Pragmatic Approach to Finance Infrastructure: Analysis of French Experience with Highway Concessions

Abstract

Governments around the world are showing increasing interest in concessions or build-operate-transfer mechanisms in the highway sector. One or two decades ago, economic theory held that private funding was the most promising method for financing infrastructure development. Unfortunately, a significant number of privately financed projects are showing signs of difficulties (e.g., the Franco-British Channel Tunnel, the Dulles Greenway in Virginia, the second stage Bangkok Expressway in Thailand, the Guanzhour-Shenzen Highway in China, the delayed Birmingham Northern Relief Road in the United Kingdom, and the M1 and M3 Highways in Hungary). Emphasis has always been put on the financial aspect, leaving out the organizational one. A new basis for infrastructure finance is presented, analyzing the mistakes and successes of French experience in highway concession for more than 40 years. This experience is of interest since France has experimented with both toll and nontoll financing as well as with publicly and privately owned toll roads in building its system of highways. The main steps of the construction of the French highway network through concessions are traced and the lessons learned from this experience indicated, focusing on key elements, the advantages and drawbacks of a concession system, and the exact nature of the state’s role in concessioning. This information can serve as potential recommendations for other countries opting for concession systems.

How to Expand Subway and Urban Railway Networks: Light Rail Extensions in Madrid, Spain

“…The BOT is a concessionaire model that distributes risk between the administration and the private sector. This gets the private sector involved in funding, thereby preventing budget limitations, and integrates their experience into management (7). At the same time, it puts a limit on the risk assumed by stakeholders in projects that are included in a complex urban context and with interactions that are difficult to control.…”

Private–Public Partnerships as Strategic Alliances

“…The high degree of failure of such concessions and the frequent early renegotiations of the original terms of the contract, however, indicate the need to reconsider some of the usual practices carried out in the design and granting of concession contracts (1)(2)(3)(4)(5). In addition, the traditional role of government in providing public financing for transport infrastructures is increasingly being questioned, with a demand for new approaches to justify public involvement (6,7).…”