International Road Federation (IRF)
Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH
The prevailing financial and institution system of road maintenance has been clearly identified to be at the root of the problem. In most of these countries an adequate flow of funds cannot be secured by the general budgeting financing procedure. In addition, the rules and regulations of the public administrative system do not allow for an effective and efficient management of road maintenance. As it is unlikely that under the prevailing system substantial and sustainable improvements can be made a new approach is necessary to eradicate this problem.
A new public-private partnership in financing and managing road maintenace can provide an adequate solution. The two basic principles of such an approach are to put road maintenance on a fee-for-service basis and to transfer road maintenance management from a "government ministry environment" to a "company environment".
The article provides a guideline for such a reform. Various alternatives are being discussed for securing sufficient and stable flow of funds for road conservation, for providing an adequate institutional framework to manage road maintenance on a national, state and local level, and for physically managing whole road networks in an effective and efficient manner. It furthermore gives examples of "good practice" based on experiences in New Zealand, Australia, and several Latin American and African countries.
The lesson to be learned is clear. Substantial improvements of road conditions can be made only by approaching the financing and management of road maintenance in a completely different way. Instead of trying to solve the many apparent problems frequently put forward such as:
Road maintenance is politically unattractive; new road construction, road rehabilitation, social or education programs are more "visible" and produce more political prestige. In addition, lack of maintenance culture and little understanding of the economic consequences of poor maintenance even by those in charge of roads make it even more difficult to raise sufficient maintenance funds. Only very few countries in the world, such as Japan and some European countries have proven to be able to assign sufficient resources to road maintenance on a sustained basis. These are rather exceptions to the rule and cannot be taken as examples for the functioning of financing road maintenance through general taxes. Some countries, also in Latin America, used to finance road construction, rehabilitation and maintenance through earmarked taxes, especially on fuels used by motor vehicles. None of these funds could be sustained on a long term basis. The main problem has been that governments regard these funds as "government funds" which they can (and do) utilize for other purposes, especially in times of crises, which often continue "indefinitely".
Cause number 1:
Experiences clearly reveal that in nearly all developing and most developed countries as well, it is impossible to secure an adequate and stable flow of funds for road maintenance through general government budget financing procedures, especially if their allocation depends on the annual political budget debate.
In Latin America and the Caribbean, the management of road infrastructure is mainly carried out by government departments. While most of the actual construction, rehabilitation and some of the maintenance of roads is being contracted out, the planning, contracting, supervision and most of the road maintenance works are still being undertaken by these government departments themselves, who face the typical problems of all public administrations, such as overstaffing, lack of discipline and control, lack of incentives and disincentives, and corruption.
Cause number 2:
Rules and regulations of the public administrative system do not allow for an effective and efficient management of road maintenance, in spite of the good will of many public employees responsible for road maintenance.
In order to improve effectiveness and efficiency of road maintenance, e.g.
This way the pump price of motor fuel will continue to contain a tax element to finance general government budget expenses, one of which will be construction and rehabilitation of roads, and a road maintenance tariff to be paid into a separate Road Maintenance Fund to be spent exclusively on road maintenance (see figure 3 ).
Since motor fuels are being consumed on all roads it is also fair that all roads, e.g. interurban, urban and rural roads should participate in receiving funds from the Road Maintenance Fund. The question remains to what extent maintenance costs should be reimbursed by the Fund. This issue is especially relevant for roads with very low traffic, as the road maintenance tariff "collected" on these roads is far below the funds required for maintaining them. Most likely, the Road Maintenance Fund will have to contribute to these costs in a somewhat higher proportion than the contribution of the road maintenance tariffs collected from the motor fuels consumed on these roads. The actual amounts could be tied to a number of criteria or simply to a flat rate per kilometer. Fixing these amounts could be part of the decision process within the Fund where the road users have a stake.
