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Bridging the EU:
Integrating Transportation
Systems
By Leah
Markowitz
Central and Eastern Europe
Business Information Center
On May 1, eight countries
in Central and Eastern Europe
officially join the European
Union (EU). The new member
states are Poland, Hungary,
the Czech Republic, Slovakia,
Slovenia, Estonia, Latvia, and
Lithuania. With their
accession, the European Union
increases in size from 15 to
25 countries, and grows from a
marketplace of some 380
million citizens to more than
450 million. Accession,
however, does not mean that
these eight countries have
completed the necessary
transformation of their
societies and economies to fit
the standard EU mold. Nor are
they finished welcoming U.S.
exports, investments, and
interest in fulfilling small
and large-scale projects in
important economic sectors.
Transportation is a sector
that is undergoing
wide-ranging renewal and
rehabilitation in these new EU
member states. This is an
important step, since an
integrated and well-developed
transportation sector is vital
to support full development of
the single market and buttress
successful expansion of the
European Union. The density
and quality of a country’s
transportation system factor
into a company’s decision of
where to locate its
facilities. A country lacking
a strong internal
transportation infrastructure
will be subject to regional
differences in economic
prosperity. Conversely, an
extensive road and rail
system—coupled with links to
air and seaports—helps to
balance out economic
disparities within a country
by enhancing connections
between outlying rural regions
and urban centers.
While many changes in
transportation linkages in
Central and Eastern Europe
have already taken effect,
numerous challenges still lie
ahead. The job is large, for
not only do transportation
systems within the accession
countries need to be upgraded,
but links between new and
current EU members also must
be strengthened in order to
maintain the smooth flow of
goods and services within the
single market. This means
encouraging greater reliance
on combined modes of
transportation to support an
efficient, safe, and
environmentally friendly
infrastructure. One EU program
that new members will become a
part of, the Marco Polo
program, was created in 2003
specifically to develop such
combined methods of
transportation. U.S. companies
can seize the opportunity to
supply exports and investments
to support the EU’ s goals.
Planning for an
Integrated Transportation
Network
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Information on EU
Transportation
Infrastructure
Cohesion
Fund: an EU fund
established in 1993
under the Maastricht
Treaty to provide
assistance to member
countries whose
per-capita GNP is
under 90 percent of
the EU average. It is
a project-based fund
that supports
transportation
infrastructure and
environmental projects
only. More
information
Marco
Polo Program: an EU
program adopted in
2003 to encourage the
development of
intermodal freight
transportation links
within the EU. The
program runs to 2010,
and has a budget of 75
million euros through
2006. More
information
Quick-Start
Program: a funding
proposal put forth by
the European
Commission in November
2003 as part of the
European Growth
Initiative. It will
fund a number of the
TEN-T projects
described in this
article.
Trans
European Networks
(TEN): an initiative
of the EU in support
of infrastructure
development in the
areas of
transportation,
energy, and
telecommunications. More
information
Transport
Infrastructure Needs
Assessment (TINA): a
list of priority EU
transportation
projects drawn up in
1998. Full
text
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The idea for an integrated
transportation network in the
EU came as a result of a
series of meetings of European
ministers of transportation
held in the 1990s, which gave
birth to the Trans-European
Transportation Network, or
TEN-T. The TEN-T system
envisions a network of 10
corridors that connect
national markets via road,
rail, inland waterways,
airports, seaports, inland
ports, and traffic management
systems (see map on page 25).
With the prospective
addition of new members to the
EU in 2004, the TEN-T had to
be revised. A list of priority
projects, with a total
implementation cost of 220
billion euros, was drawn up
under the coordination of the
Transportation Infrastructure
Needs Assessment, or TINA. In
1998, TINA outlined a plan
that anticipated construction
of 18,030 kilometers of roads,
20,290 kilometers of railways,
38 airports, 13 seaports, and
49 river ports throughout
Central and Eastern Europe.
Funding the Improvements
Funding for these
transportation projects was
arranged in December 2003,
when the EU Council of
Ministers identified 29 TEN-T
projects as priority projects
and agreed to increase EU
funding from 10 to 30 percent
to pay for them. The
Quick-Start program was
created to boost investment in
these projects. Over the next
six years, this will involve a
total investment of some 38
billion euros. The priority
projects identified by the EU
Council of Ministers will be
co-financed through a
combination of support from
the EU’s Tran-European
Networks (TENs) program,
structural funds, and a
special lending facility of 12
to 15 billion euros provided
by the European Investment
Bank (out of a long-term
package of 50 billion euros in
senior debt finance).
