The social-economic impact of in Infrastructure Road Construction in Developing Countries (A Case Study of Kenya Eastern Bypass Road Construction)

Table of content

Abstract 4

1.0 Introduction. 5

2.0 Literature Review.. 7

1.0 Introduction

Road infrastructure is a key element in the economic growth and development of the nation. The Eastern bypass is a 39-kilometer road that connects Kiambu to Aiport North road located in Mombasa road in Kenya. The project was funded by the China government in partnership with the Kenyan government. The main objective of the government was to build and transform the road to reach the Thika super high standard. The government recognizes the need for infrastructure projects paly a critical role in economic development as it facilitates the effective and efficient movement of people and goods and services from one region to another.

The ability of a country to achieve economic growth and development is pegged on its available economic resources to the society and the ability to use them efficiently. These projects address one of the issues of the region and start development. The paper will evaluate the impact of road infrastructure development on the competitive and economic growth of developing countries. Road infrastructure is considered to be one of the key requirements of the county’s social and economic development. This is specifically true in developing nations where road transport is the major means of transport. Since the role of the road networks goes beyond national boundaries, the upgrade and expansion of the road network play important role in enhancing economic performance thus, poor road network hinders domestic and foreign investment in developing nations which have an impact on the country’s competitiveness enhancement and economic performance (Boopen, 2006).

The project will address the key aspects of road network development such as funding sources, investment, and condition of the road network in the countries. The road development level will be correlated with the county gross domestic product (GDP) growth in the country.

In Kenya, road infrastructure is key in the achievement of its nation’s development blueprint vision 2030. In Kenya, road transport is the main mode of transport accruing 95% of the total passenger and cargo traffic (Kenya Roads Board). In Kenya roads are classified into five main categories which include; class A consisting of road connecting the international centers such as cross border terminals and ports, class Broad- consists of roads connecting national borders within Kenya, Class C- those connecting regions within the county, Class D roads mostly secondary roads and Class E road this consist of the minor roads however 98,950 kilometers are not classified (Kenya Roads Board).

The efficiency of road infrastructure plays an important role in supporting the transport sectors. Also, road infrastructure network state and progress reveals that many governments have put more efforts on the expansion of existing roads infrastructure as well as increasing their budget allocation to new roads.

The government used the expansion of the road network as a fundamental element in social-economic transformation. In the last 10 years, the focus has shifted to the construction of the Trans Africa corridor which starts from Mombasa to Dakar Senegal. Further, the northern corridor passing through Kenya from South Africa (Cape Town) to Cairo in Egypt (Northern Africa) has played a critical role in road network development in Kenya. Other road infrastructure project includes the construction of Thika superhighway which has many by-passes (Southern, Eastern, and Northern), Lamu Port South Sudan Ethiopia Transport (LAPSSET) project among other rural and urban roads. This has made a tremendous transformation in the state of the road network in Eastern Africa. The government has continued to collaborate with other international agencies such as the European Development Bank, World Bank, and African Development Bank to finance road infrastructure projects. The commercial banks in Kenya have also played a critical role in financing road project through buying of infrastructure bonds floated in the stock exchange market by the government.

Eastern bypass road construction project constitutes one of the major flagship projects in the Kenya government that is aimed at transforming the nation into a profitable regional economy. China’s government has been a consistent partner in funding the Eastern bypass construction project.

Eastern bypass has opened various regions peripheral to Nairobi city hence promoting economic development in the city due to ease of assessing as well as the development of new land surrounding the Thika super high. The main objective of the bypass is to help people who live along the road move with ease and promote productivity in the country making Ruiru Kiambu Road to Mombasa Road of the main contributor of trade and economic development same as that contributed by Great North Trans African that originates from cape town in South Africa. The construction of the Eastern Bypass road has contributed much to the Kenya economy.

