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EC 'RESERVED' ABOUT USING FUNDS FROM OTHER OPERATIONAL PROGRAMMES

New highway money proves elusive

AFTER the coalition government led by Prime Minister Iveta Radičová took the reins of power in July 2010 it terminated two public-private partnership (PPP) projects designed to build highways, calling the projects overpriced and ineffective. The new government said it preferred to finance construction of new highways from the state budget and from EU funds. But Transport Minister Ján Figeľ received a rather chilly reception to the idea of redirecting funds from other EU-supported operational programmes towards highway construction when he visited European Commission officials in Brussels recently.

AFTER the coalition government led by Prime Minister Iveta Radičová took the reins of power in July 2010 it terminated two public-private partnership (PPP) projects designed to build highways, calling the projects overpriced and ineffective. The new government said it preferred to finance construction of new highways from the state budget and from EU funds. But Transport Minister Ján Figeľ received a rather chilly reception to the idea of redirecting funds from other EU-supported operational programmes towards highway construction when he visited European Commission officials in Brussels recently.

The Radičová cabinet proposed re-allocating an additional €639 million for highway construction on February 2, with the largest portion, €389 million, coming from five other operational programmes partially financed by EU funds. These operational programmes deal with the information society; research and development; education; employment and social inclusion; and competitiveness and economic growth. One of the arguments advanced for making this re-allocation was the low level of EU funds which have actually been drawn within these operational programmes, currently about 10 percent. Within the overall operational programme for construction, an additional €250 million was proposed to be re-directed towards highway construction.

Transport Minister Figeľ travelled to Brussels in response to a letter from Johannes Hahn, the Commissioner for Regional Policy, and on March 1 met EC commissioners responsible for programmes from which Slovakia proposes to divert funds towards highway construction. Figeľ said after his return from Brussels that the position of EC officials to the idea was rather “reserved”.

“The commission is, according to EC Secretary General Catherine Day, reserved about the idea of reallocations between various operational programmes but it is more open to discussion on transfers within the Transport Operational Programme, ” Figeľ said, as quoted by the TASR newswire.

Figeľ added that the EC expects Slovakia to first draw down €700 million already allocated for highway construction and only after that happens should a re-allocation from other programmes be discussed. The minister also said that Slovakia is expected to demonstrate its ability to use the funds, which would be sufficient to build roughly 60 kilometres of highway between Prešov and Martin.

“I am convinced that Slovakia is able to submit realistic enough projects to draw the whole allocation within the transport operational programme,” Figeľ said, as quoted by the Euractiv.sk website, adding that after this is done allocation of funds from other programmes might be further discussed.

Hahn’s letter noted that Slovakia should improve its drawing down of the funds already allocated within the transport operational programme.

“Slovakia has been allocated €11.6 billion under Cohesion Policy funds in the 2007-2013 programming period,” Hahn wrote. “The Transport programme accounts for €3.2 billion of the Cohesion Fund and the European Regional Development Fund assistance. The current performance of this programme is relatively poor (contracting is at the level of 40 percent and payments at 17 percent) and the Commission services have therefore in the past already requested efforts [by Slovakia] to improve its absorption capacity. An increased allocation could indeed increase this risk of non-absorption of funds.”

Hahn’s letter also pointed out that Slovakia was proposing re-allocation from programmes which relate closely to the EU’s Europe 2020 objectives which are aimed at supporting competitiveness, innovation and research as well as investments in further developing further the information society.

Robert Fico, leader of the Smer opposition party, who was prime minister of the cabinet that had prepared three PPP highway construction projects, two of which were cancelled by the Radičová government, criticised the current cabinet for completely halting highway construction and for its inability to obtain EU funds for further construction. He stated the Radičová government’s decision to scrap the two PPP projects was “only a political decision with the aim to hit the cabinet which was here between 2006 and 2010”.

Radičová stated in response that Slovakia had not officially asked for a re-allocation of the EU funds and does not believe the outcome of the meetings held by Figeľ was a final refusal on the part of Brussels.

Figeľ originally wanted to use re-allocated funds for construction of stretches of the D1 highway that will connect Bratislava and Košice via the so-called northern route. Fico’s cabinet had planned to finance the construction of these highway sections via the PPP projects. Since the cancelled PPP projects were in a nearly complete stage of preparation, several stretches are ready for actual construction to begin and the current cabinet has been gradually announcing tenders for the work while seeking the necessary funding.

Figeľ has stated that there is now the possibility that the necessary funds might be drawn from private sources or through a loan from the European Investment Bank.



Halted PPP projects



The Radičová cabinet completely ended the last remaining PPP project for highway construction last December. Minister Figeľ reportedly responded to pressure from other coalition partners who saw this method of financing, building and operating highways as too expensive and he cancelled what was known as the third PPP project which was to build and operate unfinished sections of the D1 cross-country highway.

Žilinská Diaľnica, a consortium led by the German company Hochtief, was the concessionaire chosen under the third PPP package to design, build and operate about 30 km of the D1 highway between Hričovské Podhradie and Dubná Skala near the city of Žilina. Of the three PPP agreements, the third package was considered to be the most technically demanding as it included a tunnel almost 7.5 kilometres long between Višňové and Dubná Skala.

Earlier last year, in September, Figeľ had terminated the so-called first PPP package, which was to construct five stretches of the D1 highway covering 75 kilometres between Martin and Prešov. Even though a consortium had been selected via tender to execute the project, the PPP was terminated after Figeľ decided not to extend the deadline for the project to close its financing arrangements. The minister’s decision prompted objections from the leaders of the previous government who had advocated PPPs as the best method for advancing Slovakia’s highway construction goals as well as from the consortium of firms that had won the concession.

The first PPP package had been in preparation since early 2009 and the actual construction work was to have been completed by a consortium involving Doprastav and Váhostav-SK, two major Slovak construction firms.

Fico’s government had launched all three of the PPP packages but when it left office only the second PPP package was in its final phase, an agreement had been signed with the consortium – in this case Granvia – and construction had started. Granvia is building 52 kilometres of the R1 dual carriageway between Nitra and Banská Bystrica under this PPP. Its four highway stretches should be gradually put into operation during 2011 and 2012.

The current governing coalition has promised that construction of sections of highways and dual-carriageways will continue, particularly those parts that must be completed to finish the D1 highway to connect Bratislava and Košice, with Figeľ indicating that 2016 is the earliest realistic date for completion of the D1, according to the Pravda daily.


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