Figeľ calls for a more realistic view of highway construction

Talking about highway construction is a popular activity for politicians. But the topic has become more of a political mantra than an actual strategy for successive governments, argues Transport Minister Ján Figeľ. He believes that the issue needs a more consensual, stable and sustainable approach. Figeľ, whose ministerial portfolio includes construction and regional development as well as transport, recently presented a new highway construction scheme that he says is realistic and pro-European in its approach. The Slovak Spectator spoke to Figeľ, whose department has also taken on the challenge of addressing the issues of illegal construction, deregulation of rents applicable in buildings returned to their original owners under the post-communist property restitution process, and adjustment of the country’s electronic highway toll system.

Ján Figeľ Ján Figeľ (Source: SME- Tomáš Benedikovič)

Talking about highway construction is a popular activity for politicians. But the topic has become more of a political mantra than an actual strategy for successive governments, argues Transport Minister Ján Figeľ. He believes that the issue needs a more consensual, stable and sustainable approach. Figeľ, whose ministerial portfolio includes construction and regional development as well as transport, recently presented a new highway construction scheme that he says is realistic and pro-European in its approach.
The Slovak Spectator spoke to Figeľ, whose department has also taken on the challenge of addressing the issues of illegal construction, deregulation of rents applicable in buildings returned to their original owners under the post-communist property restitution process, and adjustment of the country’s electronic highway toll system.

The Slovak Spectator (TSS): The Ministry of Transport, Construction and Regional Development has introduced the Programme for the Construction of Highways and Dual Carriageways for 2011 to 2014, which sets out some fundamentals for the upcoming years. What are these fundamentals? Will this government be able to deliver a cross-country highway for the nation during its term?
Ján Figeľ (JF):
Highway construction is an important economic and modernisation tool since it is directly linked to economic growth, employment and the development of the regions, and in Slovakia the eastern and western parts of the country display significant differences in terms of the availability of safe and high-quality infrastructure. This topic, nevertheless, has become more of a political mantra rather than a predictable strategy of particular governments. The issue needs more consensus, stability and sustainability as opposed to a kind of cyclical political approach – and I am saying this as a former EU commissioner as well as minister of a wide-ranging department.

The cross-country highway between Bratislava and Košice should have been completed back in 2010, if we were to believe the promises given by the previous government. There have been numerous illusions created around highway construction but for this very reason we had to reassess some of these approaches after I took over as minister. This was because the previous government based the strategic plans on public-private partnerships (PPP), which should not be the dominant but rather a supplementary form of funding. Backing out from this model, which was overpriced and in some of its provisions even unconstitutional, I have to say required some courage. Yet, I consider our four-year programme realistic.

We presented the plan in May. The delay from April [when the ministry had originally been expected to submit the scheme] to May was negligible because we tried to eliminate the possibility of fines imposed by the legacy of PPP packages from the previous government and it was not easy to back out from these obligations.

This is not a race for us; but we want to construct as quickly as possible, at a high quality and for a reasonable price, and to deliver what the previous government promised but failed to deliver.
In more specific terms, the plan includes a connection between Žilina and Prešov, which are [D1] sections of the first and third packages that, originally, a concessionaire had been expected to build and operate for 30 years at a lavish price. In June, the construction of the first of these sections, near Levoča westwards, will be launched. When compared to the overpriced PPP package, our negotiated price is one third lower than the price recommended in an opinion by a state expert and the nominal value set out in the call for tenders by the state. Yet another bonus is that most of the costs will be reimbursed in the form of grants from the European Union. This is all good news.
The largest package has been held up by one section, between Hubová and Ivachnová, due to environmental concerns; we still do not have the consent of the European Union, which is why it was very important to reopen this package.

The programme includes the construction of sections of the D1, as well as D3 highways in Kysuce and also the launch of construction of the D4, which will bypass the capital. It also concerns dual carriageways, which are a little cheaper but at the same time very necessary for the overall road network: the finalisation of the R1, which will link Trnava and Banská Bystrica, will make it the longest uninterrupted section of dual carriageway. We will also launch construction of the R2, linking Trenčín and Košice, and sections of the R3 in Orava are also planned. The R4, which will connection Svidník and Košice with Poland and Hungary (in the direction of Miskolc, in Hungary), is also on our list, including some additional sections, for example the R5 and R6 heading to the border with the Czech Republic.

What I consider fundamentally new is that we plan to extensively invest in the restoration of first-category roads, which have been neglected over the past 20 years. These roads make up 49-50 percent of the transportation network in Slovakia but have been very poorly taken care of. We are planning the reconstruction of almost 700 kilometres of first-category roads altogether.

