Supply Chain Logistics and Transportation on the Island of ...

Supply Chain Logistics and Transportation on the Island of Ireland An Integrated Study IBEC - CBI Joint Business Council

Contents Introduction .................................................................. 1 Section 1 Overview and Key Findings ........................................ 3 Introduction ........................................................... 4 Some key issues ...................................................... 5 Specific areas for action .......................................... 8 Section 2 Supply Chain Management and Logistics .................. 11 Executive summary ................................................ 12 Main report ........................................................... 16 Conclusion ............................................................ 27 Section 3 Policy Environment and Transportation Services ....... 28 Executive summary ................................................ 29 Main report ........................................................... 35 Road Haulage ........................................................ 38 Air Transport .......................................................... 45 Shipping ................................................................ 52 Rail Transport ........................................................ 59 Appendix ............................................................... 63 Section 4 Transport Infrastructure ............................................... 71 Executive summary ................................................ 72 Main report ........................................................... 77 Conclusion ............................................................ 94 Participants ..................................................................... 96

Introduction InterTradeIreland has a legislative obligation to promote the development of supply chains across the island of Ireland. From the company point of view, the supply chain incorporates the entire spectrum of activity from procurement of raw materials, through manufacturing to delivery to customer. A comprehensive study of the supply chain will, therefore, by definition encompass transportation issues. Such issues, while vitally important, are not however, within the scope of InterTradeIreland’s activities. To ensure a comprehensive approach from a business perspective InterTradeIreland engaged the services of the IBEC-CBI Joint Business Council in a collaborative arrangement to co-ordinate a study of this overall field. The study was managed through an Advisory Group and Management Committee, comprising representation from the industrial development agencies, North and South, transport users, providers of transport facilities and services, the universities and manufacturing and services companies in both parts of Ireland. The study represents a unique partnership between InterTradeIreland and the IBEC-CBI Joint Council, with InterTradeIreland directly sponsoring the supply chain and logistics module. InterTradeIreland, with its legislative responsibility to promote north-south trade and supply chains, will take forward supply chain proposals contained in the study in the context of a wider programme on Supply Chain Management (SCM). This study on Supply Chain Logistics and Transportation on the island of Ireland stemmed from the needs of companies as identified in Northern Ireland and the Republic of Ireland through a number of feedback mechanisms including: • A north-south Conference on Logistics held by IBEC- CBI. • 4 north-south road shows organised by InterTradeIreland involving 1,500 north-south companies. • IBEC-CBI north-south Business Study 2000 of 750 companies in Northern Ireland and the Republic of Ireland. The scope and structure of this Integrated Study inherently recognises the globally competitive supply chain pressures on companies on the island of Ireland with related requirements for improved transportation services and transport infrastructure. The main objective of the Integrated Study therefore was to facilitate the development of north-south trade by evaluating policies and identifying appropriate actions related to supply chain management, logistics and transportation issues.The Study further sought to identify any supply chain and transportation barriers that might be impeding north-south trade, to recommend appropriate actions and to promote best practice. 1

Three North-South consultancy teams carried out the Study, working on each module as follows: Supply Chain Management and Logistics Institute of Logistics and Transport in Northern Ireland and the National Institute of Transport and Logistics in the Republic of Ireland Transportation Services and the Policy Environment University of Ulster in Northern Ireland assisted by University College Dublin Transport Infrastructure University College, Dublin assisted by the University of Ulster. For the first time, this partnership between InterTradeIreland and the IBEC-CBI Joint Business Council provides a framework for developing an integrated approach to the needs of companies for improved supply chain management, transportation services and transport infrastructure on the island of Ireland, which can greatly contribute to the increased competitiveness of Irish industry. 2

Section 1 Overview and Key Findings of the Study

1 Overview and Key Findings of the Study Introduction 1.1 This study, which is commissioned by InterTradeIreland in partnership with IBEC-CBI Joint Business Council, confirms the strategic importance of Supply Chain Logistics and Transportation issues to the current and future needs of business on the island of Ireland. The work has been carried out on an all-island basis with the aim of identifying ways to improve the competitiveness of northern and southern businesses to trade both on the island and in external markets. 1.2 The supply chain requirements of companies in an increasingly competitive global market are driving the need for world-class standards in logistics supply chain management including transportation services and transport infrastructure.The study focuses on logistics and transportation and its findings will require careful scrutiny by InterTradeIreland to identify issues which are within the organisation’s direct remit and those which are more appropriate for other groupings. Sub-supplier development and linkages have been the subject of a previous InterTradeIreland study. 1.3 The body of the report consists of three detailed topics or modules from which a range of key findings emerge.These are: I. Logistics and supply chain management as a competitiveness issue for manufacturers and distribution services. II. Transportation and related policies to support the provision and development of services including road haulage, shipping, air services and integrated carriers. III. Transport Infrastructure - investment in road, rail, shipping / air freight facilities, ports and airport infrastructure and information technology. The overview 1.4 The Key Overall Findings: i. The development of supply chain management is crucial to success in meeting the challenges of global competitiveness. ii. Close co-operation between governments will facilitate the development of services to supply chain management. iii. Deficiencies in cross-border transport infrastructure are impeding the ability to realise the potential of supply chain management as a means of improving competitiveness. 4

Some Key Issues The two most significant themes arising from this report relate to Competitiveness and Change 1.5 Competitiveness is a core issue and must be approached in a new and innovative way. Competitiveness extends beyond the scope of the study and is a very obvious area of co-operative action. 1.6 There is a need for change in the way in which firms adapt to global pressures for excellence in transport and logistics and the corresponding change in government and EU policies to support the new business environment. 1.7 The case for change is strong: it is based on market trends showing that if business throughout the island is to meet new challenges in the areas of supply chain management (especially SMEs), there must be a corresponding change in the approach by governments, including investment in infrastructure and the development of the relevant modal policies. 1.8 Surveys by the National Institute of Transport and Logistics, Enterprise Ireland and IBEC have concluded that global business needs are changing in relation to supply chain management and that business is lagging behind in many instances. Just catching up is no longer enough. Businesses on the island must achieve world class best practice so as to create the best environment to attract foreign investment, in addition to building strong indigenous firms and sectors. 1.9 In what is becoming a single market throughout the island business requires the closest possible co-operation at all levels to create the environment in which the EU single market can be fully operational in the shortest possible time. 1.10 A change in attitude to the creation of a true single market on the island e.g. by co-operating to improve modal policies and related services, is essential for even the basic objectives of an expansion of north-south trade - not to mention a long-term strategy to meet new competitiveness pressures. The Forces of Change 1.11 Given the broad nature of the modern definition of transportation and logistics as contained in this and other reports in recent years, as well as global trends, it is not surprising that there are many and varied forces of change. Examples include: i. Global economic and political changes ii. The creation of a single market on the island of Ireland against the existing economic and political background; iii. The speed of technological change, particularly e-technology/sourcing; iv. The extent to which the island of Ireland is still lagging behind in terms of best practice; v. The impact of differences in currency, especially with the introduction of the Euro in 2002. vi. Social change. 5

1.12 A projected future of pragmatic but radical change creates its own areas of uncertainty. A co-operative approach can remove these obstacles to change. Areas for Co-operation 1.13 The principle and practice of co-operation is well established in the development of supply chain management, in which widely dispersed sources of components are integrated in a logistics plan.This delivers a finished product at another time in another place. 1.14 Even within the transportation aspects of SCM, the various elements of multi-modal distribution are increasingly integrated by a single carrier who provides multi-modal service as well as storage and information systems. Research also shows that change is continuing as firms and sectors strive to improve their competitiveness. 1.15 Given the contrasting nature of the investment in infrastructure between Northern Ireland and the Republic, and the differences in the way in which transport policies are formulated, a comprehensive plan to facilitate co- operation at top level in all aspects of investment and transport policy is essential.The experience gained elsewhere, such as the creation of a cross- border Economic Corridor between USA and Canada, suggests that for an island market such as Ireland with a high dependency upon trade with Great Britain and continental Europe, a co-operative and innovative approach to such an important economic activity is essential. 1.16 Co-operation in the development of transportation systems linking north and south as well as the island of Ireland to Great Britain and continental Europe must be a priority.This type of inter-modal operability is an important part of European spatial planning and is supported by current and future policy initiatives. The geographic position of the island with higher than normal inter-modal transport, demands a new approach to ensure co- operation between governments and business. 1.17 The pace of change in international markets makes it difficult for firms, especially SMEs, to keep pace with competitive initiatives in markets such as the USA and the Far East. Given the importance of transportation and logistics as a competitiveness tool, an innovative approach to long-term planning is essential. The fragmented nature of transportation and logistics planning in both jurisdictions, as shown in numerous reports apart from this study, is a major impediment to the creation of an island strategy as an inte- gral part of developing the future shape of policies. 1.18 Innovation is central to achieving a competitive transportation and logistics environment. An agreed R&D and innovation programme is required to identify needs, specify initiatives and co-ordinate North-South policy options. Implications for Governments 1.19 The following are presented as the most important areas for co-operation 6 in response to the changing needs of users and providers of transportation

and logistics services on the island: i. Agreement between the Governments about the urgency of re- sponding to the needs of firms and sectors engaged in north-south business, in order to help them adapt to international trends in markets outside the island in all aspects of supply chain management. ii. A joint approach to education and training to achieve uniform standards, e.g. developing joint programmes between the National Institute of Transport & Logistics in Dublin and the Institute of Logistics & Transport in Belfast. iii. Agreement on the need for a corresponding island-wide response to changes in infrastructural investment: and on the requirement for wide-ranging transport policy targets and procedures, as set out in the specific recommendations. iv. Recognition by governments of the need for appropriate structures to create the framework within which change can happen. v. An acceptance of the need for a fresh and innovative approach to transportation and logistics. vi. Ensuring a co-ordinated departmental response related to specific programmes for north-south co-operation as well as closer working relations between the relevant agencies. Implications for Business 1.20 The recommendations below relate to changes in structures, attitudes and in integration.They are intended as the means by which the recommendations in each of the three modules may be implemented. Business organisations representing users and providers of transportation and logistics services, such as IBEC-CBI, must: i. Recognise the importance of supply chain management and encourage and assist firms and sectors to meet new demands. ii. Co-ordinate and articulate an integrated business view to Govern- ments, agencies and EU institutions regarding the implementation of the recommendations in the report. iii. Work with state agencies north and south and with InterTradeIreland to create the necessary structures and plans to support the programme.Areas for action include marketing support, R&D, education and training and e-commerce. iv. Press for interdepartmental co-operation (with business input) to identify structures, procedures and cost. v. Promote world best practice in supply chain management, encourage innovation, facilitate change in transport and related policies and deliver the necessary infrastructure within a specific time-scale. 7

Specific Areas for Action 1.21 While detailed recommendations to implement the findings across a wide range of areas and programmes is beyond the scope of this study, the following are the key findings and areas for active co-operation arising from the specific research under each of the three modules. The top five areas for action from each module are presented below. These specific areas for co-operation are not exhaustive and depend upon the achievement of maximum co-operation at the strategic level contained in this overview. Supply Chain Management i. Supply chain management offers significant opportunities for companies located in Ireland to compete in global markets. It is important to ensure that it is on the agenda in every Board Room on the Island. ii. Recent surveys show that indigenous Irish companies lag behind multinationals located in Ireland and some companies in other countries in their understanding and application of the principles of supply chain management. To be successful in global markets, Ireland’s peripheral location demands that its companies be even better at supply chain management than competitors in more favourable market locations. It is important to encourage the development of appropriate education and to develop awareness programmes and collaboration with colleges and other institutions to address this weakness. iii. Supply chain management involves the sharing of information and development of partnerships between organisations for mutual benefit. The Supply Chain module recommends that InterTradeIreland should encourage appropriate Government bodies, trade associations and others to act as ‘honest brokers’ in encouraging the development of collaborative efforts between companies in areas such as strategic sourcing, effective procurement of materials and servicing common customer bases. iv. The development and implementation of integrated information systems is fundamental to supply chain management. One specific initiative for InterTradeIreland to consider is the development of a web based ‘back-hauling’ system for companies in Ireland. v. Supply chain management offers opportunities for the encouragement of inward investment to Ireland. It is recommended that InterTrade Ireland sponsor a survey to produce empirical evidence that those companies located in Ireland which excel in supply chain management provide at least as good - and often significantly better - service to customers at lower total supply chain cost than companies located 8 in other countries.

Transportation Services i. The ‘island’ status of Ireland means seaports are vital for the development of competitive businesses. For this reason, policies must be developed to address the very urgent needs of port development and port access. ii. The importance of road transport for the movement of freight within the island of Ireland requires policies which will harmonise conditions for the road haulage industry in respect of, e.g. working time, employment conditions, licensing, vehicle excise duty, fuel prices and enforcement.This should be investigated as a priority. iii. The business environment for SMEs engaged in the provision of transportation and logistics services, north and south, must facilitate cross border trade and collaborative effort to address global markets e.g. policies for the creation and harmonisation of favourable fiscal regimes. iv. There is a need to address the use of roads for the movement of freight and the development and harmonisation of policies to encourage the development of rail. There is a particular need to look at a regional type air service for passenger movement within the island. v. The lack of North-South harmony in policies and services, for transportation and logistics, has created an uneven playing field.This is limiting the development of effective supply chain management and is absolutely critical to the competitiveness of Irish business. The European ‘Single Market’ model provides a ready-made framework within which transportation and logistics services can be harmonised. It should be approximated within the Island of Ireland. Transport Infrastructure i. A spatial vision for the island as a whole should be developed. Building on the impending Spatial Strategy (ROI), the National Development Plan (ROI), Shaping our Future (NI), and the Regional Transport Strategy (NI). Such a vision should focus on: a) Linking the regional gateways on both sides of the border and making the border invisible for trade and transport flows, b) reviewing and prioritising investment in transportation infrastructure in the western/north-western corridor in the context of economic activity in these regions. More specifically, this module proposes a north-south study based on transport infrastructure on the western corridor/north -western part of Ireland. The urgency of such a study is underpinned by the fact that NI and the Border, Midlands and West Region (BMW) are respectively ‘objective one in transition’ and ‘objective one’ status for the purposes of EU support. 9

c) encouraging seamless movement both across the border and along the border corridor. ii. A cross-border structure should be established for co-operation on road, rail and air links for the island of Ireland as a whole and particularly for cross-border links. Efforts to harmonise planning regimes and zoning policies should be a prime focus of attention in the development of such a structure. iii. Synchronisation of road planning is a key concern. Despite the efforts of road agencies to accelerate road development and land access to ports, the entire process from planning to construction needs to be overhauled to bring the road network up to standard on both sides of the border within the timescales of the development plans of both jurisdictions. This is an urgent priority since the majority of freight traffic is road-based and time-sensitive. As such, rail currently offers very limited scope for freight. Instead, investment in improving commuter passenger services could significantly reduce the number of passenger cars using the roads. iv. In tandem with investment in the road and rail infrastructure there is a need for greater traffic management. Developments in Information and Communications Technology (ICT) can help overcome infrastructural blockages by facilitating route selection, avoiding congestion and ensuring punctual arrival at ferry ports and airports. Developing an integrated approach - such as Streetwise - on both sides of the border and ensuring interoperability through a co-ordinated traffic management and information provision system for the island of Ireland is feasible. This could further link into the management of traffic on EU Trans-European Networks. However Irish participation in EU Programmes, such as DRIVE, has been very low. This module proposes that InterTradeIreland should promote and facilitate co-operation between research institutions, universities and businesses so as to ensure that the island is at the leading edge of research activity in transport telematics. 10

Section 2 Supply Chain Management and Logistics

2 Supply Chain Management and Logistics Executive Summary Background: 2.1 Why would a company supplying parts to the automotive industry locate their European distribution centre in Connemara? How does it make sense for a multi-national aircraft manufacturer to make the fuselage for an aircraft in Belfast and then ship it to North America to add the wings, engines etc? Why would a large retail multiple buy sandwiches from a Northern Ireland company for their stores in UK? The answer to all of these questions is, because of supply chain management & logistics. 2.2 Supply chain management is an increasingly important management approach, with a recent survey by MIT in the United States of America indicating that the application of supply chain management has resulted in: • 50% reduction in inventory • 40% improvement in on-time deliveries • 27% reduction in order cycle times • a nine fold reduction in out of stock rates 2.3 Supply chain management is a vital management approach for today’s competitive and global market place, and, as will be explained below, is of critical importance to Ireland in terms of North-South trade, regional economic development and companies located in Ireland being competitive in world markets. 2.4 Because of this, supply chain management and logistics is a key module within the Transport and Logistics on the Island of Ireland Integrated Study. The objective of the Logistics and Supply Chain Module of the Transportation and Logistics Initiative is to evaluate policies and identify actions related to logistics and supply chain management which will facilitate North - South trade. 2.5 How do we define supply chain management? Supply chain management is concerned with managing the physical flow of product and related information flow through the whole organisation from procurement of raw materials, through manufacturing to delivery to customer, in a way where the key business functions of buy, make, move and sell are managed in an integrated way to provide better service at lower cost, as illustrated by the diagram below: Flow of Product Buy Make Move Sell 12 Flow of Information and Money

2.6 This management approach presents particular opportunities and challenges for companies located in Ireland. For example: i. World Class Best Practice companies have endorsed the concept of supply chain management. Companies in Ireland will have to do the same if they are to be competitive in world markets. ii. In fact, given Ireland’s peripheral location, companies based here will have to be better at supply chain management than companies in more favourable locations. iii. Supply chain management shows that transport is only one, and not even the most important, cost in the total supply chain. Distance from raw material sources and markets need not be a disadvantage if companies in Ireland can be ‘world class’ in the other supply chain management elements.This is of particular significance to companies located in the West and North West of the country. iv. These supply chain management elements include lean and agile manufacturing, development of supplier partnerships, just-in-time inventory management, effective use of third party logistics services and superior customer service. If companies in Ireland can be world class in these, they can compete successfully in world markets. v. The entire supply chain does not have to be in one country, so supply chain management allows relatively small Irish-based companies to compete in the world market as part of a global supply chain. vi. E-business facilitates the creation of ‘virtual’ supply chains, and companies located in Ireland can, using a call centre here, source product in another country and using a third party, distribute to customers in different country. Supply chain management capabilities of Irish Companies: 2.7 Many of the multi-national companies located in Ireland are already taking advantage of these opportunities, however, four recent surveys related to supply chain management in Ireland indicate: i. While companies here are aware of supply chain management, few, particularly indigenous Irish companies are organised to take advantage of the opportunities. ii. Few Irish SME’s see supply chain management as a broad based senior management responsibility. iii. Generally companies in Ireland do not have information systems integrated across the supply chain, a vital requirement for supply chain management to be effective. iv. Few companies in Ireland have a full understanding of their total supply chain costs and do not have appropriate KPI’s in place. v. Compared to European companies, SME’s in Ireland do not compare 13 favourably in relation to a number of supply chain elements.

2.8 Addressing these weaknesses is essential if Irish companies are to compete on the world stage. In particular Irish companies need: i. More awareness of supply chain management ii. Supply chain management education iii. Assistance with the development and implementation of supply chain information technology. 2.9 Global Trends: Supply chain management ‘best practice’ continues to develop and change to meet the increasing demands of international markets. The most recent trends are discussed in the main body of the report. In operational terms these ‘Global Trends’ are beginning to manifest themselves in the following ways: i. Delivery time windows are getting tighter, lead times shorter and customer demands are becoming more diverse - suppliers and their customers must address the issue of ‘real’ collaboration to meet the changing needs of the customer and at the same time work together to reduce supply chain costs. ii. The speed of change is demanding faster and better flows of information across the supply chain. Companies are having to embrace new technologies, particularly information technology. iii. Customisation of products is becoming increasingly more complex and difficult to manage, driving both cost and high waste levels into the supply chain creating a greater need a collaborate to fully understand the cost and waste implications across the chain. iv. Transparency of costs and information across the chain will help improve manufacturers’ competitive advantage and ensure that all profit is not eroded for the benefit of others thus hindering investment by manufacturers. v. Collaboration between suppliers, customers and third party logistics service providers is essential in order to create greater economies of scale and reduction in warehousing and transportation costs for business operating in Ireland and serving local global markets. Critical Success Factors: 2.10 The biggest influence on the survival and success of businesses across the island of Ireland trading in the ‘Global Marketplace’ will be how well the whole supply chain competes, not just parts of it. i. Supply chains must work in harmony from end to end if true competitive advantage is to be maintained. ii. This is not industry specific, it is relevant to all sectors, however, the 14 sectors currently coming under most pressure are those involved in

Fast Moving Consumer goods (FMCG) especially food, drink, textiles and electronics. Top five recommendations: 2.11 The top five recommendations are detailed below, further details of specific Intertrade Ireland initiatives / interventions are set out in the main body of the report. i. Supply chain management offers significant opportunities for companies located in Ireland to compete in global markets. InterTrade Ireland should ensure it is on the agenda in the Board Room of every company in Ireland. ii. Recent surveys show that indigenous Irish companies lag behind multinationals located in Ireland and some companies in other countries in relation to their understanding and application of the principles of supply chain management, when, given Ireland’s peripheral location, they need to be even better at supply chain management than their competitors in more favourable market locations, in order to be successful in global markets. InterTrade Ireland should encourage the development of appropriate education and awareness programs to address this weakness. iii. Supply chain management encourages the sharing of information and development of partnerships between organisations for the mutual benefit of all. InterTrade Ireland should encourage appropriate Government bodies, trade associations etc to act as ‘honest brokers’ in encouraging the development of collaborative efforts between companies in areas such as strategic sourcing and effective procurement of materials and servicing common customer bases. iv. The development and implementation of integrated information systems is a fundamental aspect of supply chain management. One specific initiative for InterTrade Ireland to pursue is the development of a web based ‘back-hauling’ system for companies in Ireland. v. Supply chain management offers opportunities for the encouragement of inward investment to Ireland. InterTrade Ireland should sponsor a survey to produce empirical evidence that those companies located in Ireland which excel in supply chain management, provide at least as good and often significantly better service to customers at lower total supply chain cost than companies located in other countries. 15

2 Supply Chain Management and Logistics Main Report: Objectives and Scope of Supply Chain & Logistics Module 2.12 The objective of the Supply Chain & Logistics Module is to evaluate policies and identify actions related to logistics and supply chain management in an all-Ireland context which would facilitate north-south trade. 2.13 The scope of the logistics and supply chain management module of the Transportation and Logistics initiative encompasses all aspects of the supply chain from procurement through manufacture, inventory management, warehousing and distribution to sales order processing and customer service across all sectors and all companies from large multi-nationals to indigenous SMEs. What is ‘Supply Chain Management’? 2.14 Supply chain management is a much misunderstood term, meaning different things to different people. i. To some at the leading edge of global business best practice, supply chain management encompasses all aspects of producing and delivering quality products to customers ‘better, faster and cheaper’ than their competitors. ii. To others, supply chain management is merely a ‘new name’ for the operation of ‘trucks and sheds.’ Before we can begin to address the objectives and scope of this initiative, it is essential that we clarify the definition and scope of ‘The Supply Chain.’ 2.15 First, what is a supply chain? The diagram below illustrates the typical supply chain, familiar to most business people. What is the Supply Chain? Encompassing: • Sales Forecasting • Sourcing / Procurement • Manufacturing Planning • Inventory Management • Warehouse & Distribution Management Raw Material Suppliers Sourcing • Customer Service Management Buying Underpinned and supported by: • Logistics MIS • Human Resources MIS • Finance Raw Manufacturer/ Finished Goods Retailer/ Material Processing Stocks and Distributor Stocks Making Warehousing Moving A typical supply chain will include multiple suppliers and multiple customers spread across a wide range of geographical locations. 16 The principles of supply chain management apply to participants End Customer/Consumer in the supply chain, regardless of company size. Selling

