Developing Transport Infrastructure in Sub-Saharan Africa through Public–Private Partnerships: Policy Practice and Implications

In contemporary times, Public–Private Partnership (PPP) in transport infrastructure has gained considerable attention in developing regions following its success in the developed countries. However, Sub-Saharan Africa (SSA) is among the developing regions with few transport PPP projects and among the regions with high number of failed projects. Meanwhile the region's transport infrastructure need far exceeds it current provision. This paper therefore aims to examine the project experiences (success and failure factors) of three highly profiled transport PPP projects, namely the Lekki toll road concession project (Nigeria), N4 toll road (South Africa/Mozambique) and Port of Maputo (Mozambique) in order to develop policy measures for effective future implementation. The experiences of the three projects show that transport PPP policy is indeed feasible in SSA. However, to realise its full applicability, proper policy actions and measures must be carefully observed and these include effective and efficient stakeholder management, transparent and competitive tendering process, high participation of local investors, stable macro-economic conditions and strong government commitment and regulatory framework. The projects experiences and policy actions developed are impactful in accelerating transport infrastructure development through PPP approach in SSA. Hence it is hoped that policy-makers and practitioners would be informed on the key strategies to employ in implementing future projects.     

Commercialising the management and maintenance of trunk roads in the United Kingdom

Public funding of new infrastructure from money raised through taxes or borrowing has been questioned globally in recent years. One alternative solution has been to finance major capital projects through Build, Operate & Transfer (BOT) schemes. In the United Kingdom, the Private Finance Initiative (PFI) has become established as the procurement method of choice for many projects and services in central and local government. It is a natural development of other changes in government administration which have been introduced over the past few years. Projects delivered in this way enable government to become a buyer of services on behalf of the public rather than a direct provider of those services to the public, taking advantage of private sector management skills and resources in their delivery. The PFI has demonstrated its ability to deliver value for money solutions in projects across a range of capital-intensive public services, but the greatest success in delivering projects has been in the transport sector. This paper outlines how the British Government's Highways Agency has restructured and commercialised the management and maintenance of the strategic road network for which it is responsible, and how it has been at the forefront of developing successful privately financed projects. The paper explains the Agency's particular version of BOT – Design, Build, Finance and Operate (DBFO) projects. These projects are delivering new and improved road construction and maintenance, providing better services to users of the country's strategic road network and achieving significant value for money savings for taxpayers.     

Private tollroads in urban areas

Governments of all persuasions are increasingly seeking the participation of the private sector in the supply of transport facilities and services. Private sector participation in the financing, construction, operation and maintenance of infrastructure is considered a serious option in a number of countries in the search for ways of providing much needed investment which would otherwise be deferred. This paper considers some economic and financial problems in the private sector provision of major road infrastructure within urban areas. The main issues are attaching prices (i.e. tolls) to the provision of the service, the value of government rights which are being given up either permanently or temporarily, and the identification required by the promoters of the cost of capital which is essential information in establishing the risk. Broader environmental and equity issues are not addressed. If the approach to establishing a private presence in a previously public supply context is handled properly from the outset, the benefits can be significant. Contrarily however, the prospects could be quite undesirable if badly managed, despite the presence of an extended public purse.requests for offprints     

Transaction Costs in Transport Public–Private Partnerships: Comparing Procurement Procedures

Abstract

In recent years, concern has grown over good practices in the procurement process in public–private partnerships (PPPs). The consensus view is that PPPs are prone to higher transaction costs than traditional public provision. In this paper, we contrast the hypothesis that transaction costs in transport PPPs depend, to a large extent, on the procurement mechanism used in each case, comparing the Negotiated and the Open procedures. Given that PPPs may offer considerable benefits and significant savings over the entire life cycle of the project, it is essential for PPPs to minimize those costs that undermine efficiency gains and that deter private involvement. The quantitative analysis undertaken in this paper highlights that there is room for important savings in the tendering of PPP transport infrastructure projects, using an Open procedure.     

Patchwork in an interconnected world: the challenges of transport networks in Sub-Saharan Africa*

Sub-Saharan Africa has recently undergone, or still do in many countries, a period of transport infrastructure expansion. Current policies are centred on the development of international links, which require large capital-intensive projects and are sometimes economically dubious. This paper reviews the past policies and transport functions since colonial times by placing them in their economic and political context. We find that present strategies have similarities to the ones prevailing in previous periods, where expansion phases dominated by transport-led economic growth theories were followed by a stagnation of Africa’s infrastructure development. In view of the challenges in translating findings from empirical research into right policies, we identify the potential of more balanced and sustainable strategic investments, notably by reinforcing the existing secondary transport networks converging into urban centres.     

