Journal number 1 ∘ Yuriy Prysiazhniuk ∘ Oksana Shyba ∘
THE IMPACT OF INVESTMENT IN TRANSPORT INFRASTRUCTURE ON ECONOMIC GROWTH OF MEMBER OF THE EUROPEAN UNION

Summary

The purpose of the article is to explore the impact of investment in transport infrastructure on the economic development of EU members. In this article the correlation studyof the impact of the transport infrastructure investment on economic growth of EU members as whole for 2000-2014 years and as the national average for 2014 is conducted. The positive impacts of transport infrastructure investment onimport to the EU-27, on the export of goods and services from the EU countries to the world as a whole, GDP, GDP per capita and CPI were proved. The results of the research might be taken as the basis of transport infrastructure reforms in other countries, in particular, in Ukraine.

Key words: investment, transport infrastructure, international freight, infrastructure, EU.

Article category: research article.

The development of the national economy depends on how effectively it is managed in various fields. It primarily relates to infrastructure. Today the global trends dictate the continuous improvement of infrastructure management, including investment promotion. The status and level of development of transport infrastructure is one of the most important factors of social and economic development of the countries of the European Union.

The infrastructure investments of the EU members are an essential instrument to create conditions for economic growth and new jobs, especially given the growth in capacity in the steel and engineering industries, the development of high-tech industries. The investments in infrastructure arethe motivating factor of reallocation of resources and labor from stagnating sectors to the industry capable of providing long-term economic growth. [6]

The investments into transport infrastructure are the key resources for accelerated economic development of a country. In modern terms they are one of the most important tools to ensure the conditions to overcome the economic crisis, effective structural changes in the economy, the growth of science and technology, etc. [3, p. 93].

The experience of the EU member states shows that the development of transport infrastructure determines the intensity of economic relations and it is one of the most important aspects of the economy. The active economy growth may be restricted or even stopped by infrastructural limitations, which are based on poor quality of roads and low bandwidth infrastructure of road networks (bridges, tunnels) [5, p. 87].

Investments in transport infrastructure within and across national borders of the EU members are made to improve transportation. In the future it will affect growth in real GDP per capita by capital asset infrastructure increase, by exit of transport companies into new markets, which increases the volume of sales and profitability of their activities (see. Fig. 1).

 

Fig.1.Model of transport infrastructure impact on economic growth of EU member states.*

* - The author's development

Capital investments in the transport infrastructure of the EU membersarethe main prerequisite for extended reproduction in the country, not only in terms of quantitative indicators, but also qualitative improvements, as they always carried through capital upgrades of existing enterprises. Also investments help improve the structure of social production and the maintenance of balance in the economy. Givenall these activities the scientific and technological development of the countryaccelerates, the quality and range of products improves [4, p. 238].

At the same time the investments contribute to solving problems of social development: they help address the challenge of unemployment, promote the development of health, education, culture, and provide necessary public housing, participate in the work of environmental protection [4, p. 238].

The infrastructural investments reduce the transport component in the final price of goods, which move between the periphery and the center, they play an important role in reducing economic disparities between regions, increase competitiveness in terms of access to new markets, migration of labor, specialization and cooperation, reducing the cost of transit of freight within the internal and external logistics systems.

All this leads to an increase in productivity, the creation of new competitive advantages of EU member states. Typically, the result might be expressed as following [9]:

a) to improve the quality characteristics due to the investment in the construction of high-speed highways, airports, railways for modern high-speed trains in the repair and maintenance of high-level infrastructure;

b) to promote the efficient use of existing facilities;

c) to optimize the transport process using intelligent systems. Such changes seriously affect the overall level of provided transport services, which ultimately has a positive effect on economic growth in the country.

The development and investments in transport infrastructure has become one of the priorities of the economic policy of the European Union, since the growth of national economies require massive domestic investments, especially those that will diversify the national economy. [7, p. 35].

During 2000-2014 years the level of investment in transport infrastructure development in all EU countries proved to be increasing(see. Table.1).

Table (1)

The dynamics of investment in transport infrastructure development of EU member states within 2000-2014, mln.euro *

* - Author’s calculation based on [10-15]

The construction and expansion of transport infrastructure and comprehensive modernization of the European economy requires significant investment in the transport network. Although the main problem is still the financing(budget, access to foreign resources, the ability to start charging tolls roads, the ability to attract private capital), but it’s obvious that the improvements of the financing does not lead immediately to the faster pace of modernization of infrastructure; it provides a gradual positive impact on the socio-economic growth [3].

An important achievement of the European road construction are motorways or highways provided for high-speed movement of vehicles [1].