TSS: In terms of duration, does your government aim to wrap all this up by 2014? Is this also the timeframe for delivering a cross-country highway link?
Yes, this should be covered during four years, while some sections will take more time. I am referring to the tunnel in Višňové near Strečno, which is the most difficult section, but also a key to the connection between Žilina and Prešov, and is of symbolic importance. We want to launch construction at the beginning of next year at the latest, and the time required for construction is estimated to be 5 years. Thus a complete connection, with tunnels, between east and west can be expected by 2016, but most of the sections will be finished by 2014.

Why I am mentioning this? If the previous government had launched construction of the best-prepared sections we could have had them ready by now. [Former prime minister] Robert Fico said at the tunnel in Višňové back in August 2007 that it was the best-prepared section. Yet we are talking about a tunnel for which the research drilling had already been done as long ago as the Mečiar government [i.e. before 1998]. Thus several governments have passed [but] now, I hope, we are going to be able to launch real construction; we are preparing the documentation for the project and the tender. Without the tunnel in Višňové, this construction will not be complete.

TSS: However, it will be equally important to secure financing for the plan. After you took over and cancelled two PPP projects for highway construction, you said that the government would aim to make more extensive use of EU funds for highway construction. How successful have you been in fulfilling this ambition?
Numerous sections have been included in the programme up to the eastern border, while the volume of finances stands at €5 billion, and most of this should be launched within this term but will also continue in the years after 2014. The basic source is the European Union budgetary framework for 2007 to 2013, in which, for example, we had included for highway construction, again due to the incorrect approach of the previous government, some not-very-well-prepared projects; thus, the drawing of funds had been very weak. Currently we are in the fifth year of the 7-year budget for drawing funding from the EU Operational Programme for Transportation, which is now roughly 20-percent drawn. Thus we have the core of the work ahead of us with much less time remaining, but I consider this a key responsibility: to be able to use the EU funding in times of crisis and in a country which has extensive environmental and infrastructure deficits.

From the 2007-2013 budgetary period, we still have €700 million for highway construction, but within this amount are also included resources for railways and first-category roads, while the total amount of money allocated for transportation stands at €3.2 billion.

Intensive negotiations on the 2014-2020 budget are expected next year and we are already counting on assistance for financing longer sections, the so-called line construction, so that we do not cover only shorter stretches but plunge into construction and strategies that last longer than 3-4 years. After all, the construction of a tunnel lasts longer than one term of a government, thus it is logical to link periods together.

Then there is also the financing from the state budget, which will co-cover some projects, and in some other instances construction will be entirely covered from the state budget, since the state budget should reflect the priorities of the country and transportation is one of the priorities of the current ruling coalition.

Another important form of financing is the European Investment Bank (EIB), the largest bank on the continent, in which Slovakia is a shareholder: our country has an active loan open for large projects of up to €1.3 billion. Some construction we would cover from this loan and then subsequently have re-financed from EU funds.

The electronic highway toll system serves as another source of financing, and its launch was planned in such a way that highway users contribute to the maintenance and operation but also the construction of roads. We are now modifying the system so that it is not loss-making but, on the contrary, generates profits.

Highway bonds will be another source, and the revision to the law on the pension saving system already plans this option, within which the so-called pension fund management companies, or DSS, will be given the opportunity to invest in highways through state bonds.

Last but not least, there are the PPP projects, and we have already started discussing this form of financing in the case of the D4 bypass of Bratislava, which, also thanks to the highway toll, could have been differently tuned, with more balance in terms of the distribution of risks between the concessionaire and the state.

I consider these sources of financing to be very important in terms of diversification, so that we do not remain dependent on a single source, because such dependence is vulnerable to abuse. If the state shows that it is dependent only on what one partner offers in the form of a PPP, then the partner will certainly submit the bill for that.

PPP is one form, but it must be transparently prepared and must use a good tendering process; this means no mega-packages that regular firms cannot even consider, but appropriate tenders where the ability to compete means a good price as well as conditions advantageous to the state. This is what we want to apply.

TSS: Your ministry has announced changes in the electronic system to levy highway tolls on vehicles over 3.5 tons, which was launched last year and has since been showered with complaints from road carriers. What modifications do you plan to make to the system?
The electronic highway toll system was overpriced and had extensive problems. I responded to the complaints in the form of a dialogue and I am seeking solutions so that we can get the system into a better shape, and so that it is fairer and more beneficial for the state and not just for the concessionaires. This is in fact a PPP project over 13 years: a private firm built the system, which is gradually being paid off by the state, and since in the first years the system is so expensive it is also a burden on the state budget. We are negotiating how to modify the contract and agreements in a way that the conditions of operating the system are more advantageous for Slovakia. In addition to that, we are also dealing with a dispute with the European Commission so that Slovakia is not sanctioned for a second or a third time, since the fines will then have to be covered by the whole society.

