Workers on the D61 freeway near Nitra can be happy they have a job.photo:TASR
The Slovak Transport Ministry gave the green light to the continuation of motorway construction when they announced on August 16 that over 30 billion Slovak crowns had been allotted to the completion of existing projects and further development. Approximately 1.9 billion has already been used to pay off debts owed to Slovak construction firms, the ministry said.
Peter Barek, the director of the Transport Ministry's Road Infrastructure section, said the government had decided to continue the programme because the country was in desperate need of a modernised motorway system which would help it gain access to the European Union. Had the government continued the programme designed by the former government, over 55 billion crowns would be required - a sum, he said, which was out of the question for the cash-strapped state budget.
The 30 billion crowns that have been allocated for construction, according to Barek, will go first towards paying off the state's debts to Slovak construction firms. Barek stated that all debts dated before February, 1999 had been paid off, and that the rest should be paid off by September. "We took a loan from Credit Suisse [First Boston] for 5.5 billion Slovak crowns and this money will be available by the end of September," he said, "By the beginning of September, everything should be fully paid off."
But according to Pavel Obenau, assistant to the director of the construction firm Doprastav, the ministry decision was a case of too little, too late. The Slovak Road Fund owed the firm 672 million crowns in April and, according to Obenau, "they still owe us around 670 million crowns."
"This is an unpleasant situation," he continued. "The state owes us money and they are unable to pay so we cannot pay off firms we work with and then we have to suffer the penalties. This is a very unpleasant merry-go-round."
Obenau added that his firm had had to fire 1,000 workers last year, bringing their total number of employees down to 2,600 from last year's 3,600. And, although the state says that companies are being paid off, Obenau said his firm so far seen little money. "They are paying us back at irregular intervals, and as the debts are being paid off, new debts are being created," he said.
Ivan Chodák, an equity analyst for CA IB Securities, agreed that the situation was bad for construction firms, but added that it would have been worse had the government decided not to continue construction. The ministry's programme, he said, represented a sensible compromise between conflicting objectives.
"If the ministry had stopped construction altogether, the construction companies would be in even worse condition than they are now," he said. "On the other hand, if [the government] doesn't spend on highways, it will have to spend on unemployment [benefits for the construction workers who are dismissed as a result of the cutbacks]."
Obenau complained that while construction had been resumed, it was proceeding at a "snail's pace," leaving the construction firms running at far below capacity.
But Chodák again defended the ministry, saying that the government was right in taking a cautious approach. "The point is to finish highway construction projects - that is where most of the money is going. It would be senseless to leave [unfinished projects] as they are. It would be throwing cash away."
Martin Barto, chief of strategy for the SLSP state bank, agreed that the new programme "is not a waste of money." Barto also said that the state had had to excersise fiscal prudence in their budgeting. "The pace of construction should be adjusted to the conditions of the Slovak economy," he said, adding that after several years of cautious spending, a more rapid pace could be resumed.
The Slovak road programme was halted when the new government of Mikuláš Dzurinda defeated the former Vladimír Mečiar government in popular elections last September. The new government said that Mečiar's road programme had been an expensive attempt to buy votes, a luxury that the country could no longer afford. The government also said that little care had been taken either to ensure that road projects were sensible or to see that public money was used honestly.
As a result, many unfinished projects were halted, and Slovak construction companies found themselves almost insolvent due to the state's inability to pay their outstanding fees. Construction firms were forced to fire thousands of workers, and publicly pleaded with the government to continue construction and pay them the money owed.
Now, as a revised road construction programme comes to life, the plan has received mixed reviews. The Ministry says that it is doing all it can given the current economic situation of the country and analysts tend to agree. Slovak construction firms, however, say that the state has still not paid off all its debts, and that significant damage has already been done by the delay in settling debts.