2.16 The diagram traces the flow of product from sourcing or buying raw materials through manufacturing or making, distribution or moving to the customer or selling. 2.17 In simple terms, therefore, a typical supply chain can be considered in terms of the four key functions of buy, make, move and sell, as illustrated by the diagram below: Flow of Product Buy Make Move Sell Flow of Information and Money 2.18 However, traditionally these functions are often managed in isolation, often working at cross-purposes, as illustrated below. Supply chain management means thinking beyond the established boundaries of the functions, strengthening the linkages between them and finding ways for them to pull together as illustrated in the diagram below. The result is an organisation which provides a better level of service at lower costs. 2.19 Additionally, as well as optimising the flow of product, supply chain management also optimises the flow of information and added value. For example: Traditional Functions: Buy Make Move Sell Functional Objectives: Best price Lowest unit cost Lowest transport cost = Quantity = Long runs = Slowest mode Potential Impact: High raw High finished Slow response High raw material material stocks goods stocks to customer and finished demands goods stocks High risk of Limited flexibility Increased manu- obsolescence = poor service facturing costs These functional objectives are in conflict 2.20 But it doesn’t finish there. Other companies also have supply chains and supply chain management involves the interaction of one company’s supply chain with other supply chains as illustrated below: 2.21 In Simple Terms: Suppliers Buy Make Move Sell Each element will interact with other supply chains Buy Make Move Sell Buy Make Move Sell 17 Manufacturers Customers

2.22 In many ways this is the key to understanding the relevance of supply chain management for companies located in Ireland. As well as managing their own supply chains, companies in Ireland have to understand the part they play in other companies supply chain, whether those are companies located elsewhere in Ireland or abroad.This is both the challenge and the opportunity for Irish companies as is discussed in the next section. The Relevance of SCM to Companies Located in Ireland 2.23 So what is the relevance of supply chain management for companies located in Ireland. Below are a number of the reasons. i. World Class Best Practice companies have endorsed the concept of supply chain management. Companies in Ireland will have to do the same if they are to be competitive in world markets. For example, Unilever have made supply chain management one of their key strategic objectives for 2001/2. ii. Given Ireland’s peripheral location, companies based here, and particularly companies located outside of the Eastern seaboard of Ireland, have to be better at supply chain management than companies in more favourable locations. This is particularly true for Irish food companies serving large multi-national retailers in GB and Europe. iii. Supply chain management shows that transport is only one, and not even the most important, cost in the total supply chain. Distance from raw material sources and markets need not be a disadvantage if companies in Ireland can be ‘world class’ in the other supply chain management elements.This is also important for companies located in the West and North West of Ireland and is illustrated by companies such as Dell computers who have manufacturing facilities in the West of Ireland and in healthcare, with companies such as Abbott Laboratories who have a plant in Donegal. iv. These supply chain management elements include, for example, agile and lean manufacturing, development of supplier partnerships, just-in-time inventory management, effective use of third party distribution and logistics service providers and superior customer service. If companies in Ireland can be world class in these, they can successfully compete in world markets. v. The entire supply chain does not have to be in one country, so supply chain management allows relatively small Irish-based companies to compete in the world market as part of a global supply chain. An example of such a company is Bombardier Shorts who manufacture the fuselage for Lear Jets in Belfast, where labour skills and flexibility of manufacture overcome any potential disadvantage of geographical location. vi. E-business creates ‘virtual’ supply chains and companies based in 18 Ireland using, for example, a call centre here, can source product in

another country and, using a third party, distribute to international customers, with the product never entering Ireland. Microsoft is a typical example of such companies already operating in Ireland. 2.24 For all of the reasons above, supply chain management represents significant opportunities and challenges for companies in Ireland including the regions. 2.25 Because of this, companies in Ireland, business representative bodies including Government Departments, must be aware of and cognizant of the trends in supply chain management.The next section reviews these global trends. ‘Global’ Trends in Supply Chain Management 2.26 Some of the global trends in supply chain management can be summarised as: Functions Processes Profit Added Value Information Deficit Information Sharing Fragmentation Integration Functional Customer Service Adversarial Partnership Relationships Fully Controlled ‘Arm’s length’ via Third Parties Vertical Integration to Virtual Integration Company Responsibility Social & Environmental Responsibility Expanding on each of these in turn: Evolution from functional focus to process integration 2.27 i. Businesses are moving away from traditional ‘functional’ structures to become process driven organisations which recognise the need to manage the flow of product through all parts of the supply chain in a way which ensures the correct trade-offs are made in order to achieve the optimum total supply chain cost, for example, between transport cost and service, or unit cost to produce and inventory, Profit to value added 2.28 i. Traditional management accounting methods are giving way to ‘value-based management of costs’ focussed on a full understanding of total costs which are process-driven and providing visibility of true costs and profits associated with individual products and customers. No longer does ‘one size fit all’. Information deficit towards information sharing 2.29 i. Information has always been an essential part of decision-making, but has never been complete. For example, suppliers and customers have rarely shared information. ii. Recent advances in the availability and usability of information technology has made it possible to share information effectively and efficiently across the entire supply chain, including between customers and suppliers. 19

iii Better information and, therefore, visibility of supply chain activity and end customer demand, greatly enhances the business decision- making process and reduces costs resulting from service failure and obsolescence across the chain. 2.30 Traditionally fragmented operations are now becoming more integrated i. The essence of supply chain management is the need to integrate all the elements that control the flow of product through an organisation in the interests of delivering better service at optimum cost. 2.31 The recognition that the traditional product focus must evolve into a customer / market focus, including ‘Customer Relationship Management (CRM)’ i. No longer is business just about delivering the right product to the right place at the right time and at the right price. ii. Companies are now moving towards understanding that customer service is the main driver of competitive advantage and thus ‘sets the spec’ for the design of supply chains. iii. Further, companies are recognising that customer service through CRM, and therefore supply chain management, is a key part of the marketing mix. 2.32 Trading partners are leaving the old ‘adversarial’ approach behind and beginning to collaborate i. Supply chain management understanding is reaching areas of the supply chain previously untouched in terms of understanding the need to collaborate and work together both internally and externally with trading partners. ii. For example, supplier partnerships and ‘open book’ pricing and EDI links to customers are becoming the norm, as companies recognise the value in collaborating to optimise costs. 2.33 Companies no longer need to have full control of all elements of their business and are recognising the value of ‘arm’s-length relationships through the use of third parties’ i. Supply chain management encourages the use of third parties to manage parts of the supply chain. Traditionally this has been used for transport services. Increasingly, companies are also using third parties to hold and control stock, even undertake part of the production process. 2.34 The ultimate supply chain is the virtual supply chain i. Here, companies do not have any means of production or transport and distribution, but use modern technology to source product and services to run a virtual business through supply chain management. 2.35 Traditionally, companies have focussed on what is best for the company in terms of operational practices and standards. The focus is now moving to 20 the social and environmental impact of operations

i. Reverse logistics is becoming a major issue for companies, driven by legislation to ensure safe and environmentally friendly disposal of waste, transportation, etc. 2.36 In operational terms, these ‘Global Trends’ are beginning to manifest themselves in the following ways: i. Delivery time windows are getting tighter, lead times shorter and customer demands are becoming more diverse - suppliers and their customers must address the issue of ‘real’ collaboration to meet the changing needs of the customer and at the same time work together to reduce supply chain costs. ii. The speed of change is demanding faster and better flows of information across the supply chain. Companies are having to embrace new technologies, particularly information technology. iii. Customisation of products is becoming increasingly more complex and difficult to manage, driving both cost and high waste levels into the supply chain creating a greater need a collaborate to fully understand the cost and waste implications across the chain. iv Transparency of costs and information across the chain will help improve manufacturers’ competitive advantage and ensure that all profit is not eroded for the benefit of others thus hindering investment by manufacturers. v. Collaboration between suppliers, customers and third party logistics service providers is essential in order to create greater economies of scale and reduction in warehousing and transportation costs for business operating in Ireland and serving local global markets. 2.37 In all of this, global trends indicate that in the future, ‘Supply Chains will compete, not companies’. 2.38 So the biggest influence on the survival and success of businesses within the Global Marketplace will be how well the whole supply chain competes, not just parts of it. It must work in harmony from end to end if competitive advantage is to be maintained. 2.39 This trend is not industry sector specific, it is relevant to all sectors. However, the sector currently coming under most pressure are the fast-moving consumer goods (FMCG) sector, incorporating food and drink, textiles and electronics. Supply Chain Management Best Practice The thesis so far is that supply chain management will play a more and 2.40 more important role in the future management of businesses in Ireland. Given this importance what is supply chain management best practice? This can be summarised in the diagram below. Market-driven Customer Service Strategy Competitive Advantage through Supply Chain Optimum Logistics Cost and Investment Management 21

2.41 Best practice companies are those that: i. Develop market-driven customer service strategies in terms of factors such as order fill rates, order cycle times, timely deliveries, etc, which sets the spec for the design of the supply chain. ii. Design the supply chain to deliver the specified level of service in terms of optimum cost and investment. 2.42 In practical terms, this means: i. Having all the supply chain elements managed by one senior manager To effectively make the trade-offs that are necessary it is essential that procurement, inventory management, warehousing and distribution and customer service are the responsibility of a single senior manager. ii. Having visibility of all the supply chain costs and understanding how the total cost build up through the supply chain so that the functional goals can be balanced across the chain including suppliers and customers. iii. Implementing a management information system across the entire supply chain. iv Setting and monitoring supply chain key performance indices (KPIs). v. Ensuring each and everyone of the individual supply chain elements embrace best practice. Supply Chain Management Capabilities of Irish Companies 2.43 As discussed above, for companies operating across the island of Ireland, supply chain management has, during the past 5 years, become increasingly important as a prerequisite to competing effectively and efficiently in both global and local markets. 2.44 So how do companies in Ireland measure up against ‘World Class Best Practice’? 2.45 A number of recent surveys were undertaken to gain understanding of this. 2.46 First, a survey of 300 Enterprise Ireland client companies (mainly SME’s) was carried out by the National Institute for Transport and Logistics (NITL) to establish the level of supply chain management understanding and capability. 2.47 Second, an Institute of Logistics and Transport Special Interest Group, ‘Industry Think Tank’, on strategic supply chain management for businesses operating in Ireland was held. 2.48 Third, a survey of 374 companies was conducted by the IBEC Transport Council to gain an understanding of the level of supply chain sophistica- tion. 2.49 Finally,‘Made in Ireland: Benchmarking Ireland’s SME’s’, an Irish European Study carried out jointly by Enterprise Ireland and UCD, included a num- 22 ber of questions related to logistics and supply chain management.

2.50 Interestingly and reassuringly, the findings of each of the surveys were not materially different.These findings can be summarised below: Understanding of the Supply Chain Management Concept 2.51 There is some understanding of the supply chain management concept but this varies across sectors, e.g. retailer, high technology and pharmaceutical companies and multinationals generally, understand better than the rest, and are working to apply ‘SCM Best Practice’ to deliver ‘customer service.’ i. Supply chain management is often confused with ‘channels of distribution.’ ii. Supply chain management is frequently confused with ‘supplier development.’ iii. Companies in Ireland do recognise the need for greater and ‘real’ collaboration between all elements of the supply chain, both with in companies and externally with suppliers, customers, third party logistics service providers and transportation service providers. 2.52 Supply Chain Management Organisation i. The logistics and supply chain management function is not widely recognised by business in Ireland as a key senior management role. For example in NITL’s survey which related to SME’s: a. Only 14% of companies had a Logistics Manager b. Only 4% had a Logistics Director c. 72% of companies had the logistics and supply chain elements spread across three or more managers ii. IBEC’s survey, which included multinationals, 47% of companies had a director responsible for supply chain management. 2.53 Understanding of Supply Chain Costs i. Indigenous companies in Ireland do not know their ‘true’ supply chain costs, i.e. including all supply chain elements. a. 30% did not know their supply chain costs b. Less than 50% included all relevant supply chain costs. 2.54 Supply Chain Systems and Technology i. Companies in Ireland need to make significant improvements in the application of Information Technology to logistics and supply chain management. They rate poorly compared to multinationals and according to the ‘Made in Ireland’ study worse than other companies in other European countries. Specifically: a. Systems are not well integrated across the company / supply chain b. Systems do not capture real time data nor share information with customers or suppliers 23

c. Most companies are not using the latest logistics systems technology. 2.55 Supply Chain Performance Measures i. Few businesses in Ireland have clearly defined supply chain performance measures (KPI’s). a. Companies do not know and do not measure competitor performance b. Companies do not have clearly defined performance measures for supply chain activities - over 50% do not measure customer service. 2.56 Supply Chain Management ‘Elements of Best Practice’ i. Companies in Ireland do recognise the strategic importance of the individual supply chain activities with 64% of the companies in IBEC’s survey indicating supply chain management would be of strategic importance in the future. ii. From a customer perspective, customer service is rated second to quality and more important than price as a reason for doing business with a company iii. Customer service, procurement and inventory management are ranked 1, 2 and 3 in order of importance to company’s strategic development iv. The ‘Made in Ireland’ survey indicates that a number of supply chain functions score below average compared to other European countries e.g. inventory turns, time to market, production planning. In summary, all of the surveys confirm that indigenous Irish companies have a lot of catching up to do to match the multinationals located here and compared to companies in other countries. Critical Capability Gaps Identified 2.57 The section above assessed the capability of companies in Ireland in relation to supply chain management. This section attempts to identify particular critical gaps which need to be addressed.These are: i. Companies in Ireland do not fully understand the concept of logistics and supply chain management. ii. There is an absence of a broad based senior management logistics and supply chain function within companies in Ireland. iii. Companies in Ireland need help in the development and implementation of integrated supply chain IT systems. iv. Companies in Ireland, while understanding the importance of customer service, have a limited understanding of its components, how to measure them and how to use them as a basis for the development of a logistics and supply chain system. 24

v. There is little measurement of internal and external logistics and supply chain performance as a basis for effective management. vi. There is a shortage of professional Supply Chain Management education and development for both companies and individuals. How should these gaps be addressed? 2.58 The actions necessary to address the gaps identified are: i Supply Chain Management Concept: a. By creating awareness generally through conferences and semi- nars and roadshows. ii Supply Chain Education a. Education is essential if we are to look outside traditional functional roles and fully understand the entire supply chain and the impact individual elements have on the effectiveness and efficiency of the entire chain. b. Training must focus on the customer from production through to sales and needs to be driven both from the bottom up and from the top down - more in company training and courses targeted at all levels. c. Every effort must be made by educational establishments to attract the necessary industry skills into higher education. d. Skills shortage - need to attract more people into the industry. e. Need to raise the profile and awareness of supply chain management within schools and colleges - educate the educators in supply chain management. iii Information Technology a. Need to determine the degree of integration of systems necessary between suppliers, retailers and third party logistics service providers and the implications this may have for SMEs versus corporations in terms of investment, affordability and assistance available from development agencies. b. E-commerce is the key facilitator of collaboration; companies need to have an e-commerce strategy which is closely aligned to the overall business strategy. c. Information technology is no longer an internal business matter - e-commerce and IT capabilities will often be the deciding factor in deciding on potential suppliers/trading partners. d. The real benefits from supply chain best practice can only be fully realised if the investment in technology is made by all trading partners. e. Significant investment is required to bring technology up to the standard required to support the changing business environment. 25

Recommendations and Key Areas for Potential InterTradeIreland Interventions 2.59 Critical Success Factors i. The biggest influence on the survival and success of businesses across the island of Ireland trading in the ‘Global Marketplace’ will be how well the whole supply chain competes, not just parts of it. ii. Supply chains must work in harmony from end to end if true competitive advantage is to be maintained. iii. This is not industry specific, it is relevant to all sectors, however, the sectors currently coming under most pressure are those involved in Fast Moving Consumer goods (FMCG) especially food, drink, textiles and electronics. iv. The proposed interventions discussed below are those which we believe could best be undertaken by InterTrade Ireland as distinct from those which can be undertaken by the various institutions, academic, professional and governmental. v. From a logistics and supply chain perspective, we believe that the proposed interventions have the greatest and most immediate impact on improving trade between Republic of Ireland and Northern Ireland in addition to improving the competitiveness of companies operating across the island of Ireland. 2.60 The proposed interventions are presented under two main categories: i. ‘Inter-Ireland Supply Chain Interventions’, which will lead to the improvement of trade between Republic of Ireland and Northern Ireland, and between regions within the island of Ireland. ii. ‘International Supply Chain Interventions’, which will enable companies in Ireland to become more competitive in global markets. 2.61 Inter-Ireland Supply Chain Interventions i. Initiatives to encourage collaboration between SMEs for strategic sourcing and more effective procurement to hopefully achieve economies of scale. ii. Support for the development of a web-site to encourage and co- ordinate the consolidation of deliveries within the island of Ireland. iii. Education at speed for supply chain management and understanding through mentoring programmes and road shows. iv. Information on the total market potential within Ireland in terms of service level requirements as well as volumes and costs. v. Information about supply chain information technology initiatives. vi. Benchmarking and ‘Supply Chain Fitness Tests’ for logistics and supply chain management. 26

2.62 International Supply Chain Interventions i. Initiatives to ensure the supply chain requirements of the various sectors, e.g. food, are met through the provision of complimentary and co-ordinated logistics services throughout the island of Ireland, e.g. sailing times at different ports are complimentary. ii. Facilitate the co-operation between suppliers servicing the same external customer base. iii. Develop ‘Ireland’s total supply chain management capability’ as a marketing too, not only to assist Government Agencies in attracting inward investment, but as an effective tool, presenting all aspects of supply chain elements for companies needing to make decisions on product sourcing. It could be the difference between moving manufacture to the Far East or Eastern Europe, based purely on manufacturing cost. But when all aspects are taken into account, Ireland may be the best option for overall cost and service. Conclusion 2.63 Together, collaboration, education and information technology can have a positive impact on businesses operating across Ireland. However, if the infrastructure does not support the efforts of businesses to maintain their competitive advantage, drive costs out of their supply chains and ensure continued economic growth for both Northern Ireland and Republic of Ireland, then a lot of effort spent on the previous three issues will have been in vain. 2.64 Businesses in Ireland need to ‘think outside the square’ if they are to achieve the optimum use of transport infrastructure (road, sea, air and rail) to meet their customers’ requirements and through supply chain management, leverage competitive advantage both in the island of Ireland and in global markets. 2.65 The responsibility for achieving excellence in SCM does not rest entirely with the business community, co-operation and collaboration between different government departments and agencies is also essential to ensure a cohesive approach to providing the infrastructure and support necessary to enable businesses to succeed. 2.66 References 1 NITL, (Dec 2000) ‘Logistics Capabilities of Enterprise Ireland’s Client Companies’ 2 Institute of Logistics & Transport - Special Interest Group ‘Strategic Supply Chain Management for Businesses operating in Ireland’ ‘Industry Think Tank’ inputs 3 DTI, (Oct. 1995) ‘Managing the Chain from Supplier to Customer’ 4 NETA, (2001) ‘Logistics Module: Irish Perspective’ 5 ITI, (Oct. 2000) ‘The Supply Chain Challenge: Supply Ireland’ 6 Enterprise Ireland, (1998) ‘Supplier Development Programme’ 7 Joint Business Council, (May 1999) ‘Logistics - The Key to Competitive Advantage’ 8 IBEC/CBI, (June. 2000) ‘The Supply Chain’ 9 IBEC, (2000) ‘Doing Business Better’ 10 NIERC, (Nov. 2000) ‘MNC Supply Linkages’ 11 NIERC, (Nov. 2000) ‘Stability and Changes in the Supply Chain of MNE’s’ 12 NIERC, (Nov. 2000) ‘Small Business Strategy and the Adoption of Advanced Manufacturing Technology’ 13 NITL, (Dec 1999) ‘The Impact of Centralised Distribution on Distributors and Agents’ 27 14 IBEC Transport Council, (2001) ‘Survey of Supply Chain Management’ 15 Enterprise Ireland, (2001) ‘Made in Ireland: Benchmarking Ireland’s SME’s’

Section 3 Transportation Services

Study into policy options in Transportation and Logistics 3 as critical success factors in North / South Business Development Strategy and Competitiveness Executive Summary 3.1 This is one of the three components of the Transportation and Logistics Initiative sponsored by Intertrade Ireland and carried out on behalf of IBEC-CBI. In this module policies affecting transportation and logistics services are investigated. The work is done on an ‘Island of Ireland’ bases with the intention to: i Improve the competitiveness of Ireland based industries in the global market. ii Take account of the social and regional dimensions the development of infrastructure and the provision of transportation and logistics services entail. iii Assist the integration of the three modules related to ‘Policies and Services’, ‘Infrastructure’ and ‘Supply Chain Management’. 3.2 Implemented and pending European polices are a common denominator for the two political entities in Ireland.The opportunities they offer should be used in full to develop the island economy.The use of European policies is recommended as a tool to harmonise the business, industrial, operational and infrastructural environments in which supply chain management takes place. It is the clear intention to improve the competitiveness of Irish exports and to ensure the economic development and social inclusion of the regions of this island. The following polices are of paramount importance to achieve harmonisation and to the success of any North / South business development strategy: i The European Spatial Development Perspective (1), ii The Single Market as influenced by the Treaty of Maastricht (2), iii The Common Transport Policy (3), and iv The European Union’s Policies for Transport Services transposed into national law (4). 3.3 The ‘European Spatial Development Perspective’ (1) clearly influenced the ‘National Spatial Development Strategy’ (6) and the ‘National Development Plan’ (8) in the Republic of Ireland. In Northern Ireland, the ‘Draft Regional Strategic Framework’ (7) and the ‘Regional Transport Strategy’ (10) were influenced by it. Planning methods moved away from the almost exclusive application of land-use models in favour of a more holistic approach and polycentric development. With exceptions and for political reasons though, planning North and South, stops at the political border. However, agreements to co-operate, in an attempt to remedy this, are included (7, 8, 10). Interdepartmental planning and co-operation both 29

North and South and between North and South, including the development of harmonised ‘delivery mechanisms’, are vital to success. 3.4 From the European point of view, the legal framework to create the Single Market through the transposition of EU Directives into national law is largely in place. From the view of the Member States, this transposition is lagging behind.This is particularly pertinent with respect to road transport and the operation of the major gateways of airports and ports where an uneven playing field adversely affects services and competitiveness. Summary of Recommendations 3.5 An initial summary is followed by details related to the various modes of transport.All are based on an extensive review of polices and discussions with industry and administration. In summary, recommendations for policies, their direction and the efforts to implement them in sequence of priority, need to be targeted at: i Dramatically and with considerable urgency improve the land access to the ports of Dublin, Belfast and Larne as well as implement policies to mitigate the land shortage needed for expansion in Dublin port. ii Defragmenting and harmonising the road haulage industry as the main means of freight transportation in Ireland.This is in need of particularly urgent attention as the Irish exports and home markets for consumer goods are almost totally dependent on this mode of transport. iii Reviewing and harmonising the business environment in which SMEs engaged in the provision of transportation and logistics services operate both North and South. iv Enabling logistics service providers to fully benefit from improvements in communications and by this means exercise better control along the supply chain. v Approximating a Single Market on the island of Ireland, based on the European model, by harmonising the operating environment in which transport logistics and supply chain management take place. vi Evolving an Island-wide spatial and economic development plan with an integrated transportation strategy as a vital part.This should be based on existing work and close interdepartmental co-operation both North and South and between North and South. The development of appropriate, harmonised delivery mechanisms is paramount to achieve success. vii Developing an efficient, business friendly inter-Ireland ‘City Hopper’ air transport passenger service. viii In the interest of competitiveness of Irish exports, develop a fiscal regime which makes it attractive to exporters and others to engage in establishing and operating direct calling container line services 30 between Ireland and its US and European markets.

