"We have started discussions with the Transport Administration on how to ensure a strategic perspective on financing Estonian roads," Svet said. "I believe we must analyze all available options within this work, including the experiences of neighboring countries and how they finance their roads."

Estonia has considered PPP models in the past. In 2019, then-Finance Minister Martin Helme (EKRE) proposed PPPs to accelerate the expansion of major highways like the Tallinn-Tartu, Tallinn-Narva, and Tallinn-Pärnu routes. The Libatse-Nurme section of the Tallinn-Pärnu highway was selected as a pilot project.

By 2020, the Ministry of Finance, the Road Administration, and the State Support Services Center began seeking a consultancy firm to implement the project. The plan was for the chosen tender to construct and maintain the road, with the state repaying the developer over 20 years. However, despite interest from eight companies, no consultancy was selected, and discussions stalled. A change in government in early 2021 saw Finance Minister Keit Pentus-Rosimannus (Reform) reject PPPs for road construction, citing inefficiency.

"In practical terms, this would have meant the state getting fewer kilometers for a higher price," Pentus-Rosimannus, now at the European Court of Auditors, said. "Using only public sector funds would allow four-lane highways to be completed more quickly." However, no major new highways have been completed since.

Declining EU funding has added to the challenges. The European Commission has indicated the EU's Cohesion Fund is unlikely to support future road projects, and additional funding from the military mobility fund remains uncertain. Svet acknowledged the need to reduce reliance on EU resources, stating:
"These are Estonian roads, and they are used by Estonian people. We should be thinking about how to finance them ourselves. To hope that funding will come solely from EU resources, as has largely been the case in recent years, would simply be naive."

Example of Latvia

Latvia's recent €250 million PPP project, the Kekava bypass, completed in 2023 after 17 years of planning, provides lessons for Estonia. Latvia is now preparing its next PPP project, prompting Svet to seek insights from Latvian Transport Minister Kaspars Briškens.

Svet remains cautious about private funding in road construction, stressing the importance of evaluating lifecycle costs and justifying decisions. With EU funding diminishing and traffic demands rising, Estonia must find sustainable solutions.

While work on the Libatse-Nurme section of road will begin next year, future projects may require more domestic funding, necessitating a strategic review of financing options.

Public-private partnerships (PPPs) are long-term agreements between governments and private sector entities to fund, construct, and manage public services or infrastructure, with costs typically recovered through taxes or user fees. While PPPs are praised for innovation and risk-sharing, they have come in for criticism for their higher costs, issues with accountability, and debates over whether they represent actual privatization, with mixed evidence on their overall efficiency and value.

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