds. For this part of the analysis the actual annual cost and not the discounted annual cost is used. A cut off is determined by the total funds available in the 11th Five Year Plan as estimated in the Part One of this Note. 70. A further check is given by the annual availability of funds for the Plan period. A check is made of the annual expenditure of the projects that come above the cu-off point for their total cost. Where the sum of actual costs in any year is greater than the available funds in the year, it is necessary to reschedule the accepted projects, with those projects with a higher cost per point being rescheduled later in the Plan period than originally proposed. Summary of Prioritization method 1. Decide on the Objectives of investment in the transport sector, and score the Objectives with a relative weight out of 100% 31 2. For each Objective, provide a quantified measure. For most Objectives it will be a measure of capacity. 3. For each project estimate the extent to which it achieves the quantified capacity (or other measure) for its Objective. Some projects help achieve more than one Objective. For these projects the points are shared between the Objectives. 4. Weight the number of points for each Objective for each project by the points scored for those Objectives. Sum the weighted points to estimate the total points for each project 5. For each project calculate the net present value of investment needed to complete the project. 6. Calculate the score in net present value per weighted point, and rank the projects by this criterion, with those with the lowest cost per point ranking highest 7. Cut off the projects where the cumulative total cost for the Plan period equals the total funds available. Projects that rank below this cut-off are deferred to the next plan period. 8. Check the cumulative cost of accepted projects for each year against the annual budget for each year. For any year where the cumulative total cost exceeds the available budget, reschedule the projects with the highest cost per point to later years until the annual budgets are not exceeded. 32 Part IV - Financing plan and financial equilibrium 71. The public resources allocation model showed that based on the most realistic scenario (Scenario N) extensively discussed with the Authorities and the various assumptions and parameters fixed during the last August 2010 mission, the amount of resources available, as shown in Part II of the report, should amount to some SYPs 235 billion for the overall 11th Five Year Plan if the fuel surcharge was not introduced (user fee scheme proposed to be implemented). This compares to the cost of about SYP 284 billion for the 203 projects included in the prioritization process described in Part III of this report. Under more pessimistic assumptions, that the 11th Five Year Plan period is characterized by the same low average growth rate and contribution to the transport sector as occurred during the 10th Five Year Plan, then the aggregate resource mobilization for the period would remain at between SYPs 145-215 billion. See various scenarios (A and B in particular) in the Transport Action Plan model version 11.0 and presented in Annex 1. 72. The table 12 below, presents the conditions of the financial equilibrium, putting in evidence a public finance deficit of some SPYs 49 billion (equivalent to the average yearly allocation for the 11th Five Year Plan). If no other public resource could be allocated to the transport sector, then the transport sector 11th Five Year Plan priorities should be reviewed and some lower priorities projects should be delayed and/or rescheduled or canceled, until the TAP investment program equals the amount of public finance resources available over the period. Table 12: Transport Action Plan and financial equilibrium (no user fee scheme) (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario N 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 235.4 31.2 47.0 49.6 52.3 