THE MOTORWAY
How will the Bechtel motorway impact on Romania? Will the approximately 3.8 euro costs draw bigger investments?
By Liviu Iancu
ROAD OF BILLIONS
COVER STORY:
The Brasov-Bors motorway has already started to change the face of Transylvania. Businessmen estimate the collateral investments that will 'garnish' the 415-kilometer motorway with hotels, gas stations, farms, trading centers, factories, industrial warehouses and others of the like to a total amount of approximately four billion dollars.
While primitives would settle their shelters near flowing waters, modern man likes to tie his business to a motorway, should such opportunity arise. A 415km-long magnet has already started to attract tens of million euros to Romania. Other tens will follow, then hundreds then billions. Businessmen estimate the collateral investment that will 'garnish' the Brasov-Bors motorway with hotels, gas stations, farms, trading centers, factories, industrial warehouses and other of the like to approximately 4 billion euro.
Caption: IN THE MUD: In Turda- where works are carried out on a few kilometers area-Americans are busily working to meet delivery deadlines, in spite of the weather.
STORY OF THE MOTORWAY
The idea of a motorway that would link Romania to Central Europe through Budapest, belonged to Ciorbea's Government.
CIORBEA'S INPUT: In 1998, the cabinet led by the former PNTCD PM Victor Ciorbea developed a project with the alignment that we know today. The project had obtained substantial financing from IMF and green wave from the International Bank.
BUSH and BECHTEL: The first major contact with the current Bush administration (in opposition at that time) was also made during the CDR governing, when Victor Ciorbea met George W. Bush in USA, before the presidential elections. The opportunity of constructing a motorway that would link Romania to Western Europe was discussed on the same occasion and Bush jr. expressed his interest in supporting the project. The project was then forgotten because of the conflict in the government coalition between PNTCD and PD.
THE 2000 PROJECT: After the 2000 elections, the initial alignment was given up for political considerations, as minister Mitrea opted for a more southern solution for the motorway that would cross through Arad, Hunedoara, Alba, Sibiu, Brasov counties to reach Bucharest. Mitrea's project was not finalized, either
LOBBY: at one point, a Romanian-Hungarian group formed and started to lobby the idea of sticking to 'Ciorbea's alignment' before the Hungarian Government led by Victor Orban. Orban's party lost the elections and the new Budapest Government led by Peter Medgyessy supported the same alignment. Consequently, for considerations rather related to the political harmony, PSD was forced to adopt the solution supported by UDMR.
MOTORWAY IN FIGURES
Contract value Euro 2.2 billion
Total value Euro 3.8 billion
Completion time 8 years
Total length 415 km
Cross section 26 m
Carriageway 2x7.50m
Motorway bridges 300 (41 km)
Overpasses 73 (5 km)
Interchanges 19
Affected area 3.320 ha
Caption: AT ARNOLD'S: Bechtel's main offices are located in California, a preponderantly Republican area that elected actor Arnold Schwartzenegger as governor this year.
BECHTEL CONTROVERSY
The award of the Brasov-Bors motorway construction contract to the American company Bechtel raised many discussions and Romania was accused of having thus violated the EU acquis on public acquisitions. The controversy gradually started to get a strong political color and was used against PSD in the lection campaign.
JANUARY 2004: PNL accuses the Government of violating the law of public acquisition by having awarded the construction works for the Brasov-Bors motorway without any bid.
FEBRUARY 2004: Financial Times reports that the decision made by Romanian authorities to award the construction of the motorway without any bid is investigated by the European Commission and Jonathan Scheele, head of EC Delegation in Romania, confirmed that the contract concluded with Bechtel 'is examined by Brussels authorities'. US Embassy in Bucharest also reacts declaring through their cultural attaché Mark Wenig that 'they have recommended the Romanian Government to organize a bid'.
OCTOBER 2004: EC's annual report on Romania mentions the contract concluded without a bid with the American company Bechtel that would have a 'negative impact on several chapters of negotiations', being quoted as a 'most serious derogation from the European rules on public acquisitions'.
