Transport failings hamper investment

Date: 11/11/1999

By Tim Jones

TRANSPORT network improvements are often relegated to the second division when commentators talk about the deep-seated reforms needed to bring the former eastern bloc into the EU.

The costs of subsidising agriculture and regional aid hand-outs rate well above the need to upgrade central and eastern Europe's highways and rail systems, tighten up their truck regulations and bring their airlines up to western standards and profitability.

This should not be the case - and applicant governments know this, even if western European opinion-formers do not.

Among multinationals, inadequate transport infrastructure is one of the most commonly cited reasons for limiting investments in the countries of central and eastern Europe (CEECs). As the former Soviet satellites expand, they are running into serious bottlenecks on their roads and at their airports.

Freight transport patterns have altered significantly since the fall of the Berlin Wall; a fact starkly revealed during the war in Kosovo. Fears that the blockade of Yugoslavia would harm the newly-liberalised CEEC economies failed to materialise at least in part because, over the past ten years, the tonnage shipped on the Danube between eastern states has more than halved.

A short drive on the German, Belgian and even British motorways shows that the CEECs' integration into intra-European trade is growing prodigiously, with PL truck plates almost as much in evidence as E and CH.

Yet if the EU's full market forces were to be unleashed onto these economies tomorrow, they would quickly be strait-jacketed by their infrastructure and fleet quality.

As former Transport Commissioner Neil Kinnock put it in a recent speech: “Nothing symbolises or serves the integration of Europe better than the physical linking of transport systems, and nothing is more important for the development of the applicant countries than the achievement of efficient infrastructures.”

A study drawn up by the Brussels-based Centre for European Policy Studies estimates that investment in transport infrastructure in the CEECs will have to rise from its current level of just over 1&percent; of gross domestic product every year to 2&percent; if they are to cope with the single market.

Four years ago, transport ministers from both sides of the continent launched a 'transport infrastructure needs assessment' to identify the network developments necessary for the enlarged Union. Since then, the European Commission has forecast that investment by the candidate countries alone in the 'Crete Corridors' - nine designated essential transport links between east and west Europe - will come to €50 billion over the next 13 years.

In the air, the two biggest applicant countries, Poland and Hungary, are looking for exemptions until 2005 before their airlines, LOT and Malev, are exposed to the full force of the EU's open skies. Both are bringing in outside investors, but neither feels their carriers could cope yet.

Last month, Malev reported an increase in operating losses - €12.1 million in the first half of the year, up from €2.5 million during the same period in 1998 - at least in part because of growing price competition in the whole European market.

EU-wide price wars have hit carriers like Malev hard since they attract transit passengers looking for cheap deals from Germany, the Netherlands and Belgium. The lucrative and steady business traffic won by their big western counterparts is beyond their grasp.

Airport development is, however, in progress. Budapest's Ferihegy Airport opened a spanking new €110-million terminal last December, following on from the €115-million terminal opened a year earlier at Prague's Ruzyne Airport.

As negotiations kick off on the transport chapter of the EU's rulebook, the CEECs are running into problems with the quality of their trucking fleet. Heavy goods vehicles cause one-fifth of all road deaths and the Union now operates a system of road-side checks, which can result in the immediate banning of lorries.