55.2 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) (48.8) (10.3) (12.0) (10.8) (10.8) (4.9) As percent of public financing allocation ceiling 121% 133% 126% 122% 121% 109% 73. At the same time the 11th Five Year Plan for the transport sector was prepared, the concept of a user fee to use some of the transport infrastructure was also considered. Part II of this report 33 deals with this proposal. It also estimates, based on future consumption of diesel and gasoline, the resources which could complement the public finance contribution to the 11th Five Year Plan. With the introduction of a fuel surcharge of some 10% of the diesel and gasoline ongoing prices, an additional SYPs 105 billion should be generated. If the assumption is made that some 50% of the fuel surcharge would be affected to the investment program, then it has been calculated that an additional 22% of investment funding would be available. The total amount of public finance allocated to the 11th Five Year Plan would then be SYPs 287 billion. This would allow a small surplus between the sources and uses of fund of some SYPs 3 billion. At the same time, the yearly financial equilibrium is more or less met every year except probably in 2012, implying that some expenditures or some small projects should be postponed to 2013, which would also implies that some expenditures will have to be postpone to 2014, knowing that there is a substantial resource excess (some SYPS 6.5 billion) in 2015. Table 13: Transport Action Plan and financial equilibrium (user fee scheme introduced) (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario N 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 287.1 40.5 56.8 60.0 63.3 66.5 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) 2.9 (0.9) (2.2) (0.4) 0.1 6.4 As percent of public financing allocation ceiling 99% 102% 104% 101% 100% 90% 34 Part V – Main conclusions and Recommendations relating to investment and funding 74. The public budget will not be able to fund all the proposed transport sector projects that will be needed to fulfill the sector objectives over the period of the 11th Five Year Plan. For there to be a reasonable chance of achieving the objectives, three actions will be necessary. First, the public budget would need to be supplemented with a substantial share of the revenues from a transport infrastructure user fee that would be in the form of a surcharge on fuel used in the transport sector. This will need to be further supplemented by significant investment by the private sector through projects financed by both sectors, commonly referred to as public private funding. This in turn will influence the outcome of the third action, a strict prioritization of investments to include only those that are most cost effective in achieving the sector objectives. In this prioritization process, higher priority will be given to projects that include substantial private capital in their funding scheme. 75. Assuming that GDP grows at the projected rate of 5.5%, that public revenue continues at its current share of GDP (23%) and that public capital investment gets to the level planned during the last August 2010 mission during the consultations with the Deputy Prime Minister at 11% of Gross Domestic Product, and that transport gets a priority share of 15 percent of the public investment budget, public funds available for investment in transport will total about SYP 235 billion (and some SYPs 287 billion if the user fee scheme is introduced) over the period of the 11th Five Year Plan, and take into account the discussed ceiling of 15 percent of total capital expenditures to be spent on transportation. 76. In order to meet the medium and long term financial equilibrium between the investments to be implemented and the public finance resource available: (i) a user fee scheme, for example, would have to be introduced so that the amount of resources available are complemented by an additional 20-25%; or (ii) the Transport Action Plan would have to be reprioritized in order to postpone, reschedule or cancel some SYPs 50 billion of projects among the lowest priorities. 