2.0 Literature Review

The empirical review of studies on the impact of road infrastructure on economic growth in sub-Sahara Africa shows a rich pull of research work in several geographical setting. Aschauer (1989) suggested that there is a strong nexus between government investment in infrastructure and GDP growth for the US for the period between 1949 and 1985. The researcher observed a decline in economic growth for the US between the 1970s and 1990s, which resulted from a reduction in infrastructure public investment. The same results were observed by the World Bank development report (1994) which confirmed the role of infrastructure in the growth of the economy for different nations. According to Aschauer (2000), it was observed that capital investment in infrastructure projects contributes a critical role to the production. He also noted that public investment helps in improving living standards as well as private investment returns and economic growth. This was also confirmed by the findings of Demetriades and Mamuneas (2000) who suggested that public investment in infrastructure projects has a significant impact on the long-term impact on input demands and output supply.

An empirical study by Boopen (2006) who used panel and cross-section and data analysis accessed the effect of transport capital on economic growth, where he sampled 38 Sub- Saharan African countries. The sample nations showed that transport capital has a significant contribution to the economic growth. According to Seethepalli et al. (2008), it was also evidenced that infrastructure plays a critical role in the promotion of economic growth in East Asia. Similar results were replicated by Montolio and Solé-Ollé (2009) which indicated road infrastructure investment has a positive effect on productivity performance in the Spanish economy. Increase accessible road network promotes faster productivity growth in those manufacturing industries which depend on road transport to transport raw materials. The increase in road network was therefore associated with improved productivity in Spain. However, Garcia-Mila et al. (1996), Holtz-Eakin and Schwartz (1995), Holtz-Eakin (1994); and Tatom (1991; 1993) report contradicting results that infrastructure investment has little impact in the economic growth in the US using panel data.

Theoretical review on the causal relationship between the road network and gross domestic product, a lot of empirical studies have been done by economics. According to Gramlich (1994), it was reported that there is no causal relationship between transport infrastructure network and economic growth. Kessides (1996) noted that most of the researcher have not given much focus on the nexus between the infrastructure network and economic development and hence much research need to be done so that to come up with adequate results supporting the relationship between the two variables. De la Fuente (2000) argued that there is causality flows from investment in infrastructure projects and economic growth. According to research by modeling, Mittnik and Neumann (2001) public investment influences GDP positively, however, there is no significant causal relationship between public investment and the GDP. Canning and Pedroni (2008) similarly accessed the impact of various infrastructure projects in different countries. The study concluded that although there is a positive effect of infrastructure on the long-term economic growth of a nation substantial variation was observed across different countries. An empirical study by Nurudeen and Usman (2010) using error correlation and counteraction models analyzed nexus between public expenditure and GDP growth in Nigeria thus, demonstrating total recurrent expenditure, total capital expenditure and public expenditure by government on education have an adverse impact on economic growth. On the other hand, an increased expenditure on communication and transport result in positive growth in the economy. Finally, research by Pradhan (2010) on the correlation between energy consumption, transport infrastructure (rail and road) and India economic growth between 1970 and 2007 found that transport infrastructure had a unidirectional casualty.

Social-economic benefit of the project

The transformation of the road from Thika to Nairobi into Eastern bypass and super high is one of the best ways the Kenya governments have done to scale up transportation in Kenya. A recent study by the National Highway Authority suggests that there many benefits associated with the conclusion of Eastern bypass road. However, according to the Kenya Alliance Association, 2012 indicate that the project also has affected the community negatively

The study by Wanjiku, 2014 indicates that Thika super high offers significant to businesses and individuals. Improved access, quality, and reliability of the highway increase efficiency in the economic sector. The high network economic benefit includes employment opportunities supported by the construction activities of the highway, the direct benefit of user accruing to travelers and commuters including safety improvement, time savings, reduction in operating cost of vehicles and industry productivity. According to Wanjiku, 2014 the majority of businesses have increased their competitiveness as a result of the project.

Eastern bypass road influences the investment opportunities both in Nairobi and areas within the super high, the construct of the eastern bypass has enabled competition within the market hence reducing the prices. This confirms the empirical study of Abbas, & Ahmed, 2013 who argue government infrastructure contributes to poverty reduction in the nation in the long term.

The construction of Eastern Bypass road affects economic growth through enhancing the well-connected transport network which means more reliable and faster transport for goods and services. The previous study has also demonstrated that quantity and quality of infrastructure has either positive or adverse effect on growth and income equality in the long run and short run respectively. Roads have been evidenced to play a significant role in enhancing regional development and integration with the mainstream economy through trading and investment opening.