3.6 All eight requirements are under the control of the two Governments.They do require lobbying of Government but, are achievable independently in both parts of the Island. The second requirement is controversial and may be politically sensitive. 3.7 In detail, facts, problems and recommendations as they were found to apply to the individual modes of transport are: Facts, Problems and Recommendations associated with ‘Road Haulage’ 3.8 Problems identified relate to e.g.: inefficiencies in operation and service provision caused by defragmentation, lack of adequate road infrastructure and increasing restrictions on the movement of HGVs in Dublin as well as an uneven playing field: due to particularly, the non-harmonised legal and fiscal system involving operating licences, vehicle registration, vehicle excise duties, fuel costs and enforcement.The recommendation to harmonise the industry is based on the requirement to improve its efficiency and competitiveness and NOT to strangle it with more regulations and red tape! The industry is particularly troubled by the impending EU Directives on working time and employment conditions for drivers, changes in drivers hours, training needs and possible restrictions in driving days on selected international routes.The working time directive is of major importance for Ireland. It limits the four weekly average of driving hours to 48 for each driver irrespective of whether the journey is local, regional, national or international. The present industry average of weekly driving hours is between 55 and 60 hours per driver. In comparison to the present situation, this represents a daily and weekly reduction in driving time of between 13 - 20%. It translates into roughly into a 13 - 20% shorter driving distance per week unless a second driver is employed. This Directive’s effects are more pronounced on longer, international journeys.The effects of this directive are compounded by a proposed eight-hour night-time restriction, a very precise definition of ‘self-employed’ as well as the pending EU Directive on ‘Driver Training’.As Ireland is situated on the European periphery, it cannot be emphasised enough that the implications of the working time directive, night-time restriction, the directive on driver training as well as the combined effects of these includes; that Irish exports will take longer to reach their markets, become more expensive and thus loose their competitive edge. 3.9 Recommendations for policies, direction and effort based on the above are targeted in sequence of priority at: i Harmonising of the licensing system,VED calculations and particularly the difference in the cost of diesel fuel. ii Financial and management assistance through, a favourable tax regime for micro firms and SMEs engaged in the provision of transport logistics services. iii Assisting with education and training, particularly for micro firms and SMEs. iv Assisting with collaboration between firms in the industry through, 31 e.g. joint ventures, co-operatives and sharing of administrative,

accounting and management resources between SMEs and micro firms. 3.10 Recommendations 1, 2 and 3 are under the direct control of Government but require lobbying. Recommendation 1 has already proved to be controversial. However, actions as is required between North and South, was successfully taken at the Dutch - German border. Recommendation 4 is perhaps best achieved through collaboration with the professional bodies of the haulage industry concerned. However, before any discussions take place, reference should be made to the Environment,Transport & Regional Affairs Committee (ETRAC) report on ‘The Road Haulage Industry’ and the UK Government’s response to this as published on February 9th 2001. Facts, Problems, and Recommendations associated with ‘Air Transport’ 3.11 The following problems were identified: i An uneven playing field due to currency differences, the regulatory and the corporation tax environments exists for airport operators North and South of the Border. ii Excellent international and European connections are offered from Dublin Airport. iii Excellent connections to the UK mainland exist at the three Northern Ireland Airports. Direct, scheduled and regular flights to European destinations are poor. Direct, scheduled and regular flights to inter national destinations in support of an expanding island economy are totally inadequate. iv Domestic services between Dublin and destinations in the Republic of Ireland exist. v Cross-border services between Dublin - Londonderry are offered by BA - Logan Air.The Belfast - Shannon service provided by Aer Lingus was stopped on October 28th as a result of the events in New York on September 11th. However, reinstating this ‘route’ is at present under discussion. vi Inter-Ireland scheduled, direct and regular passenger services between say, Cork, Dublin, Belfast, Shannon and Londonderry are in essence non-existent. vii There are no impediments to airport expansion, operating times or noise restrictions at BIA. viii BCA has an expansion problem, restricted operating hours and is subject to noise limitations. ix Airfreight services operate all year round from BIA mainly to UK destinations but include services to Amsterdam and Brussels. International, all year round airfreight services operate out of 32 Dublin Airport. As these are mainly short haul services to UK and

European destinations, extensive use of air-trucking services is made.This service and its influence on Irish exports has, and is pre- dicted to grow substantially. x Substantial expansions took place at Dublin, Shannon and Cork airports and are still ongoing. 3.12 In the interest of a growing all island economy, to support business development and supply chain related transport logistics services; recommendations for policies, direction and effort based on the above are targeted, in sequence of priority, at: i Developing scheduled and regular inter-Ireland services. ii In the interest of competition, developing policies facilitating air trucking and air-rail services in conjunction with the Central Railway project. iii Dramatically increase the number of direct services to European destinations from Northern Ireland Airports. iv Harmonising the operating environment for airport operations between the Republic of Ireland and Northern Ireland. v Liberalisation of air transport by the UK Government to enable international services to operate from regional airports. 3.13 Recommendations 1 and 3 have a strong commercial bias. However, as the development of regular and scheduled air passenger services not only pre- cedes but, is vital to economic and business development, some of these services may have to be initiated in conjunction with a public service obligation similarly as it is taking place in Scotland. Control over recommendations 4 and 5, is in Government hands.The recommendation to liberalise air transport was made by ETRAC and resulted in UK Government offers to regional airports to this effect. Facts, Problems and Recommendations associated with ‘Shipping’ 3.14 Facts and problems identified with shipping are: i Land access to ports in Ireland is inadequate to cope with the expected demands of a growing economy. This is of particular importance for the ports of Dublin, Belfast and Larne. ii The port of Dublin needs to expand to cope with future growth without having access to the required land. iii The West Link to/from the port of Belfast is severely congested, particularly during peak hours. iv The A8 connecting the port of Larne to Belfast is inadequate for the traffic using it. v The promotion of short sea shipping should be part of the commercial strategy of ports. 33 vi Lack of uniformity in documentation used by forwarders and carriers

of the Member States engaged in short sea shipping. vii No direct calling container line services to and from Ireland and total dependency on feeder services to/from European hub ports. 3.15 Recommendations for policies, direction and effort based on the above should, in sequence of priority, be targeted at: i Substantial improvements in port development and port access. Of very particular urgency is the port tunnel and port access through the city of Dublin to Dublin port. Of equal importance are improvements to the West link in Belfast and to the A8 towards Larne. ii Resolving the land shortage for expansion in the port of Dublin with some urgency. iii To save time, harmonise the documents used by forwarders and carriers of Member States engaging in short sea shipping. iv In the interest of competition, harmonise the institutional and fiscal structures in ports to create an even playing field and reduce the existing distortions to competition between ports North and South. v Increase the competitiveness of Irish exports by developing polices for a fiscal regime which makes it attractive to shippers and others to establish direct calling container line services to the North American East Coast (deep-sea) and to Europe (short-sea) which represent the major export markets for Irish Exporters.This possibility should be kept under continuous review and related studies regularly updated. 3.16 Recommendations 1 and 2 are absolutely paramount to ease the present access problems and to prevent a looming stranglehold on a growing island economy. Recommendation 3, whilst achievable, has to be tackled by Government through the European Commission. Recommendations 4 and 5 are under the control of central and regional government respectively and, given political will, are achievable. Facts, Problems and Recommendations associated with ‘Rail Transport’ 3.17 The following problems could be identified: i Although rail freight in Ireland is of some importance, particularly for bulk cargoes, there is an increasing lack of capacity for rail passengers and rail freight. ii Rail freight in the form of containers is minimal and, with respect to Northern Ireland, is confined to the Dublin-Belfast-Larne axis. iii ‘Central Railway’s’ plans for the development of a high gauge freight railway between Liverpool in the UK and Lille in France is beset with problems associated with local planning, the raising of investment, changes in planning procedures and, obtaining Government support (30). 34 3.18 Recommendations for policies, direction and effort based on the above

should, in the sequence of priority, be targeted at: i A review of investment policies associated with rail transport in the light of all-island passenger and freight movements. ii The Enterprise service between Dublin and Belfast should be extended to include the links between Dublin and Cork and, Belfast and Londonderry.Where this is commercially non viable, it should be investigated, if a similar service could be provided by means of a first class bus service. iii Where warranted, either commercially or as a prerequisite to economic and business development, policies for improvements of the Irish rail transport system should be biased towards to high speed passenger transport. 3.19 The above recommendations, although achievable, are politically sensitive at national level in the South and regionally in the North. They require the intervention of national government and the New Northern Ireland Assembly as well as the close co-operation between the two railway operators on the island. 3.20 For information concerned with the ‘Trans-European Network’ and/or ‘Tele- communications’, please refer to the section on Infrastructure of this report. Study into policy options in Transportation and Logistics 3 as critical success factors in North / South Business Development Strategy and Competitiveness Main Report Background 3.21 This is one of the three components of the Transportation and Logistics Initiative sponsored by Intertrade Ireland and carried out on behalf of IBEC-CBI. In this module policies affecting transportation and logistics services are investigated. The work is done on an ‘Island of Ireland’ bases with the intention to: i Improve the competitiveness of Ireland based industries in a global market. ii Take account of the social and regional dimensions the development of infrastructure and the provision of transportation and logistics services entail. iii Assist the integration of the three modules related to ‘Policies and Services’, ‘Infrastructure’ and ‘Supply Chain Management’. 3.22 Policy instruments of paramount importance to the possible success of any North / South business development strategy are: 35 i The European Spatial Development Perspective (1),

ii The Treaty of Maastricht and its influence on a. The Single Market (2), b. The Common Transport Policy (3), and c. The European Union Policies for Transport Services (4). 3.23 The above listed policies form the basis for the development of transportation and communication infrastructures, social cohesion, economic development and activities and, the provision of private and of public transportation and logistics services (4). They directly affect the provision of transportation and logistics services at operator level. 3.24 The transport industry occupies an important position in the Community. It accounts for 7 % of its GNP, 7 % of total employment, 40 % of Member States’ investment in infrastructure and 30 % of Community energy con- sumption. During the last 20 years, demand, particularly for intra-Community traffic, has grown on average by 2.3 % per year for goods and 3.1 % per year for passengers (11). Introduction 3.25 External influences in the form of policy and global economic events are the main drivers and enablers for present and future transportation and communication infrastructure development (13).They form the framework within which transportation and logistics services take place at present and will take place within the next, say, 25 years. The report is based on a European overview at both national and regional level. It demonstrates how policies affect the ability of transportation and logistics service providers to offer a competitive service to industry within the context of supply chain management (Appendix 1). Linking The Three Themes 3.26 The study consists of the three separate yet intricately related themes of: i Policies to support the provision of transport services. ii Transport infrastructure. and iii Supply chain management. 3.27 The application and the effects of the various policies, which either assist or hinder the development of transport and communication infrastructure as well as the provision of transport logistics services, form the link between the three themes. The Single Market Key Issue: Current Impediments to the Single Market 3.28 The European Commission’s intentions are to make the European Union the most competitive and dynamic knowledge-based economy in the world. Current impediments to the implementation of the Single Market stem from the delays by Member States’ Governments to transpose EU 36 directives into national law (16). The delays in transposition indicate that

transport is a difficult sector.The uneven implementation of legislation fragments the Internal Market and is the source of many infringements.This is particularly severe in the road haulage sector, where the ever-increasing importance of cross-border haulage makes it more pressing to reduce potentially harmful tax competition through differing diesel charges, as was foreseen by the Commission in its energy tax proposal (73).The degree to which working hour regulations require detailed examination at Government level and taxes on trucking would benefit from harmonisation needs to be examined (17) with some urgency. 3.29 In telecommunications, implementation has considerably improved as member States fill gaps in the national legislative framework.The liberalisation of the telecommunications market is already bringing significant economic results, both in terms of market growth, estimated at over 30% in the last three years, and the number of operators which now stands at more than 300 (18). 3.30 The Single Market principle pursued by the EU can be equally and bene- ficially applied on the island of Ireland. The EU’s country specific recommendations directed at both the Republic of Ireland and at the United Kingdom affect transport logistics services throughout Ireland with direct implications on supply chain efficiency and competitiveness of exports. Policies targeted at alleviating these impediments would, to a considerable extent, approximate the desired single market on the island of Ireland. Conclusions to ‘Impediments to the Single Market’ 3.31 The conclusions that can be reached and the problems that can be identified are related to the legal framework creating the Single Market. From the Commission’s point of view, this framework is largely in place. Its transposition into national law of the Member States though, is lagging behind. This is particularly pertinent with respect to transport and creates a non- harmonised market with distortions in competition and operating conditions. 3.32 Recommendations for policies, direction and effort based on the above are, in sequence of priority, targeted at approximating a single market on the island of Ireland based on the EU concept. Prerequisites to success are: i Increasing the transposition rate, particularly with respect to trans port related Directives and ensure their correct implementation. This will harmonise the operating environment of transport logistics and supply chain management into a more even playing field. ii Reviewing the business environment in which SMEs engaged in the provision of transportation and logistics services, operate.To aid them, develop polices for, e.g. beneficial corporation tax regimes, assistance with business management and accounting. iii Increasing the transposition rate of telecommunications directives and associated implementation. This would enable logistics service providers to improve and extend their services as well as to improve communications and control along the supply chain. 37

3.33 These three recommendations are the main results of the ‘Policies and Services’ section of this report. All three are the prerogative of the governments of the two independent states on the island and under their direct control. Substantial lobbying though will be required. How these recommendations relate to the various sectors of the transport industry will become evident in the following sections. Road Haulage Key Issue: The changing Role related to Supply Chain Management 3.34 The need to integrate the supply chain leads to the increasing application of the paradigm of the ‘Extended Enterprise’ (14).Virtually every manufacturing company is chasing some form of improvement process in the inter- related areas of transportation, logistics and distribution. Manufacturers and component suppliers have moved logistics to the forefront of their priori- tised areas of cost improvement. In doing so, they are gaining competitive advantage through improved market responsiveness and the ability to provide customer value in a near-immediate time frame. 3.35 Although the increase in the volume of traffic on road systems is very largely due to the increase in the use of cars - only 8% of traffic in Western Europe is freight - the costs of congestion are borne by business. Road congestion, leads directly to longer transit times and, more significantly, unpredictable transit times. This results in the need to put additional freight capacity on the roads and has important implications for competitiveness of exports and locally used consumer goods. As an illustration: Western Europe Road Traffic Growth 1986 - 1996 Billions of vehicle kilometres 1986 1996 Goods Vehicles 25 30 Light Vans 27 40 Cars 260 362 Source: University of Westminster (15) 3.36 A number of changes occurred due to the evolution of integrated logistics. As a result, it is no longer adequate to haul components or items of manufacture from A to B, but necessary to manage a sophisticated supply line.The way of doing business has changed. Hauliers now and most certainly in the near future engage in value adding activities such as liasing with suppliers, setting up delivery windows, processing orders, warehousing, inventory control and transportation. The key to these value adding activities and future change, is IT. 3.37 For years, logistics operated in just one or two areas of the supply chain, picking-up from suppliers and delivering Just-in-Time (JIT) to the consignee. As integrated logistics comes of age, the operation of logistics companies begins to change. They become major ‘tier one’ suppliers with the need to globalise like any other supplier. 38 3.38 The evolution from haulage to integrated logistics operations has been led

by the need of the manufacturing industry to outsource. Direct transport and logistics costs account for 25% of the final price to the customer. The aim is to cut this to ~15%.The logistics company can help both the manufacturer and the supplier to achieve this (15). Paramount to success however, is the determination and the continuous review of policies transposed into national legislation, processes and systems. Key Issue: Competitiveness 3.39 EU competition policy guarantees the unity of the internal market and pre- vents the monopolisation of selected markets by firms by means of protec- tive agreements (oligopoly). Co-operation and agreements between firms that improve the production or distribution of goods or the promotion of technical or economic progress are encouraged. The competition policy allows the Council to adopt any appropriate regulations enabling certain categories of state aid.These are: i Aid to small and medium-sized enterprises, research and development, environmental protection, employment and training; and ii Aid complying with the map approved by the Commission for each Member State for the granting of regional aid. 3.40 In 1999 Commission adopted the first three draft exemption regulations concerning aid to small and medium-sized enterprises, aid to training and ‘de minimis’ aid.The three regulations were scheduled for adoption in 2000 after wide-ranging consultations with Member States and interested third parties (22). 3.41 The Irish road haulage industry, in common with this industry sector in a number of other countries, is operating in an environment that is charac- terised by a very competitive market with resultant pressure on margins. This reflects demand side pressure as well as supply related factors. The report, ‘A Strategy for the Successful Development of the Irish Road Haulage Industry’ (20) lists the following reasons: i Ease of market entry, ii National and international deregulation of sector, iii Numerous small competitors, iv Lack of detailed market information / costing expertise, v Domestic, Northern Ireland and international competition, vi Competition from own account operators, vii Intensified national and EU competition impacts, viii Prices to users are static, ix Rising input costs with main exception of interest rates, x Customer resistance to higher prices xi Pressure on margins reflects a very competitive market in the road haulage sector (20). 3.42 Government confirmed the above and, remedial action was announced by the Department of Public Enterprise (DPE) in the Republic of Ireland (23). 39 The Government of the Republic of Ireland recognises that without an

effective road haulage industry, the National Development Plan cannot be successfully implemented. The enforcement of the law of Consignor Liability will have an important part to play in the implementation of this Programme of Action (23). 3.43 With respect to Northern Ireland, the main reasons for pressure on margins were expressed as (19): i Too many competitors and the availability of surplus capacity reflecting the relevant ease of entry into this industry sector. ii Overseas competitors hold a competitive advantage. iii Rising input costs. iv Competition from licensed operators who do not comply with tax regulations or other requirements. v Competition from illegal, non-licensed hauliers. vi Higher taxes than overseas competitors pay. vii Clients face pressure on margins. Key Issues: Road Safety, Working Time, Conditions of Employment, Drivers Hours and Monitoring of Road Transport 3.44 A Communication from the Commission to the European Parliament, the Council and the Economic and Social Committee, of June 21st 2000, ‘Towards a Safer and more Competitive, High-Quality Road Transport System in the Community’ (24) specified: 3.45 Professional road transport has to face certain challenges, as a result of which the Commission has developed a global strategy for the sector. Strengthening the conditions of fair competition should minimise the impact of increasing competition due to the advent of the internal market. Moreover, ever- increasing safety requirements mean that measures must be taken to protect the safety of workers and road users. Finally, in order to deal with the social disquiet caused by the use of illegally employed drivers, working conditions must be improved, monitoring strengthened and the image of the profes- sion raised.The measures proposed come under the objectives: i Preparing legislation on the organisation of working time for drivers. ii Fair conditions of employment for drivers. iii Improved road transport monitoring. iv Improving professional training for drivers (24). 3.46 These are key issues, which, as research and discussions with industry indicate, will have serious effects on supply chain management, the associated demands that will be made on infrastructure. Also and at least as important, Irish exports, will take longer to reach their markets, will be more expensive and less competitive when they get there. Key Issue: Differences in North / South Legislation 3.47 The investigation, as well as discussions with industry, indicates serious concern about differentials that have developed between Member States’ regimes for 40 taxing and licensing vehicles and for levies and charges for the use of infra-

structure.The Economic and Social Committee (ESC) shares this concern (31). These tax differentials together with currently 15 labour market regimes and 15 overall taxation accounts make transport costs, and particularly road transport costs diverge widely.They are such that regional distortions are an inevitable outcome.They could have a negative impact on EU measures and frustrate the creation of a cohesive Single Market (31). With respect to Ireland, the most burning issues concern the differences in direct taxation as Vehicle Excise Duties (VED) and indirect taxation on diesel fuel (32).As neither the Republic of Ireland nor Northern Ireland (UK) engages in road charging as yet, the differences in a comparison of costs of haulage operations are almost entirely due to the differences in the applicable fiscal regimes. Consider an SME haulier operating ten 40 t trucks with the trac- tor units on two axles. It is assumed that drivers work 50 hours per week for 43.2 productive weeks per year. The business generates GB£ 1.2 million per annum with pre-tax profits of £ 36,000. The key costs in sterling would be as follows: Northern Ireland Republic of Ireland % Difference Vehicle excise 57,500 11,000 - 81% Duty Diesel 321,000 202,000 - 37% Wages 174,000 180,000 + 0.03% Corporation Tax 7,200 9,000 + 25% Wages 339,700 402,000 - 28% 3.48 It is clear that differentials in duties are forcing operators to consider their ‘flag’ of registration, though it is not a simple matter of registration in the lowest cost country. For this cabotage arrangement to succeed, the haulier would need to be able to demonstrate ‘base’ qualification and satisfy its EU interpretation (26, 27). The comparison is further frustrated by exchange rate fluctuations that impact on a daily basis.The Sterling/Euro relationship has changed by 25% since January 1998 (31, 32). Since a major reduction in VED was introduced, by the Chancellor of the Exchequer, at the end of 2000, flagging out of formerly UK registered vehicles has become far less attractive. However, a recent decision of the Transport Tribunal is nevertheless significant. Its conclusion, in a complicated case involving a company registered both in Ireland and in the UK, was that there is an ongoing responsibility on GB operators licence (O-licence) holders to comply in every respect with GB domestic law, including VED requirements. In other words, ‘partial’ flagging out, where a vehicle is specified on a GB O-licence but taxed and registered elsewhere in the EU is not permissible (30).VED in the Republic of Ireland is calculated on the basis of the ‘unladen vehicle weight’ whilst in Northern Ireland VED is based on the vehicle’s gross weight (33). In the UK considering the number of axles in VED calculation further compli- cates this.The results of this lack of harmonisation cause market distortion, affect competitiveness and create an uneven playing field. Examples are: In the Republic of Ireland: i Only haulage operators wishing to engage in the carriage of goods 41

for hire and reward in vehicles over 2.5 tonne net unladen weight are required to obtain a Road Freight Carrier’s Licence. ii Operators of vehicles below this weight or operators engaged in own account work are not required to be licensed.The responsibility for monitoring own account operators rests with the Department of the Environment and Local Government. iii Consignors have a responsibility to ensure that the hauliers, which they engage to carry their goods are properly licensed. Since 1998 a further responsibility has been placed on consignors in that they can be prosecuted for knowingly despatching overweight consignments. Prosecutions are few because there is a requirement to prove ‘guilty mind’ - the legal doctrine of mens rea. iv Drivers and owners and not consignors can be prosecuted for over weight vehicles. v The size of the application fee of £ 55 for each vehicle engaged in national operation and £ 185 for vehicles engaged in international operations is quoted to indicate the ease with which the market can be entered. vi The database on licensed operators is confined to the hire and reward sector and is monitored by the Department of Public Enterprise. vii Licences are valid for 3 or 5 years. viii Plating of vehicles takes place a local Garda Station. ix Gardai are only permitted to direct a vehicle to within 5 miles of where the vehicle is stopped. x Private garages undertake vehicle roadworthiness inspections. In Northern Ireland: xi Only haulage operators wishing to engage in the carriage of goods for hire and reward in vehicles over 3.5 tonne gross weight are required to obtain an Operator’s Licence. xii Unlike on the UK mainland, operators of vehicles below this weight, or operators engaged in own account work, are not required to be licensed. However, for road safety reasons, the RTA, for example, encourages its members engaged in own account work to apply for and obtain an operator’s license. xiii At present, there is no requirement on the consignor of goods to ensure that hauliers hold an operator’s license.This is different from the legal requirements in the ROI. xiv Drivers and owners, and not consignors, can in certain circumstances be prosecuted for dispatching overweight consignments under the ‘cause and permitting’ or ‘aiding and abetting’ clauses. Again, the problem is proving ‘guilty mind’ and prosecutions are few. Some trial 42

prosecutions are currently pending. xv The database on licensed operators is confined to the hire and reward sector. xvi Licences are valid for 5 years. In addition, there is an annual road freight vehicle license, which has to be purchased for each vehicle. xvii Plating of vehicles must take place a DOE test centre. xviii Vehicle roadworthiness inspections are undertaken only at DOE test centres. Key Issue: Training Needs 3.49 To harmonise the conditions of competition for the carriage of goods and passengers by road, the Community has taken a series of measures to harmonise the conditions for admission to the occupation of ‘national and international road haulage operator’ (26). It allowed the effective freedom to establish such operators. In an effort to simplify the Community legislation and make it more transparent, the Commission has adopted a Directive consol- idating these measures. New, compulsory qualification requirements for HGV drivers are in preparation and will result in training needs.These will need to be harmonised throughout Ireland. Training needs are a key issue and will affect productivity, output and costs. Key Issue: Fragmentation of the Industry 3.50 The report ‘A Strategy for the Successful Development of the Irish Road haulage Industry’ (20) indicates a rather fragmented industry. Over 70% of firms are micro businesses employing between 1 and 10 full-time staff. In the Republic of Ireland 45% of haulage businesses have between 1 and 2 full-time employees. In Northern Ireland 47% employ between 1 and 5 full-time staff (20). In addition to that, there is little co-operation between firms. In the interest of efficiency and road safety, a rigorous investigation, with official backing, into the fragmentation of the industry and means of how to solve or at least mitigate this problem is urgently needed. Key Issue: E-business 3.51 The use of IT to support and further logistics and business needs both North and South of the border has been found to be rather poor (20). 47% of those questioned do not use any IT systems. 44 and 33% respectively use IT for basic business administration, e.g. debtors, wages and VAT. 6% of NI hauliers use it for automatic trip planning whilst the corresponding percentage in the Republic rests at 3%. 10% use it for tracking and tracing of consignments (20). 3.52 The EU Directive on ‘Taxation of Carriage of Goods by Road’ (28) lists the conditions to be met by Member States wishing to introduce and/or maintain tolls or introduce user charges.These conditions are: 43

