Financing Transport Projects Essay

This essay has a total of 887 words and 5 pages.

Financing Transport Projects

Sam Vaknin's Psychology, Philosophy, Economics and Foreign Affairs Web Sites

The role of government in facilitating transport projects is inevitable. But governments
are monopolists and largely cannot be trusted with the efficient allocation of resources,
not to mention the problem of corruption. So, the less the state is involved the better
off everyone is.


Transport has gone a full circle. Until the beginning of the 17th century it was largely
privately financed. The state took over until the last two decades of the twentieth
century. And now there is a revival of the involvement of the private sector in financing
infrastructure. Additionally, transport has become a commodity and is securitized, as we
shall see.


All social (or public) goods carry social costs and bring on negative externalities (such
as environmental damage). Embedded in every public good there is a moral hazard - others
bear a disproportionate part of the costs while the perpetrators go "free". This is why
accurate statistics, forecasting and cost benefit analysis systems are a must. I am not
talking only about cost coverage calculations but also about finding ways to impose on the
users of transport infrastructure the real costs of their actions. This is known today as
"user pays" charging schemes. But to do so, the state needs to know what ARE these costs.
This is one way of forcing the private sector to participate in the financing of
infrastructure.


But we are digressing. Allow me to return to more conventional methods.

Transport infrastructure is financed today mostly by the state. Governments usually assume
bilateral or multilateral debt from commercial banks, through the international bond
markets - but, most often, from institutions such as the World Bank and regional
development banks through the EBRD. I have already indicated my aversion to this method of
financing. The money is sure to be spent either inefficiently or corruptly or both. Yet
hitherto both the financial scope of most of these projects, their regional and
international repercussions and the need to adhere to statal planning - inhibited most
forms of alternative financing.


Recent developments in private sector financing allow for reasonable solutions to this
age-old dilemma. These solutions are widely experimented with in dozens of countries, many
of them poorer and less stable than Macedonia.


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