The 19 interchanges of the motorway are the 'lucky winners'. These are the places where the motorway meets the national and county roads. Here will be built most of the factories, warehouses and hotels.
What might be the connection between some traffic coordinator in Turda, president Bush and two former premiers, one Romanian and the other one Hungarian? Marinel Ros - as he is our character - has no clue on the answer of such riddle. He has work to do over his head and - the company he works for, Canta Tour, is driving people all day long from Campia Turzii to Ciurila or Agnita. They drive them to and from work, based on a contract 'with those from Bechtel'.
'I understand even more will come in spring' said Marinel Ros who couldn't care less that the idea of this motorway belonged to the former premier Victor Ciorbea, who had had discussions with the current American president as early as 1998, or that the former Hungarian premier Peter Medgyessy had something to say about the motorway alignment, which included Campia Turzii.
It is hard to estimate in figures what benefits the motorway will bring to Romania. The analysts, companies and even the authorities are talking about collateral investments equivalent to the total cost of the motorway - of approximately 3.8 billion euro - by its opening in 2012. Hence Bechtel means a flow of approximately 7 billion dollars that will circulate through Transylvania and will change the face of Romania. The first major advantage will be the motorway in itself. Transport times will be reduced by approximately a few hours. If we add the routes to be built besides the Brasov-Bors motorway, that is Brasov-Bucharest and Bucharest-Constanta, Romania will become the favorite route for the transport of goods. And if we were to consider the receipts from the motorway tolls, direct and indirect publicity - such as that on the toll tickets or on the panels of the motorway, on those 73 passages etc. - and the lease of the land for parking, gas stations or motels, the future sounds really promising.
For the motorway Bechtel built in Croatia, which was opened last year, in the first week-end after the opening - 1.1 million dollars were received from motorway tolls on the Zagreb - Split Sector; just the last weekend 3 million dollars were received on the whole motorway' says Michael Mix, project manager of the Brasov-Bors motorway. In addition, the Croatian motorway has completely changed the life of three areas, from an economical point of view, that is: Ogulin, Brinje, Gospic. For instance the budget Ogulin increased over 7 times after the opening of the motorway, from 2 to 15 million dollars in 2004.
Yet the real stake is the investment the motorway is bound to draw. Factories, industrial parks, warehouses, distribution centers, farms, gas stations, shops - all these will string out in tens along two imaginary 25 kilometer wide strips bordering the road.
The 19 interchanges of the motorway are the 'lucky winners'. These are the places where the motorway meets the national or county roads that will become the major points of attraction for investment.
Marghita, the Bihor county town is close to one of these interchanges. Investors have already started to pour. 'Now they are looking for land and we are trying to find solutions' says Zoltan Pacsaly, city mayor. Among the potential investors we can enumerate the Italians that will build a she factory for motorcyclists - creating around 300 jobs-, a Hungarian company that intends to invest in factory for garment machines and a German company that requested 5-6 hectares of land to build a furniture factory. The pressure of investments in the areas bordering the motorway turns the mayors of communes crossed by this into real businessmen, with lots of ideas and projects. Just over the past months, expressions such as 'industrial park', 'business opportunity' have entered into the vocabulary of officials in the communes of Nusfalau, Zimbor, Netus, Gilau, Nadaselu or Salard.
Such communes that were in the best case known in the counties they belong to, will become famous names in the world of business in just a few years' time. Nor is the city Agnita in Sibiu very famous, but the local officials expect million - euro worth investments in the following years. And that is for one reason only, which is that the new motorway will cross 18 kilometers off the city.
'We started working to an industrial park and industrial area. The industrial park will lie on 20 ha while the industrial area on 15 ha' said Ioan Dragoman, vice-mayor of Agnita.
The land in the industrial park and area will be put up for auction next year, when the infrastructure works are completed.
IN FIGURES
7.54 Euro
The price the farmers obtained for a square meter of expropriated land is 38 times higher than in 2003.
Dragoman said that an Italian company that will build a factory of electronic parts was interested in the land in the industrial park. Also, in October, a Spanish company purchased 3,000 square meters of land to build a factory of textiles and a German company is already building a furniture factory. Another textiles factory is also being built.
