Economic Update
Ahead of its expected accession to the EU next year, Bulgaria is looking to get its transportation infrastructure back on track and up to the standards expected of a modern European country.

In the past two months, Bulgaria has made public a raft of projects designed to upgrade its transport infrastructure, the developments being a mix of state schemes and private enterprise initiatives.

On September 4, Prime Minister Sergei Stanishev unveiled the latest phase of the government’s strategy to upgrade the country’s infrastructure. The plan, covering from 2006 to 2015, had a price tag of $6.5bn and included developments in the education, healthcare and information technology sectors. However, the majority of funding, $5bn, would be dedicated to transportation projects, Stanishev said.

“One of the priority sectors for Bulgaria’s transport development was railway infrastructure,” the prime minister said, with several of the country’s major lines needing modernising.

At the end of July, the government announced it would be providing funding of $480m for five major infrastructure projects, again with transportation being the focus. At the same time, the World Bank said it would provide an additional $113m for the re-construction and rehabilitation of the national road network, the project encompassing the modernisation of 440km. The European Investment Bank (EIB) also announced a loan of $190m to be used for improvements of the railway from Plovdiv through Svilengrad to the Greek and Turkish borders, the development being the largest infrastructure project to be carried out in Bulgaria.

Even more recently, on September 13, the Bulgarian cabinet approved a draft memorandum for co-operation with EIB for the development and funding of infrastructure projects, with up to $1.26bn to be provided over the next two years. For 2009 to 2013 the financial resources to be made available would increase to $880m annually. Again transport infrastructure has been pinpointed as an area of priority.

Only days later, Petar Moutafchiev, the transport minister, announced that the state would open bids for concessions to operate the port terminals of three of the country’s major ports, Varna North, the Vidin central port and the port in the city of Lom, by the end of the year. The cabinet was also scheduled to make a final decision on the operating rights for the airport in the city of Rousse by the end of November, the minister said. Under the state’s proposal the former military airport, which has been closed for the past 15 years, would be used as a cargo hub as well as for low cost passenger flights. There has been both local and foreign interest in all of the projects, which would require the successful bidder to invest in the infrastructure of each of the facilities.

One of the largest developments in the Bulgarian transportation sector also came in September, with the finalising of a deal that will see a joint consortium consisting of Germany’s Fraport and BM Star of Bulgaria operate the Varna and Bourgas airports, both located on the country’s Black Sea coast.

Under the contract, Fraport Twin Stars, as the consortium is known, will take over the entire operation and master planning for both airports for 35 years. As part of its winning bid, Fraport Twin Stars will not only hand over $3.78m as a direct one off payment and give a near 20% of operating revenue or airport charges, whichever is the higher, to the state but will also invest up to $630m in new or upgraded facilities at the two airports. These investments will see the capacity of the airports doubled to 6m within three years.

It may be no coincidence that Bulgaria has been touting its commitment to boost the standard of its transportation system in recent months, with the EU set to announce at the end of September whether Sofia has made the grade to be accepted into the bloc on January 1, 2007. The EU identified the country’s transport services as being in need of improvement and the Bulgarian government has been rushing to ensure that it has removed all hurdles to accession.