i Imposition on users of motorways or similar roads, bridges, tunnels and mountain passes only. ii Application of the principle of ‘no discrimination on the grounds of the nationality of the haulier or the origin or destination of the vehicle’. iii A derogation of 50% in the rates of user charges is made for vehicles registered in Greece for a period of two years after this Directive came into force. iv No checks at internal borders. v Re-examination of maximum user charges on 1st July 2002, and every two years thereafter. vi Application of the principle of ‘proportionality of rates for user charges’, based on the duration of the use made of the infrastructures. vii Possibility of varying the rates depending on the categories of emissions from the vehicles and/or the time of the day. viii Possibility for two or more Member States to co-operate in introducing a common system for user charges, subject to compliance with certain conditions such as the fair sharing of revenue among Member States. 3.53 In addition to the taxes provided by the Directive, Member States may apply: i Taxes or charges levied upon registration of the vehicle or imposed on vehicles or loads of abnormal weights or dimensions. ii Parking fees and specific urban traffic charges. iii Charges aimed at combating road congestion. 3.54 The Directive also states that Member States that install electronic toll systems are responsible for ensuring that their systems are compatible.The Directive entered into force in July 1999 and has a transposition deadline of July 2000 (28). 3.55 At the end of January 2001, a ‘Vignette Working Group’, under the auspices of the Road Haulage Forum, discussed the introduction of a UK Vignette (road tax for non-UK registered vehicles) System.The three main objectives in introducing such a system are: i Ensuring that all operators contribute towards road wear and environmental costs. ii Levelling the competitive playing field for UK international operators, who generally have to pay for infrastructure use in most other European countries. iii Ensuring that UK operators would face no additional costs resulting from the introduction of vignettes (30). 3.56 Reference should be made to the work done under the EU RTD programmes of DRIVE, past and current IST programmes. Conclusions to ‘Road Haulage’ 44 3.57 The problems that can be identified in relation to road haulage are:

i Lack of adequate road infrastructure and increasing restrictions on the movement of HGVs in, e.g. Dublin, as well as an uneven playing field: due to particularly, the non-harmonised legal and fiscal system involving operating licences, vehicle registration, vehicle excise duties, fuel costs and enforcement. ii The industry is seriously fragmented causing inefficiencies in operation and thus service provision. iii The industry is particularly troubled by the impending Directives on working time and employment conditions for drivers, changes in drivers hours, training needs and possible restrictions in driving days on selected international routes. 3.58 Recommendations for policies, direction and effort based on the above are, in sequence of priority, targeted at: i Harmonising of the licensing system,VED calculations and particularly the difference in the cost of diesel fuel. ii Financial and management assistance through, a favourable tax regime for micro firms and SMEs engaged in the provision of transport logistics services. iii Assisting with education and training, particularly for micro firms and SMEs engaged in the provision of transport logistics services. iv Assisting with collaboration between firms in the industry through, e.g. joint ventures, co-operatives and sharing of administrative, accounting and management resources between SMEs and micro firms. 3.59 Recommendations 1, 2 and 3 are under the direct control of Government but require lobbying. Recommendation 1 has already proved to be controversial. However, actions similar to what is required between North and South, was successfully taken at the Dutch - German border. Recommendation 4 is perhaps best achieved through collaboration with the professional bodies of the haulage industry concerned. Air Transport Key Issue: Current Level of Island Services 3.60 The Republic of Ireland is served by three State-owned airports, Dublin, Shannon and Cork , and by six privately owned and operated airports, Knock, Kerry,Waterford, Donegal, Sligo and Galway (34). Northern Ireland has four privately owned and operated regional airports, Belfast International Airport, Belfast City Airport, City of Derry Airport and St Angelo Airport in Enniskillen. Some international tourist flights serve St Angelo Airport in Enniskillen (35). 3.61 Dublin airport is the major airport of an independent state and the home base for the national flag carriers Air Lingus and Ryan Air. As such it offers 7 services to /from international -, 59 services to /from European - and 6 45 services to / from domestic locations. Of particular interest for domestic

services are the origins / destinations of Cork, Donegal, Galway, Kerry, Shannon and Sligo.These are served by Aer Lingus, Ireland Airways and Aer Arann (36). 3.62 Domestic flights from Dublin Airport are: Origin Destination Flight Time Carrier Frequency Dublin Cork 1 hour Aer Lingus 5 - 8 / day Dublin Donegal 55 min Aer Arann 1/ day Dublin Galway 45 min Aer Lingus 3 - 5/ day Dublin Kerry 1 hour Aer Lingus 1 / day Dublin Shannon 40 min Aer Lingus 6 - 7 / day Dublin Sligo 55 min Aer Lingus 2 / day Dublin Knock 1 hour Aer Arann 1 / day 3.63 Belfast International Airport (BIA) is a regional airport supporting daily services for scheduled passenger flights as follows: 1 to USA, 12 to UK, 3 to European and 1 to an Ireland destination. Charter passenger aircraft as well as pure cargo aircraft operate all year round (35). 3.64 Belfast City Airport (BCA) is a regional airport. It supports passenger and freight services on scheduled flights par day to 17 UK destinations (35). 3.65 City of Derry Airport is a regional airport from which daily flights to/from 22 UK destinations are being offered. This airport also offers a daily flight to and from Dublin (38). 3.66 Flights between origins and destinations North or South of the border could be identified as follows: Origin Destination Flight Time Carrier Frequency Dublin Londonderry 50 min BA - Logan Air 2/ day 3.67 Whilst 7 domestic and 1 cross-border service could be identified, services between other Irish airports leave a lot to be desired. Examples of combi- nations of services needed to communicate by air between other Irish airports at present are indicated below (38). Origin Destination Suggested Route Time Costs Cork Shannon Cork - Dublin - Shannon 3 h 20 min 153.80 Cork Londonderry Cork - Dublin - Londonderry 4 h 35 min 148.90 Cork Belfast Has to travel via the UK 4 h 15 min 228.00 Cork - Birmingham - Belfast Dublin Belfast Has to travel via the UK 4 h 00 min 480.00 Dublin - London - Belfast Londonderry Shannon Has to travel via the UK 3 h 35 min 402.00 L’derry - Glasgow - Dublin - Shannon Key Issue: New Needs 3.68 In its response to the UK Government’s consultation document on air transport policy, ‘The Future of Aviation’, CBI clearly stated that aviation brings significant benefits to regional economies, creating jobs, increasing 46

investment and making the region a more attractive location for business and tourism. Regional airports play a vital role in maintaining fast and effective air links for businesses in the region to Europe and to other international destinations and is particularly crucial to Northern Ireland which does not have a direct surface link with the rest of the UK (39) and at present, only one direct, scheduled service link with the Republic of Ireland. What is true for the links between Northern Ireland and the UK mainland is equally applicable to the island economy of Ireland. The UK Government’s response to the Transport and Regional Affairs Committee’s Report on ‘Regional Air Services’ states that one of the Government’s series of regional air services studies will deal with Northern Ireland. This study, shortly to be let, will consider the supply of, and demand for, air transport in Northern Ireland and address the concerns of its air transport users and operators. Among other things, the study will look at existing airport provision and capacity in the Province, including the two Belfast airports. Under consideration are changes to the European slot regulations such that different categories of slots, e.g. for domestic, short range international and long haul are defined enabling control of slot swapping between different services. Even though this might be desirable, it could just as well restrict the further liberalisation of air transport and make the opportunity to offer scheduled international services from regional airports unattractive to airlines (40). It was proposed that preferential slot allocation should be made to developing regional services rather than to new entrants. 3.69 The European Commission’s proposals for revising the EC Regulation on slot allocation are still awaited. The indication is that they will not now appear in the near future. 3.70 The above issues address the UK domestic air transport requirements and hopefully enable international services to operate from regional airports, e.g. Belfast International Airport.To support regular, scheduled international services is an opportunity the management at BIA are looking for as recent discussions revealed. The industrial development need of the island economy demands, for its continued growth, regular scheduled inter- Ireland passenger services. Extending the Dublin to Londonderry service to include Cork and stop at Belfast on the way might be a start to offer this city-hopper service. Key Issue: Potential for Airfreight 3.71 Discussion at Belfast International Airport and at Belfast City Airport revealed that the distance between Belfast and Dublin is too short for a commercially viable passenger service. Should an inter-Ireland network of passenger services develop, airfreight as belly-hold cargo might develop in parallel, perhaps initially in the form of courier services. 3.72 Significant investments in the provision of modern freight facilities were made at BIA. The existing cargo facility, completed in 1991, included a 60,000 ft2 cargo terminal and a 25,000 ft2 ‘cargo agents building’. In July 47

1998 an additional 26,000 ft2 ‘cargo agents building’ was completed to provide additional office and warehousing facilities for both new tenants and incumbent tenants who have expanded rapidly. 3.73 Freight services are provided both by regular scheduled passenger aircraft, and by the significant all freighter services that operate from BIA year round. 3.74 Scheduled passenger aircraft that carry freight from BIA include 737 and A321 services to London Heathrow, A330 services to Shannon and New York, BAe 146 services to Brussels and 737 services to Amsterdam. 3.75 Dedicated freighter services are offered predominantly by DHL, TNT and Emerald Airlines who operate a variety of 727, BAe 146 and Electra L-188 services. From BIA, destinations include Liverpool, East Midlands, Coventry, Birmingham and Brussels. 3.76 Arrangements for sending or receiving freight can be made with any one of the 34 freight companies operating from Dublin Airport.These services and their influence on Irish exports has grown substantially. Whilst global predictions indicate an average growth of about 7%, CSO statistics imply a growth about 12% for Irish air cargo (75). Competition from surface modes has and will have a downward impact on airfreight growth rates.This is particularly relevant with respect to air trucking, a road based option where there is no real alternative. It involves the movement of air cargo by road under an air waybill. IATA in Resolution 507b clearly defines the main circumstances under which this can be done.They are: • The lack of available space on an aircraft. • Where consignments cannot be handled on aircraft operated by an airline due to size, weight or nature of the consignment. • Where the carriage by air will result in delayed transit times or where the carriage cannot be accomplished within 12 hours of acceptance of the consignment by the air carrier. • Where carriage by air will result in missed connections (75). Today, the practice of air trucking is predominantly orientated towards moving intercontinental freight traffic to gateway airports. In the case of Ireland, there are three main reasons why significant volumes of airfreight are trucked by road: • Most of the routes from Ireland, and particularly from Dublin are short haul intra European routes. The cargo space available on air craft plying these routes is limited and cannot facilitate large pallets / loads, unless large combination or all-cargo aircraft are utilised. • Ireland is a short distance away from London Heathrow. There, competition offers a wide range of direct long haul services and a choice of operators on most of the long haul routes. • For security purposes, airfreight that cannot be x-rayed or scanned 48 must be held for 12 hours prior to being loaded onboard an aircraft.

Once the air consignment is accepted at the Irish airport’s bonded space, there is the option of either waiting for 12 hours or using this waiting time to relocate the consignment (74) to say Heathrow where the airfreight can be directly loaded onto an aircraft. Considering the rapid growth of airfreight, the possibility of rail-air services in conjunction with the Central Railway project should be investigated. Key Issue: Impediments to Effective Expansion and Airport Development 3.77 Discussion with staff at BIA revealed the problem of an uneven playing field for airport operators in Northern Ireland and in the Republic of Ireland in favour of those in the Republic.This is due to: i The differences in the value of the currencies used in the two parts of the island of between 25 and 30 pence favours a move of travellers away from BIA towards Dublin. ii BAI lost price sensitive holiday markets due to currency differentials. iii Differences in corporation tax and in passenger duty. Passenger duty is mandatory in the UK but does not exist in the Republic of Ireland. iv Differences in operating costs of the airport. v The effects of EU competition law. vi Bilateral agreements, which affect the 5 times per week US service via Shannon Airport. It has been suggested that Dublin - Shannon should be decoupled and substituted by coupling BIA and Dublin. 3.78 Belfast International Airport is not subject to noise restrictions and operates 24 hours per day. 3.79 Belfast City Airport is subject to restrictions to the number of flights it can handle per day, operating hours and noise restrictions. Key Issue: Services from Belfast to the Continent 3.80 At present three daily flights with the European destinations of Amsterdam, Brussels and Paris are facilitated at BIA. Two indirect flights to European destinations connect to Belfast City Airport. Key Issue: Impact of NETA Findings 3.81 To date freight services from Belfast City and Derry City Airports are very small. Belfast City Airport intends to use its near city location to attract freight using its old terminal building and associated aircraft stands as freight facility. From Belfast International Airport, a large proportion of airfreight travels on scheduled passenger aircraft. DHL, TNT and Emerald Airlines offer predominantly dedicated freighter services. They operate a variety of 727, BAe 146 and Electra L-188 services. Destinations include Liverpool, East Midlands, Coventry, Birmingham and Brussels (35). From an island perspective, the principal routes for airfreight services at present are: Belfast 49 - Liverpool, Liverpool - Dublin and Amsterdam - Manchester (34).

3.82 It is suspected that the growth of trade anticipated in the NETA corridor will find available airfreight services between Ireland and continental destinations wanting. Key Issue: Airport Development, Rationing, Levels of Charging 3.83 Substantial developments do take place at Dublin Airport, i.e.The ‘Pavilion’ B Boarding Gates have been refurbished. The construction of the second phase of Pier C, consisting of an extra 3 Air-bridges is complete as is the upgrading of Pier A and the conversion of the original terminal building back to passenger usage.The work has greatly increased passenger space and the extension of the apron offers substantially increased aircraft parking space. The Westward extension of the main terminal building has been completed. Belfast City Airport is undergoing a considerable extension programme. A new terminal building together with the associated aircraft stands and the nearby car parking facilities plus improved access to the dual carriageway to Belfast City are under construction. It is planned to retain the present terminal building, to convert it into a dedicated cargo terminal and a centralised location for other airport support services such as engineering. At Belfast International Airport, 180 acres of prime development land are available for sale or rent on the airport site, in addition to available accom- modation. A £ 1,000,000 refurbishment programme for retail premises is about to be completed whilst the international pier was improved by investing another £ 1,750,000. More apron space to park aircraft is under development. 3.84 Levels of charging are negotiable for individual airlines, but passenger taxation is mandatory only in UK based airports. Together with differing corporation tax regimes between North and South, they create an uneven playing field disadvantaging Northern airports. Key Issue: EU PSO Proposals and how this could Benefit 3.85 To aid economic and business development of the regions, and, according to EU Council Regulation (72), the Governments of the Republic of Ireland and of the United Kingdom could impose Public Service Obligations on air carriers to provide scheduled air services meeting fixed standards to regional airports to which air carriers would not operate if they were considering nothing but commercial interests provided, this service is considered vital for the economic development of the region. This could benefit the setting up and operating of an inter-Ireland air service connecting the various regions with Dublin and Belfast as well as with each other. Key Issue: Route Sharing plus New Alliances 3.86 At present,Aer Lingus, BA-Logan Air and Aer Arann are engaged in scheduled domestic services to destinations in the Republic of Ireland to and from Dublin airport. Two airlines share cross-border links between Dublin - Londonderry and Shannon - Belfast. The possibility of an alliance 50 between the three airlines to offer business-friendly, inter-Ireland services

should be investigated. Similarly, the possibility of providing such a service using air cabotage, which can be provided by any EU carrier in another Member State, could be considered. Conclusions to ‘Air Transport’ 3.87 The following conclusions can be drawn and problems revealed: i An uneven playing field due to currency differences and the regulatory and corporation tax environments exists for airport operators North and South of the Border. ii Excellent international and European connections are offered from Dublin Airport. iii Excellent connections to the UK mainland exist at the three Northern Ireland Airports. Direct, scheduled and regular flights to European destinations are poor. Direct, scheduled and regular flights to inter national destinations in support of an expanding island economy are totally inadequate. iv Domestic services between Dublin and destinations in the Republic of Ireland exist. v Cross-border services between Dublin - Londonderry and Belfast - Shannon are offered by two airlines, BA - Logan Air and Aer Lingus. vi Inter-Ireland scheduled, direct and regular passenger services between say, Cork, Dublin, Belfast, Shannon and Londonderry are in essence non-existent. vii There are no impediments to airport expansion, operating times or noise restrictions at BIA. viii BCA has an expansion problem, restricted operating hours and is subject to noise limitations. ix Airfreight services operate all year round from BIA mainly to UK destinations but, include services to Amsterdam and Brussels. x Substantial expansions took place at Dublin, Shannon and Cork airports and are still ongoing. 3.88 In the interest of a growing all island economy, to support business development and supply chain related transport logistics services; recommendations for policies, direction and effort based on the above are, in sequence of priority, targeted at: i Developing scheduled and regular inter-Ireland services. ii Dramatically increase the number of direct services to European destinations from Northern Ireland Airports. iii Harmonising the operating environment for airport operations between the Republic of Ireland and Northern Ireland. iv Liberalisation of air transport by the UK Government to enable 51

international services to operate from regional airports. 3.89 Recommendations 1 and 2 have a strong commercial bias. However, as the development of regular and scheduled air passenger services not only pre- cedes but, is vital to economic and business development, some of these services may have to be initiated in conjunction with a public service obligation similarly as it is taking place in Scotland. Control over recommendations 3 and 4, is in Government hands. Recommendation 4 was sourced from the UK Government’s consultation document,‘The Future of Aviation’, published in December 2000.The UK Government keeps its policy on international access to regional airports under review, particularly as the Environment, Transport and Regional Affairs Committee (ETRAC) recommended a uni- lateral liberalisation of international access to regional airports. Shipping Key Issue: Current Level of Services 3.90 Detailed information of current services to and from Ireland and the conditions under which ships operate are contained in the Appendix under the title of ‘Shipping’. However, work done on behalf of the Institute of International Trade of Ireland and the Irish Exporters Association revealed that, few shipping services are provided by ‘Irish’ carriers (42), apart from the services provided by Irish Ferries. Irish shippers have little influence and certainly no control over freight rates unless they are able to negotiate direct service agreements with carriers. The practice / controversy of rate fixing was discussed at length by the European Commission and by the World Bank. The European Shippers’ Council is questioning it yet again (Lloyd’s List, May 10th 2001). 3.91 The practice of rate fixing applies to deep sea, short sea and ferry services. With few exceptions, available are: i Ro-Ro ferry services using the UK landbridge (road network) en route to UK or Continental destinations. and ii Lo-Lo services engaged in short-sea shipping on direct routes to UK or Continental (hub) ports. 3.92 During the year 2000, 26 Ro-Ro service providers offered between 453 and 471 sailings per week, whilst 53 shipping companies offered Lo-Lo, general-, timber-, or bulk cargo services on short sea routes to and from Irish ports (35, 48). The dominant mode for freight to cross the Irish Sea and the North Channel is by Ro-Ro ferry.About 50% of the available Ro- Ro ferry capacity was used during the year 2000 (35). Spring 2001 saw the beginning of substantial changes in Ro-Ro service provision on the Central Corridor. ‘Irish Ferries’ scheduled the ‘Ulysses’ into service to replace the ‘Isle of Innishmore’.The two vessels have a similar passenger capacity, but Ulysses offers more than double the lane meters than the Isle of Innishmore did and 52 therefore, can carry ‘twice’ as much freight. ‘P&O Irish Sea Ltd’ brought the ‘European Ambassador’ onto the Dublin Liverpool route and moved the

‘European Leader’ onto the Larne - Fleetwood service. Finally, Stena Line introduced the ‘Stena Forwarder’ onto the Dublin - Liverpool route.The result of these changes will be a considerable shift of percentage capacity from the Northern- to the Central Corridor across the Irish Sea and the North Channel.The attraction of Liverpool is the river-berths.These enable direct Ro-Ro access to the road and motorway network around Birkenhead. ‘Norse Merchant’ increased their weekly sailings between Belfast and Liverpool to 10 (35). 3.93 Both Ro-Ro and Lo-Lo traffic to and from Ireland record considerable increases as shown in the table below. Cargo 1991 d% 1992 d% 1993 d% 1994 d% 1995 d% 1996 d% 1997 d% 1998 d% Ro-Ro 2746 - 2801 +2.0 2677 -4.4 3180 18.8 3894 22.5 5587 43.5 6354 13.7 7504 18.1 Lo-Lo 2962 - 2973 +0.4 3371 13.4 3899 15.7 4175 7.1 4404 5.5 4423 0.4 4906 10.9 d% = % change Source: Central Statistical Office (34) 3.94 Ro-Ro exceeds Lo-Lo by far and indicates an inclination towards the use of the UK landbridge in favour of short sea shipping and direct links to the Continental (hub) ports.The table above depicts Ro-Ro and Lo-Lo movements in tonne rather than unit loads.The main Ro-Ro links are the ferry routes between Dublin - Liverpool and Dublin - Holyhead. Infrastructural changes, if the Central Railway proposal takes off, will probably result in increased traffic through Liverpool from both Dublin and Belfast with a relatively reduced amount of trade through Holyhead and Heysham.The discussed increases in capacity on the Central Corridor between Dublin - Liverpool and Dublin - Holyhead during 2001 should be well able to cope with the expected growth in trade. Information from MDS Transmodal shows potential volumes by route in the table below. 3.95 With respect to ports,‘P&O Irish Sea Ltd’ is relocating their Larne - Ardrossan service to Troon to benefit from improved access to the road network in central Scotland, permit larger ships to use the route and, enable increased sailing frequency. Some of their services from Liverpool are being relocat- ed to Mostyn in North Wales to bypass the congested road network around Liverpool, permit larger ships, and increased sailing frequency. Mostyn is a privately owned port and extensive improvements to facilitate Ro-Ro ferry access are in progress (35). Key Issue: Future Trends to Supply Chain Management 3.96 Substantial amounts of the trade between Irish, UK and Continental destinations consist of ‘time sensitive’ goods.These require fast and reliable transit times or short supply chains. IT offers the planning, organisation and control tools required to achieve this. Apart from booking space and arranging transport, preparing documents and informing transfer points, where the vehicle may change mode even if the goods are not, tracking and tracing as well as informing consignees and / or agents of the pending arrival of goods and particularly, having documents available in time, is crucial for manufacturing 53

and for the provision of transport logistics services including the providers of shipping services. Apart from using IT to lever competitive advantage form the supply chain (49), flexibility in route selection and mode combination as well as in the provision of services, along an order driven supply chain network, rather than a single chain, is a major contributor to success (50, 51). Key Issue: Ro-Ro v. Lo-Lo 3.97 Between 1990 and 1999 the overall volume of goods handled at Irish ports grew by over 50%. Each category of traffic, liquid-, dry- and neo bulk experienced growth.Within neo bulk, the unitised segments of Ro-Ro and Lo-Lo, being by far the most dynamic, showed increases of almost 200% and 100% respectively (34). Ro-Ro is the dominant of the two in association with ferry services to and from Ireland to the UK west coast ports. This is followed by the use of the UK mainland as landbridge to the ferry ports of the Southern North Sea and the Dover Strait to proceed by ferry to Continental ports mainly in the Hamburg - Le Havre range with emphasis on Calais, Dunkerque, Zeebrugge and Rotterdam. The ferry services become an extension of road- or combined transport, if part of the journey is carried out by rail (53). Key Issue: The Implications of Rail Transport, e.g. the Central Railway 3.98 Central Railway are in the course of developing a high gauge freight railway between Liverpool in the UK and Lille in France. Such a direct link would immediately affect the routing of exports and imports from and to Ireland and possible routes within the associated network of supply chains. Assuming the Central Railway operates effectively, and its use offers commercial advantage, shipments from Belfast to Liverpool may increase at the expense of the Larne - Cairnryan, Belfast - Stranraer and Belfast - Heysham routes. Based on discussions with Translink and considering the unfavourable state of the rail freight link between Belfast and Dublin and that Translink seems to have shelved plans to relocate and extend the Adelaide Freight Terminal, an increase in the demand for rail freight facilities in Northern Ireland to ship to containers through Dublin as a result of the Central Railway, is most unlikely. Key Issue: Incentives for Expansion of Shipping - the North-South Gap 3.99 The growth of trade from Irish ports over the last 10 years (34), indicates that Ireland’s international trade, similarly to its European trade, is expanding, albeit a lower rate. In tandem with this, shipping and port services need to expand. 3.100 The Guide to Shipping 2000 (48) indicated that there is a weekly service with a 700 TEU vessel from Belfast to Rotterdam, which calls at Dublin en route.Two carriers offer services from Belfast and Warrenpoint en route to 54 Sweden and to the Baltic States via Rotterdam /Antwerp / Le Havre. Apart

