Mega projects -- Dimitrios Dimitriou, Athens International Airport

Dr. Dimitrios J. DIMITRIOUPlanning, Management & Economics in Transport Infrastructure Development

Professor Asst, Dept. of Economics, DUTh, GreeceChairman BoD, Athens International Airport

2nd OECD Forum on Governance of Infrastructure and

10th Annual Meeting of the OECD Network of Senior PPP and Infrastructure Officials

Paris – March 2017

Session: Mega Projects - why are they difficult and what can be done about it?

Defining decision making equilibrium for mega transportation projects

Presentation outline

Key variables of transport demand growth

Transport trends and prospects

Transport economic footprint and decision making

Needs, objectives and methodology framework to estimate transport

infrastructure economic effects

Types, outputs and mechanism of economic development impact

Case studies and highlights on economic contribution of mega infrastructure

development in various regions

Discussion issues and concluding remarks to industry and investors

Further Research

22Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017

Professor Asst– Planning Management and Economics in Transport Infrastructure

Demand drivers

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Source: OECD, 2012

Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017Professor Asst– Planning Management and Economics in Transport Infrastructure

Source: Dimitriou, ACI 2016

World Airport Connectivity trend in EU-non EU in terms of airline capacity, (2005-2016)

Source: ACI , 2016

Connectivity in European hub airports (change 2008 vs 2016)

Connectivity trends and prospects - Europe

-6

-4

-2

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EU

Non-EU

19.7%

22.5%

26.8%

25.4%

21.1%

65.6%

39.5%

Intra-Europe

Europe-North America

Europe-Asia Pacific

Europe-Latin America

Europe-Africa

Europe-Middle East

Intercontinental


ProfessorAsst– Planning Management and Economics in Transport Infrastructure

A. Transport Infrastructure Industry Expectations

Expectation differencing for Key Challenges- Carriers -Win-Win situation- Infrastructures -Power game - Authorities - Business/Social Equilibrium

B. Investments and Business Development

Key Strategies Key Challenges- Concession projects - Project financing- Attract investor’s - Condition of contracts- Market expectations - Regulation

Transport infrastructure industry challenges 1/2

555


C. Tools Influencing Demand

Key Strategies Key Challenges- Pricing policy - Supply – Demand dilemma- Connectivity - Capacity – peak hour problem- Demand patterns - Incentives

D. Mega infrastructures as a ‘private’ Company

Key Strategies Key Challenges- Efficiency (operation) - Competition- Demand growth (profitability) - Merge - acquisitions- CSR (sustainability) - Marketing

E. Management

Key Strategies Key Challenges- Risk sharing - Unit cost- Business control - Capacity/Utilization- System of System approach - Employees - talent

Transport infrastructure industry challenges 2/2

666


• Government

• Authorities

Strategic Planning

• Banks

• Investors

Financials

• Ministries

• Construction agents

Construction

Carriers

Operation

Ensure that the project is developed in a manner that promotes national economic development Promote financial Stability and compliance with laws and regulationPrevent monopolistic actions

Provide the best interests for tenants

Engineering and Construction contractor monitoring

Performance management of resources and cost

Promote safety and security

Operation efficiency and lab our stability

Ensure efficient operations

Earn high return on investment Appropriate balance between equity and debt to maximize returns

Maximize the value to all stakeholders

SoS for investment in transport infrastructure



Dimitriou et al.2016, IJCEE, 10(10)

Airports contribution in European Economy

62.7 million jobs supported

2.7 trillion USD Global economic impact

Represent the 3.5 % of global GDP

Aviation jobs 3.8 more productiive than other jobs

12.3 million associated jobs

674 bio Euro, European economic impact

Represent the 4.1 % of national GDP

Source: IATA, 2016

Source: ACI, 2015

88

Airports contribution in economy


Airports contribution in Global Economy

Transport Infrastructure Corporate Decision Making Equilibrium

9

Competitiveness

Regulatory framework

Monitoring/Review performance

Analysis of the competition

Innovation

Products - services

ITS

Smart business

Research

Strategy

Development of Tourism market

Market regulation - protection

Funding - new investments

Social impact and CRS

Planning

New Infrastructure

Business Sustainability

Business Development

Social benefits return

Supply

DEM

AN

D



Dimitriou et al.2017, IJESRT, 6(1)

Business environment and investment conditions

Income per Capita

Transport business

Working conditions Expertize and product recognition

Working force capital

Inflation-Consumer Prices

Currency exchange rates

Import/Export Volume

De

man

d s

ide

V

aria

ble

s

A

Soci

oe

con

om

ic

valu

es

and

De

cisi

on

p

aram

eter

s

B

Sup

ply

sid

e

Var

iab

les C

Transport Cost

Travelers environment

sensitivity and awareness

Region attractiveness and

accesibility

Transport System Capacity

Network connectivity

Ligable assets and capitals Transport Assets Portfolio

Network efficiency and Productivity

Inligable and Natural capital

Cultural Capital

Environmental Capacity Constraints

Quality of life values and expectations

Stability –Security

Education and Health

Ecological sensitivity

Society Isolation

Demand /Supply variables influence decision making Social values Economy conditions



Dimitriou et al.2016, IJSBEEBIE, 10(11)

INPUT EVALUATION - DECISION RESULTS (OUTPUT)

Operation characteristics

Operator performance

Travel Demand Drivers

Network Evaluation

→ Competition (carriers, fares)

→ Robustness (scheduled)

→ Saturation (new routes)

Business Sustainability

→ Carriers

→ Infrastructure Operator

→ Capacity / Efficiency

Economic Productivity

→ Demand patterns (expenditure at city)

→ Transfer pax

→ Contribution (regional economy)

Infrastructure projects

Social values

Economy conditions

Decision agents and Stakeholders and

perspectives

Operation characteristics

Operator performance

Network planning

Decision objectives

Taxonomy to evaluate transport infrastructure investment




Activity Impact Assessment - General Framework

Socioeconomic Analysis

Risk Assessment

External Financial Analysis

Internal Financial analysis

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131313

Key question in strategic planning and decision making


Dimitriou et al.2017,Research Project

Financial analysis

Added value to Economic System

Equilibrium??

