Cesar Queiroz

Public-Private Partnerships in Highways in Transition Economies: Recent Experience and Future Prospects

In many countries the private sector has been involved in financing infrastructure through concessions under a public-private partnership (PPP) program. PPP projects, however, are somewhat underutilized in countries with transition economies, where financing gaps are significant and growing, and there seems to be enormous potential for more private-sector involvement in the financing and operation of highway assets in such countries. The reasons for the low rate of private financing of roads in transition economies include relatively low traffic volumes, lack of appropriate legal frameworks, economic and political instability, and the consequently high perception of risk. As traffic increases on key roads, new legislation is enacted, and institutions and economic growth become more sustainable: it is likely that this sector of transition economies will become more attractive to private investors. This paper reviews the legal framework required for attracting private capital for PPP projects, possible steps that could allow a country to launch a PPP program for highways, the concept of greenfield and road maintenance concession programs, public-sector comparators, competitive selection of concessionaires, and the use of partial risk guarantees to mitigate risks. It also summarizes potential applications of the World Bank Toolkit for PPP in Highways as an instrument to help decision makers and practitioners screen potential PPP projects and define the best approach for a specific country.

Developing Cost Estimation Models for Road Rehabilitation and Reconstruction: Case Study of Projects in Europe and Central Asia

The average unit costs of road works vary substantially between countries, and even between projects in the same country, due to a number of factors. In this paper an effort is made to develop prediction models for the unit costs of road works that could be applied for a wide range of conditions in different countries. A specialized dataset was used, which was generated under a World Bank study that included road works contracts from 14 countries in Europe and Central Asia (ECA). Two techniques were used for model development: multiple regression analysis and artificial neural networks. As the major problem found with the data set was missing or incomplete data, classification trees were used as an intermediate step to evaluate the correctness of the selected parameters. Three models were developed using regression analysis, two for the unit cost of asphalt concrete and one for the cost per km of rehabilitation and reconstruction works. The models include as independent variables the price of diesel fuel, country Gross National Income, World Governance Index, Transparency International Corruption Perception Index, percent of local bidders participating in the tender, and climate conditions. The analysis using classification trees confirmed the appropriateness of the variables selected in the regression analysis. The models developed using artificial neural networks were superior compared to the regression models, using mostly the same parameters. The resulting models could be particularly useful at the strategic level, for planning and optimization of works on road networks in ECA countries.

Economic Analysis of Bridge Rehabilitation Options Considering Life-Cycle Costs

A method is described for performing an economic analysis of a large number of bridges to establish priorities and to make preliminary selection of rehabilitation options. Selecting the most cost-efficient rehabilitation scheme for bridges is a critical problem when resources are limited. The information required to perform the analysis is normally available from basic bridge inspection data. The method compares the cost and benefits of various rehabilitation alternatives with the consequences of not undertaking the rehabilitation. A program of bridge works can be selected on the basis of the highest ratios of net present value to capital cost. The computations are well suited to common spreadsheet computer programs. From the results of the computations, owners can prepare an appropriate budget to finance a bridge rehabilitation program. The method is particularly well suited to analyzing how expenditures should be allocated over time when funds are limited.

Assessing the Financial Feasibility of Availability Payment PPP Projects

Over the last couple of decades there has been an increased contribution of the private sector to finance infrastructure projects. However, in view of the current global financial crisis, it has become more difficult for governments, particularly in transition and developing economies, to attract private financing for infrastructure, which may affect negatively the capacity of many countries to expand, and even keep up their infrastructure. While this is an observed short-term phenomenon, it is still not clear what will be the medium to long term effect of the crisis. It may well be that governments may be willing to increase their financial support to infrastructure projects so as to make them more attractive to potential private investors. This paper focuses on availability payment (AP), which has been increasingly used to undertake critical infrastructure projects in both developing and developed countries. It presents the development of a user-friendly tool for financial assessments of availability payment PPP projects. The model is suitable for preliminary assessment and screening of potential PPP projects. The applicability of the tool is demonstrated through a numerical example of a potential road PPP project. The model can also be applied to any other mode of transport or infrastructure. The model can be used to carry out sensitivity analyses. The user can change the value of an input parameter (e.g., construction cost) and obtain the resulting impact, for example, on the project financial internal rate of return.

ROAD FINANCING AND MANAGEMENT IN THE BALTIC STATES

Until the early 1990s, the Baltic states, namely, Estonia, Latvia, and Lithuania, were constituents of the former Soviet Union. When the Baltic states achieved independence, they faced challenges in finding ways to develop and maintain their neglected road networks. The new republics organized individual road administrations according to their specific needs and governmental frameworks. They chose different means of collecting and distributing the funds needed for their national road networks. Before independence, all road construction and maintenance were done by force account. Since independence, the road administrative structures and financing arrangements have undergone considerable change. A common concern in the three Baltic states is that the current levels of funding for roads are lower than those needed to maintain their national road networks. If adequate funding is not available, it is likely that there will be increased backlogs of periodic maintenance, resulting in a greater need for reconstruction later. The present system of management and financing for roads in each of the three governments is discussed. A brief comparative analysis of the markedly different approaches to management and financing of the road networks in each of the three Baltic states is also presented. The sources of the information include publications and interviews with road administrations during missions to the Baltic states.

Freight Transport Restructuring in the Baltic States

A brief outline of the restructuring of the freight transport sector in the three Baltic States (Estonia, Latvia, and Lithuania) is provided that focuses on the provision of logistics and freight-forwarding services in international transport and trade. The three countries have made significant progress in all areas of the transport sector in the past 10 years. During this period the private sector has taken over a large part of the transport sector. Despite the very positive development, continued efforts are needed to improve the transport sector further. Issues pertaining to national legislation are recognized to be of high priority in all three countries, but cooperation in customs issues between countries of the Commonwealth of Independent States is problematic. Also delays in border crossings, especially to and from Russia and Belarus, appear to be a common and persistent problem in the Baltic States. The general transport-supporting services and the performance of customs have improved substantially during the past decade. Entry of foreign operators, especially in international road-based transport and logistics services, has restructured the logistics market profoundly. It can be argued that the efficiency of the industry and the overall quality of services have improved substantially.

OVERVIEW OF ROAD MANAGEMENT IN RUSSIA

The current scarcity of road budgets compared with the significantly higher needs of the Russian road network requires that road administrations improve their management efficiency and effectiveness. Administration effectiveness in general and cost savings in particular are two key issues addressed. Since 1993 the Russian Federal Highway Department (FHD) has embarked on a reform program aimed at separating the functions of road authorities (owner) from those of execution of road works (contractor). What were previously road construction units are being transformed into contractors with management independent from the road authorities. FHD has launched, with the assistance of the World Bank, a large program of road rehabilitation and has opened this field of activity to new contractors working alone or in joint operation with foreign contractors. Many changes have recently occurred in the Russian road management organization. Russian road management at both the federal and regional levels is reviewed, some...