Financing Road Infrastructure - Lessons Learned From Europe and a New Approach

This paper proposed the use of the long-term concession contract model as a strategy for financing road infrastructure. The author outlines some of the negative aspects of such projects. For example, private construction companies will only invest in parts of the road network that is attractive in terms of vehicle numbers and readiness to pay for road usage. But besides earning profit there are various other goals that can be pursued as well: ecological, economical or social aims. When choosing long-term concession models the public sector is loosing its power over income due to road usage and transferring it to private companies. The author then proposes a way to combine both public-private partnership (PPP) in road construction but not giving away the control of road pricing. This strategy separates the level of infrastructure construction from the level of pricing. The projects can be delivered within a shorter construction timeframe and the state can concentrate on its core activities instead of financing and managing construction projects.