35 Part VI - Other components of the Transport Action Plan 77. The Transport Action Plan involves more than just investment and its funding. As a minimum, it should also include provisions for adapting the institutional structure of the sector for the changed circumstances that transport now faces, compared to that when the current institutional structure was put in place. In addition it should include provision for updating and expanding the skills of those who need to implement the investment program. As part of implementing the investment program, there should be a monitoring process available so that any changes in the funding available, or the projects to be funded (including their phasing and scheduling), and significant differences from those foreseen in the national economy (and also the economies of other countries in the region so far as they impact on the demand for transport services within Syria) can be taken into account and the investment program modified accordingly. 78. All three of these activities – institutional review, skills training and monitoring of performance of the sector and its investments – require much analysis and consideration before they can be acted upon. Perhaps the closest for such action is the monitoring of the investment program, as with little modification the Prioritization Model (prepared with support from the Technical Assistance of the World Bank) can be adapted to this purpose. 79. The investment program already includes some funding for training and updating the skills of administrators of the transport sector, but at only SYP 0.36million this is only 0.13% of the proposed investment. Given the current need for skills updating, this would need to be five or six times greater (about 1% of investment as a minimum) to have any significant beneficial impact. The investment program does not include anything for review of the sector‟s institutional structure but does include limited funding for new computer systems and buildings. 36 SYRIAN ARAB REPUBLIC PROPOSED NATIONAL TRANSPORT ACTION PLAN Annexes 37 Annex 1: Resources Allocation to Transport Sector main Scenarios Scenario N based on August 2010 meeting with Scenario A Scenario B Scenario C Deputy Prime protected protected protected Minister Targets suggested between DPM Parameters Input and MOT GDP Growth (in real terms) 5.0% 6.0% 7.0% 5.5% Public sector fixed capital formation (PSFCF) 9.5% 11.5% 14.0% 11.0% (as percent of GDP) Transport sector in the PSFCF (as percent of the PSFCF) 10.9% 12.9% 15.0% 15.0% % of newly created surcharge to be allocated to invesment Main Results Proposed TAP 2011-2015 284.2 284.2 284.2 284.2 Recommended Allocation ceiling in SYPs billion Phase 1: 2011-2015 144.3 215.2 318.0 235.4 Contribution of newly created surchage (in %) TAP as a % of allocated ceiling Phase 1: 2011-2015 197% 132% 89% 121% Main conclusions - Syrian Arab Republic- Syrian Transport Action Plan RUN ALL SCENARIOS Financing Plan Financing Plan Your Financing Financing Plan not sufficient, not sufficient, Plan is adequate not sufficient, - Syrian Arab Republic- Review lowest Review lowest BUT review Review lowest Syrian Transport Action Plan priorities and cut priorities and cut sequencing of priorities and cut RUN SCENARIO N about SYPs about SYPs investments for about SYPs billion billion 2011 billion 139.9 68.9 - 48.8 38 Scenario A: Table 10: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario A 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP at market prices 2,548 2,675 2,809 2,950 3,097 3,252 3,415 3,585 3,765 3,953 4,150 4,358 4,576 4,805 5,045 5,297 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 268 254 267 280 294 309 325 341 358 376 395 414 435 457 480 504 9.5% of GDP 10.