from these two links, one between Belfast and Dublin and one between Belfast and Warrenpoint, no other services offering, more by default than by design, a short-sea link between Irish ports could be identified. 3.101 Possible incentives are somewhat of a problem as the interpretation of Articles 85 and 86 of the Treaty in the light of maritime cabotage and short distance sea transport may construe any financial or fiscal assistance as ‘unfair competition’ and/or as a distortion of the Single Market (44). However, as the Commission is favourably inclined towards the promotion of short-distance transport by sea, advocated as part of the commercial strategy of ports, beneficial conservancy charges for vessels plying between Irish ports could be introduced. This could be realised by integrated carriers offering combined transport (53) by using coastal Ro-Ro services to entice HGV traffic off the roads. The charges however, would have to be such that, despite its longer duration a transport logistics service by short-sea shipping from, say Belfast to Dublin, would be attractive (46). Carriers and associated Time Series indicating Volumes in Freight Units by Route Irish Sea Freight Market Freight Units Company Route 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 % IRISH SEA Irish Ferries Rosslare Le Havre 5,300 5,300 4,297 3,759 3,918 3,060 3,917 2,198 2,542 2,675 2,500 467 0 0 P&O Irish Sea Ltd Rosslare Cherbourg - - 2,832 2,529 2,223 2,309 2,536 1,389 1,313 1,811 500 208 2,582 1,505 0.11% Irish Ferries Rosslare Roscoff - - - - - - - - - 100 - 144 305 306 0.02% Irish Ferries Cork Le Havre - - - - 79 55 62 190 131 143 600 26 0 0 Irish Ferries Cork Cherbourg - - - - - - - - 106 55 - 0 0 0 Irish Ferries Cork Roscoff - - - - - - - - - 113 - 49 - - Gaelic Ferries Cork Cherbourg - - - - - - - - - 0 0 662 1,846 0 P&O Irish Sea Ltd Rosslare Cherbourg - - - - - - - 1,000 8,700 9,000 9,000 9,000 12,000 12,500 0.94% Brittany Ferries Cork Roscoff 800 1,500 583 643 618 460 464 482 763 892 800 607 560 519 Subtotal 6,100 6,800 7,712 6,931 6,838 5,884 6,979 5,259 13,555 14,789 13,400 11,163 17,293 14,830 1.11% SOUTH CORRIDOR Irish Ferries Pembroke Rosslare 15,000 12,900 19,200 19,000 18,400 20,600 24,700 19,316 19,367 18,400 17,955 29,327 44,968 52,700 3.95% Stena Line Ltd Fishguard Rosslare 22,100 18,700 20,500 27,700 31,400 30,700 31,980 40,200 39,160 42,000 40,100 31,018 34,536 35,300 2.64% SCF Swansea Cork - 600 2,000 - 800 883 755 3,400 5,078 6,200 4,380 4,317 3,582 4,958 0.37% Ro-Ro Ferries Pembroke Rosslare - 6,900 - - - - - - - - - - 0 0 Subtotal 37,100 39,100 41,700 46,700 50,600 52,183 57,435 62,916 63,605 66,600 62,435 64,662 83,086 92,958 6.96% CENTRAL CORRIDOR Irish Ferries Holyhead Dublin 8,600 5,800 18,100 17,700 18,700 17,900 18,820 24,271 29,305 45,500 65,444 84,643 99,035 103,000 7.72% Stena Line Ltd Holyhead Dun Laogh 20,100 25,400 21,500 24,200 24,700 25,500 34,600 38,600 46,227 49,000 23,600 37,641 51,843 50,000 3.75% Stena Line Ltd Holyhead Dublin - - - - - - - - - 3,000 36,500 41,065 51,713 50,000 3.75% P&O Irish Sea Ltd Liverpool Dublin 92,000 75,000 70,000 73,100 82,400 87,100 99,300 105,000 110,000 141,000 153,000 154,000 160,250 158,900 11.91% Merchant Ferries Heysham Dublin - - - - - - - - - 14,200 81,000 90,000 91,000 64,000 4.80% Merchant Ferries Liverpool Dublin - - - - - - - - - - - - - 72,000 5.39% Sealink / B&I Liverpool Dublin 10,000 8,200 1,400 2,800 300 - - - - - - - - - Subtotal 130,700 114,400 111,000 117,800 126,100 130,500 152,720 167,871 185,532 252,700 359,544 407,3349 453,841 497,00 37.30% NORTH CORRIDOR P&O Irish Sea Ltd Ardrossan Larne 20,000 20,000 24,000 24,000 28,000 28,600 25,300 27,800 33,000 34,000 38,000 41,000 40,000 40,000 3.00% Stena Line Ltd Stranraer Belfast 120,500 126,700 132,400 144,500 149,900 142,700 127,040 142,300 140,559 143,000 126,400 147,800 145,320 129,000 9.67% P&O Irish Sea Ltd Cairnryan Larne 85,000 95,000 96,000 99,000 92,700 95,200 99,470 108,667 114,400 126,400 148,474 145,003 171,757 185,000 13.86% P&O Irish Sea Ltd Fleetwood Larne 84,000 87,000 86,000 80,000 83,600 83,020 89,740 90,000 92,100 90,500 98,500 91,500 102,000 105,000 7.87% BFF Heysham Belfast 17,000 33,000 37,000 44,000 46,000 51,300 60,430 67,400 70,800 70,400 87,500 103,000 103,745 105,000 7.87% BCF Liverpool Belfast 10,000 9,000 10,000 9,500 7,000 - - - - - - - - - Pandoro Liverpool Belfast - - - - - 4,600 - - - - - - - - NIF Liverpool Belfast - - - - - 4,500 45,400 63,800 78,700 78,600 101,388 83,105 108,300 110,000 8.24% Sea Truck Heysham W’point - - - - - - - - - - 25,000 52,000 50,000 55,000 4.12% Merchant Ferries Heysham W’point - 14,000 15,000 19,000 20,000 20,000 36,000 50,000 84,000 59,600 - - - - Merchant Ferries Heysham Dublin - - - - - - - - - 14,200 68,000 - - - Merchant Ferries Fleetwood W’point - - - 5,000 20,400 18,300 7,500 - - - - - - - Subtotal 336,500 384,700 400,400 425,000 447,600 448,220 490,880 549,967 613,659 616,700 693,262 663,408 721,122 729,000 54.62% TOTAL 510,400 545,000 560,812 596,431 631,138 636,787 708,014 786,013 876,351 950,789 1,128,641 1,146,582 1,275,342 1,334,688 100.00% Source: MDS Transmodal Key Issue: How Ports Help or Hinder Development 55 3.102 Ports are nodes in the European and national infrastructure network. As

such they are included in the network of transport logistics service providers who work within a network of supply chains. Ports are also nodes in the network of commodity or trade flows.They help or hinder economic development by means of the services they provide in aid of cargo transfer, throughput and storage. Prerequisites to success are: i A well-trained and flexible workforce with specialist capability. ii Modern facilities and equipment. iii Large amounts of space as today’s unitised cargo operations are space intensive. iv Excellent maritime and land access. v A good, modern and flexible management structure. vi A legal status that permits the port to be managed and operated according to commercial principles whilst safeguarding the interest of the port customers and of the public. vii Competition within and between ports. 3.103 Lack of any of the above points will cause a hindrance to economic development. The National Spatial Strategy (6) and through it the National Development Plan as well as the numerous reports listed in ‘Dublin Port 2000’ (54) recognise this. The Port Directive proposed by the European Commission specifically addresses competition within, rather than between ports. As competition between as well as within ports exists in Ireland, the proposed Directive is targeted more at State owned Continental- rather than Irish ports (62). 3.104 The work done under the auspices of the North European Trade Axes (NETA) Logistics Module (34) and in the Logistics Audit for the Northern Corridor ports and Northern Ireland (35), clearly demonstrated that the land access to ports in Ireland is inadequate to cope with the expected demands of a growing economy.This is particularly pertinent for the ports of Dublin and Belfast. 3.105 Traffic in the city of Dublin is suffering from near gridlock causing serious delays to port and other HGV traffic (54). Equally as serious, to increase, or even just to keep up with the demand for services made by a growing economy, the port needs to expand without having the land available to do so (54)! It must be pointed out that the main growth is in unitised cargo transport manifesting itself in Ro-Ro and Lo-Lo traffic (34, 54). Excellent land access and large amounts of space for marshalling purposes are paramount to their success (59, 60, 61). 3.106 The West Link to and from the port of Belfast is severely congested during the daily peak hours (10, 35, 56). Problems of inadequacy also exist along the A8 linking the port of Larne with the M2, the West Link and the M1 to the West and the South of Ireland (56, 57). Key Issue: East - West: NETA Issues 3.107 The NETA project (North European Trade Axis) is a practical example of 56 the application of a trans-national spatial planning policy. It focuses on a

broad trade and transport corridor from Ireland, across northern England - Liverpool, Heysham, Fleetwood, Manchester, Leeds, Sheffield, the Humber ports of Hull, Immingham and Grimsby - and, via the short sea crossings of the Southern North Sea, to the Netherlands and Germany. The Humber ports are a natural gateway for traffic flowing between Ireland, North-, Central- and Eastern Europe. Trade uses the UK landbridge with connections to the Northern, Central and Southern corridors across the Irish Sea and the North Channel to/from Ireland. 3.108 NETA issues related to shipping are concerned with ports, maritime and land infrastructural access to ports, ferry services and associated capacities. Extensive investigations revealed and confirmed that improvements are needed in: i Port infrastructure and land access to ports in Ireland, the UK mainland both east and west. Substantial improvements are being made in Liverpool and in the Humber Ports of Immingham and Grimsby. Land access (Infrastructure) related problems need urgent attention in Belfast (West Link), Larne (A8), Dublin (Port Tunnel and access to the port through the city). Cairnryan and Stranraer (A75, A77, M6), Heysham (A683, B5273, M6) and onward to the Humber ports (M56, M6, M62) (34, 35). ii Space for expansion of port facilities in Dublin. iii An increased frequency of sailings from the Humber ports to the near continental ports. Key Issue: What Governments should do to Help 3.109 The best and most effective ways in which Governments can assist maritime traffic to and from Ireland are to: i Do everything possible to develop and implement policies to sort out the transport infrastructural problem of the port cities of Dublin and Belfast. ii In the interest of competitiveness of Irish exports, develop polices to assist shippers to establish direct calling container line services to the North American East Coast which, apart from Europe, represents one of the major export markets for Irish Exporters (42). Conclusions to ‘Shipping’ 3.110 The conclusions that can be drawn and the problems that can be identified from the section on shipping, are: i Land access to ports in Ireland is inadequate to cope with the expected demands of a growing economy. This is of particular importance for the ports of Dublin, Belfast and Larne. ii The port of Dublin needs to expand to cope with future growth without having access to the required land. 57

iii The West Link to/from the port of Belfast is severely congested, particularly during peak hours. iv The A8 connecting the port of Larne to Belfast is inadequate for the traffic using it. v Lack of uniformity in documentation used in the Member States in short sea shipping causes lengthy port turn-a-round times. vi The promotion of short sea shipping should be part of the commercial strategy of ports. vii No direct calling container line services to and from Ireland and total dependency on feeder services to and from European hub ports. 3.111 Recommendations for policies, direction and effort based on the above should, in sequence of priority, be targeted at: i Substantial improvements in port development and port access . Of very particular urgency is the port tunnel and port access through the city of Dublin to Dublin port. Of equal importance are improvements to the West link in Belfast and to the A8 towards Larne. ii Resolving the land shortage for expansion in the port of Dublin with some urgency. iii Harmonise the documents used between Member States engaging in short sea shipping. iv Harmonising the institutional and fiscal structures in ports to create an even playing field and reduce the existing distortions to competition between ports North and South. v Increase the competitiveness of Irish exports by developing polices for a fiscal regime which makes it attractive to shippers and others to establish direct calling container line services to the North American East Coast (deep-sea) and to Europe (short-sea) which represent the major export markets for Irish Exporters.This possibility should be kept under continuous review and related studies should be regularly updated. 3.112 Recommendations 1 and 2 are absolutely paramount to ease the present access problems and to prevent a looming stranglehold on a growing island economy. Examples: The indicated six years waiting time to sort the West Link out, is six years too long. The application to the Minister for the Marine & Natural Resources, the associated planning and execution cycle to reclaim 21 hectares of land at the east end of the north port in Dublin Bay to mitigate the port’s expansion problems needs drastically shortened to the benefit of the island’s economy and its population. Recommendation 3, whilst achievable, has to be tackled by Government through the European Commission. Recommendations 4 and 5 are under the control of central and regional government respectively. 58

Rail Transport Key Issue: Operating Railways in Ireland 3.113 Rail freight in Ireland is of some importance, particularly for bulk cargoes. As there is an increasing lack of capacity for rail passengers and rail freight, a review of investment policies in rail in the light of all-island passenger and freight movements is recommended. Rail freight in the form of containers is minimal and, with respect to Northern Ireland, is confined to the Dublin- Belfast-Larne axis (~ 2,600 TEU during 1999).Translink has converted former freight yards to road vehicle use where dimensional problems mitigated against rail freight. 3.114 Discussions with Translink revealed the following: i All rail freight traffic is generated by Iarnród Éireann. N.I.R. only act as agents on their behalf in Northern Ireland. ii Three freight trains per day operate between Dundalk and Belfast from Monday to Friday.The running time per train is approximately 1 hour and 45 minutes. iii All lines running on the N.I.R. network are restricted to 8ft 6in high containers. iv N.I.R. have no freight rolling stock. All freight rolling stock and motive power for freight operations is provided by Iarnród Éireann. v There is only one operational terminal in the North of Ireland at Adelaide Street in Belfast.The terminal is difficult to access with large articulated vehicles carrying containers to and from the rail terminal. vi Plans to relocate, modernise and extend the rail freight terminal have been abandoned.There are no current plans for investment in rail freight in operation by Translink. vii There is rail access to the port of Larne, although freight is not currently moved on it.There is no rail access at all to the port of Belfast and only limited rail access to the port of Dublin where rail access exists to the P&O Irish Sea Ro-Ro Terminal (Terminal 3).There is no rail access to the Coastal Line Container Terminal nor to the container terminal of Marine Terminals Ltd. 3.115 For information on the rail infrastructure in Ireland and the Central Railway, please refer to the Infrastructure Module 3.116 Policies should be promoted to extend the substantial investment made during recent years into the Belfast - Dublin route to the links between Dublin and Cork and from Belfast to Londonderry. However, the likely patronage on the three route segments should be considered and, where believed rea- sonable, a high-class rail/bus service should be offered.Where the passenger numbers warrant this, polices advocating the use of high-speed passenger trains should be developed and adopted. Development of rail freight for 59 unitised cargo (containers) in Ireland should be stopped and the resources

previously allocated to this should be redirected towards improving passenger services or road infrastructure. Key Issue: Suitability for Intermodal Transport 3.117 Few facilities able to offer intermodal or multimodal transport services are available on the island of Ireland. Moreover, the practicability to do so is wanting due to the reasons outlined above. From this can be concluded that the road infrastructure is likely to remain the principal enabler of freight transport in Ireland. Key Issue: Central Railway 3.118 In the UK, EWS and Railtrack discussed a bridging agreement to cover track access and charging rights after March 31st 2001 (52). ‘Central Railway’ discussed the latest developments with their plan for a high gauge freight railway between Liverpool in the UK and Lille in France. Problems in the UK are associated with local planning and the raising of investment. ‘Central Railway’ are trying to persuade the UK Government to change the procedure under which construction of the route would be approved by Parliament. The proposed change would necessitate direct Government support and intervention.This effort has thus far been singularly unsuccess- ful (30, 52).A direct link as proposed would immediately affect exports and imports from and to Ireland and possible routes within the network of supply chains, i.e. the pressures on the infrastructure around Dublin would increase as shippers would wish to avail themselves of the service, assuming there is a commercial advantage in it for them. It is very doubtful whether in the event of the ‘Central Railway’ rail freight from Belfast to Dublin would increase as it is easier to ship Lo-Lo cargo directly from Belfast to Liverpool with immediate transhipment onto the ‘Central Railway’ at the respective Liverpool container terminal. Conclusions to ‘Rail Transport’ 3.119 The following problems could be identified: i Although rail freight in Ireland is of some importance, particularly for bulk cargoes, there is an increasing lack of capacity for rail passengers and rail freight. ii Rail freight in the form of containers is minimal and, with respect to Northern Ireland (~ 2,600 TEU during 1999), is confined to the Dublin-Belfast-Larne axis. iii ‘Central Railway’ has problems in the UK associated with local planning, the raising of investment, changes in planning procedures and obtaining Government support (30). 3.120 Recommendations for policies, direction and effort based on the above are, in the sequence of their priority, targeted at: 60 i A review of investment policies associated with rail transport in the

light of all-island passenger and freight movements. ii The Enterprise service between Dublin and Belfast should be extended to include the links between Dublin and Cork and, Belfast and Londonderry.Where this is commercially non viable, it should be investigated, if a similar service could be provided by a first class bus service. iii Where warranted, either commercially or as a prerequisite to economic and business development, the Irish rail transport system should be biased towards high speed passenger transport. The Trans-European Network (Ten-T) Please refer to the section on Infrastructure. Telecommunications Please refer to the section on Infrastructure. 3.121 References 1 European Commission, 1999 The European Spatial Development Perspective. 2 European Commission, 2001 The Common Market. 3 European Commission, 1999 The Common Transport Policy. 4 European Commission, 2001 The European Union Policies for Transport Services. 5 DETR, 2000 European Spatial Planning and Urban-Rural Relationships:The UK Dimension, Department of the Environment,Transport and the Region, June, London. 6 Department of the Environment and Local Government, June 2000, The National Spatial Strategy, Republic of Ireland, www.environ.ie. 7 DOENI, 1998 Shaping our Future, Draft Regional Strategic Framework for Northern Ireland, Department of the Environment for Northern Ireland, December. 8 Department of the Environment and Local Government, June 2000, The National Development Plan, Republic of Ireland, www.environ.ie. 9 Government of Ireland, 2000 The Planning and Development Act, www.environ.ie 10 DRD, 2001 The Regional Transport Strategy for Northern Ireland, a Consultation paper. Department for Regional Development, January. 11 European Commission, 2001 Transport - Introduction, January http://europa.eu.int/scadplus/leg/en/lvb/l24040.htm 12 European Commission, 2001 Union Policy - Transport Services http://europa.eu.int/scadplus/leg/en/s13000.htm 13 European Commission, 2000 TEN - TRANSPORT - C Update 14th September. RCN: 612 14 Bauersox, 1995 World Class Logistics:The of Managing Continuous Change, US Council of Logistics Management. 15 Wright C, et.al., 1998 Automotive Logistics - Optimising Supply Chain Efficiency, Financial Times Business Ltd. London. 16 European Commission, 2001 Internal Market Scoreboard: Commission warns of slowdown in Member States’ efforts to implement legislation. 17 European Commission, 2000 Report on the Implementation of the 1999 Broad Economic Policy Guidelines. 18 European Commission, 1999 Single Market Scoreboard. 19 NEA Transport Research and Training, 1999 A Strategy for the Successful Development of the Irish Road Haulage Industry. Appendix 4, Results of Survey of Northern Ireland Road Haulage Sector. March. 20 NEA Transport Research and Training, 1999 A Strategy for the Successful Development of the Irish Road Haulage Industry. March. 21 European Commission, 2000 Internal Market: Commission calls for urgent action on priority policies to help EU meet Lisbon agenda. May. 22 European Commission, 2001 Competition - Introduction http://europa.eu.int/scadplus/leg/en/lvb/l26055.htm 23 Department of Public Enterprise, 2001 Programme of Action for the Road Haulage Industry, January. 24 European Commission, 2000 Towards a Safer and More Competitive High-Quality Road Transport System. June. 61

25 European Commission, 2000 Road Safety - Driving Licences. 26 European Commission, 1998 Carriage of Goods and passengers by Road:Admission to the occupation of Road Transport Operator and mutual Recognition of Diplomas. 27 European Commission, 2000 Road Safety - Driving Licences; Directive 2000/56/EC, September. 28 European Commission, 1999 Taxation of Carriage of Goods by Road 29 European Commission, 1998 Proposal: Restrictions on the Movement of Heavy Goods Vehicles. 30 The Freight Transport Association, 2001 Activities Report, January to March 2001. 31 Economic and Social Committee (Tosh), 2001 Impact on Competitiveness created by Differentials in Road Transporting Vehicle Duty and Licensing Taxation in the EU Member States. 32 Schmidt F A, Smyth M & Flanders, P, 2000 Conflict between Fiscal Policy and Economic Reality - implications for the Northern Ireland economy. Business and Economics Review, First Trust Bank. Belfast. 33 Department of the Environment and Local Government, 1999 Rates of Duties on Motor Vehicles. 34 Fynes B and Ryan P, 2001 The NETA Report (Logistics Module) 35 Schmidt F A, 2001 The NETA Report (Logistics Audit for Northern Ireland) 36 Dublin Airport plc, 2001 www.dublin-airport.ie 37 Londonderry Airport, 2001 www.ganet.co.uk/airfield/eglinton.htm 38 Travel Select, 2001 www.travelselect.com 39 CBI, 2001 The Future of Aviation:The Government’s consultation document on air transport policy - CBI Response. 40 DETR, 2001 The Government’s Response to the Environment,Transport and Regional Affairs Committee’s Report on ‘Regional Air Services’. March. 41 DETR, 2001 http://www.aviation.detr.gov.uk/index.htm 42 Schmidt F A, O’Reilly E, 1998 ‘Study of the Feasibility for the Establishment of a direct Calling Container Service between Ireland and North America’, Institute of International Trade of Ireland, ISBN 1 85923 134 9, September 1999, pp 276 including numerous graphics and appendices. 43 European Commission, 1998 Directive: Freedom to Supply Services, Competition, Unfair Pricing Practices and Free Access to Ocean Trade. 44 European Commission, 1998 Directive: Freedom to Provide Services within Member States (Ocean Trade). 45 European Commission, 2000 Vessel Manning Conditions. 46 European Commission, 2000 Short Distance Transport by Sea. 47 European Commission, 2000 System of Mandatory Surveys for the Safe Operation of Ro-Ro Ferry and High- Speed Passenger Craft Services. 48 Export & Freight, 2000 Guide the Shipping 2000. 49 Joint Business Council -IBEC-CBI, 1999 Logistics, the Key to Competitive Advantage. Belfast. 50 Institute for Shipping Logistics, 1999 Worldwide Logistics, Bremen. 51 Eckstein W E and Szafera S, 1998 Processe und Hemnisse der Kooperation in der Transportwirtschaft, ISL, Bremen. 52 Rail Freight Council, 2001 Central Railway in FTA Activities Report 53 The European Commission, 1997 Combined Goods Transport. 54 Dublin Chamber of Commerce, 2000 Dublin Port 2000. 55 DOENI, 1998 Moving Forward. Northern Ireland Transport Policy Statement. Integrated Transport. 56 DRD, 2001 Regional Transportation Strategy - Problems in Detail as described on www.drdni.gov.uk/rts 57 DRD Roads Service, 2000 Corporate Plan 2000 - 2003, Business Plan 2000- 2003. 58 Institute Shipping Logistics (ISL), 1990 Port Management Handbook, Bremen. 59 United Nations, 1990 Port Development Handbook, Geneva & New York. 60 European Commission, 2000 Small, medium sized Ports with Effective RE-engineered processes (SPHERE). 61 European Commission, 2001 Communication from the Commission to the European Parliament and the Council Reinforcing Quality Service in Sea Ports: A Key for European Transport, Proposal for a Directive of the European Parliament and of the Council 62 European Commission, 2000 Community Guidelines for the Development of the Trans-European Transport Network, September. 63 European Commission, 2000 Licensing of Railway Undertakings. 64 European Commission, 1995 Rail Transport: Allocation of Railway Infrastructure Capacity and the Charging of Infrastructure Fees. 65 European Commission, 2000 Rail Transport: Allocation of Infrastructure Capacity, Charging for Infrastructure and Safety Certification. 66 European Commission, 1999 Interoperability of the trans-European conventional Rail System. 67 IBEC Transport Council, 1999 Irish Roads - Beyond the Year 2000 - Investments, Benefits and Future Trends. 68 European Commission, 1999 Trans-European Networks: General Rules for the Granting of financial Aid in the Field of trans-European Networks. 69 European Commission, 1997 Telematics in the Transport Sector. 70 European Commission, 1997 Common Transport Infrastructure Charging Framework in the European Union. 71 European Commission, 1998 Interoperable Electronic Fee Collection Systems in Europe. 72 European Commission, 1992 Air Transport:Access for Air Carriers to Intra-Community Air Routes (third phase). 73 European Commission, 1998 Resolution (ECSC, EEC, Euratom) on a Community programme of policy and action in relation to the environment and sustainable development, 1993-2000 62

