A rough road for transport sector

Tumult in the government that led to the resignation of Transport Minister Vít Bárta just nine months into his term could hurt developments in the transport sector already hard hit by recent budget cuts.

Forecasts for the transport sector are among the worst for 2011 after more than a dozen transportation projects were cut or downsized and the ministry failed to obtain the majority of European Commission (EC) Cohesion Funds that it was eligible for. Now, with disruption in the coalition, any plans for streamlining the ministry or boosting new methods for funding, like private partnerships, could be put on ice.

According to a report from Business Monitor International (BMI) on infrastructure, the Czech transport infrastructure industry value is forecast to "post only marginal growth in 2011, due to concerns over the budget for transport projects," citing a lack of new projects in the pipeline and political unrest. "For this reason, we are anticipating [the] transport industry value to drop from 18.7 billion Kč in 2009 to 13.7 billion Kč in 2010," followed by year-on-year growth of 1.8 percent in 2011.

"Infrastructure is important for the life of the Czech economy," said Václav Matyáš, head of the Czech Association of Building Entrepreneurs (SPS), an organization that represents primarily construction and building-materials manufacturing companies. "We have to be able to add 1,000 kilometers of highways and high-speed roads by 2025, or the Czech Republic will stay an island in the middle of Europe."

Even so, the major gem in the former minister's crown was spending cuts. After the Transport Ministry's budget was cut 10 percent in 2010 and by another 17 billion Kč in 2011 - resulting in a total 30 billion Kč budget for this year - Bárta further reduced spending by around 10 percent.

However, one manner in which he did, saving around 2.9 billion Kč, could come back to haunt the ministry long after his departure. Last summer, Bárta outraged transport construction companies by demanding they offer discounts on work already bound by contract, because he said the prices were inflated. When they refused, he stopped 12 highway projects and 15 railway projects. All the railway projects and eight highway projects have since been restarted, although many have been downsized.

The "political uncertainty" caused by Bárta's willingness to disregard the contracts, bloated or not, "presents a downside risk for project financing," the BMI report said. That at a time when experts say the government needs to boost partnerships with private companies to allow infrastructure development to continue while national and EC funding is forecast to decline further in the coming years.

Despite his rebuffing of the private sector, Bárta's administration had advanced an idea long-touted by Transport Ministry officials to afford transport construction, though never really realized: partnerships between the government and private companies known as public-private partnerships, or PPPs.

PPPs exist in several forms and essentially allow the government to reduce or spread out payments on projects by striking deals with private companies that pay for the whole or part of a project up front, or agree to build a project at a set rate. PPPs are used widely in transport construction in Europe and North America, but the Czech Republic lags behind most countries, including Hungary, Poland and Croatia, in forming them.

"Why haven't ministers done it? Maybe PPPs are too transparent, because there are too many parties involved in preparation and procurement," said Vladimír Sloup, executive director of the PPP Association. "There have been some developments under Bárta, but until I see the final steps, I can't say."

Sloup added that one minister's departure would not seriously disrupt the whole development of PPPs or significantly dissuade private companies from cooperation, but a lack of "continuity" stifled implementation.

"Ministry employees change too quickly. They get new orders, a new boss," Sloup said. "There needs to be [only] one project manager."

Bárta's departure could also complicate attempts to use the EC funding already secured from the Operational Program for Transport, as well as efforts to streamline the functioning of state-owned transport companies, and the BMI report notes that transportation experts here across the board are saying that "coalition governments have often collapsed due to infighting and weak mandates, thereby derailing the policymaking process."

The ministry only managed to secure 1.49 billion Kč in funds from the EU Operational Program for Transport, a fraction of the available 150 billion Kč, according to Marek Illiáš, a ministry spokesman.

"It's important for financing to involve private investment, but we have to realize that it's only part of the solution - maybe 20 percent - the other 80 percent depends on other sources, and not just national sources," Matyáš said.

The EC funding allotted for the Operational Program for Transport is "quite huge," he said, but he is "not a big optimist" about whether the country would be able to win it.

The Transport Ministry is not alone in winning low levels of EC funding, and there are fears that in the next EC funding period starting in 2013, the Czech Republic could lose out on available allotments.

Other transport developments that may be affected by the minister's departure include several plans to streamline and crack open the railway industry, initiatives purported to have been at the top of Bárta's agenda. Bárta had introduced a plan to offer 10 tenders for long-distance rail operators in the next 10 years, and soon after proposed merging Czech Railways and the Railway Infrastructure Administration to improve efficiency and transparency, but his resignation could complicate those efforts.

However, some say Bárta's efforts were minimal, and according to Jiří Schmidt, a spokesman for private rail operator RegioJet, Bárta's resignation could actually boost privatization.

"Bárta was a very strong proponent of a rail monopoly," Schmidt said.

The government announced April 19 that Bárta's deputy, Radek Šmerda, will replace him.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com