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The long and winding path to private financing and regulation of toll roads
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    Road transport has long been, and will be for a long time, the dominant form of transport for freight and passenger movement throughout the world. The demand for road services will continue to grow and hence so will the need for investment. From Argentina to Thailand, Australia to Canada, major arterial roads are being built under toll road concession schemes. Since in many of these countries the governments are increasingly finding it difficult to finance the costs up front, they are giving the private sector concessions to construct and operate these urban roads for a specified period of time before inheriting these assets at the end of the contract, typically at a zero cost. To be effective, toll road projects must meet many requirements to ensure that the implementation and monitoring of these concessions by a regulator is smooth. This paper focuses on the lessons of the international experience with toll road privatization and regulation. It is oriented toward project finance because the contract can achieve much more for "road regulators" than for other sectors. This means that an effective design of the contract at the project time is crucial since often there is little more for a regulator of a road concession to do than monitor that all involved parties comply with their contractual commitments. Furthermore, in many ways, the renegotiation of a contract is often a replay of the initial negotiation with a different distribution of information between the regulator and the concessionaire. Full grasp of the basics of contract design in project finance is quite important for the regulators. This paper provides a broad overview of the issues at stake from the view point of a privatization team but also from the perspective of a regulator responsible to supervise the commitments made by the government and the operation to each other and to the users through the contracts. Bibliography, tables. (49 p; 178 kb)

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