Remuneration models and revenue risk mitigation in road public–private partnership projects – a case study from Serbia

As a consequence of renewed interest in attracting private financing for infrastructure investments, public–private partnership (PPP) arrangements are mostly seen as a suitable mechanism for ensuring sound and quicker delivery of transport infrastructure projects. However, a general concern is that expectations of mobilizing private-sector funds have been overestimated in a number of cases. The purpose of this paper is to contribute to the risk analysis of transport PPP projects with substantial exogenous demand risk which could serve as a rationale for choosing the appropriate PPP model. The objective of this paper is to construct an analytical cash flow-based project model to facilitate the choice of the remuneration mechanism suitable for both private investors and public sector. The model provides an indication whether the project should be implemented as a ‘users pay’, a hybrid or an ‘annuity’ PPP model. The proposed methodology is illustrated using a case study from Serbia.     

A cost performance analysis of transport infrastructure construction in Slovenia

Due to limited data availability only a few studies have been able to provide statistically significant evidence on cost overruns in transport infrastructure investments and their systematic nature, and fewer still for road infrastructure investments. The body of available evidence refers to the most economically developed countries, while very little evidence was found regarding other countries. In this article the authors focus on cost performance of road infrastructure constructed through the National Motorway Construction Programme in Slovenia. Methodologically the study departs from other studies in this field by building on detailed expenditure data and not aggregate reports from the relevant institution. This enabled the analysis of four individual project cost categories (construction cost, land acquisition damages and others) and comparably more accurate results. A representative sample of randomly selected completed projects in the period 1995–2007 revealed that the cost overruns (19%; SD = 46.10%) in the entire period studied do not appear to be higher than in other comparable studies. At the same time the study results showed that cost overruns were unstable, i.e. much higher for older projects.     

When it comes to container port efficiency,are all developing regions equal?

In this paper we carry out a container port performance analysis of the developing world between 2000 and 2010, using both parametric and nonparametric approaches. From a unique dataset – our sample covers 70 developing countries, 203 ports, and 1750 data points–, we examine the evolution and drivers of productivity and efficiency changes across developing regions. We show that productivity growth rates between 2000 and 2010 vary significantly and that this heterogeneity is explained by pure efficiency changes rather than scale efficiency of technological changes. Therefore, we carry out a detailed efficiency analysis to determine the drivers of port efficiency. Time series results show an upward trend for port efficiency in developing regions, as it increased from 51 percent in 2000 to 61 percent in 2010. Our analysis indicates that private sector participation, the reduction of corruption in the public sector, improvements in liner connectivity and the existence of multimodal links increase the level of port efficiency in developing regions.     

Allocating Revenue Risk in Transport Infrastructure Public Private Partnership Projects: How it Matters

Abstract

Transport infrastructure public private partnership (PPP) projects are very diverse and complex in nature not only because of their mode-specific intricacies but also because of their inherent economic characteristics that relate to the scope of involvement of the private sector in the project, the large sunk costs incurred, and ultimately, the competition to which these projects are exposed. The allocation of revenue risk is of paramount importance for the successful implementation of such projects and a sub-optimal allocation may lead to project structuring that is unnecessarily expensive and vulnerable to failure. At the same time, the revenue risk depends critically on the remuneration model used (user-based versus budget-based) and may, in turn, take the form of demand risk, counterparty risk or combinations of the two. This review explores the issues related to revenue risk allocation for transport infrastructure PPP projects. Overarching principles for the allocation of revenue risk that transcend mode-specificity are identified and compared to case studies generated in the context of the COST Action TU1001. The results show that theory and practice are divergent, leading to sub-optimal structuring and exposing projects to potential failure.     

an analysis of transportation energy conservation projects in developing countries

Industrialized countries have extensive experience with various transportation energy conservation measures and have been making steady progress in improving the efficiency of their transport sector. Less Developed Countries (LDCs) have also been making progress, but their experience in many aspects of transportation energy conservation is very limited. Development organizations have funded many transportation projects in developing countries, but the vast majority of these projects were designed to improve the transportation infrastructure. Very few transportation energy conservation projects have been implemented and decision-makers face a scarcity of information on effective strategies. This paper gives an overview of transportation projects in LDCs in order to identify those transportation energy conservation measures that offer the greatest potential for LDCs. Two case studies, from Tunisia and Costa Rica, are given to illustrate the issues involved in implementing transportation energy conservation measures in LDCs. Conclusions are drawn to suggest actions for developing countries and for development organizations.Acronyms DECAT Driver Energy Conservation Awareness Training - DSE Direccion Sectorial de Energia (Costa Rica) - GDP Gross domestic product - km Kilometer - LDCs Less Developed Countries - TOE Metric tonne of oil equivalent - USAID US Agency for International Development     

Effectiveness of safety-based incentives in Public Private Partnerships: Evidence from the case of Spain