Since one of the conditions of a tariff is that only road users should pay for the road maintenance services, the issue of diesel not used on roads remains to be resolved. There are several options to deal with this problem. One possibility is to chemically differentiate between the two diesels by coloring the one which is not to be used in road vehicles. This method is being used in many developed countries and requires either a good control system or very disciplined road users. Another possibility is to give a rebate equivalent to the amount of the road maintenance tariff to those not using the diesel in road vehicles. This is fairly easy to handle in the case of power stations and others using big quantities of diesel, while it is almost impossible to administer for small scale users like farmers. In this case other methods of compensation could be applied like assigning more maintenance funds to farm roads than justified under a normal road maintenance cost allocation system for these roads.
How much is normally required to cover the maintenance cost of a country's road network? Based on the analysis of various developing countries in Latin America, between 7 and 9 US cents per liter of motor fuel would be required to cover the costs of maintaining the entire road network of a country, if motor fuels were the only source of road maintenance funding and these roads were in maintainable conditions. For most countries this means that large sections of their road networks will require rehabilitation first, before they would be eligible to receive funds from the Road Maintenance Fund. If additional road maintenance tariffs for heavy vehicles are being applied, the tariffs to be raised in connection with motor fuels could be reduced accordingly.
An often asked question regarding road tariffs is: why not use the conventional toll collection system to pay for road maintenance? Unfortunately, conventional toll collection costs are fairly high. Only for roads with more than 1500 vehicles per day do these costs stay within a reasonable range of 10% - 30% of the tolls collected, depending on the level of tolls and the number of vehicles per day. Therefore, this system is economically viable for a small percentage of roads only, less than 5% of all roads in Latin America, and cannot solve the financing of road maintenance for a country's whole road network. Tolls could contribute to recover road maintenance costs, but due to the conflict of "double charging" (tolls plus road maintenance tariffs) they are not recommended for this purpose. Tolls on toll roads should preferably be used to recover construction or rehabilitation costs while maintenance cost should be reimbursed by the Road Maintenance Fund.
It might be difficult to convince road users to pay an additional road maintenance tariff, because they will argue that the government already receives enough funds from taxes on motor fuels, motor vehicles, licensing fees, etc. to cover the cost of road construction, rehabilitation and maintenance. Probably equally difficult might be to persuade governments to renounce part of "their" taxes and thus leave room for levying road maintenance tariffs so that the pump price of motor fuels will not be affected. The fact is that road users presently face the consequences of poor road maintenance in the form of higher vehicle operating costs. Investing 1/3 of the additional vehicle operating costs now spent on bad roads in road maintenance, would save the road user the other 2/3 (see figure 4 ). Most road users are not aware of these facts. Knowing what they could save by paying a road maintenance tariff, most road users would be willing to pay, even if this would mean paying in addition to what they pay already in the form of fuel taxes and other road vehicle related taxes, but only if they can be sure that the funds raised through tariffs will be used for road maintenance only. On the other hand, governments very often are willing to decrease fuel taxes by the amount actually used for road maintenance when the responsibility for the funding of road maintenance shifts to the Road Maintenance Fund.
How can we safeguard public interest in preserving roads in good condition? Presently, in most of the developing world, public road administrations and the respective ministries are responsible for keeping the road networks in good condition. But hardly anybody in those institutions cares whether this is done well or not. None of them has to face any real consequences of not preserving roads in good condition. Often they don't even know the conditions of the roads under their jurisdiction, even less so they know the asset value of these roads (which is often the biggest or one of the biggest assets governments are responsible for) or whether the asset value is increasing or decreasing. Any commercial enterprise neglecting its assets as governments do would be out of business soon. The ones who actually have to bear the consequences of poor road maintenance are the road users. Therefore, they are the ones who have a direct interest in maintaining roads in good condition and therefore should have a more direct control of overseeing road maintenance spending. One way of achieving such control is to create a Road Maintenance Board, a public institution with complete financial, administrative and technical autonomy and with active road user participation. Depending on the size of a country, there might be either subsidiary or independent local Road Maintenance Boards for the different categories of roads and or road administration districts. The principal attributions of such road boards should be:
One question still remains: Who is going to contract and pay for road construction, rehabilitation and major improvements? As long as goverment bodies are receiving motor fuel taxes, it seems fair that they should continue to finance these works and either contract them directly or let the Road Maintenance Board(s) contract the work on their behalf. The second solution would have the advantage that it might better ensure that quality of road design and construction suits road maintenance needs.