Based on cooperation with the road carriers, we have reduced sanctions for violations by 60 percent through an amendment to the law. These sanctions were leading to bankruptcies but today they serve as a deterrent to violation of the rules. Then we also cancelled the requirement that each carrier first had to deposit a certain amount into the system so that a kind of invoicing relationship was established.

A regulation which joins smaller [tolled highway] sections together is in the pipeline since the existence of disjointed sections made the system under the previous government overpriced, producing extra costs. The change is bringing savings and advantages for road carriers, who will not be charged for unfinished sections. We are also working on other changes which we will gradually apply, but all this we plan to do in dialogue with the road carriers, for example with UNAS or ČESMAD, as well as the national highway company NDS and the operator of the system, Skytoll, and with the involvement of the toll police and the Slovak police force.

TSS: There is still an ongoing procedure against Slovakia over a violation of the accession treaty in the public procurement process used for the electronic toll system. Brussels has not accepted Slovakia’s explanation and in October the EU sent its reasoned opinion to Bratislava. At what stage is the case right now?
We have sent our response and now we are waiting for the stance of the European Commission, which could be the definite stance regarding four points. The approval of specific solutions is within the jurisdiction of the EC and I do not want to predict these. I can only restate that our goal is that Slovakia is not fined again by the EU. This lesson has been an expensive one.

TSS: The state has long tolerated the construction of illegal or unlicensed structures. Your ministry has prepared a small revision to the Construction Act. How will this change the treatment of illegal construction sites? Is legislation enough to address this problem?
The legislation can only partially solve the problem since laws only set the minimum morality that society agrees on. Yet we want to make sure that if construction is illegal, then someone has to be made responsible for such a state of affairs: someone must have financed such a structure, and someone else must have built it and overseen it. So far, this has not been differentiated and sanctioned. We have known about illegal construction but somehow society has developed a tolerance for this illegal conduct, which isn’t good.

TSS: Why has society tolerated illegal construction for so long?
Partly it comes from communism, when the law wasn’t considered a servant of justice but rather a way to control those who were weaker and subordinate. The law really comes from 1976, which means that – also mentally and generationally – it has been overtaken and has been modified via several revisions, even revisions of revisions. This is why we are working on a new law, which would consider the current situation in the 21st century.

With a separate revision, a faster one, we want to deal with these structures because it is a phenomenon that the government considers a problem, and we want to create new tools to eliminate illegal construction. Unlike during the previous era, there are now much more clearly defined fines and sanctions for not observing the law. There is a wider circle of so-called responsible persons who are being assessed during the whole process of construction, throughout all construction activities, and there are much stricter fines for drafting an illegal construction project or investing funds into such a structure. So far the legislative process is not wrapped up, but we want this law, along with the revision to the penal code, to strengthen the state in its effort to fight illegal construction.

TSS: You have also pledged to solve the challenge that the planned deregulation of rents for homes returned via restitution would bring. What solution are you proposing and why do you consider the issue to be an urgent one?
The state had caused an injustice and now it has to fix the situation, which has its roots in communism. Based on our survey, the problem concerns about 1,000 apartments and about twice as many tenants of such returned apartments. The right to ownership is one of the key entitlements respected by any free society and by democratic countries. Here it was only partially respected, since it was acknowledged, but was not fulfilled. The state installed regulated rents but at the same time set conditions under which certain owners were able to use their houses, with the tenants being given certain social security. In reality all this meant that people have not really invested in such houses because the owners had difficulty deciding on their own property. Often, older tenants faced harassment in order to vacate apartments or on the other hand to remain in the rental relationship since it was protected by the law. There are nine collective lawsuits filed against Slovakia in Strasbourg at the international court and hardly any other result can be expected than fines that Slovakia will have to pay.

We are solving this situation with three laws: the first is a measure to create a transitional period and then support those who cannot afford to solve their housing situation immediately and who need state support or must depend on their municipality in terms of a solution.

There will be a five-year transition period for liberalisation of rents and, on the other hand, those eligible for state support will receive alternative housing from the respective municipalities. The state will allocate €73 million to help municipalities to fund the purchase of apartments for such citizens. The second law creates an environment making it possible for municipalities to deal with the situation for such families.

The third law comes from the workroom of the social affairs department and regulates state contributions for social housing to help the socially weak to bridge this situation. It would be irresponsible towards the owners, tenants and even the municipalities to leave this situation unresolved.

More information about Slovak real estate market you can find in our Real Estate and Construction Guide.

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