Czech transport investments going nowhere fast

Investments in transport infrastructure, particularly in the road sector, in the Czech Republic are stark reminders of wider failures in the country's decision making that have left public confidence in national officialdom at all time lows. Some of these investments have also lead to hefty penalties being imposed by the European Commission. With planning underway for future EU funding in the Czech transport sector, now is not the time for the Commission to take its eye off the ball.

This article is from Issue 53 of our quarterly newsletter Bankwatch Mail

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The financing of transport infrastructure in the Czech Republic is exorbitant for a number of reasons. First, existing infrastructure is technically unfit as a result of historical under-financing for maintenance and rehabilitation that lasted for decades under communist rule. Second, the whole sector has been blighted by ineffectiveness in the preparation and construction of transport projects – and the lack of a clear, strategic determination of priorities at national level is to blame here.

The upshot has been, for example, that certain motorway projects have been proposed and constructed despite lacking the necessary traffic volumes, or even being necessary at all. Often poorly built, one infamous motorway project is the D47 near Ostrava.

A major contributory factor for such white elephant projects is that over the last two decades it has become the norm for the interests of the construction business, linked to Czech politicians, to outweigh the public interest: realising an effective transport network, with minimised impacts on the environment and people’s wallets and health, has fallen by the wayside as a result.

There are a variety of cases where original expected construction costs have doubled – or even in some cases quadrupled – during project implementation. At the same time, the inhabitants of dozens of towns and municipalities suffer from excessive transit traffic (the share of freight road transport between 1995 and 2010 rose from 57 to 79 percent), while the Czech rail network in most directions is not able to compete with roads in terms of travel times and sometimes also capacity. The debt on the maintenance of regional railways, roads and bridges continues to deepen, and is now reaching similar levels as the projected costs of new capacity transport infrastructure planned for construction.

As a result of recurrent unacceptable practices in planning, decision-making and construction costs, the European Commission has correctly refused to green light the financing of a number of transport projects, particularly roads such as the notorious D8 motorway, that had been listed as priorities in the current Czech operational programme for transport.

Furthermore, in September 2012, the Commission announced the first penalty measure: due to the violation of basic fiscal rules for the use of EU funds, with the operational programme for transport among the main wrongdoers, approximately EUR one billion was cut from the Czech Republic's overall allocations of EU money for the 2007-13 period. And this is unlikely to be the final word on the matter.

Thus, the Czech Republic is not only squandering the chance to advance its transport infrastructure via the EU funds, but since money – billions of euros indeed – for certain major projects such as the D8 motorway and the upgrading of the D1 motorway has already been spent (ie, pre-paid nationally), further pressure is mounting on the national budget deficit, with repercussions for basic social and health services and the education system that are now in the firing line for spending cuts.

A way forward

Is there a chance to move ahead? Perhaps yes, but it will not be a straightforward task.

The European Commission has insisted that the Transport ministry begin the process of preparing a Transport Sectoral Strategy that should serve as a basis for drawing up the operational programme for transport for the 2014-20 EU funding period. This strategy needs to reflect crunch issues – other than socio-economic factors, above all there is a need to reduce the environmental impacts of transport in the Czech Republic, including measures to decrease the sector's growing carbon footprint in line with EU strategies.

Key to this is ensuring that the strategy focuses on the long term goal of increasing the share of rail transport and decreasing the sector’s overall environmental impacts. The strategy must therefore support the following measures:

• Investments for upgrading the railways, not only on the trans-European or backbone routes.
• The construction and development of services in multimodal terminals.
• The introduction of intelligent transport systems in order to increase the safety and capacity of transport connections.
• Investments aimed at the development of integrated transport systems in agglomeration areas.
• Decreasing some of road transport's negative impacts through the construction of bypasses and roads with appropriate capacity.
• The extension of the 'polluter pays' principle, for example through the extension of freight road transport charging to selected secondary and tertiary roads. This would not only serve to increase the attractiveness of railways, but also lead to a curbing of the negative trend of bypassing charged sections of the road network, resulting too in less destruction of lower category roads.
• Specifying indicators in the transport sector that will enable monitoring of the level of the change (eg, modal shift, decreases in transport-related emissions) that can be realised thanks to the use of the EU funds.

In the coming few years, the development of the Czech Republic's transport infrastructure can not happen without significant involvement of the EU funds. The formulation of a good strategy for the 2014-20 period is therefore essential to guide and ensure prudent investments, together with appropriate oversight of the spending.

The deeply regretable – and avoidable – stink over the current operational programme for transport, where the European Commission has had to wield a big stick, shows nonetheless that if we want to see effective use of cohesion money in the Czech Republic there has to be no let up in monitoring of the national authorities.

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