Forecasting the Demand for Privatized Transport : What Economic Regulators Should Know, and Why

Abstract

Forecasting has long been a challenge,
 and will remain so for the foreseeable future. But the
 analytical instruments and data processing capabilities
 available through the latest technology, and software,
 should allow much better forecasting than transport
 ministries, or regulatory agencies typically observe.
 Privatization brings new needs for demand forecasting. More
 attention is paid to risk under privatization, than when
 investments are publicly financed. And regulators must be
 able to judge traffic studies done by operators, and to
 learn what strategic behavior influenced these studies. Many
 governments, and regulators avoid good demand, modeling out
 of lack of conviction that theory, and models can do better
 than the "old hands" of the sector. This is
 dangerous when privatization changes the nature of business.
 For projects amounting to investments of $ 100-200 million,
 a cost of $ 100,000-200,000 is not a reason to reject a
 reasonable modeling effort. And some private forecasting
 firms are willing to sell guarantees, or insurance with
 their forecasts, to cover significant gaps between
 forecasts, and reality.