The European Union developed a large number of directives, rules and regulations which set the path for the Beneficiaries to access these funds. In layman’s words these subsidies are available, but not easily. The levels of absorption of the European funds for transport projects are relatively high for road and port projects. The situation is different for rail infrastructure projects. For example, it is estimated that only 50 percent of the 2007-2013 rail infrastructure funding designated for Poland has been so far contracted by government authorities. The desperate Polish government tried to divert some of these funds from rail to road and other projects. The European Commission however, rejected this request. This reflected the assumptions for the European transport policy which gives strong priority to the development of rail transportation. Unfortunately, these objectives and priorities are hardly achieved by the New Member States. Their rail systems are significantly outdated which results from long-time neglecting this mode of transportation by the former communist governments and lack of sufficient support to rail infrastructure maintenance and modernization by the governments after the fall of the Berlin wall. Some of these governments, like for example Polish authorities, embarked on a carousel of ever-changing and unpredictable reform programs and objectives. Within the last ten years they voraciously consumed tons of paper for new strategies and reform plans which have never been seriously implemented.
The European Union rules and regulations, although very often theoretically sound and well thought-through, lack understanding of the specifics of the New Members States markets and economic conditions. They often call for conducting project evaluation based on data that rail infrastructure managers (IM) in the New Member States simply do not have. The lack of these data does not stem from frivolity of the IM managers and staff but from many years of adjusting post-communist accounting, financial and cost calculating systems to other EU rules and regulations. On the other hand, the transport ministries in these countries did not exhibit sufficient imagination to develop their own evaluation procedures which could be accepted by the European Commission officials (The Czech Republic being a prize-worthy exception in this respect).
The European Commission documents and rules allow and often encourage the member states for developing their own, country specific project evaluation regulations. For example, the European Union Working Document No. 4 titled The New Programming Period 2007-2013, The Guidance On The Methodology For Carrying Out Cost-Benefit Analysis dated August 2006 indicates that that “In order to ensure consistency within a Member State, it is proposed that Member States develop their own guidance frameworks taking account of specific institutional settings, particularly for the transport and environment sectors”. An assessment of the developments of the last years leads to a conclusions that this call fell on the death ears. Or maybe not? It is true that some countries developed their own CBA guides. Paradoxically however, they awarded the task of writing these regulations to institutions partially owned by the European Commission. The Commission officials from Brussels directed and controlled the development of these guides. The circle hence has closed, as a result the country-specific guides are not so country-specific, and the European funds are not sufficiently absorbed.
How much of the European transport designated funds were really used will be known only in 2015 when all the accounts between the New Member States and the European Commission will be finally settled. One must remember that the entire system of the EC infrastructure construction and modernization subsidies is based on the system of refunding the expenditures previously incurred by a member state. The full refunds will be made only if given projects meet all the EC criteria, and are properly and professionally defended by the member states’ institutions against nosy auditors, who often, without any substantiation, assume that every official in the New Member States is a potential EU funds money-pocketing machine.
Some of the U.S. and European experts are definitely against subsidizing transport infrastructure. The true financial impact of the subsidies for the EU New Member States transport projects is much greater than it appears. It is clear that without the EU funds, many co-financed projects would never go ahead. Consequently Europe would continue transport-wise and economically to be divided into those who have (EU-15) and the poor guys. So, like it or not the subsidies are the necessities and should stay there for years. The trick is that the entire co-funding system must be redone, become less biased against the New Member States and be realistic.
The difficulties in absorption of the EU transport designated funding are only one reason of the still slow-growing and ineffective rail transport in the New Member States. Hectic transport policies of these countries are probably the major culprit. For example, Poland for a number of years was getting ready to join the EU-15 countries in developing the European High Speed Rail System. Suddenly a year ago a newly appointed Minister of Transportation cancelled these plans by uttering one sentence during a press conference. The promises of modern trains crossing the country with a speed of 250 kilometers per hour or faster, with which his Prime Minister was feeding up the society for years, were brutally shattered. Many rail experts are still in a total disbelief.
In the time of economic crisis, the New Member States must consider wider utilization of the private sector funds for the development of their transport infrastructure. This will involve using financial engineering, project finance techniques and last but not least Public Private Partnership. Unfortunately, none of the above occurs as it should. This is primarily because of the lack of local expertise, fear of international advisers, and ill-written laws.
The lagging negotiations of the European Union budget increase worries of the New Member States that the amount of transport infrastructure subsidies in 2014-2020 will be smaller than in the previous years. These are justified concerns. It is already known that the priorities of the European Commission have changed. Major focus will be on innovative approaches to economic development including transport, infrastructure and logistics. Transport related innovations must be multidisciplinary. They are needed in technology, financing, management, operations and many other areas. This is particularly important for the New Member States which must find the ways to close the transportation and infrastructure gap with EU-15 states. Innovation occurs only when a new idea or improved solution is implemented. No implementation means, no innovation. To insure this implementation the New Member States must provide appropriate innovative mechanisms that they have not used before. These countries, in addition to introducing new products, approaches, schemes and solutions, must also deeply reach to so called “imitation innovations”. Imitation innovations are the solutions that have been previously used somewhere else but in the new environment constitute something new or improved. For example, an implementation of an Intelligent Transport System involving city traffic management (similar to that which has existed for ten years in Stockholm) in a Polish city is innovative and brings tangible economic benefits. This broad understanding of innovations should also be used by the European Union for identifying transport projects worth funding in 2014-2020. It is also critical that the new regulations for EU co-funding be developed with consideration to conclusions from the 2007-2013 period. Old mistakes should not be repeated.
Prof. Adam K. Prokopowicz, Ph.D., Published on Forum Oeconomicum