High-Quality Transportation for 2040: Planning, Investments, and Benefits

Transportation access in Israel is lagging significantly behind leading European countries, as a result of transportation infrastructures whose extent is around a third of their scope in countries similar to Israel. Furthermore, the current investment plan in Israel does not match the rate of population growth and the development of economic activity. This paper aims to propose high-quality, nationwide transportation accessibility objectives toward 2040, along with a national program of investment in transportation infrastructure supporting these targets, and to estimate their impact on the GDP and thereby on the welfare of the Israeli population. High-quality transportation accessibility targets toward 2040 will bring Israel to the level of leading European countries and will have a dramatic impact on the country in terms of GDP and quality of life. We propose setting transportation accessibility targets which would match the level of transportation access in leading metropolitan areas around the world, and to formulate a long-term investment plan in accordance with these targets. Two targets were defined in the framework of this paper: reducing public transit travel time during peak hours by 30%, and increasing trips by public transportation as a ratio of total motorized trips in Israel from 20% to 40%. The existing transportation investment plans do not meet these targets. We propose a comprehensive plan totaling around NIS 940 billion, which represents a transportation investment to GDP ratio of 2.1%, as opposed to the current level of 1.1%. Implementing these investment plans will allow Israel to reduce the gaps in transportation infrastructures in comparison to developed countries and reach travel times and numbers of trips resembling those of leading metropolitan areas around the world. Even though the discussion regarding the lack of core infrastructures concentrates mainly on the Tel Aviv metropolitan area, we cannot overlook the fact that in other metropolitan areas, as well, traffic congestion and prolonged travel times hamper labor productivity. Increasing investment in infrastructures across all metropolitan areas, as well as connecting them by an efficient transportation system will make it possible to utilize the economic potential of each and every one of them, while also contributing to efficient social and economic population distribution.

Massive investment in transportation infrastructure that would achieve those goals, is likely to impact GDP and labor productivity substantially. We measure these effects using two models. The first is a model of agglomeration (describing the mechanisms that cause employees and firms to be co-located geographically) based on reduced travel times between business centers. The second is a macroeconomic model, in which transportation capital stock is used to increase overall productivity within a framework of a production function. In this paper we show that the additional annual growth across the economy as a result of this plan, compared to baseline scenario where transportation infrastructure investment is limited to maintaining existing infrastructures, is between 0.27% and 0.34%, depending on the model used. The GDP per employee in 2040 is projected to be 4.8% to 6% higher in comparison to the baseline scenario, and the return on investment ranges between 24% and 31%. Implementing a massive transportation investment plan requires a multi-year plan spanning at least 20 years, comprising specific goals, detailed strategic planning, and anchored in a government resolution. Such a plan, accompanied by the advancement of detailed planning processes and execution according to national prioritization, would establish certainty and allow the private sector to allocate resources for investments in urban areas including employment centers, residential compounds, and leisure and recreational centers, as well as prepare the execution capabilities required for carrying out these projects. This component is crucial for the efficiency of investments at the national economic level and for the scope of business investments in all segments, particularly in office spaces, industrial facilities, services and commercial spaces. Advancement of projects related to transportation infrastructure encounters planning and implementation barriers, which hinder the advancement of these projects within a reasonable timeline. Our principal recommendations in this regard are: enacting a National Infrastructures Law providing for executive powers and a funding plan; establishing metropolitan authorities tasked with transportation management; and removing barriers related to execution and professional workforce.