Appendix 3.122 In addition to the information contained in the main body of this report, the following should be noted as it forms the European overview and the basis for the ‘Policies and Services’ section of this report. Background 3.123 The European Union policies for transport services, transposed into national law, directly affect the provision of transportation and logistics services at operator level.These policy instruments form, to a considerable extent, the basis for past and particularly for future developments of transportation and communication infrastructures, social cohesion, economic development and activities and, amongst these, the provision of private and public transportation and logistics services (4). The Common Transport Policy 3.124 The ratification of the Treaty of Maastricht marked the beginning of a new phase for developing further the European Union in general and the Common Transport Policy (CTP) in particular (11).The Maastricht Treaty maintained the goals of: e.g. safeguarding and developing further the Single Market, improving the safety of transport, sustaining economic growth, respecting / protecting the environment and furthering the quality and effectiveness of transport infrastructure, i.e. the Trans-European Networks (TENs). The CTP contains the concept of subsidiarity. This requires decisions to be taken, and implemented, at the most appropriate level, i.e. Europe, Member State or Region.The most recent rolling programme for the period 1995 - 2000 consisted of policies and actions in three fundamental areas: i Developing integrated transport systems based on advanced technologies that contribute to environmental safety and economic objectives, e.g. competitiveness, in order to achieve an improved quality of service. ii Promoting more efficient and user-friendly transport services while safeguarding social standards and choice by improving the functioning of the Single Market. iii Broadening the external dimension by improving transport links with third countries and fostering the access of EU operators to other transport markets. 3.125 The abolition of frontiers and other liberalisation measures - including liberalisation of cabotage, make it possible to keep pace with the growth in demand and tackle problems of congestion, saturation and lack of transport services.The liberalisation of transport takes various constraints into account: i A social constraint, to prevent national legislation being by-passed. Liberalisation of services accompanied by harmonisation of social conditions and of the rules governing the provision of services and 63 of qualifications.

ii An economic constraint, so that investment in infrastructure is not exploited by transport undertakings, which play no part in their financing.This is of particular concern to the road transport sector. iii A route-guarantee constraint, so that the introduction of new factors of competition does not put in doubt the continuity of transport links between peripheral (island) and central (mainland) areas (11). 3.126 The above outlined constraints make themselves felt in the EU’s Policies for Transport Services (12).They affect the operation of all modes of transport and measures already taken have been adapted, in the way that they are applied, to the specific nature of each mode of transport. For each mode, the aim was to proceed from the provision of an international service, between two Member States, to cabotage (11), i.e. the transport of goods or people within another Member State by an operator based in yet another Member State. Cabotage has considerable implications in the development of North / South trade in as much that it opens opportunities to non- nationals to offer transport services, say scheduled inter-Ireland air passenger services or shipping services to cover both business and SCM needs. The European Spatial Development Perspective 3.127 The European Spatial Development Perspective (ESDP) (1) acts as a policy framework identifying the spatial impacts of the sectoral policies of the Community and of the Member States, regional and local authorities.The final version of the ESDP, approved in May 1999, is the result of several years of intensive discussion amongst Member States, and with the European Commission, on the spatial development in the European Union (EU) (5). The ESDP is based in the EU’s aim of achieving a balanced and sustainable development by strengthening economic and social cohesion throughout the EU.This general aim is reflected in a ‘triangle of objectives’ linking the three aims of spatial development, i.e.: i economic and social cohesion, ii conservation of natural resources and cultural heritage. iii a more balanced competitiveness of the European territory. 3.128 This integrated approach to European, national and regional development can be conveniently represented by the triangle below having Society, Economy and Environment as its apexes. It will permeate all EU directives, legislation and development programmes in the future. Society Economy Environment 3.129 A further key objective of the ESDP is to illustrate the importance of spatial dimensions of policy issues and interventions. Specifically, ESDP challenges the autonomy of the present sectoral policy programmes, which dominate 64 the organisation of much of the EU and UK spending programmes.

Contrary to these, the ESDP emphasises an integrated approach to the development of regions and sub-regions, intermediate between national government and cities/rural areas. An important aspect of this integrated approach is the way in which urban and rural areas relate to each other in spatial patterns and polycentric development within Europe overall. A key concern is to avoid further excessive economic and demographic concentration in the core area of the EU, i.e. the London - Paris - Brussels area, particularly with EU enlargement in mind (5). 3.130 The concept of polycentric development as used in the ESDP refers to patterns of spatial concentration and dispersal of rural, urban and industrial developments. Based on the ESDP are the spatial development plans of the Member States and, within these, those of the regions.The National Spatial Strategy of the Republic of Ireland (6), and Shaping our Future, Draft Regional Strategic Framework for Northern Ireland of the Department of the Environment for Northern Ireland (7) can be taken as examples. Closely allied with these are the National Development Plan 2000 - 2006 (8) and the Planning and Development Act 2000 of the Republic of Ireland (9) and the Regional Transport Strategy for Northern Ireland (10). The Single Market 3.131 In addition to the information contained in the main body of this report and under the same title, the following information should be noted: Key Issue: Current Impediments to the Single Market 3.132 The Internal Market gives Europe’s citizens a wider choice of quality goods and services, greater freedom to travel, work, study and live in other EU countries. It gives businesses greater trading opportunities. Current impediments to the implementation of the Single Market stem from the delays by Member States’ governments to transpose EU directives into national law (16).“After two years of improvement, efforts by Member States to decrease the time it takes to write Internal Market legislation into national law have come to a standstill. According to the latest issue of the Single Market Scoreboard, 13% of all Internal Market Directives (194 out of 1489) that had entered into force by 15 April 2000, had still not been implemented by all Member States. Four countries - Greece, Portugal, France and Luxembourg - account for more than 40% of the delays.The gap between the countries that implement legislation the fastest and those, with a record as the slowest, is widening. The Commission has set Member States the objective of bringing the implementation deficit to below 1.5 per cent by the end of the year 2000.To date only Sweden, Spain and Finland have hit that target although Italy, Luxembourg, Belgium, Austria, United Kingdom and Spain have all improved their performance. It is clear from these figures that extra effort will be needed if Member States are to meet the challenge they set themselves at the Lisbon Council to speed up economic reform and establish a fully operational Internal Market. Most delays relate to the 65

implementation of recent Directives. Some 60 per cent of those whose deadline for implementation expired in 1998 have still not been fully implemented by all Member States, for 1999 the figure is 90 per cent.” 3.133 Transport stands out as a difficult sector. The high number of Directives (32/61) whose deadline for implementation expired after 1.1.1997 has to be reduced. The very short periods for transposition established by some Directives, particularly in maritime transport, must be taken into account. Uneven implementation of legislation fragments the Internal Market and is the source of many infringements. This is particularly severe in the road haulage sector, where the ever-increasing importance of cross-border haulage makes it more pressing to reduce potentially harmful tax competition caused by differing diesel charges. This was foreseen by the Commission and lead to its energy tax proposal.The effects of fuel taxation were not always beneficial. This was witnessed by the United Kingdom abandoning its fuel escalator in the face of complaints from the road haulage industry that excessive taxation introduces market distortions and affects the competitiveness of industry.The degree to which working hour regulations and taxes on trucking require closer harmonisation needs to be examined (17). Government assisted research in this area is strongly recommended. 3.134 The report by the European Commission Directorate-General for Economic and Financial Affairs on the Implementation of the 1999 Broad Economic Policy Guidelines (BEPG) (17), in its general assessment of the European economy, makes very specific reference to transport. It states, that even when the large volume of transport undertaken by own account operators and private individuals is neglected, the annual turnover of the transport sector in the EU is well over Euro 500 billion. This indicates a large potential of economic efficiency improvements, as much of the sector remains tightly regulated. The road haulage industry can be considered to be broadly liberated with a high degree of competition, also across borders, since the last restrictions on cabotage have been abolished in July 1998. 3.135 The 1999 the Broad Economic Policy Guidelines (BEPGs) asserted that: i The single market and competition policy should be strictly applied and closely monitored. ii Member States need to exercise self-discipline with respect to State aids and the Commission needs to control these. iii Regulatory reforms should be pursued and speeded up in telecommunications, transport and energy. iv Further progress should be made with the legal and regulatory environment, especially for SMEs and business start-ups engaged in the provision of transport and logistics services. v VAT should be further revised and simplified. vi Further progress should be made to avoid harmful tax competition. 66 vii Member States should also put more emphasis on the environmental dimension of economic policy (17).

3.136 The problems of uneven and delayed implementation of Internal Market rules will be keenly felt in the information society services area. Information society services do not recognise borders and therefore legal uncertainty on the applicable rules can hamper businesses’ growth and the take up of information services in general (16). This is nowhere more so than in the application of information technology to direct, and control, transportation and logistics services as part of supply chain management activities. However, implementation has considerably improved as member States fill gaps in the national legislative framework. In fact, liberalisation of the telecommunications market is already bringing significant economic results, both in terms of market growth, estimated at over 30% in the last three years, and the number of operators which now stands at more than 300 (18). 3.137 In summary, the degree of implementation of the single market legislation has increased. The legal framework for the single market has now been largely established in almost all the Member States. 10 out of 15 Member States have a transposition deficit below 4%.To reduce the impediments to the Single market still further, similar efforts are now required by the five Member States whose transposition deficit continues to be above 4%. As transposition increases, the focus must now shift to the correct implementation of the Single Market Directives. Key Issue: Current Impediments to the Single Market 3.138 The Single Market principle pursued by the EU can be equally and bene- ficially applied on the island of Ireland. The EU’s country specific recommendations directed at both the Republic of Ireland and at the United Kingdom affect transport logistics services throughout Ireland with direct implications on supply chain efficiency and competitiveness. Policies targeted at alleviating these impediments would, to a considerable extent, approximate a single market on the island of Ireland. Impediments listed in the Broad Economic Policy Guidelines (BEPGs) (17) as they affect the two sovereign states concerned are: i With respect to the Republic of Ireland: a. Accelerate the reduction of its transposition deficit on single market legislation especially in transport. b. Consider initiatives to promote competition in telecommunications, domestic and international transport. The National Development Plan (NDP) (8) addresses infrastructure needs and implies a rapid rise in general government investment expenditure. ii With respect to the United Kingdom: a. Improve the record of single market legislation, particularly in the area of transport. b. Adjust the tax structure in favour of small and medium-sized enterprises (SMEs) engaged in the provision of transport logistics 67

services, and alter laws on insolvency to ensure that a greater share of venture capital goes to early-stage business. In spite of the fact that obstacles to the creation of new enterprises are low in the UK, the share of SMEs in total business-sector employment is relatively low in Northern Ireland and in GB compared with other Member States. The failure rate of businesses gives cause for concern. The United Kingdom has been in the forefront of the movement towards regulatory reform, most notably in the network industries. To address the problem of company failures, the government has announced a series of measures to improve the management capabilities of SMEs, further simplifying the regulatory framework and make it easier for new, innovative firms to obtain finance (17).An Enterprise Fund is to be created to provide risk capital and guarantees to SMEs and start-ups. In addition, a number of tax measures will make investment in SME’s and start-ups more attractive.This is particularly important in the Irish road haulage industry, both North and South, the where over 70% of firms have between 1 and 10 employees (19). Shipping 3.139 Apart from the discussion and the points made in the main body of the report, the following should be noted. Key Issue: Current Levels of Services 3.140 The operation of ships and, as a consequence, shipping services are gov- erned by international conventions ratified by flag states and thus transposed into national legislation, generally in the form of Merchant Shipping Acts. In addition, several European Directives, which apply to manning, operation, technical and ‘physical’ condition of the vessel as well as enforcement will influence the costs of transport logistics services.These are: i Freedom to supply services, competition, unfair pricing practices and free access to ocean trade.Whilst the deadline for implementation by the member States was 1995, the application of Articles 85 and 86 of the Treaty, which concern rules for competition in maritime transport were not laid down and became effective until December 1988 (43). ii Freedom to provide services within the member States (ocean trade) concerns maritime cabotage and enable non UK or Irish flag carriers to provide maritime services between the ports of Ireland and those of the UK and between these and continental ports (44). iii Vessel manning conditions.The objective is to apply to seafarers from third countries terms and conditions of employment which are identical to those applied to Community seafarers, and thus exclude the possibility for unfair competition (45). iv Short-distance transport by sea. In June 1999 the Commission 68 reviewed the possibilities offered by short distance transport by sea

in the framework of sustainable, safe mobility and studied the incor- poration of this mode into Community logistics and intermodal transport chains, its image and the barriers to its development. Measures, which the Commission recommends taking, relate to the documents and procedures applicable to short-distance transport by sea in the various Member States. Voluntary action to achieve greater uniformity in this area was advised.The Commission would also like to encourage the promotion of short-distance transport by sea as part of the Community’s port’s commercial strategy. To this end the Commission provides an overview of recent projects which have been supported by the Community in the field of short- distance transport by sea (46).This may be useful in trying to close the gap in short-distance shipping services between Irish ports. v System of mandatory surveys for the safe operation of Ro-Ro ferry and high-speed passenger craft services (47). 3.141 Present services offered to and from Ireland to date are as follows: Thirteen services are offered directly from Belfast, 22 operators sail directly from Dublin. 6 direct sailing are available from Warrenpoint. 6 sail directly from Cork, 2 from Dundalk to Rotterdam and 1 sails from Waterford.The frequency of sailings of the various operators varies from daily to several times per week, to fortnightly, to once per month, depending upon route. The sailings indicate a movement of commodities from/to Ireland via the hub ports of Thamesport, Liverpool, Felixstowe, Southampton, Le Havre, Zebrugge, Antwerp and Rotterdam. Other UK ports called at are Greenock, Cardiff, Swansea, Bristol and Ramsey on the Isle of Man. Rail Transport 3.142 Apart from the discussion and the points raised in the main part of the report, the following should be noted. Key Issue: Uniform Access to Rail Infrastructure 3.143 The Commission also wishes to make it easier for the Community’s railways to adapt to the demands of the single market and to make them more efficient. To help achieve this, it has proposed introducing an operating license to provide uniform access to rail infrastructure (63). It has established a system for ensuring that infrastructure capacity is allocated on a non- discriminatory basis and that users pay the full real cost of the facilities they use (64). On the 29th of September 1998, the Commission submitted a proposal for a Council Directive relating to the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (65). The objective is to repeal the Council Directive of 1995 (64) and to define the rules for setting and col- lecting charges for the use of railway infrastructure and for allocating this infrastructure capacity in a way, which will make the transport system more 69

efficient and promote goods services by rail. Through its amendments, Parliament specified that the guarantee of proper public transport needed to be given priority when it came to allocating infrastructure capacity. Member States would then be able to allow infrastructure managers compensation for financial losses caused by the need to allocate specific capacity in the interest of public transport services.The long-term aim was to let users bear the cost of operating and maintaining the existing infrastructure. However, the principle of full cost recovery would not be applicable until such time as it is also included the other modes of transport, including road haulage, failing which, the competitive position of the railways would dete- riorate further. Hence the need to guarantee the principle of fair and non- discriminatory compensation between Member States, the various means of transport and the various transport undertakings. Lastly, Parliament considered that the Directive’s scope also needed to extend to the railways of Ireland, Northern Ireland and Greece, which are geographically separated from the Community rail network. This proposal has been submitted to Council for examination and final adoption whereupon it will be transposed into national law of the Member States (65). In some cases recourse has to be made to the public service obligation of Member States. 3.144 List of North-South People consulted: Belfast Harbour Commissioners, Larne Port Authority, Belfast International Airport, Belfast City Airport, TR Shipping, Department of Enterprise,Trade and Investment Translink InterTradeIreland The Freight Transport Association The Road Haulage Association IBEC CBI Websites of both governments and the European Commission/Union as listed in the Reference Section of the module on ‘Policies and Services’. 70

Section 4 Transport Infrastructure

4 Transport Infrastructure Audit - Island of Ireland Executive Summary General Commentary on island of Ireland Transport Infrastructure 4.1 The unprecedented recent industrial and economic success is placing much increased pressure on the island of Ireland’s existing transport infrastructure. Despite great advances in some areas, for example port services, by international comparison the general level and standard of transportation provision and infrastructure on the island of Ireland is, at best, mediocre.This is borne out by various International Competitiveness Reports, Industry Surveys, and Government Reports.This assessment remains true despite the considerable additional investment that has taken place in the transport system, particularly south of the border, in recent years by the public sector with the aid of buoyant tax revenues and the EU Structural and Cohesion Funds. Much of this investment was allocated to the remedy of long-standing deficiencies in standards and in basic provision of transport infrastructure. 4.2 The shortfall between transportation provision and requirements is actually widening as the effects of economic growth and the needs of industry out- weigh the infrastructural developments despite increased public spending. Continued large-scale investment, particularly in the national road network and in integration of the transport network, is essential to support continued economic growth on both sides of the border. The focus should be on delivery of seamless infrastructure with complimentary resources and integration. 4.3 On both sides of the border it can be safely stated that the road and rail systems are incapable of supporting the long-term development of the enterprise sector without major renewal and upgrading.The Republic of Ireland (ROI) National Development Plan 2000-2006 and Northern Ireland (NI) Regional Transportation Strategy set out substantial investment allocations to improve transport infrastructure on both sides of the border. Such action to develop transport infrastructure in Ireland is an urgent priority and welcome.Any delays in delivering planned infrastructure will compound current bottlenecks, increase congestion costs and hinder industrial activity as well as being a social nuisance. Progress has been slow with continued gridlock especially in Dublin, the Westlink in Belfast (which completion is not due for 6 years) and the lack of a Dundalk-Newry motorway being prime examples. 4.4 In essence, what is in evidence is a congested road network, regions that are poorly served by road, rail and air, antiquated rolling stock on the rail network, inefficient public transport services, clogged-up metropolitan areas, blocked access points, lack of traffic information provision, few rail freight 72 options, and inexplicably and incomprehensively slow planning systems,

confused zoning policies and tardy implementation of schemes. 4.5 In an era of just-in-time manufacturing, time delays due to transport congestion impose added costs on industry. Ultimately this may create a negative perception of Ireland as an inward investment location. Furthermore, as an island entity heavily reliant on international trade, access and entry points for people and freight should be easily accessible but are not. Decongestion of the entire transport network is vital and the highest short-term priority. Regional Development 4.6 Road, rail and air transport deficiencies continue to isolate the western and north-western regions and mitigate against integration with the national economy and attractiveness to inward investors. 4.7 The objective of more balanced regional development will necessarily be supported through major investments in roads and other transportation modes and significant increases in travel services in order to facilitate access to domestic and international markets. 4.8 Several Chambers of Commerce on both sides of the border in the North West (NW) region have conceived the concept of an ‘invisible border’ for cross-border NW regional development.Transport planning must take place at this level of conception. 4.9 The development of a properly-functioning Western Corridor for transport is vital to support economic development in the South-West, West and North-West regions on the island of Ireland. Surface Access to Ports and Airports and Other Problems 4.10 As stated above, good and unimpeded access to and from the seaports and airports is critical, particularly for an island heavily dependent on international trade. The road network leading to and from both seaports and airports in Ireland, but especially in Dublin and Belfast, is fraught with congestion and access urgently needs to be improved.This is an urgent priority and projects such as the Dublin Port Tunnel are needed to redress the situation and must be implemented sooner rather than later. Even then it will only really alleviate traffic difficulties in Dublin when it connects to the East link. Decentralisation of cargo traffic to regional ports could free up space at the more congested ports. Ownership and fairness issues need to be considered in this regard due to historical Government policies. Development of an oil pipeline from ports to airports or to dedicated depots away from metropolitan areas should also be considered. 4.11 Regional airports serve as attractors for inward investment and obviously ease business travel and freight movement thereby reducing the sense of isolation from the economic core. 4.12 Passenger traffic volumes to all airports, with the exception of Dublin, do 73 not warrant dedicated rail links. Existing lines in Northern Ireland could be

extended to serve Belfast International Airport. Similarly, freight from the ports is most likely to move by road rather than rail despite the stated wishes of both Governments and EU policy-makers. Road 4.13 The speed of implementation of the strategies of the road agencies on both sides of the border to further develop the road transport network is critical to the further development of the economy for Ireland as a whole. Congestion in metropolitan areas and on the main arterial routes is especially problematic and hampers both economic competitiveness and people’s lifestyles. The acceleration of the road development strategy is a key recommendation of this report. 4.14 Major road investment is also required to open up the regions particularly in the west and the north west of Ireland. 4.15 Cross border links exist but in the short term need upgrading and by-passes for particularly problematic congestion points. In the longer term the planning authorities on both sides of the border must think in terms of total route development and avoid simple ‘by-pass syndrome’.The inadequacy of many parts of the road network associated with the principal Northern Corridor, i.e. the roads between Dublin and Belfast and those leading to and from the ports on this Northern Corridor limits trade development. The speed of implementation is simply appalling. For example, the Ballymacscanlon-Newry road plan is still under discussion and completion of the Belfast Westlink is still six years away. An objective to have a completed motorway between Dublin and Belfast by 2005 at the latest should be set. Sligo-Donegal and Donegal-Belfast gateways are also urgent requirements and must become high priorities for the roads authorities on both sides of the border. Furthermore, there is a mismatch of available funds for cross-border roads development as NI suffers from severe under-funding. The NI budget needs to be seriously augmented for a national spatial plan to be a reality. 4.16 Improved traffic management through the use of telematics is necessary to compliment infrastructure investment. Rail 4.17 Rail plays a secondary role to road for both passenger and freight movements on the island of Ireland. In terms of cross-border development a high-speed line from Derry to Cork via Dublin and Belfast is the optimum objective with the Derry-Belfast link realistically a longer term prospect. A major delay is caused by the need to transfer between stations by road in Dublin between Connolly and Heuston stations. An operational rail link between the two is a necessity to greatly reduce total journey time. 4.18 Two lane tracks are necessary to enhance access to Galway, the west of 74 Ireland, the North West and Derry. There is no western corridor for rail

transport on the island of Ireland. Such a corridor, whilst desirable, is not a high priority for Translink or Irish Rail but must become one. 4.19 While EU and government policies favour the transfer of freight from road to rail, the reality of the situation for a small island such as Ireland (especially in the context of supply chain reliability, JIT delivery and service quality), is that a modern and efficient rail service should focus on the transportation of passengers, thereby removing much car traffic from the roads, especially in congested urban areas and on principal arterial routes.This in turn would facilitate improved point-to-point supply chain performance for road freight vehicles. Freight carriage by rail is most appropriate for chemicals and other bulk cargo rather than unitised traffic which tends to go point-to-point. 4.20 In the long term, if rail heads were in existence and operational at the container terminals of the ports, direct connections between the container terminals at the ports of Belfast, Larne, Dundalk, Dublin,Waterford and Cork could make the use of intermodal transport using Lo-Lo facilities an attractive option. However, this is unlikely to happen because of the relatively short travel distances between locations on the island of Ireland. Furthermore, the inherent inflexibility of any railway system, which generally operates from and to railheads rather than from shipper to consignee and, due to this, the multiple handling requirements to transfer the cargoes, first from road to rail and second, at destination, from rail back to road, mitigates against intermodality. Any justification for container freight movement could come from a link to a wider transport network such as the UK Central Railway freight plan, the proposed North European Trade Axis (NETA) or the wider EU plans for Transport European Networks (TENS) and any such developments must be monitored. 4.21 Northern Ireland appears to be poorly treated by the UK rail authorities vis-à-vis other UK regions in terms of investment in rail infrastructure and rolling stock. It may have potential to attract EU funding as an ‘objective one in transition’ region in its own right or jointly with the Border, Midlands and West (BMW) region of the ROI. Bus 4.22 The freeing up of the road network on the island of Ireland necessitates efficient bus service. Bus services, especially to the western and north-western regions and across country from north to west, need to be improved. Effective hubs must be developed in these regions from where passenger traffic can be distributed to outlying areas. Information and Communications Technologies (Telematics) 4.23 Currently telematics for traffic planning and management are in existence solely in metropolitan areas, most especially in Belfast.There is scope for an island of Ireland, intermodal, telematics traffic planning and management 75

