Analyzing the Hybrid Financing Deep-Discount Project Bonds and Land Leases for a New Toll Road Financing Model

Abstract

Infrastructure has been discovered to be the backbone of an economy due to its influence on business and productivity. However, a significant investment funding gap was observed in infrastructural projects, particularly regarding toll roads. Therefore, this paper aims to provide a solution to fill this gap through the use of a hybrid financing model with deep discount project bonds and land leases. Both Latin hypercube and system dynamics simulation methods were used for analysis due to their ability to handle large and complex systems. Moreover, a case study was used to accurately depict the concept. The simulation results showed it is possible to overcome the risk of the ramp-up at first operation by avoiding land acquisition delays, minimizing construction cost, and optimizing toll road tariff and deep discount bond yield interest instead of creating a new entity. Furthermore, it is also possible for the government to improve its revenue by renting the land along the toll road in order to reduce the dependence on land acquisition costs from the state budget allocation.