Friday, February 22, 2008

Romania: Upgrade of Motorways

Oxford Business Group Latest Briefing

Romania's government has laid out plans to extend the motorway network by more than a third this year. This is part of a $19bn investment plan which will enlarge the system to almost 2000 km in the next seven years.

Romania currently has less than 300km of European-standard motorways as part of its 15,900 km "national road" network. This compares unfavourably with countries such as Hungary, a considerably smaller country in terms of both geographical size and population, which has around 650km of motorways.

A plan drawn up by the ministry of transport and the National Company for Motorways and National Roads in Romania (CNADNR) sets out details to extend Romania's motorway network to a total of 1950 km by the end of 2013, including 120 km this year. During this period, some $18.7bn will be invested, including $2.2bn from the EU.

The EU money will specifically be spent on developing motorways along the "Pan-European transport corridors" that have been highlighted as important but under-developed transcontinental routes, of which two pass through the country. One, corridor IX, runs from the Bulgarian border at Giurgiu through Romania, Moldova to Ukraine and Russia. The second, corridor IV, connects the western city of Timisoara with Hungary and Central Europe, and then divides into two different routes, one east through the southern Transylvanian city of Brasov to Bucharest and Constanta on the Black Sea, and the other south through Craiova to Bulgaria and the Aegean Sea.

As the EU corridors suggest, Romania lies at a key position in Europe, but does not have the matching transport infrastructure to unlock its full economic potential. A lack of investment and political squabbles over tenders has hamstrung progress since the fall of the Ceausescu regime in 1989. While Ceausescu completed the admittedly impressive Trans-Fagaras road across the country's highest mountain range and kept the basic transport infrastructure going, only two motorways were completed - the 110km A1 from Bucharest to Pitesti in the north-east and between Bucharest and Constanta, as part of the planned A2 "Sun Motorway".

Progress on extending the A2 has been intermittent. Around 150 km has been completed, and the full 204 km is expected to be operational by 2010. Given the country's economic crises and political turmoil in the 1990s, some delay is not surprising but has prevented the realisation of the port's planned potential and limited the region's economic development.

Meanwhile, another extremely important motorway project, the $10.5bn Autostrada Transilvania, has faced delays due to political issues surrounding the project, but will see two major stages completed this year. This 415km-long motorway will link Brasov, north of Bucharest, to Budapest and Central Europe. The contract was awarded to American firm BechtelBechtel's management. Sections close to the Hungarian border and south of the large city of Cluj Napoca are likely to be completed and operational by the end of this year while the whole road is scheduled to be finished by 2013.

The Autostrada Transilvania will connect with the Bucharest-Brasov motorway, on which construction commenced last year and which is expected to be fully operational by 2014.

The government's seven-year plan also foresees the construction of several other motorways. One will follow the eastern corridor IV route from Timisoara to Constanta; another will go north from the capital to the central city of Targu Mures, and from there to the Moldovan border at Iasi, though this stage of the project has a more tentative timeline. A link from Bucharest to Giurgiu should also be completed.

Several of the motorway projects in Romania, including the Autostrada Transilvana, are being constructed on a build-operate-transfer (BOT) basis. This entails a contractor building the road on the government's behalf, and then operating it as a toll road until it has earned its contract fee, before passing it back into the government's hands. This is, of course, a convenient way to pass many expenses off the state balance sheet, but also encourages the contractor to ensure that the construction is swift, and the road well maintained.

For all the grand plans and optimism, the travails of the Romanian motorway network's development may not all be over. The government faces the hurdle of expropriating an estimated 9000 ha of land along the routes of the planned motorways. This is a difficult enough task in any country, given the problems of land valuation and local opposition. It is even more of a challenge in Romania, with its hazy post-communist land ownership deeds, bureaucracy and occasional but damaging corruption. The government must have the will to match its ambitions
without tender in 2003 by the then socialist government, provoking criticism from European funding bodies. Work was suspended on the election of the Justice and Truth (DA) coalition the following year, but restarted in 2006, still under

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