Akashi-Kaiko bridge is world’s longest suspension bridge (total length= 4km; suspended length=2km ). It is located in Japan connecting two main islands called Honsu and Sikoku. Recently I had chance to visit this bridge. Yes, as a civil engineer I can say this bridge is awesome, magnificent and beautiful. During construction, this bridge suffered a big earthquake that increased its span by about 0.80m than original length. Thanks to Japanese high tech and safety measures, only 6 injury occurred to build this bridge and no one lost life during 10 years of construction works.
Besides its technical marvels, i was also interested in hidden parts – financial and economical side of this bridge.
Wikipedia mentions – “The total cost is estimated at 500 billion yen, and is expected to be repaid by charging drivers a toll to cross the bridge. The toll is 2,300 yen and the bridge is used by approximately 23,000 cars per day. At 2300 yen/car annual revenue would equal 19.5 billion yen. Given the interest expense on 500 billion yen, this bridge will never be repaid. But annual revenue is around 4% of investment, so with near zero interest rates in Japan, the bridge will pay for itself in 30 years, plus enable the growth of the overall economy in the region.”
I had doubt on the wiki’s statement. So, I did some research with authentic publications. After some study i found that, wiki is partially correct.
The bridge was build during the times when roads and trains were under Japanese government control. 67% of the investment for the construction of this bridge (and the related highway) was done by central government and rest were divided between 10 other local governments. Interestingly, all the government investments were at 0% interest rate.
In addition, loans were taken in the form of government guaranteed bond, private sector bond and pure loans. Similarly, Japan Railway also had small investment (although there is no train way in Akashi-Kaiko bridge, there is train ways in other bridge connecting two islands which same company operates, hence the loan).
How the investment will be paid back?
In 1990s, there was change in government policies and many government bodies were privatized. This resulted in complicated system of revenue collection and payment system for the bridge. Railway has to pay to the Highway company for leasing the train ways. In addition, the highway itself collects the toll. The total revenue is to be split up for loan payback and maintenance and operation of bridge.
Figure below shows the summary of payment method.
As wiki mentioned earlier, the cost of bridge is so huge that even with cumulative traffic tolls, the revenue will not be sufficient to payback the normal interest rate. However, as most of the investment was done by government at 0% interest rate, the pay back period of this bridge is estimated to be about 45 years (including cost of highways).
The fact remains that investment by government in such massive projects becomes mandatory if we want to develop the society as a whole.
Just side note: Government of Japan has taken massive loans from World Bank for infrastructure development. However, most of the loans were re-payed in 1990s and now there is almost no loans left to be repaid.