Prior to accession, EU
programs such as the
Instrument for Structural
Policies for Pre-Accession (ISPA)
and Phare had already helped
to implement TINA projects.
The sums associated with these
projects are not negligible:
During the 2000–2006 budget
period, for example, ISPA
funds for the transport sector
totaled 500 million euros a
year. However, as of January
1, 2004, funds for new
transportation projects were
redirected from ISPA to the
EU’s Cohesion Fund. Fifty
percent of the fund’s 18
billion euros for 2000–2006
has been set aside for
transportation. Co-financing
for most of the projects will
come from European sources,
mainly the European Investment
Bank (EIB). The EIB can
provide loans for projects
from the transportation
priority list in amounts up to
50 percent of their value. The
inclusion of private capital
is also being discussed.
Another EU program designed
to help finance transportation
infrastructure is the Interreg
program for cross-border
regional development. The
goals of the Interreg program
include promoting cooperation
and integration across borders
and in remote regions. Funding
for projects concerning rail,
road, sea, and airports in
Central and Eastern Europe is
also part of the Interreg
program.
Rail Network: Still
Carrying the Legacy of the
Soviet Era
The accession countries
have a greater reliance on
rail transportation than do
the pre-accession EU member
states. In general, the rail
systems of Central and Eastern
Europe are plagued by
problems, some of them the
legacy of central planning in
the Soviet era. The networks
are old and inefficient,
systems are often not
interoperable, and few funds
have been channeled into
system upgrades.
The Baltic states are a
good example. They are an
important international rail
transit area for traffic to
Russia. Yet, due to Soviet
policy, the rail lines in
these states run in one
direction: east, toward
Moscow. As a result, no direct
rail lines connect the capital
cities of Latvia and Estonia.
Nor is there a direct route
connecting the capitals of
Latvia and Lithuania.
Moreover, even though Baltic
rail links to Russia are
relatively strong, train
tracks and grade crossings
still need to be upgraded to
handle higher speeds and
heavier loads.
Estonia relies heavily on
rail transportation. More than
90 percent of the country’s
freight transit moves by rail.
The Estonian railway system
operates 968 kilometers of
rail, of which only 132
kilometers are electrified.
Recent investment has
emphasized reconstruction of
rail connections to the ports
of Muuga and Paldiski.
Investment plans in these two
areas account for some 60
percent of the total
transportation upgrades in
Estonia through 2010. The
remaining funds have been
earmarked for equipment
purchases, the introduction of
computerized management
systems, and the renovation of
rolling stock for passenger
trains.
Latvia has a rail system
that covers 2,305 kilometers
and averages 38 million tons
of cargo annually. This
tonnage comprises about 54
percent of all Latvian freight
transportation. Seventy-five
percent of the country’s
railway cargo is transit.
Upgrades on the TEN-T Corridor
I line in Latvia focus mainly
on increasing the speed of
transportation.
Lithuania has nearly 2,000
kilometers of railroad
connecting its major cities.
Express passenger service is
available along the major line
connecting Vilnius, Kaunas,
Siauliai, and Klaipeda. In
1997, a total of 30.5 million
metric tons of goods were
carried by Lithuanian
railroads. In the same year,
the railroads carried 11.2
million passengers, of which
almost 2 million were
international travelers.
Upgrading Slovenia’s rail
links is a top priority for
Corridors V (east-west) and X
(northeast-southeast). An
extensive rail system links
Slovenia’s port of Koper,
one of the region’s largest,
to all neighboring countries.
Construction of a direct rail
link from Koper to Hungary is
underway. Part of Corridor
V—the Lyon-Trieste-Ljubljana-Budapest
rail line—is among the
priority projects outlined by
the EU to improve European
transportation links. Focusing
on the construction and
modernization of this line
will help ease one of the
major bottlenecks of Slovenian
transportation, by adding a
second track on the
Dlvaca-Koper rail line. The
project’ s expected
completion date is sometime
before 2015.
The Polish State Railways (PKP),
with 25,000 kilometers of
rail, is the third-largest
railway in Europe in terms of
line length. However, the
system suffers from
poor-quality equipment and
inferior service, and is far
below the standards of other
EU countries. Approximately 60
to 80 percent of PKP’s
rolling stock requires
modernization. Additionally,
Polish producers of railway
equipment have a poor record
of penetrating the markets of
Central and Eastern Europe and
the EU. They have been able to
compete with foreign-made
products only for inexpensive
train cars (such as coal and
box cars) or for high-quality
specialized means of
transportation (such as
low-suspension tram cars or
special-purpose train cars).
