The expansion of transport infrastructure, especially highways, highways and railways, is a key element of economic and social development in Europe, the Staszic Institute emphasizes in its report.
The growth trend in some countries shows that investments in transport are a key element of development strategies. Unfortunately, the current economic and geopolitical situation means that many projects and ongoing investments are threatened by the constantly rising costs of construction entities – according to the Staszic Institute report.
Insufficient pace of infrastructure development
According to 2021 data, the length of the road network in Poland was only 1,761 km, while Spain, the leader in Europe, has almost 16,000 kilometers of highways.
However, it is not just the length of highways that is a problem. Poland also suffers from an insufficient growth rate of this infrastructure, which averages only about 44 km per year. This does not meet demand, given Poland’s strategic location at the crossroads of north-south and east-west transit, including the Asia-Europe routes.
Similar problems concern railway infrastructure. Although the track length in Poland is 19.3 thousand km, over the last ten years we have observed a clear decrease compared to 20.1 thousand km in 2012. Problems in the development of railway infrastructure are due to management problems, conflicts, financial problems and lack of clarity about costs and financing.
Roads beat railways
Moreover, Poland still retains a major advantage of the road sector over the railway sector, even though the latter is considered more ecological. Road transport now exceeds 80% of the transport share, compared to 69.5% in 2010, while investments in the road network receive much more funding than investments in rail.
Funding for infrastructure projects in Poland comes from various sources, including the state budget, local government funds, Ministry of National Defense funds, EU funds and other external sources. However, the lack of expected resources from the National Recovery and Resilience Plan is an obstacle to the implementation of road and rail programmes. This in turn leads to delays in implementation.
Valorization – 15% level achieved
An ongoing problem of the entire construction sector is mainly unexpected price increases, which nullify the original calculations of completed projects. We are talking mainly about projects started before the Russian invasion of Ukraine, as a result of which in the first half of this year. about a third of road contracts submitted for tenders before the outbreak of war exceeded the legal limit of 10%. indexation limit. The construction industry estimates that the increase in limits will average almost 20%. until the end of the contracts, assuming the current price level is maintained. Already in October, but after the parliamentary elections, the Council of Ministers decided to increase this level to 15 percent.
Nevertheless, problems related to the indexation of contracts and the stagnation in announced tenders will result in a new wave of layoffs of specialized workers and financial problems for contractors. The situation concerns both general contractors and smaller companies who incur higher costs in carrying out work without receiving adequate compensation to prevent losses. As a result, a record number of bankruptcies were registered in the sector this year: the number of bankruptcies of construction companies in the first half of 2023 increased by 59%. compared to 2022
Coordination is essential
To ensure the development of road and rail infrastructure in Poland, coordinated action by the government, local authorities and other entities is necessary. We also need stable and predictable financing conditions and flexible adjustment mechanisms to changing costs.
An important aspect is to stop inflation in the construction sector, i.e. implementing a decisive and consistent anti-inflation policy, such as the introduction of a uniform VAT rate at an appropriately low level (e.g. 10%) for the entire construction sector, for all products and services. or temporarily introducing preferential rates for the purchase of gas for producers of building materials that are particularly sensitive to price increases.
How can the market be effectively protected against competition from outside the EU?
A separate topic is the development of instruments to protect the domestic procurement market in the infrastructure sector against non-EU entities. Taking into account the negative impact on the conduct and implementation of infrastructure projects by contractors from third countries with little experience in implementing projects on the Polish market, the participation in tenders of entities whose knowledge and experience cannot be verified on the Polish market are strictly controlled. limited. In addition, non-EU companies funded by large subsidies from their own countries have a detrimental impact on competition in the infrastructure construction market. One of the important solutions should be appropriate tools to verify the experiences of contractors from distant countries.
Only by implementing the above-mentioned requirements and other recommendations of the Staszic Institute report will it be possible to achieve infrastructure goals and increase Poland’s competitiveness in the international arena.
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