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% Of which Transport Sector 25 19 29 30 32 34 35 37 39 41 43 45 47 50 52 55 10.9% of public sector fixed capital formation 9% 8% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% Other sectors 243 235 238 250 263 276 289 304 319 335 352 369 388 407 428 449 Transport recommended allocation ceiling From public fixed capital formation 24.7 19.3 29.0 30.4 32.0 33.6 35.2 37.0 38.8 40.8 42.8 45.0 47.2 49.6 52.1 54.7 0% Share of new surcharge going to capital investment for road maintenance - - - - - - - - - - - - - - - Total 24.7 19.3 29.0 30.4 32.0 33.6 35.2 37.0 38.8 40.8 42.8 45.0 47.2 49.6 52.1 54.7 Table 10 B: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario A 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP at market prices 2,548 2,675 2,809 2,950 3,097 3,252 3,415 3,585 3,765 3,953 4,150 4,358 4,576 4,805 5,045 5,297 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 268 254 267 280 294 309 325 341 358 376 395 414 435 457 480 504 9.5% of GDP 10.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% Of which Transport Sector 25 19 29 30 32 34 35 37 39 41 43 45 47 50 52 55 10.9% of public sector fixed capital formation 9% 8% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% Other sectors 243 235 238 250 263 276 289 304 319 335 352 369 388 407 428 449 Transport recommended allocation ceiling From public fixed capital formation 24.7 19.3 29.0 30.4 32.0 33.6 35.2 37.0 38.8 40.8 42.8 45.0 47.2 49.6 52.1 54.7 50% Share of new surcharge going to capital investment for road maintenance 9.4 9.8 10.4 11.0 11.3 11.9 12.4 13.1 13.9 14.7 15.5 16.3 17.1 17.9 18.8 Total 24.7 28.7 38.8 40.8 42.9 44.9 47.1 49.4 51.9 54.7 57.5 60.5 63.5 66.7 70.0 73.5 39 Scenario B Table 10: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario B 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP at market prices 2,572 2,727 2,890 3,064 3,247 3,442 3,649 3,868 4,100 4,346 4,607 4,883 5,176 5,487 5,816 6,165 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 270 314 333 353 374 396 420 445 472 500 530 562 596 631 669 709 11.5% of GDP 10.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% Of which Transport Sector 25 28 43 45 48 51 54 57 61 64 68 72 77 81 86 91 12.9% of public sector fixed capital formation 9% 9% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% Other sectors 245 286 290 307 326 345 366 388 411 436 462 490 519 550 583 618 Transport recommended allocation ceiling From public fixed capital formation 25.0 28.2 42.7 45.3 48.0 50.9 54.0 57.2 60.6 64.3 68.1 72.2 76.6 81.1 86.0 91.2 0% Share of new surcharge going to capital investment for road maintenance - - - - - - - - - - - - - - - Total 25.0 28.2 42.7 45.3 48.0 50.9 54.0 57.2 60.6 64.3 68.1 72.2 76.6 81.1 86.0 91.2 Table 10 B: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario B 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP at market prices 2,572 2,727 2,890 3,064 3,247 3,442 3,649 3,868 4,100 4,346 4,607 4,883 5,176 5,487 5,816 6,165 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 270 314 333 353 374 396 420 445 472 500 530 562 596 631 669 709 11.5% of GDP 10.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% Of which Transport Sector 25 28 43 45 48 51 54 57 61 64 68 72 77 81 86 91 12.9% of public sector fixed capital formation 9% 9% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% Other sectors 245 286 290 307 326 345 366 388 411 436 462 490 519 550 583 618 Transport recommended allocation ceiling From public fixed capital formation 25.0 28.2 42.7 45.3 48.0 50.9 54.0 57.2 60.6 64.3 68.1 72.2 76.6 81.1 86.0 91.2 50% Share of new surcharge going to capital investment for road maintenance 9.4 9.8 10.4 11.0 11.3 11.9 12.4 13.1 13.9 14.7 15.5 16.3 17.1 17.9 18.8 Total 25.0 37.6 52.5 55.7 59.0 62.2 65.9 69.6 73.7 78.2 82.8 87.7 92.8 98.2 104.0 110.0 40 Scenario C Table 10: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario C 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP at market prices 2,597 2,778 2,973 3,181 3,404 3,642 3,897 4,170 4,461 