Overall, the increase in freight traffic and investment in road transport infrastructure was typical for almost all EU member states. However, the leaders of infrastructure investment among EU member states include Austria (269 mln.euro), Great Britain (1557, mln.euro), Spain (779.7 mln.euro), Italy (466.9 million.euro), Germany (1335 mln.euro) and Poland (248 mln.euro).

Among the outsiders in terms of investments in transport infrastructure there are Slovakia, Romania and Bulgaria.

In most EU members the transport network is formed under long-term government programs that have the identified indicators of transport networks and related indicators of its funding. The European Union is considering the formation of the trans-European road network and related transport infrastructure with the ability to integrate it in the new EU members. Priority projects for the development of the transport network funded by the state or with participation of the state, including in the framework of public-private partnerships [2].

The financing of infrastructure investment projects of the EU members is mainly mixed, i.e.involving own funds of transport companies, public spending and private investment. It raises the problem of finding ways to attract the long-term investment from various financial resources, including the use of various forms of organizational and economic partnership between the state and private business. The sources of funds are: the state budget; local budgets; other sources (investments, loan funds, etc.) [9, p. 67].

In European practice, the problem of lack of financial and economic resources is solved by implementing the following measures: additional budget allocations; the introduction of targeted taxes for users of the infrastructure; borrowing guaranteed by the government; attract extra-budgetary investment based on the use of mechanisms of state-private partnership (SPP) and other forms of investment [9, p. 68].

The investment in transport infrastructure of EU members may influence the following parameters of economic growth:

-         the level of trading activity and exports (exports to the world in general (X1), exports to the EU-27 (X2), imports from the whole world (X3), imports from the EU-27 (X4));

-         transportation volumes in the network (the volume of freight transport relative to GDP (X5), the modal share of freight transport (X6), freight transportation (X7), freight transport by road (X8), freight water transport (X9));

-         the overall level of capital investment and activity in the EU countries (foreign direct investment (X10), investment as a percentage of GDP (X11), investment income (X12), investment in the economy as a percentage of GDP (X13));

-         income levels (GDP per capita (X14), net national income as a percentage to GDP (X15));

-         GDP fluctuations and inflation (consumer price index (X16), GDP, fluent prices (X17);

-         innovative investment in the economy (the cost of innovation (X18);

#	Indexes	Equations	The correlation coefficient
1	Exports to countries around the world as a whole	Y = -310E2 + 2,8913 * Investment in transport infrastructure development	r=0,96
2	Exports to the EU-27	Y = -9966, + 1,0384 * Investment in transport infrastructure development	r=0,96
3	Imports from the whole world	Y = -122E2 + 1,3481 * Investment in transport infrastructure development	r=0,90
4	Imports from the EU-27	Y = -125E2 + 1,2500 * Investment in transport infrastructure development	r=0,95
5	Modal share of freight transport	Y = -6,488 + ,00197 * Investment in transport infrastructure development	r=0,75
6	Freight rail	Y = -559E5 + 4649,6 * Investment in transport infrastructure development	r=0,90
7	Freight traffic activity services	Y = 4044E2 + 9,9735 * Investment in transport infrastructure development	r=0,98
8	Foreign Direct Investment	Y = -367E3 + 243,64 * Investment in transport infrastructure development	r=0,75
9	Income from investments	Y =-217E4 + 228,60 * Investment in transport infrastructure development	r=0,92
10	GDP	Y = -207E2 + 2,7786 * Investment in transport infrastructure development	r=0,97
11	GDP per capita	Y = -349E2 + 4,9911 * Investment in transport infrastructure development	r=0,96
12	Consumer price index	Y = 45,308 + ,00645 * Investment in transport infrastructure development	r=0,96
13	Spending on innovation	Y =  -366E5 + 3058,1 * Investment in transport infrastructure development	r=0,89
14	Labor costs per month	Y = -1675, + ,30289 * Investment in transport infrastructure development	r=0,99
15	The share of renewable energy in gross final energy consumption	Y =-240,8 + ,02081 * Investment in transport infrastructure development	r=0,92
16	Gross capital formation in industry	Y =-542E5 + 5106,8 * Investment in transport infrastructure development	r=0,78

-         rates of industrial growth (industrial production (X19), the production index of construction industry (X20), gross in industry (X21), index of industrial production (X22));

-         social development (unemployment rate (X23), labor costs per month (X24));

-         environmentalization  (the share of renewable energy in gross final energy consumption (X25)).

The analysis of the effect of investments in infrastructure and specified factors was carried out in two stages: a) the research of the impact of investment in transport infrastructure on economic growth of the European Union member states in general ; b) the study of the impact of investment in transport infrastructure on economic growth of the European Union member states as the national average in 2014.

The equation1,reflectsthe relationships between indicators: (1)

                                                                            

When interpreting the results of correlation analysis, the size of error should be p> 0,05. So, in our study we use the narrative matrix and correlation matrix listed in Annexes B, C (See tab. 2).

