Toll Roads in Central and Eastern Europe: Promises and Performance

Abstract

In the early nineties, after the collapse of the communist system, many Central and Eastern European (CEE) countries hoped to expand their motorway network by offering concessions to private companies to finance, build and operate toll roads. Both the lack of public resources and the aim of increasing the role of private sector in the economy were behind that policy. In the nearly two decades since, roughly one‐third of the motorways built in CEE have been private concessions. But far fewer such motorways were built than expected, and many of those that were built were financed largely by payments from the government rather than by toll revenues. Moreover, all the toll roads are concentrated in three countries—Hungary, Poland and Croatia. This paper examines the history of toll road projects in those countries and the reasons of the gap between the expected outcomes and the actual results, which vary across countries.

Acknowledgements

The author wishes to express his gratitude to the Harvard Kennedy School for hosting him during the summer of 2008, when he wrote this paper. He also wishes to thank Professor Jose A. Gomez‐Ibañez of Harvard University for direction and discussions and Professor Antonio Lopez Corral of Polytechnic University of Madrid for his many valuable insights about the subject of toll roads. He is also grateful to Andras Timár (Budapest University of Technology), Radek Czapski (World Bank Office in Warsaw) and Waldemar Kurylowicz (Warsaw) for valuable information, contacts and comments, as well as many others whom space prevents individual thanks, but who provided him with relevant data and shared ideas. He also thanks the anonymous referees for their valuable comments.

Notes

1. Poland, Hungary, Czech Republic, Slovakia, Slovenia, Estonia, Latvia and Lithuania joined the European Union in 2004; Bulgaria and Romania in 2007.

2. The plan behind that initiative was first to buy out 60% of the shares and sell them later at a substantially higher market price, generating additional revenue for the Treasury (Cutteree et al., 2008). However, due to the large budgetary deficit and public debt, the European Commission had started an ‘excess deficit procedure’ against the Hungarian government, which in response had introduced austerity measures in 2006 and had approved a ‘convergency programme’ for 2006–09, reflecting severe fiscal and monetary policies. Therefore, it was more advantageous from the point of view of the State to sell its nearly 40% of AKA Rt shares to Raiffeisen PPP Infrastruktur Beteiligungs GmbH, in March 2008, for a sum of around EUR 188 million. This could be credited easily in budgetary accounts as revenue of the State Motorway Management Company and set aside, or used to be spent for the implementation of a distance‐based electronic toll collection system (planned to replace the vignette system not later than 2012).

3. In order to compensate for the loss of revenues from tolls on heavy vehicles, private toll motorway operators received a financial compensation paid from the revenues from vignettes. This temporary measure has proved to be very costly and as of early 2009, it was in the process of being cancelled.