SSATP Working Paper No. 26

Under a concession system the state grants a franchise the right to finance, build, own, operate, and maintain a public infrastructure for a given period, and to charge users for that service. Concessions are normally stand-alone, single-purpose entities that are expected to finance themselves eventually, if not initially, without recourse to their shareholders. They are independent corporate entities run by a dedicated staff that seeks career advancement within the concession company. Invariably, the successful concession has been created because of a compelling economic need. This paper refers mainly to toll roads. However, a concession system can be used to run many other public services, such as bridges, telecommunications, and airports. In order for a concession to be successful, the State's granting authority must be clearly defined. Typically, this authority is vested in the Ministry of Transport, and the road that needs to be built is approved as part of a national highway plan. The Ministry exercises its authority under a special law. But there are exceptions to this design. In the United Kingdom concessions have been authorized by special acts of Parliament. Examples include the Dartford River Crossing and the Channel Tunnel High Speed Rail Link, for which a bill is pending in Parliament.

File Type: 
PDF
Date of Publication (Year): 
Apr 1996
Author: 
Michael J. Hamilton