Urbanization is progressing rapidly in developing countries. Funding is a major challenge, as the development of public transportation infrastructure, an important part of urban planning, is enormously costly. We interviewed Tomoyoshi Suzuki, a researcher at JICA’s Sadako Ogata Institute for Peace and Development Studies (JICA Ogata Institute), who is seeking a solution to this problem, about his research on spillover effects based on his study in Medellín, Colombia.
Aiming for Sustainable Infrastructure Financing
-How did you start your research on transportation in developing countries?
I have loved vehicles since I was a child and studied transportation planning in college. I thought that if I were to work in the future building large infrastructures such as highways, bullet trains, and ports, the stage would be in developing countries, so I went to Tanzania in Africa during my senior year of college. In fact, that was my first trip abroad. The people I met in this developing country were cheerful, flexible to unexpected situations, and rough in a good way. I felt that this suited my skin. After graduating from university, I joined JICA and was posted to Senegal and Tunisia, and studied Transit-Oriented Development (TOD) in the UK for a year from 2019, which is a series of urban development centered on public transportation, including not only transportation development but also the development of residential and commercial areas in the surrounding area. Transit-Oriented Development (TOD), which is a series of urban development projects centered on public transportation, including not only the development of transportation systems, but also the development of residential and commercial areas in the surrounding areas. At that time, there was an internal call for applications for the post of researcher at JICA’s Ogata Research Institute, so I applied and was appointed to my current post in 2020.
-Please tell us about the research you are currently involved in.
I am involved in research on the spillover effects of urban transportation infrastructure. JICA is helping many developing countries to develop master plans for urban transportation planning. However, even if a proposal for the development of public transportation systems such as Mass Rapid Transit (MRT), Light Rail Transit (LRT), and Bus Rapid Transit (BRT) is made because the population of a city is growing and demand for transportation is increasing, the infrastructure for such systems is still not sufficient to meet the needs of the population. Even if a proposal for the development of public transportation systems such as MRT, LRT, Bus Rapid Transit (BRT), etc. is put forward, it is not easy to realize because of the large initial investment costs involved in the infrastructure development. We are researching ways to sustain the financing of such transportation infrastructure.
When transportation infrastructure is developed, residential land development begins in areas along rail lines that had not been developed before, and when people begin to live there, commercial facilities and offices will increase. As people begin to live in the area, commercial facilities and offices will increase. This will increase land prices and real estate values in the surrounding area, and local governments can expect an increase in property tax revenues. However, in general, the tax revenue goes into the general account of the municipality and is not usually returned to the transportation infrastructure operator. Therefore, by incorporating a mechanism to return the increased tax revenue to transportation from the master plan stage of urban transportation planning, building consensus among related parties, and making necessary institutional revisions, it is expected that sustainable financing for transportation infrastructure development, operation, and maintenance will become possible. We call this infrastructure financing utilizing the “spillover effect” of urban transportation. One way to decide how to return the money to transportation operators is to conclude an agreement with municipalities that a percentage of the increased tax revenues from transportation will go to transportation, or to issue bonds in anticipation of increased tax revenues from the beginning. In either case, since we are talking about changing the use of tax revenues, necessary decisions and procedures must be made, such as going through the national and local government councils. The method should be suited to the actual conditions of the area, and discussions should be conducted systematically over time, even before the transportation infrastructure is built.
Aiming to spread the spillover effect
-What kind of research did you conduct as part of your study?
First of all, did the construction of the transportation infrastructure really increase land prices in the area in the first place? We had to quantitatively investigate this question. To this end, we conducted a survey and analysis of the impact of past infrastructure development on surrounding land and real estate prices in three cities: Medellín, Colombia; Bangkok, Thailand; and Kuala Lumpur, Malaysia. The analysis was successful in some areas and not so much in others, and the bottleneck was the accuracy and disclosure of the data. In some cases, the objective real estate appraisal system had not been established like in Japan, so appropriate figures could not be obtained, and for political reasons, data for each region could not be disclosed…. We also struggled to analyze the data because it was not taken in a geographically detailed range.