system, possibly web-based, using Global Satellite Positioning (GSP) proto- cols and including access points. Further research into the feasibility and functioning of such a system is required. General Recommendations 4.24 Despite the efforts of road agencies to speed up road development the entire process from planning to construction needs to be overhauled to bring the road network up to standard on both sides of the border in the shortest possible time period as an urgent priority. 4.25 Both Governments advocate the transfer of freight traffic from road to rail but the reality is that most freight will continue to be moved by road. A more feasible approach would be to improve rail and bus service to attract passengers and free up road space. 4.26 Public-private partnerships are recommended for road infrastructure development on both sides of the border. In addition, changes in regulations to ease the use of foreign contractors and construction workers are welcome to help speed up the implementation process. 4.27 A cross-border transport policy council or committee should be established for joint planning of road, rail and air links for the island of Ireland as a whole and most particularly for cross-border links. Efforts to harmonise planning regimes and zoning policies could be a prime focus of attention for such a body. A spatial vision for the island as a whole could be con- structed linking the regional gateways on both sides of the border and creating an ‘invisible’ border for trade and transport flows, building on the National Development Plan, ROI and the Regional Transport Strategy, NI. 4.28 As a spatial vision, investment in transportation infrastructure should be east-west as well as north-south.This should include a review and prioriti- sation of plans to a west/north-west focus. We propose that Intertrade Ireland encourage a north-south study based on transport infrastructure on the western corridor of Ireland and linked to economic activity in the western and north-western regions. This might include a Derry-Galway- Limerick-Cork transport corridor and with, for example, an east-west North European Trade Axis (NETA) dimension.The opening of the Cork- Sligo rail route and the feasibility of rail and motorway links between Sligo and Derry could be investigated. The urgency of such a study is underpinned by the fact of NI and BMW’s current statuses respectively as ‘objective one’ and ‘objective one in transition’ for the purposes of EU support. The question of which comes first, infrastructure or development would be at the heart of the study.A similar study could be conducted for a Donegal- Belfast gateway. 4.29 In tandem with an investment in road and rail infrastructure is a need for greater traffic management. Developments in Information and Communications Technology (ICT) mean that a Centralised Traffic 76 Management and Information Provision Centre for the island of Ireland is

a feasible scheme.This could further link into the management of traffic on EU Trans-European Networks. The establishment of such a Centralised Traffic Management System is a concrete task for Intertrade Ireland. 4.30 Intertrade Ireland can play a key role in lobbying for the improvement of transport infrastructure on the island of Ireland and the reduction of blockages to cross-border traffic and trade through the fast-tracking of key projects. As a planning group with a definite mandate and a ‘helicopter’ view beyond parochial self-interest, it can make a significant input to the development of an integrated spatial vision for the island as a whole. Intertrade Ireland can call on the roads authorities on both sides of the border to speed up motorway development on the Eastern corridor and reconsider their plans and priorities and encourage them to fast-track regional links for and between the BMW and NW. Furthermore, there is a mismatch of available funds for cross-border roads development as NI suffers from severe under- funding.The NI budget needs to be seriously augmented for a national spatial plan to be a reality and Intertrade Ireland has an important lobby role to play in this regard. Innovative thinking is required such as the possibility of a bond from the ROI Government to fund such cross-border development.This report aims to help steer and support Intertrade Ireland’s policy- making in these regards. Transport Infrastructure Audit - Island of Ireland 4 Main Report Introduction 4.31 The brief for this module on transport infrastructure on the island of Ireland essentially pertains to the adequacy of the infrastructure to support trade growth in the medium and long term. From this the question arises as to the extent to which the infrastructure permits the efficient operation of supply chain logistics both nationally, with particular reference to cross- border flows, and internationally. At the core of the study is the underlying view that the only way to promote the distribution of economic activity on the island of Ireland is to build adequate regional infrastructure. In this sense, it would be misleading to discuss transport and communications infrastructure in isolation without continuously keeping in mind that they are means to the ends of economic development, economic growth, economic well-being and social cohesion. As such, they affect people, population and manufacturing centres, imports, exports, employment and the flow of goods across the transport network. From a business point of view, the strategic transportation network has to be resilient and flexible and be able to provide a high degree of reliability, speed and comfort for the safe movement of people and goods (Schmidt, 2001). 77

4.32 It is important to note from the outset of this report that the historical development of transport infrastructure differs on either side of the border with developments on the southern side being of a much more recent vin- tage. For both jurisdictions, maintaining and improving competitiveness is of paramount importance in the context of national trade policy. The OECD defines competitiveness as “the degree to which a nation can, under free trade and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long term”.Transport infrastructure is identified as a key factor in supporting trade and enhancing the international competitiveness of an economy and its component industries.This report assesses the standard and adequacy of Ireland’s transport infrastructure on both sides of the border in support of Irish trade with particular emphasis on impediments to cross-border traffic flows. 4.33 The message is clear and widely acknowledged.The transport infrastructure on both sides of the border is inadequate for the needs of modern economies, for example, Denis O’Brien at a recent ISME conference described it as “an African road network for a 21st century economy.” In essence, what is in evidence is a congested road network, regions that are poorly served by road, rail and air, antiquated rolling stock on the rail network, inefficient public transport services, clogged-up metropolitan areas, blocked access points, lack of traffic information provision, few rail freight options, and inexplicably and incomprehensibly slow planning and implementation of schemes. 4.34 The need to address these problems is well understood by both government and business on both sides of the border.The NI executive draft programme for government states that “The development of an effective, safe and reliable road network and a quality public transport system, providing choice while minimising congestion and environmental harm, is central to the future development of the region. Similarly, the Confederation of British Industry, NI comment that “investment in transportation is of paramount importance to maintaining a modern economy.” However, currently the UK Government seriously underfunds infrastructure development in the NI region. 4.35 Chapter 9 of the Republic of Ireland’s National Development Plan, which relates to cross-border issues, states with regard to transport policy and infrastructure development that: “Efficient and competitive integrated public and private transport services are critical to the development of trade, inward investment and tourism and the provision of equality of access to employment opportunities through improved labour market mobility. ...There is a recognition that the value of proposed investments in roads infrastructure on either side of the Border can be enhanced significantly through co-ordination of planning and construction. Consequently, a key aim of transport development policy during the period of the Plan will be to improve infrastructure and integration within and between road and 78 public transport networks, in both jurisdictions, so as to provide a more coherent

and sustainable strategic transport network for the island as a whole.The objective will be the generation of a co-ordinated transport and logistics plan for the island in the context of East-West linkages to Britain and Europe, including strategic cross-border roads and Trans-European Networks (TENS) routes. To that end, under the direction of the NSMC, the authorities in both jurisdictions will be working together to identify and promote joint projects within this important area” 4.36 Similarly, in December 2000, the North/South Ministerial Council joint communiqué on transport identified the following selected options for possible co-operation on strategic transport: “The exchange of information on the transportation aspects of Northern Ireland’s Shaping our Future draft, Ireland’s National Development Plan and the proposed National Spatial Strategy and consideration of the implications, if any, for transportation strategies in both jurisdictions especially for cross-border transportation development; The review of strategies for the development of cross border national/arterial roads with a view to the identification of investment priorities and the improved co-ordination of planning for those routes; The review of the scope for further development of cross-border rail and bus services and for improved integration services in areas such as co-ordinated timetables and passenger information.” 4.37 This report addresses these areas of joint interest and concern for transport policy and development on both sides of the border. The methodology employed in the study utilised both primary and secondary research. Interviews were held with key information sources from the road authorities, rail operators and sea and airport governing bodies on both sides of the border. Government reports and planning documents from both jurisdictions and the web sites of Government departments and policy agencies (see bibliography) were examined and incorporated throughout this report. Regional Development Policy 4.38 A key objective for regional policy must be to achieve more balanced regional development in order to reduce the disparities between and within Regions. Both parts of Ireland have seen accelerated development of gateways in recent years. On the southern side of the border Dublin is a national gateway serving the whole country with Cork, Limerick / Shannon, Galway and Waterford acting as regional Gateways for extensive parts of the country. The Irish Government’s ‘Regional Development Policy’ is built around the idea of Regional Gateways. These are centres which have a strategic location relative to the surrounding territory, possess good social and economic infrastructure and support services and have the potential to open up their zones of influence to further development by providing transport links with contiguous zones. Provision is therefore made for major investments in roads and other transportation modes in 79 order to facilitate access to domestic and international markets.

4.39 Arising from an undertaking given in the National Development Plan 2001-2006, the Department of the Environment, ROI is preparing a National Spatial Strategy to provide a framework for future balanced regional development in Ireland over the next two decades. It is envisaged that the Strategy will guide future infrastructural, industrial, residential and rural development while providing protection for Ireland’s cultural, natural and environmental heritage, promoting social inclusion and enhancing quality of life. The Strategy will also take account of the European Spatial Development Perspective. 4.40 Similarly, on the northern side of the border the Department of the Environment for Northern Ireland’s (DOENI) ‘Spatial Development Strategy’ for Northern Ireland proposes a hub, corridor and gateway approach for the future physical development of the region. The aim is to give a strategic focus to future development and achieve balanced growth within the Region by developing: i The key transport corridors and associated trunk road links and the primary links to the port and airport gateways. ii A compact and thriving metropolitan core centred on Belfast, the major regional gateway at the hub of the Regional Strategic Transport Network. The Belfast Metropolitan Area includes the major urban centres of Bangor, Carrickfergus and Lisburn providing a wide range of services, and Castlereagh and Newtownabbey, which play an important role in supporting the City. iii A strong North-West regional centre based on Derry, the transport pivot and regional gateway for the North-Western corner of the island. iv A polycentric network of strong Regional Towns with a reinforced role as the main service centres for urban and rural communities. v Building-up Craigavon and six other major service centres strategi- cally located along the key transport corridors and serving large catchment areas, which have the existing capacity to accommodate and provide a wide range of services for larger scale population and housing growth including mobile housing demand. The centres are:Antrim, Ballymena, Coleraine, Enniskillen, Newry and Omagh. vi Strengthening twelve Regional Towns as key service centres to accommodate local growth.The twelve towns are:Armagh, Ballycastle, Ballymoney, Banbridge, Cookstown, Downpatrick, Dungannon, Larne, Limavady, Magherafelt, Newtownards and Strabane. vii A vibrant rural community comprising of revitalised small towns, villages and small rural settlements with an appropriate scale of rural development in the open countryside, and with enhanced accessibility to regional facilities via the key transport corridors. 4.41 There is also the potential for special business opportunities based on the 80 two major cross-border Development Corridors, i.e. the Belfast-Dublin and

the North-West Corridor respectively. In these two corridors the cluster- ing of urban centres, regional gateways, extensive infrastructure assets and a concentration of human resources together offer an extra growth momen- tum.The inadequacy of many parts of the road network associated with the principal Northern Corridor, i.e. the roads between Dublin and Belfast and those leading to and from the ports on this Northern Corridor limits trade development. The speed of implementation is simply appalling. For example, the Ballymacscanlon-Newry road plan is still under discussion and completion of the Belfast Westlink is still six years away. As regards a Western corridor a recent consultant’s report on the feasibility of a Cork-Sligo rail link suggested that the population density is too low to support such a link. This view however is rejected by a Connaught-based Action Committee which believes that infrastructure development brings economic and consequent population growth. On the North-Western and Northern corridors Sligo- Donegal and Donegal-Belfast gateways there are also urgent infrastructure requirements and these must become high priorities for the roads and rail authorities on both sides of the border. Detailed cross-border regional road and rail developments and proposals are covered in subsequent sections of the report. Transport Infrastructure Audit 4.42 The main body of the report analyses the adequacy of physical transport infrastructure on the island of Ireland. It focuses on the principal access points for sea and air traffic and the internal connectors of road and rail. Sea Ports 4.43 As an island nation with an open economy situated on the edge of Europe, Ireland is strongly dependent on maritime transport. Almost all of the Republic of Ireland’s trade by volume passes through the country’s seaports. During the 1990s the overall volume of goods handled by ports grew by over 50 per cent. Each category of traffic experienced growth, with the unitised segments of RO-RO and LO-LO being by far the most dynamic. Because the goods carried by the unitised sector tend to be finished goods the performance of this mode is linked closely with that of both economies and mirrors their growth. Officially the island of Ireland has about 30 ports. However over 80 per cent of the trade is handled by just six ports: Dublin, Shannon, Cork and Rosslare in the ROI and Belfast and Larne in NI. 4.44 Dublin is by far the busiest ROI port accounting for over 70% of traffic. The advantage Dublin port has over its smaller rivals is its advantageous position in terms of access to markets and motorway networks. However, immediate access to the port is still highly congested and plans are in progress to enhance such access. Eight thousand trucks pass through the streets of Dublin every day on their way to and from Dublin Port.The ton- nage of goods being transported has doubled since 1995 and is projected to 81

increase by at least a further 35 per cent by 2005, boosting the number of daily truck movements to 10,600.With the proposed Port Tunnel unlikely to be completed by then, access to Dublin Port has become the most critical problem facing it. Even then it will only really alleviate traffic difficulties in Dublin when it connects to the East link. Rail access to Dublin Port is also becoming increasingly dependent on the availability of time slots to avoid clashing with passenger services. In any event, rail movement for unitised traffic represents a small percentage of total freight traffic movement. 4.45 A KPMG (1999) review recommended that Dublin Port should take responsibility for the ports of Wicklow and Arklow. The rationale for this recommendation was that it offered Dublin Port relief ports in the event of ship diversions or cargo overflows. Such decentralisation to reduce congestion in accessing Dublin port carries some inconsistencies. Ownership and fairness issues need to be considered in this regard due to historical Government policies. Development of oil pipeline from ports to airports or to dedicated depots should also be considered. 4.46 In Northern Ireland substantial support to ferry traffic in the form of infrastructure, facilities and equipment exist at the ports of Belfast and Larne. Good Lo-Lo facilities are in operation in the port of Belfast. The port of Derry at Lisahally is a bulk port and neither supports Ro-Ro ferry nor container operations. Land access to the North-East ports is fraught with congestion and problems of traffic flow.The continuous and increasing congestion on the West Link seriously restricts the possible expansion and growth of the ports of Belfast and Larne as do the traffic problems on the A8 linking the port of Larne with the M2 to Belfast, the West Link and the M1 to Dublin and Cork. Airports 4.47 There is increased need for high speed international distribution in a knowledge economy wherein goods often tend to have a high value-to- weight ratio. Airports more and more need to be ‘freight friendly’. Furthermore, increased business activity tends to lead to increased business travel, both domestically and internationally.Alternatives such as video con- ferencing are not yet replacements for face-to-face contact. Inward investment seeks convenient, accessible, high frequency air services for both business travel and freight transport. For regional development, regional airports help attract inward investment. Surface access for major airports tends to be a constraint to ease of travel. Improved access must be planned between local authorities, rail bodies, road agencies, rail and bus operators. 4.48 Ireland has experienced very high growth rates in air traffic in the period from 1993 to 1999, again reflecting the high levels of growth in the economy generally.The Republic of Ireland is served by three State-owned airports (Dublin, Cork and Shannon) and six privately-owned and operated regional airports (Knock, Kerry, Waterford, Donegal, Sligo and Galway). A 82 major infrastructural issue is the ease of access to the major airports from

the road and rail network. According to Forfas (2000), only Dublin airport has passenger traffic volumes that would justify a rail link. 4.49 Belfast International Airport is the largest of the four Northern Irish airports with no restrictions on noise, operating time and aircraft size. Land access to this airport situated some 16 miles from Belfast suffers from the problem of not having direct motorway access and no direct rail link on site. Airport traffic has to negotiate the town of Templepatrick and cross the Bleach Green railway line connecting Belfast with Antrim. Due to this, delays to airport traffic flows are inevitable. Currency, regulatory and taxation (exit tax is up to £20 in Northern Ireland and zero in the Republic) differentials mitigate against commercial and passenger traffic at Belfast International Airport vis-à-vis Dublin Airport. Belfast International Airport has in fact excess capacity. Current passenger volumes do not exist to justify a rail link from Belfast City. 4.50 The growth of passenger traffic at Belfast City Airport has been substantial but less emphasis has been put on airfreight. A new passenger terminal is planned. It is the intention to use the old terminal building for airfreight and lever the airport’s near-city-centre location to considerably increase BCA share of airfreight. Belfast City airport is easily accessed using public or private transport.The airport entrance opens onto the Sydenham Bypass (A2), a dual carriage way, which is a main arterial route into the city centre with links to the M2 for north bound traffic and to the Westlink for traffic to the south, including the Republic of Ireland, and to the west of the province. However, access problems are in evidence at the exit from the airport. This issue will be addressed by the current development plan, which includes a full right-hand turn junction, followed by a road underpass across to the Belfast bound lanes of the A2. Furthermore, with respect to the airport, the railway line is on the wrong side of the road and a pedestrian bridge needs to be negotiated by passengers approaching the airport by rail. The City of Derry Airport and St. Angelo near Enniskillen concentrate on passenger movements and, as is the case in the ROI, have a significant role to play in regional development outside the principal metropolitan areas. Road Transport Infrastructure 4.51 Policies and plans for roads on both sides of the border are well document- ed in the ROI’s ‘National Development Plan’ and the National Road Authority’s ‘Review Programme’ and in NI’s Department for Regional Development’s ‘Regional Transportation Strategy’. This section synopsises the key elements of these programmes and argues for a dramatic increase in the speed of implementation of development plans and a greater emphasis on regional and cross-border infrastructure development. 4.52 Roads are the dominant mode of internal transport on the island of Ireland. Roads account for 90% of freight traffic and 96% of passenger traffic in the ROI. The national primary road network has an overall length of 2,749 kms, of which 2,478 kms (90%) is 2 lane single carriageway, 177 kms (6%) 83

is dual carriageway and 94 kms (3%) is motorway. National secondary roads have a total length of 2,694 kms. In addition there are 90,300 kms of regional and local road. Northern Ireland’s dispersed population is served by an extensive road network of almost 25,000 kilometres, of which some 1,200 kilometres are trunk roads linking the major towns. Within this strategic trunk road network, high capacity roads such as dual carriageways and motorways carry the heaviest traffic volumes.These high capacity roads are mostly located in the Belfast ‘travel to work’ area. While ROI has a reasonably good road coverage in terms of road density (38 persons per km of road compared to the EU average of 99, and 1.3 km of road per square km of area compared to the EU average of 1.6 km) the quality of the road infrastructure is poor by EU standards. For example about 0.1% of the total road network in ROI is of motorway standard compared to an EU average of 1.3%. Despite the investment programme under the 1994-1999 Transport Operational Plan, the road network is still inadequate by reference to needs and EU standards. Rapid economic growth over recent years has put an even greater strain on this inadequate road infrastructure with serious congestion now a feature of several parts of the network. If this congestion is not addressed promptly in a systematic fash- ion the competitiveness of the economy will be impaired with adverse con- sequences for growth and employment. To be fair, the National Roads Authority (NRA) in conjunction with local authorities are pursuing a broad range of measures to speed up project delivery. These measures include the paralleling of procedures to reduce the overall period to com- mencement of construction and the attraction of foreign contractors to carry out major construction work but the need for implementation is extremely urgent and history shows a gloomy picture of major delays. 4.53 At the regional level, 52% of national primary roads and 30% of national secondary roads are in the Southern & Eastern (S&E) Region. The S&E Region has a higher percentage of quality roads reflecting the higher traffic volumes in the region, both from within the region and from outside it. Despite better quality roads in the S&E Region, there is greater congestion in the region and journey times can take longer than in the non-S&E Regions. However the lack of better quality roads serving the non-S&E Regions makes them less attractive to inward investment and acts as a constraint on growth and competitiveness in those regions. The Economic and Social Research Institute (ESRI) recently placed investment in road infrastructure as the top national investment priority for the 4.54 ROI in the period 2000-2006. They state that provision of a high quality inter-urban motorway infrastructure is an obvious requirement. In response, the Irish Government has initiated an investment programme aimed at the upgrading and development of four strategic corridors (Eastern Corridor, Western Corridor, East/West Corridor, Southwest Corridor) whose 1566 km of road will link the major centres of population and the access transport network to ports and airports.This ambition has been reflected in the 84 National Development Plan 2000-2006 (NPD), which provides £4.7

billion for investment in national roads including motorway/dual carriageway links between major urban centres.The development strategy for national primary roads will include the development by 2006 of the following routes in their entirety to motorway/ high quality dual carriageway standard: i Dublin to Border (M1), (the recent completion of the 17km Dundalk- Dunleer motorway is estimated to take 10 minutes off the Dublin- Belfast journey time); ii Galway to Dublin (N4/N6); iii Cork to Dublin (N8); iv Limerick to Dublin (N7); v Waterford to Dublin; vi further major improvements on other national primary routes with in the State include : a. routes to the North-West: N2 (Dublin / Monaghan / Omagh / Derry), N4 (Kinnegad to Sligo), N13-N15 (Sligo / Donegal / Lifford / Letterkenny / Derry), N16 (Sligo/Blacklion/ Enniskillen/ Dungannon/Larne), N3 (Dublin/Belturbet/Enniskillen/Derry); b. the Western Corridor from Sligo through Limerick to Rosslare (N17, N18, N24 and N25), N5 (Castlebar/Longford), N26 (Ballina/Foxford); c. other roads in the South and East: N11 (Rosslare/Dublin), N20 (Limerick/Cork), N21 (Tralee/Limerick), N22 (Tralee/Killarney/ Cork), N28 (Cork/Ringaskiddy), N30 (Enniscorthy/New Ross); d. completion of the M50 and Dublin Port Access Tunnel. 4.55 Consultation was entered into with Northern Ireland’s Department for Regional Development on its investment priorities for Northern Ireland transport infrastructure; congestion point/blockages in the movement of goods; and cross-border developments required to enhance transport flows elicited the following response. “These, and other questions, are currently being considered in the development of a Northern Ireland transportation strategy. The following paragraphs briefly outline the progress to date. The Department for Regional Development has a strategic objective of developing a transportation network that will support the Regional Development Strategy (RDS). A key mechanism for achieving this lies in the development of a 10-year Regional Transportation Strategy (RTS) which will: i provide guidance to facilitate the development of transport plans; ii identify strategic investment priorities; iii consider alternative funding sources; and iv increase the awareness and understanding of key transportation issues. 4.56 A Consultation Document launched by the Department for Regional Development was aimed at obtaining views on several key issues important to the development of the RTS.These included: 85 i the principal characteristics of a modern, efficient and effective

transportation system; ii the relative priority of each of five key RTS objectives (environment, safety, economy, accessibility and integration) iii the acceptability of potential funding sources; and iv potential solutions to address the problems which have been identified. 4.57 Many of the consultation responses will shortly be placed on the DRD web site. There will be a conference for key stakeholder groups at the end of June to further inform the process and it is planned to have a draft strategy available by autumn 2001. 4.58 In Northern Ireland, six key road schemes were named in the Chancellor’s Initiative of Spring 1998 as follows: i Westlink/M1. ii A1 Loughbrickland to Newry Road. iii A5 Derry to Ballygawley Road. iv A6 Toome By-Pass. v A8 Belfast to Larne Road. vi A26 Antrim to Ballymena Road. 4.59 To a considerable extent, the above schemes incorporate the suggestions of CBINI who, based on industrial feedback identified the need for improved road infrastructure to effectively provide transport logistics services and based on this proposed the following schemes, in addition to those of the Chancellor’s Initiative: Belfast-Derry • M22 to Castledawson upgrade to dual carriage way • A6 Castledawson-Dungiven provide overtaking and climbing lanes • Dungiven By-Pass • A6 Dungiven-Derry provide overtaking and climbing lanes Northern Corridor • A26 Ballymena - A44 Junction upgrade to dual carriage way • A26 A44 Junction to Ballymoney provide overtaking lanes • A26 Ballymoney Bypass upgrade to dual carriage way • A26 Ballymoney - Coleraine upgrade to dual carriage way • A37 Coleraine - Limavady provide overtaking and climbing lanes • Limavady By-Pass • A2 Limavady - Derry provide overtaking and climbing lanes Derry-Omagh-Monaghan • A5 Derry - Strabane provide overtaking and climbing lanes • Strabane By-Pass • Newtownstewart By-Pass • A5 Strabane - Omagh provide overtaking and climbing lanes • Omagh Throughpass • A5 Omagh - Border provide overtaking and climbing lanes 86 Dungannon - Border • A4 Dungannon - Ballygawley provide overtaking and climbing lanes