|Box 1. Membership and Characteristics of Some Road Management Boards
Board of Transfund New Zealand
Even more savings in road maintenance costs could be realized by contracting out the entire management of the maintenance of whole road networks to private road maintenance management companies. The task of these companies is to keep a specific road network in pre-established (good) condition and receive as compensation a pre-established fixed fee, determined through a competitive bidding process. As for maintaining a specific road network road management companies are not paid on a unit price basis or for specific works performed, there is a strong incentive to plan and execute maintenance works at the lowestoverall cost possible, triggering incentives for new technological advances and breaking new grounds in maintenance management. Crucial for success is to have a well qualified and highly competitive market and to establish appropriate criteria for road conditions as well as to strictly supervise adherence to these standards. Until now little experience has been gained in this field but it can be expected that savings of more than 50% of maintenance cost per km of road can be achieved compared with works performed by the road administration's own work force. So far Argentina is one of the few countries which has contracted nearly 10,000 kilometers of its paved main trunk network on a long term concessionary basis to be rehabilitated and subsequently maintained in accordance with pre-established road standards (see box 2). Recently, Australia has let a 150 million Australian dollar contract to maintain several kilometers of roads in pre-established conditions for the next 10 years. Several other countries have either started to follow suit or are in the process of doing so. A joint IRF/GTZ project is presently assisting Uruguay, Brazil, Colombia, and Peru in setting up pilot projects to contract out the maintenance of their road networks to private road management firms on a long term basis.
|Box 2. Long Term Road Maintenance Management Contracts, the Argentina
Since 1990 almost 10,000 kilometers of the national highway system of Argentina is operating under a concession scheme for a period of 12 years. The package deal for each concession includes rehabilitation works, improvements, maintenance and ancillary services for road users such as ambulances, towing, and emergency telephone services. Road users are paying tolls, approximately 1.5 US$ per 100 kilometers for cars. Heavier vehicles pay up to 4 times this amount. What is interesting about this scheme is that the concessionaire has to preserve and partially improve the conditions of the road over the concession period. A number of criteria have been established to define the minimum condition to which the roads have to be maintained. For example: the international roughness index should be lower than 2m/km for asphalt concrete roads and less than 2,9m/km for slurry seal roads; rutting should not exceed 12 mm; cracks should not exceed a certain index established by the National Roads Directorate; there should be no potholes; the coefficient for friction should be higher than 0,4 (measured with a MU-METER); vegetation should not exceed a certain height within a specified distance from the road; the drainage system has to be kept clean, the road signs must have a minimum reflectance; etc. These standards are periodically checked by the National Roads Department and non-compliance is being heavily penalized.
In order to be successful, all of these schemes require a well qualified
and highly competitive private sector able to plan, construct and maintain
roads in good condition. Unfortunately, not all countries find themselves
in such a favorable situation. In many countries a weak public sector as
well as weak private sector is the rule rather than the exception. And
to transfer the responsibility for road maintenance entirely to the private
sector in such countries might even worsen the situation. Therefore, each
country has to find its own way when approaching such a reform, taking
into account its very specific situation and circumstances. Nevertheless,
due to mounting criticism of ineffective and inefficient public administrations
and a squeeze on public budgets, in many countries worldwide, there is
a growing movement towards redefining the role of the government and in
this respect the role of the ministries and public administrations responsible
for roads as well. The aim is mainly to reduce the role of the public
sector and to transfer to the private sector those responsibilities the
private sector is able to perform more effectively and more efficiently.
More generally speaking, to leave the private sector to "play" the game
and let the public administration be the arbitrator who defines and controls
the rules of the game. This would leave the Ministry of Transport/Public
Works in charge of defining the road sector policies, in consultation with
all the parties concerned, and to ensure that they are being followed.
