|  09.11.2012

Which road to take first?

Romania most urgently needs to fully develop and modernize its motorway and roadway infrastructure

Romania is positioned geographically to become a major distribution hub for much of Central and Eastern Europe in addition to its potential to be an exporter of food and other products.

 

Completion of the motorway system across the country, particularly from the Black Sea to the western borders is essentially for this potential to be more fully realized.

 

Romania ports can be a faster and more inexpensive alternative to getting products from the Far East into Central and Eastern Europe than those in Western Europe. However, this must be supported by faster and more efficient motorway network for trucks to It seems clear that something must be changed in the area of attracting European funds.

The current system for the planning projects, awarding contracts, and managing the projects is not working as it should. Projects seem to consistently experience delays, higher costs, the failure of contractors, and even lower quality than designed. The entire process and structure needs to be accomplished under a structure that is not politicized and with complete transparency.

It may also be necessary to revise the structure to awarding of contracts with a greater emphasis on past performance of the contractor teams and even to provide bonus incentives if completion schedule, cost and quality targets are met.

There are examples in other areas of the world where the system of construction for roadways works very efficiently.  It is not unreasonable for Romania to copy the systems and approaches that are being used elsewhere effectively, so long as the desire and commitment to change is really present in those in power.

 

Going green

 

Romania has the potential to be well positioned for green infrastructure projects which primarily seem to be in the area of renewable energy production. Wind, hydro, biomass and solar are forms of renewable energy that are being put in place currently in Romania and there is strong potential for this to continue and foreign investment to come to the country in this area.

However, in working with a couple of foreign investors on these types of project we have seen that the investors are encouraged by the potential but also put off by confusion in many of the legal requirements and regulations for developing such projects.

The licensing, accreditation, incentive (green certificate) on the surface is quite complex and not as straight forward as some investor might wish it to be.  Foreign investors who are diligent and have spent the time to educate themselves about the potential and the processes required seem to stay committed to developing such projects.

 

The need to clarify on PPPs

 

The structure for PPP in Romania is not clear in many areas that allow these partnerships to be formed as easily. In most PPP structures the role of the public side partner is to be the sponsor of the project, allowing the private side to do what they do best in delivering cost effective project results.

The public partner needs to set the overall performance requirements for the projects and work to eliminate the barriers and bureaucracy that might stand in the way of the private partner in delivering the project and making a profit. Again, there are many models where this works effectively in other countries and perhaps PPP structures can be developed to try and replicate the positive results elsewhere.

 

A matter of logistics

 

The time horizon for Romania becoming a logistic hub has a lot of variable factors that could either hasten or delay this potential. Obviously, the world economic situation may be the largest factor in that a stagnant economy will not provide the driver for moving the need forward.

Continued national political turmoil will also tend to lessen foreign investment that will support activity for becoming a regional hub. From an infrastructure project perspective, transportation is key to logistics, and for access to Central and Eastern Europe Romania must have a completed motorway network which at minimum crosses the country east to west and south to north.

Completion of this is a priority because infrastructure improvements at port facilities and for air cargo are not particularly useful unless goods can be put in trucks for distribution via roadways.

Depending on whether changes are made to the current structure for delivering infrastructure improvements this time horizon could be between 5 and 10 years.

Having a reliable project delivery structure would enhance the financing of projects.  If lenders or financing entities have better assurance that projects will be managed within budgets and schedules and there will not be cost overruns then they are firstly more likely to be willing to provide financing and the costs of financing will also be less.

This benefits the process and is the value that the authorities and politicians should be delivering to the tax-paying public who they are there to serve.

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