BOT in Motorway Development: Hungarian Experience



BOT in Motorway Development: Hungarian Experience

Authors

MURANYI M, Ministry of Transport, Communication and Water Management and JASZBERENYI M, University of Economics, Hungary

Description

As most of the other Eastern and Central European countries, Hungary met with the growing demand of road users in the early nineties, and it was facing extremely severe financial difficulties as it has been trying to balance all the competing urgent deman

Abstract

As most of the other Eastern and Central European countries, Hungary met with the growing demand of road users in the early nineties, and it was facing extremely severe financial difficulties as it has been trying to balance all the competing urgent demands during the period of transition into a market economy. Under serious budgetary constraints caused by external and internal indebtedness and worsening macroeconomic conditions the tasks included rehabilitation and reconstruction of the existing and constructing the missing infrastructure, including road network. The financial sources of the Government earmarked for this purpose have been strictly limited, since the major part of fuel taxes - which is the main revenue source of the Road Fund, established by an Act for financing road maintenance and development - is already consumed by the highly deficitary State budget. The Government has not been in a position to finance development of large and expensive transport network entirely from general taxation and public borrowing. Raisirig further loans or guaranteeing these by the State for the road sector would have been meant that high priority should be assigned to this sector for many years, which seemed to be socially undesirable. Extra-budgetary financing in form of public-private partnership, was the only option to attract additional (mainly foreign and private) capital into the road sector.

The Act No. XVI/1991 on Concessions and the Bylaw No. XXXIX/1992 on Transport Related Concessions enacted by the Hungarian Parliament in 1991 and 1992 made possible and created a secured legal background for BOT type motorway concessions awarded by the State through international tendering. The law on the Road Fund (No. XXX/1992) - approved by the Parliament in May 1992- allowed to finance preparations and undertake financial obligations in the name of the State for the concessions from the Road Fund.

The concession is documented in a Concession Contract which specifies the rights and responsibilities of the sponsoring government entity and the concessionaire. Principal components include investment undertakings, the regulatory/tariffstmcture, penalties for non- performance, provisions for termination and concession time period.

Publisher

Association for European Transport