Historically, in a country that has high taxes, investment in road and rail has for the most part been financed by the state. The same is true for the operation and maintenance of the infrastructure in these sectors. However, politicians of all hues in Sweden have emphasised the importance of investigating the possibilities of alternative financing to make better use of funds. As a result, a government working group was commissioned to investigate the options.
In December 2000 this committee presented a report – Alternative Financing Through Partnership: A New Way of Financing Investments in Roads and Railways – that explored the options. The panel, connected with the Ministry of Industry, Employment and Communications, presented a model of financing roads and railways through PPP.
The model was similar to that used to finance the Arlandabanan (the high speed train to Stockholm's international airport) which was the first infrastructure project in Sweden to be jointly financed by the government and private investors. The Arlandabanan project also involved granting exclusive service rights to one company, A-Train. In addition, users pay for the service and not the government.
The working group suggested that a subgroup should be asked to develop the financial model for PPP and suggested that it be tested on three projects: E4 (a road bypassing Uppsala with an estimated construction cost of £182m), Norrortsleden (a road in Stockholm with an estimated cost of £112m) and Västkustbanan (a railway project in Halland with an estimated cost of £105m). But that is where the project seemed to grind to a halt.
Oddly, the new bill makes no mention of the report on PPP … This is understood to be a concession to get the bill through parliament
In October last year the industry ministry introduced a bill concerning investments in infrastructure for 2002 to 2004. The proposals, put together by the Social Democratic minority government and the Left Party, were to invest £840m in roads and railways from this year to 2004. It also outlined plans for 2004 to 2015, the planned investment for which period is said to be £26bn – nearly half of which has been earmarked for road and rail.
The government has stated that most infrastructure projects will be financed by grants for the period 2004 to 2015, with a minority receiving loans through the National Debt Office. Oddly, though, the bill makes no mention of the earlier report on PPP. This conspicuous absence is understood to have been a concession made by the Social Democrats to the Left Party, in order to get the bill through parliament. The Left Party is strongly against any move towards privatisation of public roads.
So where does all this leave private investment and associated opportunities? Sources at industry ministry have hinted that the door is still open but are unable to say if and when any such proposal will get the go-ahead.
Everything hangs on the results of the general election next Sunday. The conservative party, Moderata Samlingspartiet, which received 22.9 % of the vote in the 1998 election, is eager to test PPP in roads and wants to invest an additional £4bn in roads for 2002-15 on top of the £3.3bn planned by the government. This view on PPP and road investment is supported by the other conservative party, the Christian Democrats, who got 11.76 % in the 1998 election. The liberal party, Centern, which received 5.1 % of the vote in the 1998 election, and Folkpartiet (4.7 % of the vote) are also in favour of PPP but focus more on investment in railways than roads.
This piece was co-authored by Jörgen Sandquist, managing associate of the construction law group at Linklaters, Stockholm, and Victoria McKinnell, a solicitor at Linklaters, London.