This introductory report is built upon the text and findings of the report prepared by PIARC Committee on Financing and Economic Evaluation (C9): Guide for new methods of financing and public-private partnerships (1999). The report confirms that road infrastructure remains a key element for enhancing sustainable economic development. Being under budgetary constraints, however, many countries try to set up new forms of financing within the framework of an enlarged and renewed co-operation between public bodies and private companies allowing developing, or maintaining properly their road network. Financing roads out of public expenditure is the traditional way to cover road expenditures in most countries. In compliance with relevant fiscal policy and legislation, various taxes and duties are collected and paid into and regularly allocated by the public budget, aiming to finance procurement of public assets, goods, provision of public services, as well as public administration. Road expenditures are generally considered as public expenses. The resources allocated through the public budget to road expenditures could be used either to pay actual road expenses or to service sovereign loans used previously for that same purpose. To avoid some of the difficulties related to budgetary allocation of resources and constraints, a specific budget dedicated to finance public road expenditures, based mainly or exclusively on taxes and duties linked to road use (so called road user charges) could be temporarily or permanently separated from the public budget. Dedicated taxes access fees and tolls could provide or enlarge the revenue basis for road financing. There are good reasons for the growth in private sector involvement in the provision and operation, or even financing of public roads including: public expenditure faces severe constraints while the private sector can raise large amounts of capital for infrastructure projects; the trend towards commercialisation demonstrates the political willingness of numerous States to transform the role of the public administration from provider to regulator. The private sector has demonstrated its capacity to manage such companies and services efficiently. The "user pays" principle is gaining increasing political acceptance and is being made possible by dramatic advances in electronic tolling. When the expected revenues are large enough to repay the debt and obtain a return on investment over a reasonable period of around 20-25 years the project can be funded through project financing. However, a project can provide an important socio-economic benefit without generating an adequate financial return out of toll revenues alone. This socio-economic benefit may justify appropriate support from public funds and public guarantees to make the operation financially viable under a public-private partnership (PPP) scheme. The introductory report reflects an overview of world-wide experience in road financing and search for innovative methods aiming to alleviate budgetary constraints, enhance private sector involvement and first of all increase efficiency. Main constraints to overcome if private road financing is to be developed further include: to develop political consensus and acceptance of tolling by the public; to set up a transparent contractual framework for private sector involvement, to define the socio-economic and financial conditions of the partnership; and to think in the long term. For the covering abstract see ITRD E118727.
Abstract