Table 2. Matrix of the most significant correlation impacts of investments in transport infrastructure on economic growth of the EU member states during 2000-2014.*

* - The author's development

According to Table 2we can make a conclusion about density of connection between investment in transport infrastructure and economic growth of the EU member states during 2000-2014.

The growth of investment in transport infrastructure (0,90 <r <0,93) affects the exports of goods and services in the EU member states of the world in general (r = 0,96), exports to the EU-27 (r = 0,96), imports from the world in general (r = 0,90), imports from the EU-27 (r = 0,95), the share of renewable energy in gross final energy consumption (r = 0,92), gross in industry (r = 0.78), which may demonstrate the interconnectedness between the level of domestic and foreign trade activity and investment in the transport sector.

Investment in transport infrastructure increased their domestic and international freight. There has positive impact of investment in transport infrastructure EU member states with the modal share of freight transport (r = 0,75), a whole set of freight traffic by rail (r = 0,90), freight water transport (r = 0,98).

It was possible to identify the relationship between the GDP of the EU member states and the volume of passenger and freight traffic and transport infrastructure investments in GDP (r = 0,97), GDP per capita (r = 0,96) and the consumer price index (r = 0 96).

Also infrastructure stimulates the accumulation of other factors of production; it maybe an important factor in the formation of aggregate demand. Large infrastructure projects are usually accompanied by significant investments in construction and later in repair and reconstruction of buildings, increasing the demand for related industries (metallurgy, construction materials and structures, chemical and wood industry, services) [8, p. 238]. Thus, the volume of investment in transport infrastructure EU member states exert positive influence of gross industrial (r = 0,78) and the share of renewable energy in gross final energy consumption (r = 0,92).

Also, investment in infrastructure transport projects of EU member states have significant impact on the overall level of investment, particularly foreign direct investment (r = 0,75) and total yield investment projects (r = 0,92).

There has also positive effects of investments in social development of the member states, in particular, income growth and labor costs (r = 0,99) and reduction of total unemployment in the EU member states (r = -0,95).

If we however analyze the volume of freight transport relative to GDP and freight transport by road, there is the negative dynamics of the relationship (r = -0,67) and (r = -0,97), which is associated with a reduction of freight by road.

In addition to the aforementioned investments in transport infrastructure or those that are negative in nature, namely the volume of freight transport relative to GDP (r = -0,67), freight transport by road (r = -0,97 ), investment as a percentage of GDP (r = -0,96) and unemployment rate (r = -0,95).

Most significant investments in transport infrastructure of EU member states in recent years had influence: the level of trading activity and exports; transportation volumes in the network; the overall level of capital investment and activity in the EU; income levels and GDP and inflation fluctuations.

To study the channels of influence of investment in transport infrastructure on economic growth of individual EU member states in 2014 we use the average variables for countries in the narrative matrix and correlation matrix. (see annex D,E)

Consequently, investment in transport infrastructure in 2014 in average for countries positively affect the dynamics of railway freight (r = 0,98), the dynamics of freight rail transport (r = 0,98), foreign direct investment (r = 1), GDP (r = 0,98), investment income (r = 0,99), GDP (r=0,99), spending on innovation (r = 92), industrial production (r = 0,99 ) and the gross industrial (r = 0,98). Connection between the level of investment in transport infrastructure and other factors has direct character, that means by increasing the dependent factor also increases the value and vice versa.

Table 3. Matrix of the most significant correlation impacts of investments in transport infrastructure on economic growth of member countries in 2014*

          * - The author's development

Also the average level of foreign direct investment in 2014 the for countries is very strong (0,90 <r <0,93) it affects the dynamics of railway freight (r = 0,98), the dynamics of freight rail transport (r = 0,98 ), GDP (r = 0,98), investment income (r= 0,99), investment in transport infrastructure (r = 1), GDP (r =0,99) and expenditure on innovation ( r = 0,92).

Thus, the study of factors influencing investments in transport infrastructure on economic growth of the European Union Member States in 2014 we can conclude that the investments in transport infrastructure have the direct positive relationship with exports to the third countries, exports to the EU- 27, imports from the world in general, imports from the EU-27, modal share of freight transport, cargo transportation by railway, cargo transportation by water transport, foreign direct investment, return on investment, GDP, GDP per capita, consumer price index, the cost of innovation and labor costs per month per employee, and the negative - the volume of freight transport relative to GDP, road freight transportation, investment as a percentage of GDP and unemployment. Accordingly, the growth dynamics of railway transportation, the dynamics of freight rail transport, foreign direct investment, GDP, investment income, GDP, prices and costs flowing on innovation will increase the level of investment in transport infrastructure development and foreign direct investment in general.

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