Next-generation Light Rail Transit (LRT) streetcar system in Medellín, Colombia
The city of Medellín was the most successful in this analysis. The reason for this was the availability of relatively detailed land price data, the fact that Medellín Metro, a transportation company that operates cable cars, urban railroads, and LRTs that connect Medellín’s central area to the higher ground on the periphery, was seeking a source of revenue other than fares, and had high expectations for our research, and the fact that Medellín Metro and the city authorities had a partnership. Medellín Metro and the city authorities had a partnership relationship. We also benefited greatly from the cooperation of Eric Bergel, an associate professor at a local university and a prominent figure in transportation and urban studies. He is a former government official who once studied land readjustment in Japan as a JICA trainee, and he is cooperating with us to return the favor to Japan. In addition, even if there is data that we want to obtain, in developing countries, it is not immediately available just by requesting it at the administrative office. Therefore, Mr. Julián Muñoz, a national staff member of JICA’s Colombia office, made a great contribution by persistently working with the relevant authorities to build a good relationship and obtaining the data over a period of one year. The results of the analysis confirmed the increase in land prices along the transportation line due to the transportation improvements, and the extent of the increase varied depending on the transportation system, such as railroads and cable cars. In addition, since transportation is a network, land price increases along the relevant rail line were also confirmed when multiple transportation systems within a city are connected and the overall transportation network expands. We began our research in the three cities with the idea that “you never know until you try,” but I think the success in Medellín was due to the successful combination of each person’s strengths and the collaboration among them.
-How will you use the results of this survey?
Researcher Suzuki (far left) participated in the “Transport Research Board.
In January 2022, Eric, Julian and I presented our research findings at the Transport Research Board, the largest transportation-related conference in the world, held in Washington, D.C., USA. There are not many examples of research on transportation in developing countries, and since the topic is relevant to all developing countries, we were asked questions such as, “How do you include a discussion of infrastructure financing using spillover effects in your master plan?” There was a great response, with questions such as.
What I learned from this survey is that land prices and real estate prices are profound. In developed countries, it is natural to assume that land prices in the surrounding area will increase with the construction of transportation infrastructure and that property tax revenues will increase, but in developing countries, there are no standards in place to properly appraise land prices, and the system is not based on land prices in the first place. For example, in Tanzania (which I hear is still in the process of reorganizing its property tax system), property tax is determined by the type and size of the building. To simplify the situation somewhat, for example, in Japan, the same three-story building in Tokyo or Hokkaido would pay the same amount of tax. Japanese common sense and perspectives are not enough. We need to leave Japanese common sense once and for all and fully recognize the diversity of land prices and property tax systems, and in some countries, it may be necessary to start cooperation by measuring appropriate property values first, rather than jumping into a discussion of spillover effects. There is much to be gained from the experience of not getting it right. We would like to try first, accumulate that know-how, and continue our research.
Based on this research, we also developed a standard infrastructure and financing study workflow from spillover effect measurement to master planning and published it as a field report. In addition, we produced a video explaining spillover effects. In the future, we would like to have ministers and undersecretaries responsible for decision-making in developing countries view this video and actively market it so that they will consider the introduction of infrastructure finance from the initial stages of master planning.
Pursuing a new “transportation and urban” future through the use of data
-What are your aspirations for the future?
The new project is “Empirical Research on the Economic and Social Impact of Infrastructure. Until now, when measuring the effects of transportation infrastructure, it has been common to evaluate the economic impact from a macro perspective, such as the hundreds of millions of yen, but from now on, even in the world of transportation, evaluation from a micro perspective, such as inclusiveness, environmental sustainability, and safety, is required. For example, “Are the benefits of transportation infrastructure distributed to the various people living in a city in a balanced manner without disparities? In Dhaka, the capital of Bangladesh, JICA plans to conduct a survey of approximately 4,000 households along the MRT line, which is under construction with the cooperation of JICA, to examine the economic status of households and changes in commuting time, including inclusiveness and gender. In addition, we have recently been able to obtain new data that was previously unavailable. We plan to quantitatively investigate how urban transit has impacted real estate prices by collecting real estate price data for areas around urban railroads under construction in Ho Chi Minh City, Vietnam, and by obtaining data on apartment and office rents along the Jakarta subway line in Indonesia, which opened in 2019.
The 20th century was the era of the automobile; this century is the era of public transportation. And developing countries are also entering the age of the city. Africa, in particular, has the highest population growth rate in the world, and more and more people will be pouring into cities. Public transportation is the key to building urban infrastructure in terms of environment, traffic safety, and energy efficiency. Today, urban transportation in Africa is mainly based on informal, non-mass transit systems such as shared-ride buses, and traffic congestion and inaccessibility are major issues. African cities are entering a phase in which public transportation systems, especially BRT, are being developed one after another, but not all problems can be solved by introducing only a transportation system. It is necessary to always consider the relationship between transportation and the city in an integrated manner, for example, by designing a compact city by concentrating urban functions along transportation lines as much as possible, so that the city does not expand too much in a disorderly manner. Transportation and the city” is my life’s work. I would like to continue to explore this theme by combining practical work and academic research.
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