Bulgaria is back on the road

By bne IntelliNews November 1, 2012

Andrew MacDowall in Belgrade -

"We want to ride on your metro all the way to Europe" - an unusual sentiment to express in a pop song, perhaps, but one that was expressed by gyrating Bulgarian starlets in a 2009 ditty dedicated to Prime Minister Boyko Borisov. "Boyko", as he is generally known in the country, like Bulgaria's pop-folk singers, has a habit of making the country's educated classes cringe. But he also has a reputation, not entirely undeserved, for knocking heads together and getting important infrastructure projects going.

The Sofia metro is one of these. Borisov was mayor of the city until becoming prime minister in 2009 - just weeks after a long-awaited extension to the then single-line metro had been opened. The system was once almost entirely incidental to those not travelling in the north-western part of the city, through which it ran from the centre; the new track led through the city to the south-eastern outskirts, via several important locations including the main university, the embassy district and a major road intersection.

On August 31, Borisov and European Commission President Jose Manuel Barroso were among the first passengers on the second line of the metro, a north-south link with 11 stops, including the railway station (hopefully further undermining the aggressive rip-off taxi touts who linger there). Local TV channel bTV suggested that passenger numbers rose by 40% within a month of the new line opening, with 100,000 leaving their cars at home and going underground instead. Further extensions and a third line are planned - in September, a two-part tender was announced for two new stations on Line One.

And it is not only in the capital that the diggers are moving in. Borisov has said in the past that his government should be judged on its progress in building roads. Perhaps just as well, as this has been one of the administration's success stories (critics would sooner judge Boyko on his legislative consistency, or lack thereof).

In a detailed statement issued to bne, the Ministry of Regional Development and Public Works (MRRB) said that the government is pushing ahead with four major motorways, with varying degrees of progress: the Trakia, long considered the flagship project, which runs from Sofia to Burgas, Bulgaria's second port, on the Black Sea; Maritsa, which will link the Trakia to the Turkish border to the south-east; Struma, from Sofia to the Greek border; and Hemus, running almost parallel to the Trakia, but on the northern side of the Balkan Mountains from Sofia to Varna, the biggest port, and, by some measures, second city. These routes are all part of European "transport corridors" - key transit routes across the continent identified by the EU.

Between July 2009 and July 2012, Bulgaria added 119 kilometres of new motorway. This included the 20-km Lyulin motorway running to the west of Sofia, the first full highway project to be completed in Bulgaria (in 2011), and the first built under EU financing.

This year, sections of the Trakia totalling 82.3 km were completed, and the final 34.28 km should be open by the end of 2013. The Maritsa motorway is also due to be completed next year after construction began in 2011; according to the MRRB, "will take the traffic of heavy-freight and of transit passengers from Turkey".

The Struma route is currently an odd mix of impressive modern highway ploughing down the valley of the same name, and frustrating winding roads through small villages. Two new sections totalling 31.48 km are currently under construction, with work another 34 km due to start soon. The final 67.5 km, which according to the MRRB is "the most complicated," will have to wait until the 2014-2020 programme period. The remainder of the Hemus motorway is also due to be tackled under that programme; which is some time to wait for what is an important trunk route linking Sofia to Varna and Romania (via the Danube Bridge).

As the MRRB is keen to point out, such infrastructure developments provide interesting opportunities for international contractors.

The Ministry cites the examples of the 31.8 km Nova Zagora-Yambol stretch of the Trakia motorway, executed by a Greek subcontractor; an Italian firm building a section of the Maritsa; and eight companies, both foreign and Bulgarian, applying for the Dupnitsa-Blagoevgrad section of the Struma road.

Parallel to the motorway-building programme, Bulgaria is also undertaking the rehabilitation of hundreds of kilometres of second and third class roads, financed by institutions including the EU, the European Investment Bank, and the World Bank. "Mostly second and third class roads have not been renovated for more than 30 years, and these are roads which are used daily by people as a connection between populated areas," says the MRRB. "By their modernization, the disparities between regions will be resolved and economic development will be stimulated."

While current progress is impressive, the Ministry's admission that Bulgaria is playing catch-up rings true, according to Petar Ganev, at the Sofia-based Institute for Market Economics, a free-market think-tank. "Investments in infrastructure are hugely important in Bulgaria, as we had something like a lost decade in the 1990s - no investments, no new roads, no maintenance even," Ganev told bne. "This changed in the last ten years and the results are quite positive - there is a metro in the capital, new highways are being built. Still, huge investments are needed to achieve a relatively middle-ranking European standard of infrastructure."

Nikolai Bozhinov, executive chairman at Sofia-based Unimasters Logistics, agrees - and warns that the success of the road-building programme should not let the authorities off the hook for failure to develop other transportation infrastructure, which has hindered the growth of his industry, long identified as one in which the country has the distinct competitive advantage of its geographical location. "The potential of Bulgaria's logistics sector has not been realised due to lack of proper infrastructure," he told bne. "The road network was improved in the last three years but all the rest is in a dire state - ports, inland terminals, railways, warehouses and cross-docks. Bulgaria lags behind any other country in the region except former Yugoslavia."

There are some positive signs: the freight division of decrepit state railway company BDZh (sometimes rendered BDZ) is being lined up for privatisation again, in a move that could bring much-needed capital and expertise to a player that should be playing a key role in the development of rail connections in South Eastern Europe, and between Europe and Turkey, and the Middle East beyond. Better rails and rolling stock would help take some of the pressure off Bulgaria's shiny new motorways, prolonging their longevity.

Both Ganev and Bozhilov are strongly in favour of greater use of private financing for infrastructure development that is currently "almost totally excluded" at the moment, according to the former. Ganev argues that Bulgaria is over-reliant on EU funding that is seen as "free". With the government's coffers currently under pressure, "if private money doesn't go to Bulgarian infrastructure in the forthcoming years, then out potential for growth will suffer," he says.

He and Bozhilov suggest the government implement public-private partnerships (PPPs) in road building and port development. This would almost certainly entail some motorways becoming toll roads, and probably involve part-privatisation of transport assets, which could prove politically sensitive. After next year's election there may be some breathing space to roll out PPPs, but this will depend on parliamentary arithmetic as well as political will.

Given past controversies privatisation and infrastructure contracts in Bulgaria and elsewhere in Eastern Europe, the process is likely to come under scrutiny from the EU and the electorate alike. But if Bulgaria wants to extend and accelerate its better-late-than-never infrastructure overhaul, the cash will have to come from somewhere.

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