4,774 5,108 5,465 5,848 6,257 6,695 7,164 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 273 389 416 445 476 510 546 584 625 668 715 765 819 876 937 1,003 14.0% of GDP 10.5% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% Of which Transport Sector 25 41 62 67 71 76 82 88 94 100 107 115 123 131 141 150 15.0% of public sector fixed capital formation 9% 11% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% Other sectors 247 348 354 379 405 433 464 496 531 568 608 650 696 745 797 853 Transport recommended allocation ceiling From public fixed capital formation 25.2 40.8 62.4 66.8 71.5 76.5 81.8 87.6 93.7 100.2 107.3 114.8 122.8 131.4 140.6 150.4 0% Share of new surcharge going to capital investment for road maintenance - - - - - - - - - - - - - - - Total 25.2 40.8 62.4 66.8 71.5 76.5 81.8 87.6 93.7 100.2 107.3 114.8 122.8 131.4 140.6 150.4 41 Table 10 B: Public finance, 20010–20, 2009 constant prices (SYPs billion) Scenario C 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP at market prices 2,597 2,778 2,973 3,181 3,404 3,642 3,897 4,170 4,461 4,774 5,108 5,465 5,848 6,257 6,695 7,164 Consolidated central government Public Sector Gross Domestic Fixed Capital Formation 273 389 416 445 476 510 546 584 625 668 715 765 819 876 937 1,003 14.0% of GDP 10.5% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% Of which Transport Sector 25 41 62 67 71 76 82 88 94 100 107 115 123 131 141 150 15.0% of public sector fixed capital formation 9% 11% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% Other sectors 247 348 354 379 405 433 464 496 531 568 608 650 696 745 797 853 Transport recommended allocation ceiling From public fixed capital formation 25.2 40.8 62.4 66.8 71.5 76.5 81.8 87.6 93.7 100.2 107.3 114.8 122.8 131.4 140.6 150.4 50% Share of new surcharge going to capital investment for road maintenance 9.4 9.8 10.4 11.0 11.3 11.9 12.4 13.1 13.9 14.7 15.5 16.3 17.1 17.9 18.8 Total 25.2 50.2 72.2 77.1 82.4 87.8 93.7 100.0 106.8 114.1 121.9 130.3 139.1 148.5 158.5 169.3 42 Annex 2: Prioritization of 11th Five Year Plan projects main tables POINTS NPV COST No. of In SYPs millions Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of PER POINT Projects Priorities by subsector 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total Total Total AIR 5,991,000 14,404,700 15,902,900 20,327,500 16,286,500 72,912,600 56,546,803 9.71 5.8 25 ROADS 11,220,145 13,150,330 15,159,250 14,437,750 14,248,400 68,215,875 54,006,612 10.53 5.1 83 RAILWAYS 13,276,750 16,480,250 18,889,350 22,452,700 23,002,200 94,101,250 73,575,736 5.16 14.3 26 PUBLIC TRANSPORT 4,390,150 5,731,948 948,532 395,810 360,060 11,826,500 10,268,133 8.42 1.2 14 MARITIME & PORTS 6,348,100 9,026,750 9,253,200 5,288,200 5,937,000 35,853,250 28,889,949 11.74 2.5 45 MOT 240,000 255,100 234,200 245,300 275,400 1,250,000 994,580 7.18 0.1 10 TOTAL 41,466,145 59,049,078 60,387,432 63,147,260 60,109,560 284,159,475 224,281,814 52.73 4.3 203 TRUE TRUE POINTS In % Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of Priorities by subsector 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total AIR 14% 24% 26% 32% 27% 26% 25% 18% ROADS 27% 22% 25% 23% 24% 24% 24% 20% RAILWAYS 32% 28% 31% 36% 38% 33% 33% 10% PUBLIC TRANSPORT 11% 10% 2% 1% 1% 4% 5% 16% MARITIME & PORTS 15% 15% 15% 8% 10% 13% 13% 22% MOT 1% 0% 0% 0% 0% 0% 0% 14% TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 43 POINTS NPV COST No. of In SYPs millions Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of PER POINT Projects Priorities by type 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total Total Total MAINTENANCE 12,501,400 12,118,850 12,424,000 11,397,150 10,932,850 59,374,250 47,645,862 5.32 9.0 16 ONGOING PROJECTS 25,748,245 39,397,628 37,545,132 41,450,510 42,472,110 186,613,625 146,795,786 39.45 3.7 126 NEW PROJECTS 3,216,500 7,532,600 10,418,300 10,299,600 6,704,600 38,171,600 29,840,165 7.95 3.8 61 TOTAL 41,466,145 59,049,078 60,387,432 63,147,260 60,109,560 284,159,475 