Bulgarian road-building steps up a gear

By bne IntelliNews November 9, 2010

Nadia Damon in Sofia -

Bulgaria's plans to upgrade its road network are showing fresh impetus as the year draws to a close.

Just weeks away from trialling the country's first completed motorway, the government has given the green light to a €615m package for 2011, which will take the form of EU and state funds, as well as investment loans. This may sound like more of the same to anyone familiar with the country's single-lane highways - which continue to bear the burden of heavy commercial traffic from Greece, Turkey and the Black Sea ports - but those of us "on the ground" can testify that these projects are at last becoming tangible.

Following pricing issues with Turkish contractor Mapa Cengiz, construction has now recommenced in earnest on the long-delayed 19-kilometre-long Lyulin motorway extension linking Sofia with the Daskalovo road intersection near the industrial town of Pernik to the west. Lyulin will also serve the major E79 route to Greece - which, in turn, is destined to become the Struma motorway. After officially setting a completion date of May 15, 2011, the government has now declared Lyulin should actually be ready by the end of the year. Tendering for Struma, meanwhile, will be well underway by Christmas, insists Rosen Plevneliev, minister for regional development and public works.

Making it happen

Many in Bulgaria attribute this sudden progress to the "dream team" of Prime Minister Boyko Borisov, Minister of EU Funds Tomislav Donchev and the aforementioned Plevneliev, who are all pushing to get stalled projects back on track. Their aim is to get works completed, or at least well underway, by the time the next election comes around in 2013.

Politics aside, there's a very good reason why there has been so much activity of late. ISPA, the EU pre-accession infrastructure funds programme which covers some 40 projects, is due to expire on December 31, 2010 - which means the Bulgarian administration faces a race against time to absorb as much of the subsidy as it can. Failure to do so could mean the country losing €543m across the board, according to some domestic press reports.

PM Borisov is making no bones about the fact that the clock is ticking as regards ISPA, but at a recent press conference he insisted that on Lyulin, at least, the present speed of construction would ensure Bulgaria meets the absorption target.

Just how much of an impact the loss of ISPA would have on road projects spanning the New Year remains unclear. However, with at least half the government's 2011 allocation coming from EU subsidies, the administration will be keen to negotiate any possible extensions if it gets the chance - and thus avoid having to dip into the Operational Programme on Transport (the next wave of European Commission-approved funding which spans the 2007-2013 period). This may not be as unlikely as it sounds either - given that ISPA extensions have taken place before and the Commission is finally able to see some mileage being made in terms of asphalt and project management within Bulgaria.

Elitza Zlateva, an advisor with the representation for the Commission in Bulgaria, certainly didn't rule out any extension when speaking to bne. "The EC will decide on a case-by-case basis if it may be possible to extend deadlines," she stresses, "or whether it would be more appropriate to have a bridging approach [that would] bring particular projects into the operational programmes of the existing financial framework. Any extension of an ex-ISPA deadline would need to be well justified."

Law and order

According to Kamen Kolchev, chairman of the ELANA Investment EU-funding consultancy, and a member of the board of the Bulgarian Confederation of Employers and Industrialists, the government's increasing shift towards transparency should work in its favour - certainly in terms of ensuring that progress continues in 2011. He points out that many of the problems the government has faced to date with these infrastructure contracts (notably in the form of disputes over rising costs after tender), will be tackled by the forthcoming Public Procurement Act - which is due to come into effect at the end of 2010.

Kolchev believes this new framework should enable things to proceed much more smoothly from now on. "I see public procurement as the biggest problem - rather than the construction companies or the projects themselves," he states. "If this issue is resolved, then projects can be implemented."

While Bulgaria looks set to continue reining in overall expenditure in other areas during 2011, it continues to publicly advocate road network improvements as being key to economic recovery - both in the short and long term.

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