Friday, 1 April 2011

Jamaica's toll concession vs railway reopening

Jamaica wisely decided some years ago that a major highway upgrade from Kingston to Montego Bay and Ocho Rios would be commissioned as a PPP concession using tolls. The resulting highway – Highway 2000 – has had 46km completed so far, with another 85km under construction or subject to land acquisition. The total project will be 233km long and form the backbone to the country. It is being tolled with DSRC technology and cash at toll plazas. Clearly, electronic free flow systems were not thought to be worthwhile for Jamaica, or perhaps Bouygues (with little experience) took a cheap, low risk approach.

The first phase has a very positive cost/benefit ratio, the second does not but is more about economic development. However, the Jamaican government has a problem. The concessionaire Bouygues included in its contract that no competing mode can be established to compete directly with the toll road. This, of course, should have been restricted to roads, as it may be seen to restrict aviation, but the issue is not that. It is rail.

Jamaica’s railways have been long neglected and mothballed. However, they are also being revitalised, with passenger services expected this year according to Go Jamaica. I’m not going to express a view on whether that is a good idea or not, but it does raise one issue toll concessionaires often want reassurances over – competition. My view is that as long as competition is not state subsidised, then it should not be restricted. Private roads shouldn’t be seen as a right to a perpetual monopoly. Nevertheless, it does seem that Jamaica’s government might want to have a more integrated approach to transport policy.

2 comments:

  1. I am inclined to believe that this could be attributed to poor advice from their legal transaction adviser. The Jamaican people not only view the railway as an economical alternative but associate some of the best of their memories and lots of sentiment to the railway. It would be painful to be 'railroaded' by a poorly thought out no-competition clause.

    Any idea what breaching a contract in that nature would imply for Jamaica?

    And if you find that a PPP goes awry because of bad advice is there any recourse at all. I don't think you can ever be compensated but seriously what penalty is there beyond loss of reputation if a firm gave poor advice of this nature. Any thoughts?

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  2. It would be a matter of corporate liability insurance, and suing the firm for negligence. Quite something to try under the circumstances.

    However, it is rather ridiculous for the railway to be seen to make any meaningful difference.

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