Calls for funding to bolster Eastern Europe’s telecoms

Date: 25/04/1996

By Thomas Klau

THE daunting task of rebuilding Central and Eastern Europe's telecommunications infrastructure will run dramatically behind schedule if investment spending is not increased by 100&percent;, the European Commission is warning.

Commission experts have estimated the investment needed to bring the accession candidates' telecoms sector up to the standard of modern economies at an annual 3 billion ecu until the year 2000 - double the volume of investment made in 1994.

After a surge in 1993, western spending on Eastern Europe's antiquated telecoms infrastructure has dropped below initial expectations, partly because some governments have been sluggish in opening their markets to competition, a precondition required by most western companies before making an investment.

“We are aware there is an investment problem,” said an EU official.

“The worst a government can do is to shield its market from competition for too long.”

The collapse of a bid by Stet, the Italian state-controlled telecoms holding company, to acquire 25&percent; of the Russian telecoms company Svyasinvest in December last year, also highlighted the political and legal uncertainty which still surrounds major business deals in Central and Eastern Europe.

Experts point to Hungary and the Czech Republic as the two East European countries arguably furthest down the road to full telecoms liberalisation. Between them, Budapest and Prague have received more than 50&percent; of the total multilateral telecommunications funding for the region, which amounted to about 2.9 billion ecu between 1990 and 1994.

Multilateral funding is mainly provided by the European Bank for Reconstruction and Development (EBRD) in London, the Luxembourg-based European Investment Bank, and the World Bank in Washington.