224,281,814 52.73 4.3 203 TRUE TRUE POINTS In % Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of Priorities by type 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total MAINTENANCE 30% 21% 21% 18% 18% 21% 21% 10% ONGOING PROJECTS 62% 67% 62% 66% 71% 66% 65% 75% NEW PROJECTS 8% 13% 17% 16% 11% 13% 13% 15% TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 44 POINTS NPV COST In SYPs millions Annual cost Annual cost Annual cost Annual cost Annual cost Total Cost NPV of PER POINT Priorities by subjector and type 2011 2012 2013 2014 2015 2011-2015 2011-2015 cost Total Total AIR 5,991,000 14,404,700 15,902,900 20,327,500 16,286,500 72,912,600 56,546,803 9.71 5.8 Air-Maintenance 2,681,300 1,983,700 2,153,000 805,000 467,000 8,090,000 6,802,040 1.25 5.5 Air-New projects 45,000 45,000 1,244,000 3,787,000 939,000 6,060,000 4,490,400 2.01 2.2 Air-Ongoing projects 3,264,700 12,376,000 12,505,900 15,735,500 14,880,500 58,762,600 45,254,363 6.45 7.0 ROADS 11,220,145 13,150,330 15,159,250 14,437,750 14,248,400 68,215,875 54,006,612 10.53 5.1 Roads-Maintenance 3,000,000 3,000,000 3,500,000 3,500,000 4,000,000 17,000,000 13,423,144 0.26 51.6 Roads-New projects 1,870,000 3,125,000 3,910,000 3,510,000 3,449,000 15,864,000 12,441,836 1.19 10.5 Roads-Ongoing projects 6,350,145 7,025,330 7,749,250 7,427,750 6,799,400 35,351,875 28,141,632 9.08 3.1 RAILWAYS 13,276,750 16,480,250 18,889,350 22,452,700 23,002,200 94,101,250 73,575,736 5.16 14.3 Railways-Maintenance 5,517,750 6,045,650 5,910,250 6,335,900 6,003,850 29,813,400 23,727,140 0.67 35.7 Railways-New projects 184,000 935,000 1,383,600 2,398,600 2,272,600 7,173,800 5,380,064 0.42 12.7 Railways-Ongoing projects 7,575,000 9,499,600 11,595,500 13,718,200 14,725,750 57,114,050 44,468,531 4.07 10.9 PUBLIC TRANSPORT 4,390,150 5,731,948 948,532 395,810 360,060 11,826,500 10,268,133 8.42 1.2 PublicTransport-Maintenance 144,250 148,250 14,250 11,250 5,000 323,000 283,649 1.03 0.3 Public Transport-New projects 0 Public Transport-Ongoing projects 4,245,900 5,583,698 934,282 384,560 355,060 11,503,500 9,984,484 7.39 1.4 MARITIME & PORTS 6,348,100 9,026,750 9,253,200 5,288,200 5,937,000 35,853,250 28,889,949 11.74 2.5 Maritime & Ports-Maintenance 1,154,100 931,250 837,500 736,000 448,000 4,106,850 3,377,726 1.12 3.0 Maritime & Ports-New projects 1,117,500 3,427,500 3,880,700 604,000 44,000 9,073,700 7,527,779 3.33 2.3 Maritime & Ports-Ongoing projects 4,076,500 4,668,000 4,535,000 3,948,200 5,445,000 22,672,700 17,984,444 7.28 2.5 MOT 240,000 255,100 234,200 245,300 275,400 1,250,000 994,580 7.18 0.1 TOTAL 41,466,145 59,049,078 60,387,432 63,147,260 60,109,560 284,159,475 224,281,814 52.73 4.3 TRUE TRUE 45 Annex 3: Transport Action Plan financial equilibrium-Scenarios 1ST SCENARIO: A Scenario A protected Parameters Input GDP Growth (in real terms) 5.0% Public sector fixed capital formation (PSFCF) 9.5% (as percent of GDP) Transport sector in the PSFCF (as percent of the PSFCF) 10.9% % of newly created surcharge to be allocated to invesment Main Results Proposed TAP 2011-2015 284.2 Recommended Allocation ceiling in SYPs billion Phase 1: 2011-2015 144.3 Contribution of newly created surchage (in %) TAP as a % of allocated ceiling Phase 1: 2011-2015 197% Main conclusions - Syrian Arab Republic- Syrian Transport Action Plan RUN ALL SCENARIOS Financing Plan not sufficient, - Syrian Arab Republic- Review lowest Syrian Transport Action Plan priorities and cut RUN SCENARIO N about SYPs billion 139.9 Transport sector public investment 2015 (as percent of GDP) 1.0% 46 Then Summary table is: Table 12: Transport action plan summary (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario A 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 144.3 19.3 29.0 30.4 32.0 33.6 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) (139.9) (22.1) (30.1) (30.0) (31.2) (26.6) As percent of public financing allocation ceiling 197% 215% 204% 198% 198% 179% Analysis and recommendations Financing Plan not