Finance & Economics

This page offers a brief overview of the Finance & Economics theme and includes a comprehensive site map.

Transport infrastructure plays a central role to economic and social development of a country or region. A recurring problem with transport infrastructure investments however, is the shortage of funds to build, upgrade and maintain transportation networks.

The Finance & Economics theme addresses core issues for transport specialists related to exactly this challenge. The following topics are featuring in this section:

  • Methodologies for evaluating economic impacts of transport infrastructure investments in the planning and preparation stage in order to determine socio-economic feasibility of projects and programmes.
  • Different sources of funding for road infrastructure investments: government funding, road funds, user charging, private finance, donor funding and mixed forms of funding.
  • There are many different ways to involve the private sector into transport infrastructure development and to sculpt the relationship between the client authority, being a government at national, regional or local level, and private contractors in a contractual agreement. The choice of a private sector contractor for a project needs to be based on fair competition and transparent procedures. Public private partnerships can boast upon growing interest from governments.

This theme will explore concepts and knowledge resources that are available to policy makers in the above mentioned areas.

Financing is a key element of any transport development strategy. Today, transport financing is still predominantly done through public sector tax revenues or development aid. Nevertheless, there is increasing interest and use of non-traditional sources of finance and user pay principles. Under the Road Finance section several financing sources are discussed.

Many governments have looked into attracting private finance to infrastructure investments as an additional source of funding. A Public Private Partnership (PPP) is a way of formalising the relationship between the public authority and the private sector partner. PPP is a broad term and encompasses many different contractual agreements with some key characteristics in common: a combination of tasks in one contract, relative autonomy for the private sector to organise/plan its work, risk sharing between public and private partner, mixed or fully private financing and a long duration of the contract.

Management of infrastructure assets is increasingly being commercialized. In this case, the public works administration ceases to undertake maintenance activities itself, but rather is responsible for setting technical standards, prioritizing works, contracting for works, monitoring to ensure that contractors perform according to contract terms and ensuring timely payment for works satisfactorily completed. Software has been developed to assist governments in effectively planning asset management and determining the cost implication of maintenance schedule options. In some cases, where working capital is not available to contractors from private financial institutions on affordable terms, the administration may need to provide or guarantee loans and equipment leases from public resources.

Numerous studies document the importance of access to rural development. The size of the rural network (often as much as 70% of the total road network) makes the financing of rural road construction and maintenance a major component of total financing requirements. Financing may be integrated into rural development programs or community participation schemes. It may also be used to foster broader development goals through encouragement of private contracting, labor-based approaches or combinations of the two.

Building major infrastructure projects is universally carried out by private companies who should be contracted through a competitive procurement process. Increasingly maintenance, roadside equipment, back-office operations and public transport services are also being provided by private sector companies under contract to public authorities, rather than by in-house providers. The importance of transparent and fair competition procedures to select the private company, as well as the wide variety of possible contractual arrangements, is addressed in this section.

The Finance and Economics theme web pages are under development. If you have suggestions and recommendations for knowledge gaps in this theme, please contact Caroline Visser at caroline.visser@gtkp.com or info@gtkp.com.