Attracting Private Financing to Roads: Case Study of Bosnia and Herzegovina

Abstract

While countries worldwide have used public-private partnerships (PPP) to improve their road networks, such investments have not yet materialized in Bosnia and Herzegovina (BiH). Attracting private financing to road projects would help the country to keep road infrastructure in acceptable condition and carry out required expansions under budgetary constraints. Because of relatively low traffic levels on potential PPP motorways and expressways in BiH, it is anticipated that a combination of government support (e.g., capital grants and/or availability payments) and toll collection would generate enough revenues to attract private partners to compete for public-private partnership (PPP) road projects in BiH. The paper presents, as a case study, the quantitative financial assessment of a potential PPP project, the Mostar – Zvirovići motorway section, showing that the project could attract private investors with a combination of availability payments and construction subsidies to keep the toll rates at the deemed affordable level of €0.06/car-km.