Economic growth and development is influence the efficiency and effectiveness of different services that are provided to promote the living standard of different communities; this has been greatly been influenced by the infrastructure project within the country. according to Kumo, 2012 road infrastructure is defined as an unpaid factor of production which may result in the long term and short term increases in productivity among different variables as well as making sure that the intermediate input is available. An effective infrastructure system output is seen through the increased economic growth that results from the infrastructure projects in the country. The construction of the eastern bypass road helps in promoting effective transport systems that precondition for sustainable economic development. The construction of the eastern bypass road plays a critical role in promoting investment opportunities. According to previous studies has enhanced the mobility of capital and labor. Eastern bypass has also resulted in business development. Business entities are able to transport raw materials to different parts of the countries hence contributing to the development and growth of industries. The other impact contributed by the bypass and road network is it increases the supply and demand for products in the market. People are able to transport goods and services from the rural area areas meeting the required demand in the market.

The bypass has road has also assisted the customers to enjoy the benefits of goods and products that are not manufactured locally. The eastern bypass has also contributed to price stabilization. This is due to increased demand and supply of goods as a result of improved transport networks. These findings are supported by the findings of (Ahmed, Abbas, & Ahmed, 2013) who found that improved infrastructure help in poverty reduction among the citizens of the community. Growth in business as a result of well quality roads creates employment opportunities for the citizens hence raising their living standards.

The current development in road infrastructure financed by the Public-private Partnership (PP) has also played a critical role in solving the infrastructure financing problem. However, this could be enhanced if the road infrastructure could have an economic multiplier effect on the growth of the economy. In Kenya, road construction facilitates easy access of people to social amenities (security amenities, financial institutions, trading centers, administrative offices, and health centers) and delivery of farm products to the markets. In general, the direct and indirect advantage of the bypass may include access to public transport, employment opportunities, and social economy. According to Lucas and Markovich, 2011 construction of road may realize both direct and indirect benefits to society. For the people who depend on public transport, the construction of the eastern bypass plays a critical role in reducing the time-waster in traffic. This increases the productivity of employees in the workplace as well as the business as there is no much time wasted in traffic and therefore people get to work on time. Based on the multiplier effect theory the impact of road construction will result in growth in the economy. Eastern bypass road infrastructure investment has a positive effect on productivity performance in the Spanish economy. Increase accessible road network promotes faster productivity growth in those manufacturing industries which depend on road transport to transport raw materials.

Conclusion

The objective of this project is to investigate the impact of road network project (Eastern bypass) on the economic growth in Kenya. The reason behind this study is to confirm of road infrastructure plays a critical role in poverty reduction and economic growth since it contributes to competitiveness enhancement, trade facilitation, and integration of nations with other countries. From the literature review, road infrastructure enhances access to employment opportunities as well as access to goods and services. The road network promotes trade and investment among nations. The result of sustainable economic growth which results from the multiplier effects of government expenditure on infrastructure in a country.

Eastern bypass road infrastructure has a vital role in the achievement of the vision 2030 economic development blueprint. The findings of this study, therefore, confirm the government ambitious strategy is to establish more road network projects. The objective of increasing the number of tarmacked roads network is based on the concept of a positive multiplier effect on the country’s economic growth. Further, the government has been seen not only to develop international road but more focus is been geared toward the construction of rural, urban and national roads in its effort to enhance connectivity.

Reduced travel time results in saving the transport cost. With this project, the ease of doing business in the transport has gone down and hence increasing the profitability of the sector. This impacts the gross domestic significantly. This study demonstrates that the GDP per capita is more responsive to public expenditure as compared to the investment in road infrastructure by the private sector. However, it is noteworthy to state that the private expenditure has a positive effect on the economic growth and hence the need to include the private sector on development on road through a public-private partnership.

Recommendations

Several critical policy recommendations can be derived from the findings of this study. First, the government must corroborate with the private sector in funding the road network in developing countries. This can be achieved through sensitization of private-public partnership (PPP). Further, the government should more effort into the development of rural road networks to promote the agriculture sector which plays a critical role in promoting economic growth.

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