The fact that the motorway will tangentially touch commune Bors in the county of Arad and another interchange will be located in this area could not pass unnoticed by foreign investors. 'Motorway construction attracted investments undreamed of to our commune. Thus, in August, Celestica, a Canadian company, purchased land and started to build a factory of electronic sub-assemblies. This investment will exceed 100 million euro and will create 4,000 jobs. 'Explained Batory Geza, mayor of Commune Bors. Celestica, Geza added, made a simple calculation: the motorway crosses 12 kilometers away from the factory. 'They said this way they can export to EU more easily, they have immediate access to the motorway'.
On the other hand, the hopes of the inhabitants of Bors did not stopped with this Canadian investment. The mayoralty has already signed contracts for the execution of an industrial park, 70% of whose funding is ensured through PHARE funds, 20% from State budget and 10% from the local budgets. As a fist step, the park will stretch on 25 ha.
The mayor of Bors commune, already used to speaking about wide-scope business, adds: 'There are also a few smaller investments, of about one million euro each. We are currently negotiating with several international companies that are willing to purchase land, mainly for the industry of electric products'.
Even if it does not cross through Harghita, the construction of this well-off motorway was also felt in the area of Odorheiu Secuiesc, located at a 50 kilometers distance. 'Foreign investors started to come to us too. Basically, ever since the construction has started, each month we have as many investments as we would have before in one year', rejoices Levente Bunta, vice-president of Harghita County Council.
To use an expression that is in fashion these days, the preliminary data indicate that the biggest investment explosion drawn by the motorway construction will be felt in Cluj county. The motorway will cross this county on a 84 kilometer area and will generate investments of hundreds of million euro. Tens of foreign companies started to inquire about the land located in the area of the motorway and some of these have purchased or are negotiating for the purchase of lease of lands.
'Most of the discussions held were about the foreign investments to be carried out in the area of commune Mihai Viteazu, located between Turda and Campia Turzii. Here started the works for the construction of an industrial park stretching over 14 ha in a first stage, but works can be extended up to a surface of 44 ha. The arrangement of this park will be completed in the second half of 2006' said Valentin Cuibus, Cluj prefect.
IN FIGURES
3.8 billion Euro
This is the total cost of Brasov-Bors motorway, out of which 2.2 billion represent construction works and the rest is for expropriations, approvals and other costs.
He added that two Italian companies are interested of investments in this park. One of them wants to manufacture shoes and the other clothes. Each company will invest between four to eight million euro, in a first stage.
Turda will not stay outside the interest of foreign companies, either. The German company Argilon will invest 20 million euro in this area in a factory for electric insulators.
Caption: READY IN 2008: Section Campia Turzii -Cluj Vest where the BUSINESS Magazin photo-reporter captured these pictures, will be completed in 2008.
CONSTRUCTION PULSE
1. SECTION 1: BRASOV (CRISTIAN) - TARGU MURES (OGRA) - 161 KM
SECTION 1A: Brasov (Cristian) - Fagaras (starts in January 2009 and is completed in 2012).
SECTION 1B: Fagaras - Sighisoara (starts in January 2009 and is completed in December 2012).
SECTION 1C: Sighisoara - Ogra (Tg. Mures) (Starts in January 2007 and is completed in December 2010).
2. SECTION 2: TARGU MURES (OGRA) - CLUJ: 90 KM
SECTION 2A: Ogra (Tg. Mures) - Campia Turzii (36 km, starts in July 2005 and is completed in June 2006)
SECTION 2B: Campia Turzii - Cluj Vest (Gilau) (54 km, was started in June 2004 and is completed in December 2008).
3. SECTION 3: CLUJ - BORS: 164 KM
SECTION 3A: Cluj Vest (Gilau) - Mihaiesti (24 km, starts in January 2008 and is completed in December 2010).
SECTION 3B: Mihaiesti - Suplacu de Barcau (76 km, starts in April 2006 and is completed in November 2011).
SECTION 3C: Suplacu de Barcau - Bors (64 km, was started in June 2004, is completed in December 2008).
