Last updated: 31 March 2014
"The state of a country's infrastructure explains its economic position. And while the market provides opportunities, investors need legal guarantees."
Infrastructure is a hotly debated subject in the whole of the European Union. In Romania's case, the subject has been included on all government agendas over the last 20 years, and its poor development also explains, to a certain extent, the reluctance of some inves- tors to choose Romania to carry out their busi- ness in this part of Europe. When we speak about infrastructure, we speak about the need to massively finance road construction, the development of the energy sector, the water supply and sewage networks... Nowadays Romania has only approximately 600 kilom- eters of highways, plus county and communal roads that – even though it does not need to reconstruct them from scratch – require main- tenance and modernization. There is the same need for investments and modernization for railway infrastructure, which is also obsolete. Generally, airport infrastructure, where it is present, is the closest to European standards, given the modernization investments made by the authorities in order to fulfill the technical conditions for access to the Schengen Area. However, Romania continues to have very few airports.
Therefore, there is a need for major invest- ments in various areas of intervention. I would not say that Romania's infrastructure does not "totally" meet the EU standards, but I would point out that efforts must still be made to remedy the deficiencies in this domain. Romania is already an important regional market, but its attractiveness for business may increase significantly once infrastructure is developed. And with concrete measures taken in this area, Romania could gain a lot in the area of infrastructure.
While it is true that major EU funding was and is available for the large projects neces- sary for the development of infrastructure, I would add that there are also national funds. However, these funds were not and are not sufficient, given the needs in the area, which is why they must be managed correctly and efficiently so that these projects are carried out and completed. The lack of transparency in awarding and managing works contracts, as well as the poor and slapdash management of these projects and the allocation of the existing funds (mainly caused by the lack of responsibility of the public servants in charge of them, on one hand, and the collateral, or even political and electoral interests, on the other) have led to the unhappy existing situation.
Still, the current state of the country's infrastructure cannot all be blamed on the lack of legislation on PPPs. At present, Romania has legislation allowing it to carry out major infrastructure projects (the law on public tender and concessions), fairly well adapted to the European legislation in this sector. The national jurisprudence in the field follows the European jurisprudence, and Roma- nian judges are increasingly well prepared and abreast of the European jurisprudence, especially if the lawyers providing assistance in such cases have extensive knowledge and experience in European law.
However, a law on PPPs could lead to a greater number of projects and a more rapid development of infrastructure. But without the two elements I have mentioned above (trans- parency and efficient management), the result will be the same as today. Having legislation is not enough; there has to be a real will to apply it correctly and continuously, and, moreover, there must be the will and the knowledge to manage those projects correctly and efficiently. The legislation on PPPs is meant to provide the framework for efficient cooperation between the public and private sectors, by facilitating investments in transportation, the environ- ment, energy and public services. Although PPPs have been a recurring theme in Romania since 2002, no major project has yet been completed.Economic theory and practice underline the major role of infrastructure in a country's economic and social development. The pres- ence of an investor in a certain area ensures economic growth and jobs. Meanwhile, there is a close relationship between infrastructure and other activities, such as supplies and con- struction, but also the industries using it, such as the airline and road industries and trans- portation services. With a different approach, infrastructure development would also lead to the levelling out of development disparities between a country's regions.
Investors are interested in all domains with potential and infrastructure is without doubt one of them, because there is so much to be done... Nevertheless, major deficiencies, the lack of transparency and the failure to apply the law in a uniform and equal manner have persuaded certain major investors in infrastructure to leave Romania. Others are following Romania with great interest and are waiting for better investment conditions, for assurances that their money and rights can be guaranteed. At the same time, taking part in concession procedures remains an option that certain investors in the infrastructure sector are considering.
Infrastructure development is dependent on far too many factors (the economy, legisla- tion, resources, political will and so on) so we are not able to predict the situation for 2014; nevertheless, major projects, worth several billion Euros are expected in this domain. The expected entry into force of the new law on public private partnerships may lead to an increase in the number of projects, at least for transportation infrastructure, but also for energy infrastructure, where the need for investments is also very high. Investment opportunities are there, but Romania must want and know how to attract, protect and keep these investments! Romania can receive funding from the European Invest- ment Bank or attract European funds, making the development of the public procurement sector more predictable. According to the authorities, the future Grand Infrastructure Operational Programme, which will also com- prise European funds for transportation, will have at its disposal approximately EUR 9 bil- lion from the European Commission between 2014 and 2020. Moreover, the Regional Opera- tional Programme, which includes transporta- tion infrastructure components, will benefit from over EUR 6 billion.
Article published by Business Review, March 31, 2014