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EU for 123 km of highway in the Balkans will spend 1.2 billion euros, Albania gives "Gener 2" 1.3 billion euros for 20 km

2022-06-10 09:23:04Biznes SHKRUAR NGA REDAKSIA VOX
EU for 123 km of highway in the Balkans will spend 1.2 billion euros, Albania
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The European Union through WBIF (a joint financial platform of the European Commission, financial organizations, EU member states, aimed at public and private sector investment in the Balkan region) has recently published a list of priority projects that have been approved for funding in the Balkans, among which 6 highway projects mainly focused on the segments of the Mediterranean Highway (Adriatic-Ionian) which includes Albania and another project related to the continuation of the Nation road from Pristina to Merdare (Serbia) baptized as the Peace Highway, (see attached table).

According to the document at the link https://www.wbif.eu/storage/app/media/News/2022%20Endorsed%20flagships%20February/WBIF%202022%20Endorsed%20Flagship%20Projects%2024.02.22.pdf) the length of the highways that will be funded by the EU in the Balkans is a total of 123 kilometers, while the total cost of construction is 1.2 billion euros or about 10 million euros per kilometer. 

One of these segments is in Albania part of the "Ionian Adriatic Highway".

It is about the Tirana by-pass which has a length of 21.5 kilometers and will be financed with 190.6 million euros or an average of 8.9 million euros per kilometer.

The Albanian government undertook to reactivate the Milot-Kashar concession with a length of 20 kilometers with a total value that provides for 35 years of maintenance with about 1.3 billion euros. The contract between the government and the concessionaire "Gener 2 sh.pk and G2 infra sh.pk", did not separate the cost of works from the cost of maintenance.

The financing will be done by the company while it seems that the settlement will be done by the taxes that will be paid by the road users.

But in 2019, when the first concession contract was in force, the Ministry of Finance in the state budget tables accounted for the construction of this segment with 45 billion ALL or 372 million euros or 18.6 million euros per kilometer.

While a similar project from Pristina to Merdare will cost only 7 million euros with EU funds. The feasibility study for the Adriatic-Ionian Highway commissioned by the Albanian government revealed a cost of 160 million euros for the construction of the Thumanë-Kashar segment.

The concession contract, Thumanë-Kashar provides the construction and maintenance of 20 kilometers in the next 36 years worth 1.3 billion euros.

Meanwhile, the Albanian government spends an amount of about 1.5-2.5 billion ALL (12-20 million euros) per year for the maintenance of national road axes. For example, during 2019, the ARA budget for maintenance executed 20.6 million euros, for approximately 2,200 km of roads.

If all this fund were used for the maintenance of only 20 kilometers of Thumanë Kashar, a fund of about 600 million euros would be needed for the 35 years of the contract. The high value of construction and maintenance will translate as a high toll value in tolls, which will be set on the axis.

The cost of one km of road for the concession contract, Thumanë-Kashar, including maintenance, will cost Albanian citizens 60 million euros per km. Meanwhile, the government announced yesterday that a bridge worth 9 million euros, 310 meters long, will shorten the distance between Vleipoja and Ulcinj!

Costs per unit with foreign funds, much less than with budget funds

Official data from the Ministry of Finance and the Ministry of Infrastructure show that, over the years, there is a high difference in the costs of road works with foreign financing, compared to domestic financing.

Systematically, unit costs (kilometers) with foreign funds are much lower than those with domestic budget funds. This trend was valid for 2019 and 2020 as well.

One kilometer of category B road, with domestic financing, cost in 2020 on average 555 million ALL, while such a category with foreign financing, cost 347 million ALL, or 37% less.

Large differences were also observed in category C, where the cost of one kilometer with domestic financing in 2020 reached 667 million ALL, while with foreign financing, was 111 million ALL, or 6 times less.

Data on costs per kilometer were provided in the Monitoring report of the Ministry of Infrastructure.

The comparisons are not strict, as they represent works in segments, or works of art that often produce costs that vary from year to year, for the same road category.

But the data show a linear difference over the last 10 years where the cost per unit of foreign financing is much lower than the cost per unit of domestic financing.

According to the data of the Ministry of Infrastructure in the "Monitoring Report 2018", the actual costs for road construction were about 15 billion ALL, of which about 9 billion ALL domestic financing and 6.3 billion foreign financing. For the same road category, the cost of financing with domestic funds is 10 times higher than with foreign funds.

From domestic financing, 4.2 billion ALL were spent, with which 28.7 kilometers of category C roads were built. The cost per kilometer with domestic funds was 146 million ALL, or 1.1 million euros at the current exchange rate. For category C, with foreign funds, 205 million ALL were spent and 12 kilometers were built. The cost per kilometer was 17.1 million ALL, 136 thousand euros, or 10 times lower than with internal financing.

The same difference applies to category B. According to official data for 2018, 1.7 billion ALL were invested, with which 6.7 kilometers of roads were built. The cost per kilometer was 262 million ALL, or 2 million euros per kilometer. Cost per kilometer for the same category of roads with foreign funds cost many times less. During 2018, 89 kilometers of category B roads were built, with an amount of ALL 3.2 billion. The cost per kilometer was 36 million ALL or 294 thousand euros per kilometer./ Taken from Monitor.al/


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