Caption: Bogdan Sgarcitu
Communication Manager, Bechtel
The company also owns factories in Germany, Poland, USA and Indonesia. In February, they will start the works to arrange the space already purchased and the manufacture will commence at the end of next year. 'They were attracted by the construction of the motorway, as they are very interested in transport. They want to export to Hungary, Yugoslavia and Ukraine', explained Valentin Cuibus.
On the other hand, there are tens of Italian companies that bought huge land properties in the area, some having purchased even hundreds of hectares. Nevertheless, these did not announce whether they will use this land for agriculture or for industrial purposes. The prefect added that in November, the ambassador of Japan and a few other Japanese investors have visited Cluj as they were interested in investments in the area of the motorway.
Also, the Korean company CJ intends to invest in the area Turda in a factory of electric apparatus for cars. 'They have asked for land as close as possible to the motorway. They even had plans of what buildings were supposed to look like. There will be halls of two hectares each. They will come to buy land by the end of the year' indicated the prefect.
He added that only in November, 18 foreign companies came to the prefecture for discussions regarding investments in the motorway area. 'There have been German, Austrian, American, Italian and even Portuguese or Luxembourg companies. Some said they wanted to invest 50 million euros, others just 2-3 millions. All are researching the market looking for land. I believe, collateral investments will exceed the initial investment in the motorway when this is ready' concluded Cuibus.
The representatives of municipalities said that the motorway would generate high investments also in agriculture as this sector offers SAPARD and PHARE funding opportunities that add to the possibilities of faster transport of goods to the Occident.
Another field in which the motorway proved to be a godsend is tourism. Westerners who want to drive to Romania in their personal cars would not have to spend more than a few hours from Budapest to Brasov.
'The impact of the Brasov-Bors motorway on the growth of tourism traffic and on the development of tourism activities in general will obviously be consistent and immediate. Firstly, the motorway alignment crosses areas in Transylvania with real tourist potential: Baile Felix, Apuseni Mountains, Sighisoara or the Southern Carpathians and facilitate access toward the 'Szekler communities' and the related spas and ethno folklore areas, respectively towards the areas of Saxon tradition - Saxon rural citadels etc', deems Radu Morariu, director of the tourism agency Eximtur Cluj.
Those working in tourism estimate that as soon as the motorway sections are commissioned, motels will be built near gas stations, on the edge of the road. At the beginning there will only be small accommodation spaces of 10-12 rooms with restaurant that will subsequently be replaced by hotels of approximately 50 rooms, in average.
The representatives of the hotel industry estimate that upon opening it is necessary to have at least 16 hotels of 50 rooms each (800 'on the road' accommodation) along the motorway for this industry to reach maturity.
'Subsequently, that is after 2012 when the motorway construction will be finalized, there will be a massive investment in the hotels located on a distance of a maximum 25 km on one or the other side of the motorway' said Cornel Gaina, administrator of the of the hotel complex Cormoran in the Danube Delta, former president of the National association of Tourism Agencies in Romania.
A major advantage will also have those who already have hotels or boarding houses in areas such as Bran, Sighisoara or Targu Mures. A high development will also take place in the area of interchanges, added Cornel Gaina, where hotels, restaurants and mini-markets will pop-up.
MILLIONS of TONS
The motorway contractor has estimated the quantities of materials needed; the quantity of cement, for example, is close to the total amount of cement produced by the 9 Romanian companies in one year.
COST PER KILOMETER: The cost of construction works will amount to 2.2 billion euro that is 5.3 million euro per kilometer. According to the Romanian Contractors' Association (ARACO), this motorway will be the second in Europe from the point of view of costs (the most expensive is in Sweden that has a difficult alignment through a mountain area, with many tunnels).
COMPARISON: According to ARACO, in Portugal, a three-lane motorway costs 2 million per kilometer, in Great Britain - below four million euro/kilometer.
LABOR: ARACO's study indicates that in Romania, the labor employed in constructions is very cheap, that is one euro per hour, while in Sweden, for example, one man hour in constructions is worth 30 euro.