In 2001, about one-fifth of
rail vehicles manufactured by
Polish firms were exported.
Given the current state of
rail transportation in Central
and Eastern Europe, U.S.
companies have a unique
opportunity to assist in the
construction of new lines and
the modernization of existing
ones. The highest potential
for exports exists in the
following areas: project
engineering, design, and
management; electric
locomotives; railway signaling
and communications equipment;
fare collection systems;
rolling stock; automatic
train-control systems;
computer hardware and
software; and railway parts
and accessories.
For Highways, a Mixed
Picture
In accordance with the
European Commission’s Quick
Start program, several
large-scale road building
projects are already underway.
These include a highway
connecting Gdansk and Vienna;
another beginning in Hungary,
crossing Romania and
continuing to the Black Sea;
and another running across
Bulgaria, connecting the
capital Sofia to Thessaloniki,
Greece.
Road development throughout
Central and Eastern Europe
varies greatly. In Estonia,
for example, the road network
is comparable to the Nordic
countries in terms of its
density. In Poland, on the
other hand, numerous obstacles
(largely due to funding
disputes) have impeded the
smooth progress of road
development.
The climate for road
development in Poland,
however, is changing. While
only 480 kilometers of
freeways are scheduled to open
in Poland between 2002 and
2005, new sources of stable
financing—such as the fuel
fee—will help pave the way
for future upgrades. Over the
past several years, Polish
funding for road projects has
already stabilized: $1.8
billion in 2002, $1.8 billion
in 2003, $1.3 billion; and
$1.7 billion is estimated for
2004.
By the end of 2005, Poland
is expected to have nearly 740
kilometers of freeways, and
the government is determined
to open 250 kilometers of
freeways and 60 kilometers of
expressways every year
thereafter. An impetus for
upgrading Poland’s highways
came in July 1996, when an EU
directive mandated that
international roads be able to
carry axle loads of 11.5
metric tons. At present,
Polish roads that handle 10
metric tons are more common,
and tolerance of 8 metric tons
is the standard. Currently,
only 0.5 percent of the Polish
national network meets the
11.5-ton standard.
The Czech Republic, with
only a quarter of Poland’s
population, has exceeded its
neighbor in road construction.
Since the so-called “Velvet
Revolution” of 1989, through
2003, some 220 kilometers of
new highways have been built
in the Czech Republic.
Additional road and highway
reconstruction and upgrades
have been necessitated by the
flooding that devastated the
country in August 2002.
In 2001, Hungary’s
national public road network
was 30,322 kilometers, 448
kilometers of which were
highways. Major infrastructure
improvement projects consist
of further development of the
radial form of expressways
that cover the country. With
Budapest at its center, this
network makes it possible to
reach Szeged, Debrecen,
Nyiregyhaza, Miskolc, and Pecs
by expressway. In addition, it
is expected that completion of
the M0 ring road surrounding
Budapest will decrease traffic
congestion in the capital
city.
Road and traffic service
opportunities for U.S.
companies in Central and
Eastern Europe span a wide
range of industries and
activities. These include
metrology testing and
research, road marking,
traffic signs and lights,
driving schools, logistics
forwarding and transportation
services, and engineering,
design, and construction
services.
Strengthening Adriatic
and Baltic Port Links
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Steps for the U.S.
Exporter
Resources
for U.S. exporters
attempting to enter
the Eastern European
transportation market
include:
U.S.
Commercial Service:
Part of the U.S.
Department of
Commerce’s
International Trade
Administration, the
Commercial Service
offers detailed market
information on the Web
for the following
regions and countries
through its Web site,
BuyUSA.gov:
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Historically one of the
most important methods of
transportation for
facilitating trade, ports have
maintained their strategic
position as part of the EU’s
emphasis on combined modes of
transportation. Several of the
acceding countries possess
thriving seaports.
Slovenia’s port of Koper
serves as the principal port
for Austria and Hungary, and
is an essential port for
Czech, German, and Slovak
exporters. The port has 20
berths, 2,284 square meters of
enclosed warehouses, and
numerous specialized
warehouses. Its specialized
facilities include a terminal
to handle automobiles,
perishable goods, timber and
wood products, livestock, and
bulk liquids. In 2001, the
port, which operates a
free-trade zone, handled 9.4
million tons of cargo. Future
improvement projects include
increasing the number of
modern warehouses and
logistics centers (including
construction of an additional
pier to house a terminal for
cars and containers), creation
of a new terminal for iron
products, and expansion of
facilities at the aluminum and
grain terminals.