Financing Plan not Financing Plan not Financing Plan not Financing Plan not Financing Plan not sufficient, Review sufficient, Review sufficient, Review sufficient, Review sufficient, Review sufficient, Review lowest priorities lowest priorities lowest priorities lowest priorities lowest priorities lowest priorities and cut or postone and cut or postone and cut or postone and cut or postone and cut or postone and cut or postone about SYPs billion about SYPs billion about SYPs billion about SYPs billion about SYPs billion about SYPs billion -140 -22 -30 -30 -31 -27 47 2cd SCENARIO: B Scenario B protected Parameters Input GDP Growth (in real terms) 6.0% Public sector fixed capital formation (PSFCF) 11.5% (as percent of GDP) Transport sector in the PSFCF (as percent of the PSFCF) 12.9% % of newly created surcharge to be allocated to invesment Main Results Proposed TAP 2011-2015 284.2 Recommended Allocation ceiling in SYPs billion Phase 1: 2011-2015 215.2 Contribution of newly created surchage (in %) TAP as a % of allocated ceiling Phase 1: 2011-2015 132% Main conclusions - Syrian Arab Republic- Syrian Transport Action Plan RUN ALL SCENARIOS Financing Plan not sufficient, - Syrian Arab Republic- Review lowest Syrian Transport Action Plan priorities and cut RUN SCENARIO N about SYPs billion 68.9 Transport sector public investment 2015 (as percent of GDP) 1.5% 48 Table 12: Transport action plan summary (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario B 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 215.2 28.2 42.7 45.3 48.0 50.9 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) (68.9) (13.2) (16.3) (15.1) (15.1) (9.2) As percent of public financing allocation ceiling 132% 147% 138% 133% 131% 118% Analysis and recommendations Financing Plan not Financing Plan not Financing Plan not Financing Plan not Financing Plan not Financing Plan not sufficient, Review sufficient, Review sufficient, Review sufficient, Review sufficient, Review sufficient, Review lowest priorities lowest priorities lowest priorities lowest priorities lowest priorities lowest priorities and cut or postone and cut or postone and cut or postone and cut or postone and cut or postone and cut or postone about SYPs billion about SYPs billion about SYPs billion about SYPs billion about SYPs billion about SYPs billion -69 -13 -16 -15 -15 -9 49 3rd SCENARIO: C Scenario C protected Targets suggested between DPM Parameters Input and MOT GDP Growth (in real terms) 7.0% Public sector fixed capital formation (PSFCF) 14.0% (as percent of GDP) Transport sector in the PSFCF (as percent of the PSFCF) 15.0% % of newly created surcharge to be allocated to invesment Main Results Proposed TAP 2011-2015 284.2 Recommended Allocation ceiling in SYPs billion Phase 1: 2011-2015 318.0 Contribution of newly created surchage (in %) TAP as a % of allocated ceiling Phase 1: 2011-2015 89% Main conclusions - Syrian Arab Republic- Syrian Transport Action Plan RUN ALL SCENARIOS Your Financing Plan is adequate - Syrian Arab Republic- BUT review Syrian Transport Action Plan sequencing of RUN SCENARIO N investments for 2011 - Transport sector public investment 2015 (as percent of GDP) 2.1% 50 Table 12: Transport action plan summary (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario C 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 318.0 40.8 62.4 66.8 71.5 76.5 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) 33.9 (0.6) 3.4 6.4 8.3 16.4 As percent of public financing allocation ceiling 89% 102% 95% 90% 88% 79% Analysis and recommendations Your Financing Financing Plan not Annual Financial Annual Financial Annual Financial Annual Financial Plan is adequate sufficient, Review Equilibrium met Equilibrium met Equilibrium met Equilibrium met BUT review lowest priorities sequencing of and cut or postone investments about SYPs billion according to 34 -1 0 0 0 0 51 4th SCENARIO: N without user fee scheme involved Scenario N based on August 2010 meeting with Deputy Prime