News
BackDuring a Road User Charging Conference, the Commission took the opportunity to pull the old, slightly dusted concept of Public Private Partnerships (PPP) to finance road transport projects out of the drawer. In view of the empty state coffers, this would be a good option to implement infrastructure projects. Unfortunately nobody asked the question whether PPPs really represent a suitable resp. more cost-effective alternative to public infrastructure projects – experiences from the past, however, leave room for doubt.
The actual intention of the conference was to deal with fair and efficient road charges. For environmental organisations and associations, which demand more cost transparency in road traffic, a welcome initiative of the European Commission. Hence, Commission officials informed the Conference of the wishes participants of the public consultation had voiced: they would like to apply the principle that road users are to pay for the infrastructure (and not all taxpayers); fees shall also be charged for pollution; congestion charges and higher tolls in peak times were also supported by a majority; however, representatives from Germany, France and Great Britain were opposed to this measure. The consultation participants also agreed with the Commission that uniform framework conditions should be in place for the vignette systems on European motorways.
However, listening to participants speaking at the event one could get the impression that the European Commission was less concerned with integrating environmental costs and other external costs in road charges and thereby with ensuring fair competition with other modes of transport such as rail, but preferred to dust off and resurrect an old liberal concept: Public Private Partnerships. Hence, the list of speakers invited by the Commission did not hold any surprises: Christophe Nicodème of the European Union Road Federation, Lech Witecki General Director for National Roads and Motorways in Poland and Massimo Schintu of the Italian Association of the Concessionaires of Motorways and Tunnels - all were supporters of PPPs. In view of the empty state coffers, Public Private Partnerships would be the suitable model to force infrastructure projects – with private investors instead of public money. According to the speakers, private investors would claw back their money via tolls once the infrastructure was in place. And of course, the concessionaires would also have to have the option of generating a profit; otherwise it would not be possible to interest private investors in these projects.
Why Public Private Partnerships lost in popularity some years ago was not discussed: experiences with PPPs both at European and Austrian level have shown that PPPs are by no means a more cost-effective alternative for the taxpayer: in general, private investors have to refinance at less attractive conditions than the state; this in turn generates more costs; apart from that, investors expect certain yields - the state does not; added to this are considerable control and transaction costs, which make PPPs even more expensive. One must also consider the fact that it is in the nature of private investors wanting to avoid risks – if the state is in an economic crisis, private investors will be reluctant to fund infrastructures as they fear too little revenue resp. losses instead of profits. And that is the point where the concept fails and the state has to step in. This had been demonstrated more than 80 years ago when President Roosevelt not only lifted the US out of the great depression by introducing a thorough banking reform but also and in particular through public infrastructure investments, whilst private investors preferred to keep their money together and waited for “better times”. One can only hope that the European Commission will come to realise that in too many cases private investors are not prepared to assume the responsibilities of the state because they are afraid of private risks (for example to do a weak economic situation). In the end, it remains with the public sector to realise infrastructure projects in order to boost the economy.
However, listening to participants speaking at the event one could get the impression that the European Commission was less concerned with integrating environmental costs and other external costs in road charges and thereby with ensuring fair competition with other modes of transport such as rail, but preferred to dust off and resurrect an old liberal concept: Public Private Partnerships. Hence, the list of speakers invited by the Commission did not hold any surprises: Christophe Nicodème of the European Union Road Federation, Lech Witecki General Director for National Roads and Motorways in Poland and Massimo Schintu of the Italian Association of the Concessionaires of Motorways and Tunnels - all were supporters of PPPs. In view of the empty state coffers, Public Private Partnerships would be the suitable model to force infrastructure projects – with private investors instead of public money. According to the speakers, private investors would claw back their money via tolls once the infrastructure was in place. And of course, the concessionaires would also have to have the option of generating a profit; otherwise it would not be possible to interest private investors in these projects.
Why Public Private Partnerships lost in popularity some years ago was not discussed: experiences with PPPs both at European and Austrian level have shown that PPPs are by no means a more cost-effective alternative for the taxpayer: in general, private investors have to refinance at less attractive conditions than the state; this in turn generates more costs; apart from that, investors expect certain yields - the state does not; added to this are considerable control and transaction costs, which make PPPs even more expensive. One must also consider the fact that it is in the nature of private investors wanting to avoid risks – if the state is in an economic crisis, private investors will be reluctant to fund infrastructures as they fear too little revenue resp. losses instead of profits. And that is the point where the concept fails and the state has to step in. This had been demonstrated more than 80 years ago when President Roosevelt not only lifted the US out of the great depression by introducing a thorough banking reform but also and in particular through public infrastructure investments, whilst private investors preferred to keep their money together and waited for “better times”. One can only hope that the European Commission will come to realise that in too many cases private investors are not prepared to assume the responsibilities of the state because they are afraid of private risks (for example to do a weak economic situation). In the end, it remains with the public sector to realise infrastructure projects in order to boost the economy.