• A4 Ballygawley - Enniskillen provide overtaking lanes • A4 Enniskillen - Border provide overtaking and climbing lanes 4.60 Enhanced cross-border transport infrastructure offers the potential for major economic integration and social gains for the whole of the island. The primary cross-border routes are from Dublin to Belfast, Sligo/Donegal to Belfast, Larne and routes through Cavan/Monaghan to Enniskillen, Omagh, Strabane and Derry. 4.61 Cross border links exist but in the short term need upgrading and by-passes for particularly problematic congestion points. In the longer term the planning authorities on both sides of the border must think in terms of total route development and avoid simple ‘by-pass syndrome’.The inadequacy of many parts of the road network associated with the principal Northern Corridor, i.e. the roads between Dublin and Belfast and those leading to and from the ports on this Northern Corridor limits trade development. The speed of implementation is simply appalling. For example, the Ballymacscanlon-Newry road plan is still under discussion and completion of the Belfast Westlink is still six years away. An objective to have a completed motorway between Dublin and Belfast by 2005 at the latest should be set. Sligo-Donegal and Donegal-Belfast gateways are also urgent requirements and must become high priorities for the roads authorities. Furthermore, there is a mismatch of available funds for cross-border roads development as NI suffers from severe under-funding.The NI budget needs to be seriously augmented for a national spatial plan to be a reality. 4.62 The ongoing cross-border roads programme principally includes the following schemes: i N1 - Cloghran/Lissenhall to NI Border: Work was commenced on part of this route with a forecast date for completion of Q3/2006. ii A1 to N1 Loughbrickland to Border: Currently at design stage with a likely completion date of 2003. Project implementation, however, is subject to funding. iii N2 to A5 - Dublin - Monaghan - Omagh - Derry: Part of this route is completed with preliminary design and construction ongoing on other parts. However, funding is awaited for work on 1.2 kms of carriageway at Leakpatrick, Co. Derry on the A5. iv A4/N16 - Belfast to Sligo: Schemes currently programmed for completion in 2004. However, Dept. of Environment for Northern Ireland has no plans at present to carry out major works to the Enniskillen to Blacklion section of this route. v A2 to N13 - Derry to Letterkenny:A scheme to provide approximately 2 kilometres of new single carriage-way on this route at Skeoge. vi N15 - Sligo - Bundoran - Ballyshannon - Donegal - Lifford: Funding has been allocated for the planning and design and a consultant appointed for the Bundoran/Ballyshannon bypass and the Stranorlar / 87

Ballybofey bypass. Other parts of the route are being designed, have been completed, or are under construction.The Department of the Environment for NI, however, has no plans for a new link road between Strabane and Lifford. vii N3 - Dublin - Cavan - Aghalane: Dublin City boundary to Clonee part of this route has been opened since 1991 and the Belturbet to Aghlane section linking up with the A509 to Enniskillen has been completed in 1999 as has the Cavan by-pass. For a major part of this route, however, public consultation is underway. viii N16 - Greenore - Enniskillen - Sligo: A strategic study is due for this route of primary importance as an east-west link road. 4.63 In addition to under-investment there is the concern with ongoing deterioration of the existing road network on both sides of the border.The ROI National Road Needs Study is a comprehensive assessment of the works required to bring the national road network as a whole up to the necessary standards and to maintain these standards as traffic volumes increase. It sets out a proposed type of roadway for each segment of the network in order to cater for projected traffic flows over the period 2000-2019. The study indicates that, in 1995, 91% of the inter- urban national primary network could meet the minimum level of service which is equivalent to an 80 kph average inter-urban (90 kph dual carriageway) journey speed.An assessment was carried out to determine the likely performance of the network based on traffic levels in 1999.This concluded that 24% of national primary roads and 14% of national secondary roads were below the specified minimum level of service standard at the end of 1999. By 2019, two-thirds of the 50 national primary network would, in the absence of investment, fail this standard, with about 37% of the national secondary network also failing to meet the minimum specified level of service.The percentage failing to meet the standard would be even higher in the S&E Region. The recent Northern Ireland Audit Office report into the “Structural Maintenance of Roads” noted a need to double the current £40 million per annum maintenance budget to address the £100 million road maintenance backlog. Unless the budget is increased, deterioration will continue. 4.64 Cities and larger urban areas are the primary engines of growth in modern economies. In order for them to reach their full potential they need to have efficient public transport systems. This is not the case on the island of Ireland. Traffic congestion is a serious problem in urban areas. There is a need to reduce the reliance on private cars and switch to public transport in order to reduce congestion and emissions related problems. Improved transport systems are vital to the economic well-being of the Greater Dublin Area and Belfast Metropolitan Area. Other cities and towns on both sides of the border face similar congestion problems, commensurate with their scale and similarly need improved transport systems. 4.65 Enhanced bus services would reduce the number of cars clogging the roads 88 both in urban areas and on the main arterial routes. Bus services, especially

to the western and north-western regions and across country from north to west, need to be greatly improved. Hubs could be developed in these regions from where passenger traffic can be distributed to outlying areas. Telematics: Information and Communications Technologies (ICT) in Transport and Traffic Management 4.66 The transport and logistics system must be fit to meet the needs of an advanced economy and respond to the requirements of the information and communications technologies (ICT) revolution. There is little evidence of telematics for transport and traffic planning and management in the Irish transport system on either side of the border. Hence, there is considerable scope for greater use of information technology advances to manage traffic and monitor traffic movements to help achieve a better balance between road use and the social and economic costs of providing such infrastructure. In addition, demand management measures such as road pricing and telematics that promote more effective utilisation of the existing transport infrastructure warrant serious consideration and likely implementation.Websites can be used to obtain information, select routes and carrier, book space, place orders as well as track and trace en route consignments. 4.67 The sole evidence of telematics in operation is in the Belfast and Dublin Metropolitan areas. In Belfast, one of the most advanced traffic control systems in Europe is used to manage the traffic flows on urban roads and also at the important motorway/urban interchanges.The Urban Traffic Control (UTC) system in Belfast, which co-ordinates and monitors traffic signals, has been extended to Lisburn, Newry and the A2 Bangor to Belfast Road. Increasingly, greater priority is being given to pedestrians and public transport. The Traffic Information and Control Centre (TICC) in Belfast continues to provide traffic information using local radio stations, a travel information telephone line and electronic variable message signs at the roadside. Translink plans to extend its usage of telematics throughout the NI region through the use of GPS. Scope certainly exists to develop an intermodal telematics system for the island of Ireland as a single entity or as part of a wider EU network. In addition, several ongoing EU projects are looking at the merits of ICT in intermodal traffic management. For example, STREETWISE (Seamless & Effective Travel Information on the TEN between Wales, Ireland, Scotland and England) is an embryonic programme aimed at developing a seamless travel environment through the provision of traffic information in the Western Isles of Europe. Rail Transport Infrastructure 4.68 Rail plays very much a secondary role to road transport for internal traffic flows, accounting for about 4 per cent of passenger traffic and just over 10 per cent of freight traffic in ROI and a mere 1.2 per cent of passenger traffic in NI. However, rail has a higher relative share on the main road/rail corridors, amounting to 24% of end-to-end journeys in the passenger market. 89

In addition, rail carries significant volumes of bulk and other freight traffic, much of which is unsuited to transport by road, for example chemicals. 4.69 The mainline rail network in ROI, operated by Irish Rail, consists of 2,290 kilometres (1,430 miles) of track, of which 2,030 kms (1,270 miles) are used by scheduled passenger trains. Northern Ireland Railways (NIR) is the sole provider of rail passenger services in Northern Ireland. It operates a regional rail network comprising over 300 route kilometres of track on four lines connecting Belfast with Bangor, Larne, Newry and Derry/Portrush. The competitive position of mainline rail services has been substantially eroded over a number of decades partly as a result of inadequate investment in the network infrastructure.The lack of investment has been reflected in slower operating speeds, reduced reliability of journey times and an overall poorer quality of service. In recent years the investment needs of the railway have begun to be addressed. Since 1990 mainline rail has benefited from considerable grant assistance from both the EU Cohesion and Structural Funds, and more recently has also received Exchequer support. As a result, the quality of both the infrastructure and services on the Belfast and Cork/Limerick routes is now of a high standard. The Galway, Waterford, Tralee and Sligo routes infrastructure have been upgraded recently but remain inadequate. Further trainsets are also required. Despite considerable investment in improving container handling equipment at many of the railheads in the country, rail has failed to make any significant progress in achieving market share in container handling in Ireland. This appears unlikely to change in the foreseeable future.With regard to rail freight traffic the view of Irish Rail is that the majority of freight to and from Dublin Port is destined for locations within a fifteen mile radius of the city and does not warrant transit by rail. 4.70 Irish Rail’s emphasis is now on improving suburban rail in the Greater Dublin area. A plan exists to build a dedicated line for the Dublin-Belfast Enterprise service as far as Howth Junction to alleviate congestion with suburban traffic close to Connolly station. Passenger traffic on the Enterprise has increased from 400,000 to 1,000,000 per annum since the institution of the peace process. 4.71 The railway network in Northern Ireland is small and serves mainly the eastern half of the Region. It has somewhat benefited from investment in recent years, but much more is required. However, with the exception of the Belfast to Dublin service, rolling stock and infrastructure are in considerable need of upgrading and the regional railway system needs strengthening.Translink state that passenger rather than freight traffic is their priority. Plans to improve passenger as well as rail freight transport are in accordance with the Draft Regional Strategic Framework and the associated Regional Strategic Transportation Network advocated by the Department of Enterprise in Northern Ireland (DOENI). Key elements of the plans are as follows: 90 (i) To develop commuter rail services in the Belfast Metropolitan Area

connecting Carrickfergus, Belfast, Lisburn, Antrim, Templepatrick and Bangor with regular shuttle services, with linking services from the lines to Derry, Craigavon, Newry and Larne. (ii) The provision of better train services from both Derry and Coleraine is advocated. This shortening of railway journey times might be achieved by new rolling stock with a higher power-to-weight ratio. Unfortunately, the single track layout with few passing places mitigates against substantial further improvement. (iii) To examine the feasibility of promoting greater rail use for freight by improved connections with the external gateways, the strategic road network and centres of major economic development. This includes the exploration of the potential for more all island freight movement by rail. 4.72 A report commissioned by Translink identified a need to invest £183 million over a 10-year period to maintain safety levels on the railway network. During 2000 a Railways Task Force undertook a technical appraisal of the future role of railways in Northern Ireland. Following this appraisal an additional £105 million was included in the 2000 Spending Review to be spent on upgrading main commuter rail lines, purchasing new rolling stock, and carrying out other safety related work. 4.73 The railway infrastructure has been improved by: (i) Spending £7.6 million on safety related issues (ii) Completing the Antrim to Bleach Green railway line reinstatement at a cost of £17m. (iii) Relaying the Belfast-Dublin railway track using continuous welded rail and upgrading the associated signalling system. (iv) Provision of the Enterprise service between the two cities.This high speed, high quality service has eight journeys per day in each direction, a service enhanced by the provision of four new Enterprise train sets based in Belfast and Dublin. Passenger usage on the route has increased significantly to almost one million per year. (v) Relaying the Portrush Branch line. (vi) Replacing the Connswater Railway Bridge. (vii) Providing Park and Ride facilities (complete with close circuit television cameras, fencing and landscaping) at 9 railway stations. (viii) Construction of new bus/train transport centres in Coleraine and Bangor. 4.74 In 2001-2002 it is proposed to promote rail services by: (i) Upgrading the Belfast to Bangor railway line at a cost of almost £15 million. 91

(ii) Refurbishing Carrickfergus Railway Station. (iii) Introducing extra coaches onto the Portadown Line to alleviate rolling stock shortages. (iv) Completing the refurbishment of Central Station in Belfast at a cost of more than £4 million. (ii) Re-opening the Bleach Green service to provide a more direct link between Belfast and Antrim. 4.75 In terms of cross-border development a high-speed line from Derry to Cork via Dublin and Belfast is the optimum objective.A major impediment is the need to transfer stations by road in Dublin between Connolly and Heuston stations. An operational rail link between the two is a necessity to reduce journey times.There is no western corridor for rail transport on the island of Ireland. Such a corridor, whilst desirable, is not a high priority for Translink or Irish Rail. However, the reopening of the Cork-Sligo rail route and the feasibility of rail links between Sligo and Derry could be investigated further.Two lane tracks are necessary to enhance access to Galway, the west of Ireland, the North West and Derry. 4.76 Rail freight traffic on the island of Ireland is minimal and confined for the most part to the movement of chemicals and bulk cargo rather than unitised container traffic. Schmidt (2001) states that the possibility for intermodality is lessened because: (i) There is no direct rail link in to the port of Belfast. Introducing a direct rail link into the port on the North side of Belfast Lough by taking a spur of the Belfast/Whitehead/Larne line appears to be fraught with problems as the spur would have to cross a major motorway, the M2. (ii) There is a possibility of taking a spur of the Belfast/Bangor line and leading it to a possible development site referred to as ‘D3’ on the South-east side of the port. However, the interest in intermodal transport is related in the main to the movement of containers to and from the port and all the existing container facilities at e.g. Victoria Terminal 3 are situated on the North side of the port. (iii) There is a rail link to the port of Larne.This, however, is a passenger terminal and very few Lo-Lo containers are moving through the port of Larne. Containers passing through this port are carried on road trailers as ferry traffic uses the Ro-Ro facilities of the port of Larne. To compound the problem further, the gauges of stations, bridges and tunnels are such that only 8 foot 6 inches high containers can be transported by rail. The fact that a large number of container and swapbody movements involves boxes of 9 foot 6 inches in height, represents a further disincentive to use either rail or intermodal transport for freight. 92 (iv) A railway track is passing close by the port of Derry at Lisahally.

Again, no spur exists and ‘Lisahally’ is in the main a bulk port although some inland container facility is under development.While Derry port could be connected for rail freight traffic there appears to be no demand on that route for the types of containerised or single commodity bulk goods flows which characterise rail freight transport. (v) Within the context of Northern Ireland, intermodal transport is economically and practically unattractive due to the short distances and the additional time and costs involved in the required multiple handling from, e.g. the container yard in the port of arrival to rail and from rail to trailer and truck at the rail terminal for the final leg of the journey to the premises of the consignee. Intermodal transport only makes economic sense in a North-South context, i.e. to Dublin,Waterford or Cork for transhipment and even then the distances concerned may be too short for economic operation. (vi) Freight carriage by rail is most appropriate for chemicals and other bulk cargo rather unitised traffic which tends to go point-to-point. 4.77 In summary, intermodality for the island of Ireland as a whole may not make economic sense due to the short distances involved. However, con- nection to the Trans European Network (TEN), the North European Trade Axis (NETA) or even the proposed UK Central Railway Project might justify investment in the movement of freight by rail to the ports from the regions. Public Private Partnership 4.78 Public Private Partnerships (PPPs) are an important element within the overall investment planned under the National Development Plan 2000- 2006 for the ROI, particularly under the Economic and Social Infrastructure Operational Programme and the UK Transport 2010 Programme. PPPs in the form of design, build finance and operate (DBFO) contracts for roads is an arrangement between the public sector and a private sector contractor, where the latter is responsible for designing, building, financing and operating the road(s).The contractor aims to recover his costs and profit margin by way of payments from the public sector or through tolling. In mid-1999 the ROI Government established a Cabinet Committee on Infrastructural Development, including public private partnership. In the Partnership 2000 agreement, the Government expressed its support in principle for Public Private Partnership in construction and agreed that a detailed assessment of the scope of private financing mechanisms for public infrastructure and the methodology of identification of suitable projects would be undertaken early in the life of the new Partnership. A number of structures have been put in place to facilitate implementation of the PPP approach both within the responsible agencies and Departments through establishment of PPP Units, and in the form of co-operative arrangements. The ROI Government established the Central Public Private Partnership Unit in the Department of Finance at the beginning of 1999, to lead, drive and co-ordinate the process. A PPP Unit was 93

established in the Department of the Environment and Local Government at the same time. 4.79 The ROI Government has decided to adopt a Public Private Partnership approach, on a pilot basis, to public capital projects, with an initial concentration on economic infrastructure projects.The initial priority for the pilot projects is the roads area. The rolling out of PPP is not intended to await the final completion of the pilots. The experience gained at each stage of developing the pilots is being used for additional projects, whether in the pilot sectors or others, at the same time as the pilots are being implemented. Broad classes of projects for which PPP may be appropriate can be indicated. In the first instance, the pilot projects announced by the Minister for Finance in June 1999 will all be developed within the NDP period of 2000-2006.These include, subject to statutory procedures and negotiations where appropriate: (i) a new Western River Crossing in Limerick on the N7; (ii) the Waterford By-Pass, including a new bridge over the Suir, on the N25; (iii) the second West Link Bridge on the M50; (iv) key elements of the Dublin Light Rail (LUAS) project. 4.80 “Transport 2010 - The 10-Year Plan” sets out the UK Government’s plan for delivering the scale of resources required to put the policies proposed in the 1998 White Paper into practice in Great Britain. One prong of the Plan has identified the need for a new approach based on public private partnerships. Public-private partnership moves must be considered for transport infrastructure development in the North of Ireland and, where feasible, for cross- border constructions. Conclusion 4.81 In summary, the road and rail systems are incapable of supporting the long- term development of the Irish enterprise sector both north and south without major renewal and upgrading. The ROI National Development Plan 2000-2006 and DRDNI Strategic Transport Plans set out substantial investment allocations designed to achieve this. Such action to develop transport infrastructure on the island of Ireland is an urgent priority and welcome but the pace of implementation needs to be drastically increased. Any further delays in delivering planned infrastructure will compound current bottlenecks, increase congestion costs and hinder industrial activity as well as being a social nuisance. In addition, there is a compelling need for an integrated approach to transport planning and co-ordination in the development of road, rail, sea and air transport. Integrated land-use transportation planning is particularly essential for the larger urban and metropolitan areas, which are increasingly congested, and for cross-border road and rail infrastructure planning. It can be concluded that the road system on the island of Ireland is likely to remain the principal means of freight transport. However, the 94 feasibility of the transfer of freight to rail should be continuously assessed in

both all-Ireland and pan-European contexts. It is recommended that a cross-border committee be created for integrated transport planning for the island of Ireland as a whole and the planning regimes harmonisation that would be required. Intertrade Ireland can take a ‘helicopter’ view of an integrated spatial vision for the island of Ireland as a whole beyond parochial interests. Bibliography Aer Rianta Annual Reports Central Statistics Office (CSO) Air Traffic Statistics Central Statistics Office (CSO) Passenger Movement by Sea Central Statistics Office (CSO) Statistical Bulletin Central Statistics Office (CSO) Statistics of Port Traffic Central Statistics Office (CSO) Statistics of Trade Confederation of British Industry Northern Ireland (2000) Developing a Regional Transportation Strategy Department of Environment, NI (1998) Shaping our Future - Towards a Strategy for the Development of the Region of Northern Ireland Department of Environment, ROI (2001) National Spatial Strategy: Scope and Delivery Department of Public Enterprise and Transport (1999) Passenger Traffic Trends Department of Regional Development, NI Regional Transport Programme 2001-2002 Department of Regional Development, NI Developing a Regional Transportation Strategy: A Consultation Paper DETR, GB (2000) Transport 2010 - The 10-Year Plan Dublin Port Annual Reports Duffy, D. Fitz Gerald, J., Kearney, I. and Shorthall, F. (1997), Medium-Term Review 1997-2003, Dublin: ESRI Economic and Social Research Institute (1996) Medium Term Review 1997-2000 Economic and Social Research Institute (1999) National Investment Priorities 2000-2006 Fitzgerald, J., Kearney, I., Morgenroth, E. and Smyth, D. (1999), National Investment Priorities for the Period 2000-2006. Policy Research Series Number 33, Dublin: ESRI Fitzpatrick Associates (1999a), Border, Midlands and Western Region Development Strategy 2000-2006, Dublin: Fitzpatrick Associates Fitzpatrick Associates (1999b), Southern and Eastern Region Development Strategy 2000-2006, Dublin: Fitzpatrick Associates Forfas (2000) Enterprise 2010 Report Gallagher, M.(2000) “Maritime Transport”, in Logistics and Transport in a Fast Growing Economy (eds) Mangan, J. and Hannigan, K. Blackhall: Dublin Government of Ireland (1999) National Development Plan 2000-2006, Dublin:The Stationery Office Hannigan, K. (2000) “The Challenge of Economic Growth”, in Logistics and Transport in a Fast Growing Economy (eds) Mangan, J. and Hannigan, K. Blackhall: Dublin IMD World Competitiveness Report, Lausanne: Switzerland International Marketing Services (1999) Enterprise Survey on National Competitiveness KPMG Consulting (1999) A Review of State Regional Ports and Harbours National Competitiveness Council: Annual Competitiveness Reports National Competitiveness Council (1999): Proposals for Development of Transport Infrastructure Reynolds-Feighan, A. (2000): “Air Transport”, in Logistics and Transport in a Fast Growing Economy (eds) Mangan, J. and Hannigan, K. Blackhall: Dublin Rosslare Port Annual Reports Schmidt, F (2001) NETA Transport Study for Northern Ireland Waterford Port Annual Reports Western Development Commission (1999), Blueprint for Success: a Development Plan for the West 2000-2006 (Report prepared by Indecon International), Ballaghaderreen:WDC. Websites http://www.cso.ie. http://www.drdni.gov.uk http://www.environ.ie http://www.forfas.ie http://www.irlgov.ie 95

Supply Chain Logistics and Transportation on the Island of Ireland An Integrated Study The IBEC-CBI Joint Business Council and InterTrade Ireland gratefully acknowledge the input and support from the following organisations and companies during the research, editing and consultancy phases of the report. Others, too numerous to mention, in the public and private sectors have also contributed to this report and we acknowledge our thanks to them. An Bord Bia InterTrade Ireland Aughinish Alumina Irish Business and Employers’ Confederation Barbara Anderson Consulting John Kenna Consulting Bass Ireland Larne Harbour Belfast City Airport Marks & Spencer Plc Belfast Harbour Commissioners National Institute of Transport & Belfast International Airport Logistics BT Northern Ireland Nortel (Northern Ireland) CBI Northern Ireland Post Office Consignia Phoenix Merchants Don Anderson Consulting Readymix Dublin Port Co River Services & Agents Enterprise Ireland Road Haulage Association Farrans Construction Ltd Tesco Fitzwilton Plc Translink Forfás Trinity College Dublin Freight Transport Association University College Dublin Golden Vale NUI of Galway Hamilton Shipping University of Ulster Industrial Development Board Williames Group Institute of Logistics and Transport 96

IBEC - CBI Joint Business Council IBEC-CBI Joint Business Council Scottish Amicable Building Confederation House 11 Donegall Square South 84/86 Lower Baggott Street Belfast BT1 5JE Dublin 2 Tel (028) 9024 3199 Tel (01) 660 1011 Fax (028) 9024 5915 Fax (01) 660 1717 e-mail : william.poole@cbi.org.uk e-mail : robert.grier@ibec.ie InterTradeIreland The Old Gasworks Business Park Kilmorey Street Newry BT 34 1DE Tel (028) 3083 4100 Fax (028) 3083 4155 e-mail : dermot.odoherty@tbdb.org

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