Financing of Urban Roads in Developing Countries: Experiences and Prospects for Decentralisation

Financing of Urban Roads in Developing Countries: Experiences and Prospects for Decentralisation


G Metschies, GTZ, DE



I. Introduction: The National Transport Policy in general focuses on the National Roads and Rail system, followed bythe concern for urban transportation for the masses of urban population. But the financing of the urban roads, which fall under the jurisdiction of the municipalities, is a much neglected field.

II. Main Ideas:Principles for financing urban roads were established already by Adam Smith in his book on the Wealthof Nations , which puts - valid up to now - a special emphasis on the road user principle ("Transport finances Transport") and calls for a general urban decentralisation. Modern approaches follow these principles also.

A. Analysis of the existing situation: the following types of Urban Road Financing exist:

1.) Construction of new urban roads

a) the Central European Model: development fees for Residents b) The former socialist model of Eastern Europe: Urban Roads provided free of charge by the central government budget
c) The Road Fund Model: Unified Road Fund for all Interurban and Urban Roads or separate road funds

2.) Maintenance of existing urban roads (with examples from developing countries)

a) In Central Europe maintenance of roads is financed in the Community by:

* the general urban budget, sometimes earmarked from:
* taxes on locally produced water and electricity (Namibia)
* part of vehicle taxes, part of fuel taxes, tolls on specific roads

b) In Eastern Europe and in newly decentralized cities: lack of budgets
c) Urban Road Maintenance Funds

B. Practical solutions for developing countries

* a) the Namibia Case : A fuel tax based Road Fund model for urban Roads and the need for Urban representation in the Road Fund Board
* b) the Kyrgyz Case : Vehicle taxes for urban budgets and its social aspects of the taxation scale
* c) solutions within the framework of urban infrastructure: UN-Habitat/WB standards for urban budgets (revenues and expenditures)

C. The taxation potential of the transport sector worldwide: A global research on vehicle and fuel taxes

* a) World Fuel Taxation Overview and individual fuel tax calculations
* b) World Vehicle Taxation overview and individual vehicle tax calculations


Association for European Transport