In a first stage the role of the road administrations would gradually shift
from executing works by themselves to merely planning and supervising works
to be contracted out, introducing more and more commercial principles into
their operations. At a later stage public road administrations could be
transferred into fully commercially operating publicly or privately owned
corporations. The national road administration of New Zealand is a good
example of having gone successfully through such a transformation process
(see box 3). Several road administrations, especially in Europe and some
in Latin America, are following suit.
|Box 3. A Comprehensive Re-Organization of a Road Agency. The New
Pre-1987 road funding and coordination on behalf of government was managed by the National Roads Board (NRB) with the Minister o Works and Development as the Chairman. The NRB was administered by the then Ministry of Works and Development (MWD), a department of 9,600 people employed on a wide range of activities from the design of buildings, roads, irrigation schemes, and power projects. It also provided regulatory advice on many major issues including town and country planning, roading, building controls, and water and soil resource use. The MWD was a typical public works department with a mix of policy, regulatory, and commercial activities.
In 1986, the Government decided to separate the commercial activities of the MWD from the policy/regulatory function to be completed by 30 September 1987. As the date drew near, the government further decided to corporatise the commercial activities by 1 April 1988 and transfer all the policy and regulatory functions to other government departments.
The NRB's operations and management were transferred to the Ministry of Transport with the Minister in charge taking over as Chairman of the Board.
At this time, passenger transport was funded an coordinated at a national level by the Urban Transport Council which was a quango of government. This Council was primarily responsible for the distribution of funds to local authorities and research into passenger transport activities.
On 1 April 1988 the NRB and the roading function were taken over by the Minister of Transport. In September 1989, the New Zealand Government passed a number of laws which reformed the management of the New Zealand land transport system. The main features of the new laws were the:
As from 1 July 1991 contracts all design, supervision, and physical works associated with the state highways on the basis of competitive bidding. At the same time local authorities, who want Transit New Zealand funding for local roads and passenger transport, have been required to competitively bid all services and works except road maintenance and minor works.
On 1 July 1996 a separate entity known as Transfund New Zealand took over the funding role of Transit New Zealand, leaving Transit to manage and control the state highways.
Source: R. J. Dunlop
Often the question arises whether or not to include the financing of road rehabilitation in such a financial scheme as well. This depends on whether the users are willing to pay for rehabilitation too. They might argue that road rehabilitation is necessary only because the government did not maintain the roads in the first place, and thus will be reluctant to pay in form of user fees. As long as governments find enough funds or are pressed by the road users to do so, the road users might succeed with this line of argument. If public administrations are neither able nor willing to mobilize enough resources of their own, external credit organizations like the World Bank or Regional Banks might step in to assist in financing road rehabilitation (which they presently still do), or the road users will have to allow for road rehabilitation costs to be covered by road maintenance tariffs. Some countries such as Zambia allow for road rehabilitation to be financed out of the Road Fund. Since many countries are faced with a high percentage of their road system being in poor condition, requiring rehabilitation first, before regular maintenance can take place, it might be necessary for some of them to temporarily include financing of road rehabilitation in this financing scheme as well. This of course will be reflected in the tariff levels, which for inflationary reasons should rise only gradually, to allow for a parallel saving in vehicle operating cost. A good example of how to gain support from road users for such reforms is given by the Roads Board of Zambia (see box 4).
To change the present financing of road maintenance from a tax to a "fee-for-service" basis is a fairly new approach too and requires the support of a wide base of road users as well as the approval of the government and the politicians in control of the legislative bodies. The easiest way to convince somebody to change something is to clearly demonstrate to him the advantages he would receive from doing so. This doesn't seem to be too difficult in this case, because the road users finally will save more on vehicle operating cost than they will have to spend on road maintenance tariffs, and the government and ultimately the taxpayers will have to spend less on future road rehabilitation as well. Experiences reveal that road users very often are willing to pay more if they can be assured that the proceeds will go to road maintenance only. And the best way to ensure this is by giving road users a control over where and how to spend the tariffs collected. A few but influential people might lose from introducing the new charging system. These are mainly politicians who used or still are abusing the present system to favor political or personal friends, which certainly will be more difficult to do in a more transparent system controlled by road users. Therefore, awareness building, orientation and organization of the direct and indirect road users is essential for implementing such reform. Typical groups to involve in this process are, for example, passenger and freight transport organizations, automobile associations, farmers associations, chambers of commerce and industry, and road associations.
