All across Europe, spending on infrastructure is supposed to be under pressure amid fiscal tightening and challenging financing conditions for private construction projects.
That is not the case, however, in northern Poland‘s largest city, Gdansk. In February, the Gdansk’ Council’s Infrastructure Investment Management Company handed out a 221.4 million Euro contract for the fourth stage of the Slowackiego IV road and tunnel project, which links the airport to the Gdansk port, to a joint venture comprising of Spanish engineering giant OHL and Polish group PBG.
To be completed over a 36-month period, the project’s most prominent feature revolves around the creation of twin tunnels under the mouth of the River Vistula in the Baltic Sea. The tunnels, each 1.075 kilometres long, will feature an 11-metre free diameter circular cross-section, two lanes, and shoulders in each.
Significant though that project is from Gdansk’s point of view, it is only a snippet of the road building boom currently underway across Poland.
In the lead-up to preparations for its co-hosting of the Euro 2012 football championship with Ukraine, the Polish government embarked on a whopping 95 billion zloty (roughly $A34 billion) infrastructure spending spree. The majority of this went to highways as part of a plan to more than double the nation’s 674-kilometre road network, which existed in 2007, when Poland’s role in co-hosting the tournament was announced.
Furthermore, with the road building program expected to run until 2015, the sector is not expected to slow down any time soon even though the games have now passed. In its recent report on Poland’s infrastructure, Business Monitor International (BMI) says it expects good growth ahead, with the sector expected to draw around $US60 billion in investment between 2007 and 2015.
Thanks largely to the road building program, along with significant work on railways, tramlines, stations and airport terminals – not to mention the building of four stadiums – the civil construction sector in Poland has been the standout performer among very weak building conditions elsewhere in Europe. In the five years spanning 2006 to 2010, BMI says, civil construction activity averaged more than nine per cent annualized growth. Last year, even as work cratered elsewhere on the continent, the value of work done in the sector rose by a further 11.8 per cent.
Along with the games, much of the upgrade reflected a desire to improve the nation’s infrastructure, which was in a poor state following the collapse of communism two decades ago and which acted as a barrier to foreign investment.
All of this has helped shield the nation ‘s economy from the European downturn. Last year, Poland’s economy grew by 4.3 per cent, more than double the rate of Europe as a whole. In 2012 and 2013, the International Monetary Fund (IMF) expects the country’s economy to grow by a respectable 2.6 per cent and 3.2 per cent respectively even as Europe as a whole experiences virtually no growth at all.
This has not, however, meant huge returns for builders. Thanks to cut price competition, over-optimism with regard to profit margins and unexpected increases in prices of asphalt, cement, fuel and steel, many bids for work have turned out poorly economically. In the most public example, Chinese contractor Covec went bust after undercutting the government’s own estimate by 40 per cent with regard to a contract to build two sections of the A2 highway from Warsaw west to the German border – causing significant delays to that project.
Indeed, even as activity was going full steam ahead, no fewer than 85 Polish construction firms went into bankruptcy in the first four months of this year, the Financial Times reported on June 27. This is up from 60 for the same period one year earlier.
Despite this, the program has provided a significant boost in terms of civil construction employment and the overall economy.
With its team eliminated in the group stage, one aspect of UEFA Euro 2012 did not go as planned for Poland.
At least with all the roads it is building, the country has something to show for its efforts.