Alternative financing and privatization of transport infrastructure – Prospects and difficulties

EETS Business Framework SeminarMalmö, April 9 2013Björn HasselgrenArchitecture and the Built Environment

The rise of markets and the ”tax state”(Schumpeter, 1918)

Autocracies

Govern-mentMarkets

Study object

Private and public squares (Wagner, 1997/2007)

- Private ownership - Collective ownership- Voluntary - Coercive- User financing - Tax financing- Agreement - Regulation

Private square

Public square

The entangled reality (Wagner)

Private square

Public square

Cooperation and polycentrism is the normal pattern

Historical development of roads and railroads

Railroad corporations

Private and state railroads in Sweden 1925

- Concessions

- Regulation

- Financing/guarantees

Development over time of transport infrastructure -a co-evolutionary approach

Technology EconomicsPolitics and

”socio-culture”

Public sector

Private sector

Development of transport infrastructure systems

Government and private sector involvement

Private – entrepreneurs

1850-

Government – consolidation

1930-60

Private/public – stronger efficiency

incentives 1980-

Government and market

Natural mono-polies

Finan-cing

External effects

Wel-fare-

econo-mics

Scale-effects

Competi-tiveness

Inno-vation

Incen-tives

Flexi-bility

Cust-omer orien-tation

Central planning

Decentralized coordination

Public or private goods?

Roads and railroads

Public goods(non-rivalrous, non-

excludable, externalities)

Private monopoly

Public monopoly

Private goods(rivalrous, excludable)

Market

Public sector provision

Market failure?

Government failure?

Government failure?

Planning models

Spontaneous order

Centralized planner

Market failure Government failure

Coordinated

Un-coordinated

Centralized knowledge

Individual knowledge

Future challenges

• Spatial – division of responsibility and organization of transport infrastructure networks

• Functional – new technology makes former organizations and financing measures obsolete

• Financing and efficiency – user charging might be more efficient, private sector actors have stronger incentives for efficiency

Possible ways forward…

How can markets be fostered?

• The institutional environment – regulation, political support

• Profits are necessary!

• Financing and risk – government guarantees?

• Knowledge – innovation and research

• Long term perspectives

• Culture and communication – language, political/business culture

• Competition – diversity is good!

Do we have the necessary preconditions for success with projects like EETS?

• How should transport infrastructure be financed?

• What role should the government have?

• Is there political support for road-charging?

• Is there a business case? Too high risks/uncertainty?

• Is there financing for innovators and entrepreneurs?

• Do we have technical standards that support the business case?Technology

Economics

Politics and

”socio-culture”

What has to be changed?

• Political consensus concerning alternative financing/user charges for roads

• Local/national projects as a starting point

• Concessions and financing

Björn Hasselgren

KTH Royal Institute of Technology

+46-70-762 33 16bjorn.hasselgren@abe.kth.se