Since in the late 80's whole road networks were collapsing in several
developing countries, as was the case in Peru for example, and since governments
began to recognize that the present financial and institutional system
of road maintenance is at the root of the problem, many countries, especially
in the developing world, have begun to ride the road towards reform. More
than five years ago, and with the help of The World Bank and bilateral
donors in what was called the Road Maintenance Initiative, several
countries in Africa started to reform their road maintenance systems by
creating Road Boards with road user participation to oversee Road Funds
to finance road maintenance and partially road rehabilitation as well.
Until now Zambia, Tanzania, Sierra Leone and Ghana have successfully managed
to establish Road Boards in Africa. Zambia even managed to create an executive
Board where only the representatives of the private sector are eligible
to vote (see box 1 on page 6). For the road maintenance reform to take
shape in Latin America and the Caribbean the reform concept developed by
ECLAC was instrumental. The development of this concept and its dissemination
in the whole region as well as a favorable reform climate made various
countries susceptible to engage in such a reform. So far only Honduras
has succeeded in creating a Road Maintenance Board which oversees a Road
Maintenance Fund, but other countries like Guatemala, Costa Rica, Nicaragua,
Peru and Colombia are well advanced in their efforts towards reforming
their road maintenance systems as well. Each country is faced with a
different situation and is therefore shaping its very unique solution to
the problem, but all are following the basic principles which govern the
|Box 4. Building Public Support. Example: Zambia National Roads Board.
An important element in the strategy to involve road users in the management of roads and win their support, was the launching of a supplement in the two daily newspapers to inform the public about the establishment of the National Roads Board. This has been followed up by monthly press releases in the form of an advertisement, to inform the public on Board activities and the funding for road maintenance by the Board. This has led to roads becoming one of the most hotly debated issues in the press. Politicians, councilors, contractors, consultants, road users and newspaper editors continuously write in the papers on road maintenance. Road users have been sensitized to the extent that no day passes without some news about roads in the daily and weekly print and electronic media.
Another initiative to inform, involve and win public support for adequate road management, has been the launching of a weekly radio program on Zambia National Broadcasting Corporation's national service in English and seven local languages. This program informs of actions taken and progress achieved in road maintenance management through the contribution made by the public by way of the Road Tariff and the Road Fund. These programs are not funded by the Board but are sponsored by stakeholders, key players and road users.
The National Roads Board has launched a road user driven National Program of Road Maintenance in Zambia. This program is being launched through the nine Provincial Road Engineers and the 61 District councils in the country. The road users represented in the District and Provincial Coordinating Committees, and through the Provincial Roads Engineers, submit a program of maintenance of Main and Trunk roads. This program is coordinated by the Ministry of Works and Supply through the Director of Roads. Funding of maintenance of Main and Trunk roads is done by the Board on a continuous basis on submission of a program and cost estimates recommended by the Director of Roads.
The maintenance of District or Urban roads and Feeder roads is funded through the 61 District Councils. The Board believes that the District Councils are the best fora at grass the roots level for road users to participate in the management of roads. The elected representatives at the 49 District, 9 Municipal and 3 City Councils, discuss the proposed programs of road maintenance drawn up by respective Directors of Works in the Councils, agree on priorities, and thus participate actively in the management of roads. The elected representatives further participate in the formulation of procedures for inviting tenders, in the evaluation and selection of winning tenders, and approve awarding of contracts on the basis of the recommendations of consulting engineers.
Source: R. A. Jhala
-Heggie, Ian G. 1995. Management and Financing of Roads - An Agenda for Reform, World Bank Technical Paper Number 275, Africa Technical Series, Washington D.C.
-Jhala, Raymond A. 1995. Ownership: Involvement of Road Users in the Management of Roads. Pa per presented at the XXth World Road Congress, Montreal.
-Schliessler, Andreas, and A. Bull. 1993. Roads: A New Approach for Road Network anagement and Conservation. United Nations Economic Commission for Latin America (ECLAC), Santiago de Chile.
-Zietlow, Gunter J. 1996. Financial and Institutional Reform of Road Conservation in Latin American and Caribbean Countries. Paper presented in the NASTO '95/PROVIAL Conference in Puerto Rico.
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