Many countries around the world are implementing Public–Private–Partnership (PPP) contacts to manage road infrastructure. In some of these contracts the public sector introduces economic incentives to the private operator to foster the accomplishment of social goals. One of the incentives that have been introduced in some PPP contracts is related to safety in such a way that the better the safety outcome the greater will be the economic reward to the contractor. The aim of this paper is at identify whether the incentives to improve road safety in highway PPPs are ultimately effective in improving safety ratios. To this end Poisson and negative binomial regression models have been applied using information from highway sections in Spain. The findings indicate that even though road safety is highly influenced by variables that are not much controllable by the contractor such as the Average Annual Daily Traffic and the percentage of heavy vehicles, the implementation of safety incentives in PPPs has a positive influence in the reduction of fatalities, injuries and accidents.     

How Do Governments Support the Development of Public Private Partnerships? Measuring and Comparing PPP Governmental Support in 20 European Countries

Abstract

Taking an institutional perspective, in this article we develop an index of the governmental support for public private partnership (PPP) — a ‘PPP Governmental Support Index’ (GSI) — which aims to measure the extent to which national governments provide an institutional framework that is either conducive or preventive for the introduction and diffusion of PPPs within transport infrastructure and other sectors. First, based on a substantive review of the literature, we define the elements of the PPP GSI, including the policy and political commitment regarding PPPs, the legal and regulatory framework, and the presence/absence of dedicated PPP-supporting arrangements. Second, we calculate the PPP GSI for 20 European countries, cluster them and compare similarities and differences in national governmental support of infrastructure PPPs. Third, we explore the potential link between national institutional index scores and infrastructure PPP activity in the 20 countries. Lastly, we discuss the potential and usefulness of the presented PPP GSI, as well as methodological limitations, and elaborate on how this index might be utilised to strengthen future comparative research on PPP in transport and other sectors.     

On including travel time reliability of road traffic in appraisal

In many countries, decision-making on proposals for national or regional infrastructure projects in passenger and freight transport includes carrying out a cost–benefit analysis for these projects. Reductions in travel times are usually a key benefit. However, if a project also reduces the variability of travel time, travellers, freight operators and shippers will enjoy additional benefits, the ‘reliability benefits’. Until now, these benefits are usually not included in the cost–benefit analysis. To include reliability of travel or transport time in the cost–benefit analysis of infrastructure projects not only monetary values of reliability, but also reliability forecasting models are needed. As a result of an extensive feasibility study carried out for the German Federal Ministry of Transport, Building and Urban Development this paper aims to provide a literature overview and outcomes of an expert panel on how best to calculate and monetise reliability benefits, synthesised into recommendations for implementing travel time reliability into existing transport models in the short, medium, and long term. The paper focuses on road transport, which has also been the topic for most of the available literature on modelling and valuing transport time reliability.     

Impact of Everyday Weather on Individual Daily Travel Behaviours in Perspective: A Literature Review

Despite the hundreds of billions of dollars being spent on infrastructure development -- from roads, rail and airports to energy extraction and power networks to the Internet -- surprisingly little reliable knowledge exists about the performance of these investments in terms of actual costs, benefits and risks. This paper presents results from the first statistically significant study of cost performance in transport infrastructure projects. The sample used is the largest of its kind, covering 258 projects in 20 nations worth approximately US$90 billion (constant 1995 prices). The paper shows with overwhelming statistical significance that in terms of costs transport infrastructure projects do not perform as promised. The conclusion is tested for different project types, different geographical regions and different historical periods. Substantial cost escalation is the rule rather than the exception. For rail, average cost escalation is 45% (SD=38), for fixed links (tunnels and bridges) it is 34% (62) and for roads 20% (30). Cost escalation appears a global phenomenon, existing across 20 nations on five continents. Cost estimates have not improved and cost escalation not decreased over the past 70 years. Cost estimates used in decision-making for transport infrastructure development are highly, systematically and significantly misleading. Large cost escalations combined with large standard deviations translate into large financial risks. However, such risks are typically ignored or underplayed in decision-making, to the detriment of social and economic welfare.     

When are subsidies to trans-European network projects justified?

The trans-European transport network (TEN-T) encompasses the major planned transport infrastructure in Europe, ranging from high speed rail to port infrastructure. Projects in this category are considered priority projects and receive European subsidies; but these have been insufficient to get these projects off the ground. This paper addresses two research questions. First, it sketches the basic economics of cross-boundary infrastructure projects: what pricing and investment policies can we expect, what is the role of through traffic and high fixed costs of infrastructure? Second, it examines briefly what lessons the EU could draw from the experience of other existing federal funding institutions like the US and Germany. These ideas are used to propose a new subsidy scheme for the TEN-T projects.     

Should the user pay?