The Baltic states are
well-situated to capture an
increasing share of the
rapidly growing maritime trade
through the Baltic Sea.
Estonia has 101 ports located
along its coast, 31 of which
handle commercial shipping and
are open to international
transit. Estonian ports offer
easy navigational access, deep
waters, and good ice
conditions.
Tallinn is the biggest
cargo and passenger port in
Estonia, handling cargo flows
between Russia (and points
eastward) and Western Europe.
The Estonian-Russian border is
only 210 kilometers from
Tallinn by railway and 1,100
kilometers from Moscow. In
addition, Estonia’s
sea-transportation system is
well connected to other
European ports. Daily ferry
links sail to Scandinavia, and
there are frequent cargo
ferries to Antwerp,
Copenhagen, Hamburg, Kiel, and
Harwich.
The port of Muuga free
zone, also located in Tallinn,
is especially attractive to
high-value
container-distribution
operators. Its simplified
customs handling, easy
transfer of ownership rights,
and value-added operations
are, according to the port’s
Web site, “designed to
foster the development of
distribution centers.”
The three other large ports
in Estonia are: Kunda
(handling timber and cement);
Parnu (handling timber and
peat moss); and Paldiski North
Port (handling timber).
Overall, cargo passing through
Estonian ports consists of
grain (27 percent), liquid
cargo (26.5 percent), and
timber (25 percent).
Lithuania’s port of
Klaipeda is the northernmost
ice-free port in the eastern
section of the Baltic Sea. It
is the main multimodal
transportation center of
Corridor IX, which connects
the eastern and western
shipping and road lines.
Approximately 7,000 ships from
50 countries call at the port
annually. A 433-kilometer rail
line links Klaipeda to Kena in
Belarus; a 1,303 kilometer
line links Moscow; and a 594
kilometer line to Minsk. The
port of Klaipeda, which
largely handles oil
transshipments, is well
equipped, but in need of
modern management. Projects
designed to increase
value-added services at the
port include creating
conditions to load vessels of
up to 60,000 tons of weight,
increasing cargo-turnover
capacity, developing port
operations (such as cargo
distribution services), and
dredging the port’s entrance
channel.
The three main ports in
Latvia are Liepaja (including
the special economic zone),
Riga, and Ventspils. The three
ports saw 52.2 million tons of
cargo turnover in 2002, while
seven smaller ports served
1.03 million tons. Most of
this (42.8 million tons) is
transit cargo. Up to 80
percent of cargo turnover at
Riga consists of transit
forwarded or received from the
CIS countries. It handles
mostly dry bulk cargo (about
37 percent of turnover),
including fertilizers, coal,
and grain. Priority
development projects include
construction of a new
oil-handling terminal,
creation of an industrial
park, and reconstruction of
the passenger terminal. The
port of Liepaja boasts 45.4
hectares of land for
industrial development,
including two industrial
parks. Ventspils, handles 55
percent of total Latvian port
cargo turnover. Like Riga, it
manages dry bulk (such as
fertilizers, coal, grain) as
its main charge.
Airport Expansion Plans
Throughout the Region
Potential investors and
financiers would do well in
the airport arena in Slovakia.
All of its airports are in
need of upgrading. A recent
Eurostat survey showed that
Slovakia has the
least-developed
air-transportation system of
the accession countries. Thus,
projects exist for U.S.
exporters and investors in
such areas as security,
baggage-handling facilities,
extension of plane taxiways,
and new control centers for
phytosanitary and veterinary
services. To facilitate
financing for airport
projects, the Slovak Airport
Authority proposes to open its
airports to strategic
investors.
Opportunities also exist in
the Czech Republic. The
current capacity of Prague’s
Ruzyne Airport is 7 million
passengers annually. To
increase capacity, the Czech
Airport Authority started
construction of a new terminal
in 2003. The investment is
estimated at $300 million,
$270 million of which was
financed by the EIB. The new
terminal, set to open in 2006,
will serve passengers from
non-EU countries and will
increase the capacity of the
airport to 10 million
passengers. Four Czech
construction companies
submitted bids for the
project. In addition,
construction of an additional
runway is slated to begin in
2005, which represents an
investment estimated at $82
million. A rapid-rail link
from the airport to downtown
Prague is expected to open in
2005. The Czech Republic does
not have the capacity to
produce any significant
airport equipment
domestically, and U.S.
airport-related technologies
and services are held in high
regard.
