Economy, Business And Markets

Transportation in Need of Major Overhaul

Transportation in Need  of Major OverhaulTransportation in Need  of Major Overhaul

December 17 marks National Transportation Day, which this year takes on a special significance as the implementation of the nuclear deal between Iran and world powers draws near.

The deal is expected to pave the way for the lifting of economic sanctions, which have led to the slowdown in the development of many industries, including transportation.

Transportation sector is known to directly fuel economic growth. During 1959-2014, it averaged 6.3% of Iran’s gross domestic product. Its average share in GDP even grew to more than 7% in the last 10 years.

“Iran’s transportation indices from mid-90s to mid-2000s show that, despite considerable investments, we have not been able to develop the sector based on objectives set in the third, fourth and fifth five-year development plans,” Hamid Azarmand, economic expert and former deputy head of National Iranian Productivity Organization, was quoted as saying by the Persian weekly Tejarat-e Farda.

“Figures show that the domestic transportation sector is far behind what is necessary to achieve high growth rates and that it does not meet international standards,” he said.

Azarmand believes that while Iran’s road transport infrastructures are adequate, the quality of road transport fleet is where the sector fails to reach global norms.

“One of the serious problems in road transport is the dilapidated fleet,” he said.

The average age of Iran’s public transportation fleet, according to the Ministry of Roads and Urban Development, stood at 12 years in 2009. The figure later reached 16 years in 2013.

The public freight transportation fleet has not fared any better, as its average age stood at 17 years in 2013.

The above figures account for the shocking figures of road accidents, profligate fuel consumption and alarming air pollution. But what can be done?

In a state-dominated economy like Iran’s, the first step would be to seek government support. However, amid the unprecedented fiscal crunch at present, resulting from a historic drop in the price of oil, which in turn has squeezed the government’s income to a large extent, it sounds impractical to expect the government to be able to do much in this regard.

High and inefficient fuel consumption has been blamed on the subsidies paid by the government to fuel over the past decades.

Liberalization of fuel prices, according to deputy minister of roads and urban development, Davoud Keshavarzian, could not only act as a motivation for transportation companies and truck drivers to purchase vehicles that are of better quality and meet international fuel consumption and safety standards, but it could also help draw investors to the sector.

“Due to the government’s insistence on providing drivers with cheap fuel, rail transport has fallen behind in competition with road transit handling domestic freight,” he said.

The development of rail and air transportation has been highlighted many times in the past few months by Iranian officials in their meetings with foreign trade delegations visiting Iran, following the conclusion of the nuclear deal.

The Ministry of Roads and Urban Development earlier said $80 billion worth of businesses are up for grabs in Iran’s transportation sector.

  TPOI Conference

The Trade Promotion Organization of Iran is organizing a conference on ‘Outbound Transportation: Opportunities and Challenges’ on January 3. The event is aimed at improving Iran’s global rankings in the transportation sector.

The role of the transportation in Iran’s foreign trade, investment in the development of outbound transportation, domestic companies’ capabilities in the sector, measures to cut trade logistic costs, performance of ports, airports and container export terminals, and the role of insurance companies in the development of outbound transportation are the topics to be discussed in the 1-day conference, IRNA reported.