The paper puts the case that historical analysis helps to understand current discussions on user-pays principles and practice. In particular, (a) it is demonstrated that the nature of funding systems is dominated by political considerations, and (b) user-pays systems lead to inadequate funding of infrastructure when politically controlled, but provide funds for expansion when “market-driven” (in pursuit of profit maximisation). The case is illustrated by reference to the experience of interregional transport infrastructure in 19th century in England and 20th century Australia. Revenue deficiencies arising from government-controlled rates can lead to the demise of private transport infrastructure. The problem is considered in the context of the history of interregional roads and railways in England between the 15th and 19th century in England and in Australia in the 19th and 20th century. The current embrace by government of the user-pays system in transport services arises from fiscal deficiencies, as much from economic philosophy. User-pays policies are part of the global re-emergence of economic rationalism since the 1970s. The lesson for other nations from Australia's experience is twofold. First, in a federal system of government, despite the efficiency benefits of user-pays in interregional land transport, fiscal and political objectives will prevail. Second, in sparsely populated and/or developing countries, deregulation of long distance road transport will make funding a national highway system a critical concern.     

Flexible-term contracts for road franchising

Private participation in road projects is increasing around the world. The most popular form of franchising is a concession contract, which allows a private firm to charge tolls to road users during a pre-determined period in order to recover investments. Concessionaires are usually selected through auctions at which candidates submit bids for tolls or payments to the government. This paper discusses how this mechanism does not generally yield optimal outcomes and it induces the frequent contract renegotiations observed in practice. A new franchising mechanism is proposed, based on a flexible-term contract and bi-dimensional bids for total net revenue and maintenance costs. This new mechanism improves outcomes compared to fixed-term concessions, by eliminating traffic risk and promoting the selection of efficient concessionaires.     

Exploring transport carbon futures using population microsimulation and travel diaries: Beijing to 2030

Evaluating transport policy for cities in developing countries is often constrained by data availability that limits the use of conventional appraisal models. Here, we present a new ‘bottom-up’ methodology to estimate transport CO₂ emission from daily urban passenger travel for Beijing, a megacity with relatively sparse data on travel behaviour. A spatial microsimulation, based on an activity diary survey and two sample population censuses, is used to simulate, for Beijing’s urban districts, a realistic synthetic population, and their daily travel and CO₂ emission over 2000–2010. This approach provides greater insight into the spatial variability of transport CO₂ emission than has previously been possible for Beijing, and further, enables an examination of the role of socio-demographics, urban form and transport developments in contributing to emissions over the modelled period.Using the 2000–2010 CO₂ emission estimates as a baseline, CO₂ emissions from passenger travel are then modelled to 2030 under scenarios exploring politically plausible strategies on transport (public transport infrastructure investment, and vehicle constraint), urban development (compaction) and vehicle technology (faster adoption of clean vehicle technology). The results showed that, compared to the trend scenario, employing both transport and urban development policies could reduce total passenger CO₂ emission to 2030 by 24%, and by 43% if all strategies were applied together. The study reveals the potential of microsimulation in emission estimation for large cities in developing countries where data availability may constrain more traditional approaches.     

Do Road Planners Produce More ‘Honest Numbers’ than Rail Planners? An Analysis of Accuracy in Road‐traffic Forecasts in Cities versus Peripheral Regions

Abstract

Based on a review of available data from a database on large‐scale transport infrastructure projects, this paper investigates the hypothesis that traffic forecasts for road links in Europe are geographically biased with underestimated traffic volumes in metropolitan areas and overestimated traffic volumes in remote regions. The present data do not support this hypothesis. Since previous studies have shown a strong tendency to overestimated forecasts of the number of passengers on new rail projects, it could be speculated that road planners are more skilful and/or honest than rail planners. However, during the period when the investigated projects were planned (up to the late 1980s), there were hardly any strong incentives for road planners to make biased forecasts in order to place their projects in a more flattering light. Future research might uncover whether the change from the ‘predict and provide’ paradigm to ‘predict and prevent’ occurring in some European countries in the 1990s has influenced the accuracy of road traffic forecasts in metropolitan areas.     

Risk Management in Motorway PPP Projects: Empirical-based Guidelines

Abstract

This paper deals with the topic of risk management in Public Private Partnership (PPP). The analysis of the related literature reveals that risks must be analyzed and managed on a context-specific approach, and that there is a lack of a comprehensive study on the appropriate risk mitigation strategies for each risk embedded in PPP projects. Focusing on the transport sector, based on the results of a Delphi survey, the paper provides guidelines for both public and private parties in defining a list of significant risks in PPP motorway projects, and identifying for them both the effective allocation and the suitable mitigation strategies. Results of the Delphi survey have been compared with the common practices on risk management applied in eight real motorway PPP projects.