Asphalt mixture Open asphalt concrete
1,300,000 t 1,100,000 t
Lime Crushed stone
100,000t 300,000,000cubic meters
Sand Cement
1,800,000 cubic meters 4,500,000t
Caption: Michael Mix, Project Manager of Brasov-Bors motorway
'The motorway will have a huge impact on the number of visitors coming to Romania. In tourism, infrastructure is highly significant as it influences by approximately 35-40% the decision to go to a certain destination', believes Gaina. According to the latter, when the motorway will be opened, the number of tourists will increase by 30% as compared to previous year, because the access by car from the western states will be much easier.
In Harghita, one can already feel a refreshment of tourism. 'Last month a Hungarian company came to built boarding houses and hotels. Tourism will arrive not only from Hungary, but from other countries like Holland. It is cheap to stay here and it is nice. The main problem is the road. Now I can drive all the way from Germany in one days' time' added Levente Bunta from CJ Harghita.
On the other hand, those working in this sector appreciate that once it is opened, the motorway will lead to a growth in the number of local tourists. For example, a tourist from Cluj will get much faster then to the seaside or to the Delta.
On both sides of the motorway, the beneficiary of works, National Company of Motorways and National Roads will establish the areas leased and put them forward in bids for those interested in the construction of gas stations, motels and fast-foods.
'I believe many companies will be interested to invest as the part of motorway that will be commissioned in 2010 will have daily traffic over 20,000 cars' believes Mihai Basulescu, general manager of the National Company of Motorways.
Among the companies that want to invest in the immediate vicinity of the motorway we can mention: Petrom, Rompetrol, OMV or McDonald's. These, as well as many others, are waiting for the tender organized for the relevant spaces.
The construction of the motorway will also 'boom' the market of constructions both for the material suppliers and for the constructors. 'The market of construction materials will be raised for eight years. This market will have to keep up with the huge demand. An immense amount of construction materials will be absorbed. As production capacities are limited it is highly possible that the price of construction materials increases' estimates Cornel Martincu, general manager of Iptana, company providing the design works for Autostrada Transilvania.
He thinks that the alignment of the motorway is very difficult, as 10% of its length is covered by bridges, passages and viaducts. Hence the high costs of 3.8 billion euro, out of which 2.2 billion go to construction the rest being the price of land, approvals, agreements and other related costs.
Romanian and foreign transporters carrying out business in Romania are delighted in their turn about the construction of this motorway. 'Romania's current problems regarding the traffic from east to west and the other way around consist mainly in the compliance with all traffic rules (speed limitation, overtaking interdiction), traffic within localities and professional divers' compliance with the working and resting times, that is very hard to meet given that the average general speed for heavy vehicles is of 50km/h' said Radu Dinescu, general secretary of the National Union of Road Transport Companies in Romania.
Thus, it is only in 8-7 years' time that we will have the same conditions as the Americans where the distance between two localities is not measured in kilometers but in hours of drive. And that is because, as the saying goes over the ocean, 'time is money'...
By 2012, maybe Ciorbea - the parent of this motorway -will be taken for granted as he mentioned the dim light at the end of the tunnel. Maybe this was the spark of satisfaction in the eyes of Marinel Ros, the traffic control of the Turda cab company, who can hardly keep up with the orders since Americans came and started to build in the area.
Bechtel's History
The American company is a family business that was started in San Francisco in 1898 by warren A. Bechtel. At the fourth generation, Bechtel family has lead the company and completed over 20,000 projects in 140 countries on seven continents. Today, the company is being led by Riley Bechtel and has 47,000 employees. Among their most famous projects, one can mention:
EUROTUNNEL: The railway underwater tunnel that links England to France and was built between 1986 and 1994, the total cost of works amounting to 14,7 billion dollars.
JUBAIL INDUSTRIAL CITY: Since 1976, Bechtel has designed and completed an urban complex with 11 businesses in Saudi Arabia. The cost of this work was over 40 billion dollars, as this is the greatest industrialization project ever.
HONG KONG AIRPORT: Between 1990 and 1998, using a 20 billion dollar budget, Bechtel built one of the most complex and modern airports in the world, erected on an artificial island.
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