Economic benefits of roads

The reality that roads, or their wider genre, transportation in general, brings economic progress to a country will never be up for debate. In all the centuries, nay, millennia of the world’s history, roads have always been at the forefront of development, both as a cause, or as a result, of it. But how do roads, or transportation, help the economy? And how is it computed?

For many, the answer is always descriptive in nature. It will facilitate the movement of people, goods, and services. It will move them faster, easier, more conveniently, and cheaper. How much of each factor is person-dependent, of course, based on differing circumstances. They may even vary between individuals, with some roads, or transport solutions, in general, better for some than others. Or worse. Depending on where you are, where you’re going, and the reason for travelling.

Herein lies the catch, why people sometimes disagree --oftentimes, roads, or transport projects and activities, including traffic regulations affect them differently, better for some than others, and may sometimes even be inconvenient for a few. For this reason, transportation project decisions, even those concerning traffic policies, have to be evaluated under one criterion. The government, through NEDA and DPWH, since the start has always depended on economic evaluation to make such decisions. Thus, any project, policy, or regulation, needs to be measured on their resultant economic advantages and benefits, through their Economic Internal Rate of Return (EIRR).

The question is, how is this measured? Firstly, we need to establish that in general, and for most people, the benefit of a road or transport project is most often measured in a decrease in travel time. For example, in the 2012 Ex-Post Evaluation of the Metro Cebu Development Project III (Cebu South Reclamation and Cebu South Coastal Road), it states that “travel time by CSCR is shortened by 14 minutes” (as compared to the old Cebu South Road). This may not sound much but this translates to billions of pesos of savings which supported the approval of the project. The monetary equivalent values of the economic benefits are two-fold: time savings (translated to value of productive time) and vehicle operating cost (VOC) savings.

As with anything involving the country, the economy, or people in general, economic benefits differ from one person to another and must be taken collectively. A road may be beneficial to one and not to another --a traffic regulation may affect one favorably or adversely-- decisions are always made based on what is good for the whole, or for at least, the majority. Which unfortunately means that for anything that the government should do for the majority, there will always be those who won’t agree and protest. And this is particularly true for transport decisions including that of traffic management. Regulations and policies should be for the whole population, and not for a few or a certain group.

The worst thing that a government, or its officials can do, is take the side of a minority --a few who may be adversely affected by certain policies and make their decisions to the detriment of the majority. These things happen when leaders make decisions not based on proper analyses.