Minister Parameters Input GDP Growth (in real terms) 5.5% Public sector fixed capital formation (PSFCF) 11.0% (as percent of GDP) Transport sector in the PSFCF (as percent of the PSFCF) 15.0% % of newly created surcharge to be allocated to invesment Main Results Proposed TAP 2011-2015 284.2 Recommended Allocation ceiling in SYPs billion Phase 1: 2011-2015 235.4 Contribution of newly created surchage (in %) TAP as a % of allocated ceiling Phase 1: 2011-2015 121% Main conclusions - Syrian Arab Republic- Syrian Transport Action Plan RUN ALL SCENARIOS Financing Plan not sufficient, - Syrian Arab Republic- Review lowest Syrian Transport Action Plan priorities and cut RUN SCENARIO N about SYPs billion 48.8 Transport sector public investment 2015 (as percent of GDP) 1.7% 52 Table 12: Transport action plan summary (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario N 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 235.4 31.2 47.0 49.6 52.3 55.2 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) (48.8) (10.3) (12.0) (10.8) (10.8) (4.9) As percent of public financing allocation ceiling 121% 133% 126% 122% 121% 109% Analysis and recommendations Financing Plan not Financing Plan not Financing Plan not Financing Plan not Financing Plan not Financing Plan not sufficient, Review sufficient, Review sufficient, Review sufficient, Review sufficient, Review sufficient, Review lowest priorities lowest priorities lowest priorities lowest priorities lowest priorities lowest priorities and cut or postone and cut or postone and cut or postone and cut or postone and cut or postone and cut or postone about SYPs billion about SYPs billion about SYPs billion about SYPs billion about SYPs billion about SYPs billion -49 -10 -12 -11 -11 -5 53 4th SCENARIO: N with user fee scheme involved starting 2011 Scenario N based on August 2010 meeting with Deputy Prime Minister Parameters Input GDP Growth (in real terms) 5.5% Public sector fixed capital formation (PSFCF) 11.0% (as percent of GDP) Transport sector in the PSFCF (as percent of the PSFCF) 15.0% % of newly created surcharge to be allocated to invesment 50% Main Results Proposed TAP 2011-2015 284.2 Recommended Allocation ceiling in SYPs billion Phase 1: 2011-2015 287.1 Contribution of newly created surchage (in %) 18% TAP as a % of allocated ceiling Phase 1: 2011-2015 99% Main conclusions - Syrian Arab Republic- Syrian Transport Action Plan RUN ALL SCENARIOS Your Financing Plan is adequate - Syrian Arab Republic- BUT review Syrian Transport Action Plan sequencing of RUN SCENARIO N investments for 2011 - Transport sector public investment 2015 (as percent of GDP) 1.7% 54 Table 12: Transport action plan summary (in billion SYPs, 2009 constant prices) For details see Prioritization model (included) data base Scenario N 11th Transport Sector 5 year Investment Program 2011-2015 2011 2012 2013 2014 2015 Public investments in Transport sector Roads 68.2 11.2 13.2 15.2 14.4 14.2 Railways 94.1 13.3 16.5 18.9 22.5 23.0 Air 72.9 6.0 14.4 15.9 20.3 16.3 Maritime & Ports 35.9 6.3 9.0 9.3 5.3 5.9 Public Transport 11.8 4.4 5.7 0.9 0.4 0.4 MOT 1 0.2 0.3 0.2 0.2 0.3 Subtotal public sector 284.2 41.5 59.0 60.4 63.1 60.1 Simplified Sources and Uses of Funds Recommended public financing allocation 287.1 40.5 56.8 60.0 63.3 66.5 ceiling TAP Investments 284.2 41.5 59.0 60.4 63.1 60.1 Financing Capacity/Needs (in red between brakets) 2.9 (0.9) (2.2) (0.4) 0.1 6.4 As percent of public financing allocation ceiling 99% 102% 104% 101% 100% 90% Analysis and recommendations Your Financing Financing Plan not Financing Plan not Financing Plan not Annual Financial Annual Financial Plan is adequate sufficient, Review sufficient, Review sufficient, Review Equilibrium met Equilibrium met BUT review lowest priorities lowest priorities lowest priorities sequencing of and cut or postone and cut or postone and cut or postone investments about SYPs billion about SYPs billion about SYPs billion according to 3 -1 -2 0 0 0 55