U.S. companies may also
find several occasions for
export and investment in the
Hungarian aviation market,
specifically in terminal
construction, air-traffic
control equipment, and cargo
handling. Budapest’s
Ferihegy International Airport
currently houses two
terminals. Terminal 1 is used
for general aviation, cargo,
and charter flights, while
commercial aviation takes
place through Terminal 2.
Terminal 1 was recently
refurbished to accommodate
low-cost airlines. Terminal 2
is capable of handling
approximately 5.5 million
passengers annually. While a
strategic plan covering the
next 10 years of airport
development is underway, work
on a new passenger terminal
will probably not occur before
2007.
The Budapest airport’s
strategic plan also includes
discussion of extension of
parking facilities and
construction of a third
terminal, a new cargo base, a
runway, and a hotel. In
addition to these planned
airport improvements,
Hungarocontrol, the national
air-traffic control authority,
plans to purchase a number of
equipment-system upgrades by
2010. These purchases,
expected to total some $88
million, include a tender for
an Aerodrome surface movement
radar system; replacement of
the existing radar with a
Mode-S capable radar, and a
new cargo base. The latter
project would increase cargo
traffic from 45,000 tons to
108,000 tons by 2012. Its
estimated cost is $34 million.
Poland’s central
international airport, in
Warsaw, is Okecie. Passenger
traffic at the airport has
been growing: from 3.8 million
passengers in 1998, to 4.7
million passengers in 2001.
Okecie opened a new terminal
in 1992, but it reached its
maximum capacity well ahead of
projections, thus prompting
the decision to build a new
passenger terminal. The new
terminal, to be finished by
2006, will increase the
capacity of the airport to 10
million passengers a year.
There are also plans to build
a new passenger-cargo airport
near Warsaw, called Warsaw II.
Construction could start in
2006 and be finished by 2010.
The Warsaw II airport would
serve 7 million passengers
annually.
The European Investment
Bank (EIB) is the main source
of debt finance for airport
infrastructure investments in
Central and Eastern Europe.
Large projects (more than 25
million euros) may be financed
directly through loans, or
indirectly through government
or banking intermediaries.
Smaller projects may be
financed through “global
loans”—that is, credit
lines to selected EIB partner
banks.
Following Up on
Opportunities
A multitude of
opportunities exist for U.S.
companies to do business in
the Central and Eastern
European transportation
sector. Materials for rail
lines, warehousing and
logistics services, airport
equipment, and road
construction needs all pose an
open door for companies to
enter, and stay engaged in,
the expanded European Union.
For more information, look to
some of the links listed in
the sidebars that accompany
this article.
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A
Stroll Down the EU’s
Transportation
Corridors
Corridor
I (via Baltica):
includes Finland, the
Baltic states, and
Poland. This is a
multimodal (that is,
rail, road, sea)
corridor.
Corridor
II: includes Germany,
Poland, Belarus, and
Russia. Total length
of 1,830 kilometers,
with both road and
rail links.
Corridor
IV: the backbone of
the TEN-T network,
consisting of more
than 3,285 kilometers
of road and railways,
connecting Berlin-Nürnberg-Prague-Budapest-Constanta/Thessaloniki.
Corridor
V: connecting
Venice-Trieste/Koper-Ljubljana-Budapest-Uzgorod-Lvov
(1,600 kilometers).
Corridor
VII: the Danube
corridor, connecting
11 countries (Germany,
Austria, Slovakia,
Hungary, Croatia,
Serbia and Montenegro,
Romania, Bulgaria,
Moldova, and Ukraine).
This rail and road
network overlaps
Corridor IV.
Corridor
VIII: connecting
Durres-Tirana-Skopje-Sofia-Varna.
Corridor
IX: connecting
Copenhagen to
Stockholm and
Helsinki; and Helsinki
to St.
Petersburg-Moscow.
Corridor
X: connecting
Austria-Slovenia-Croatia-Serbia
and
Montenegro-Macedonia-Bulgaria-Greece.(Corridors
III and VI are not
relevant to this
article.)
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For additional information
please see the following
ExportMichigan WebGuides:
|
WebGuides
|
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Czech
Republic is one of the
newest members of the
EEC.
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Estonia
and the EEC is
Michigan's 2nd largest
market.
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Hungary
is one
of the newest members
of the EEC. |
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Latvia
is a newly developing
trading partner for
Michigan.
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Lithuania
is Europe's 3rd
largest market for
Michigan.
|
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Poland
with it's accession to
the EEC will become a
more important market
for Michigan.
|
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Slovak
Republic will soon
become one of the
newest members of the
EEC.
|
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Slovenia
will soon become one
of the newest members
of the EEC.
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Date Updated: March 27, 2007
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