Strategic planning and DSS

What will be the ripple effects across the Regional Economic

System?

What is the Region Economic Base

How many jobs will be gained?

How much total Output will be gained?

141414

Key questions in strategic planning and decision making


15

`

Direct Indirect

Induced

SectorMultiplie

Income per sector

SectorsTransaction tables

Wages per sector of activity

Macroeconomic features of the project

catchment area

Jobs per sector Catalytic

Direct

Multiplied impact

Indirect Induced Catalytic

New demand from additional capacity

Jobs distribution for each project phase

Project financial features and technical characteristics

New Jobs

New Income

1515

Methodology framework


Dimitriou et al.2015, IJAE,47(40)

0

1

2

3

4

5

6

7

8C

YPR

US

MA

LTA

GR

EEC

E

LUX

EMB

UR

G

PO

RTU

GA

L

SPA

IN

IREL

AN

D

DEN

MA

RK

NET

HER

LAN

DS

CR

OA

TIA

SWED

EN

FIN

LAN

D UK

FRA

NC

E

BU

LGA

RIA

BEL

GIU

M

PO

LAN

D

GER

MA

NY

ITA

LY

AU

STR

IA

SLO

VEN

IA

CZE

CH

LATV

IA

RO

MA

NIA

SLO

VA

KIA

LITH

UA

NIA

ESTO

NIA

HU

NG

AR

Y

DIRECT/INDIRECT/INDUCED

CATALYTIC

161616

Contribution of Air Connectivity in European Countries as share of National GDP

Highlight on Economic contribution of air connectivity in EU-28


Source: ACI, 2016

3.94 9.94

17

88,700

271,700

2.2%National

GDP

Direct/ IndirectInduced

Catalytic

Employment Direct, Indirect and Induced Catalytic

GDP(Billions)

5.5%National

GDP

GREECE

3.11 7.46

PORTUGAL

84,200204,100

Direct/ IndirectInduced Catalytic

1.9%National

GDP

4.5%National

GDP

GDP(Billions)

Direct, Indirect and Induced Catalytic

1717

Case Study: Air Connectivity Economic Impact in Remote tourist destinations


Source: ACI 2016, Author analysis

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-10

-5

0

5

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ann

ual

gro

wth

rat

e(%

) Real GDP forecast, annual growth rate (%), 2009-2018

OECD GREECE EA15

-30

-20

-10

0

10

20

30

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ann

ual

gro

wth

rat

e(%

) Investment forecast, annual growth rate(%), 2005-2018

OECD GREECE EA15


Source: OECD, 2016

Source: OECD, 2016

Case studies: Τransport Infrastructures in Greece

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8.3 8.5 7.5 6.8 7.5 7.3 8.4 9.6

35.3 36.131.9 28.9 31.9 31.0

34,538,5

223.2233.2

231.1 222.2

208.5

193.7181.1 181.2

100

120

140

160

180

200

220

240

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2011 2012 2013 2014

Euro

Bio

GDP

Direct Income by Tourism

Income contribution of Tourism

Current prices

19191919

Case study: Αir Transport Economic Impact in Greece

Air Transport economic impact in Greece


Dimitriou et al., WCTR 2016

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Hub airport

New airport investmenrt

EUROPE

2020

Case Studies: Mega transport infrastructures in Greece


Concession Motorways

Rail line upgrade in

North Greece

Ports privatization 14 concessioned

airports

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Why to estimate mega transport infrastructure impacts in national/regional economy?

Estimate the overall contribution in an economic system (regional – national scale)

Estimate the economic impacts on other economic sectors

Provide essential economic and social outputs for a variety of stakeholders

involved in decision process (such as Government; authorities; NGOs, etc)

Monitoring the productivity and the efficiency of transports in economies

How to estimate mega transport infrastructure impacts in national/regional economy?

I-O and CGA methodology approach

High need for data

Outputs in terms of income and jobs

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Concluding Remarks 1/2

Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017ProfessorAsst– Planning Management and Economics in Transport Infrastructure

22

How significant are the transport infrastructure impacts in national/regional economy?

Quick and HIGH impacts in unemployment and business growth

Income multiplier 2 ÷ 5

Act as un FDI providing additional economic benefits to the poorest regions

GDP contribution up to 15 %

Significant higher (direct/indirect effects) if investments are implemented

Other sectors of development?

Tourism, Energy, Real estate, Trade and Commission services are the top sectors

of growth + construction

Provide new opportunities to other economic sectors (e.g. education)

Ensure social stability and culture exchange

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Concluding Remarks 2/2

Dimitrios J. DIMITRIOU, OECD, Annual meeting on PPP: Mega Infrastructure projects, Paris, 2017ProfessorAsst– Planning Management and Economics in Transport Infrastructure

Dimitrios J. DIMITRIOUPlanning, Management & Economics in Air Transport

Professor, Dept. of Economics, DUTh, GreeceChairman BoD, Athens International Airport

2nd OECD Forum on Governance of Infrastructure and

10th Annual Meeting of the OECD Network of Senior PPP and Infrastructure Officials

Paris – March 2017

Thank you

[email protected]

Mega projects -- Dimitrios Dimitriou, Athens International Airport

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