Transport represents an intermediary link indispensable for the production of all sorts of goods and services, and this makes it of great importance to the economic development of any country.
Bulgaria’s geographical location is suitable for the development of all types of transport: by river (via the Danube), by sea (via the Black Sea), by road, rail and air. Major transport routes cross the country, as does the natural gas pipeline from Russia.
Rail transport is of prime importance to the economy. Recent figures show that it employs 37.5 per cent of the people working in the transport sector and carries 36.6 per cent of transported loads.
The number of people transported by road is increasing, but the loads transported are decreasing in comparison with rail transport. Today, the road network is more than 37 000km long and the rail network 6467km.
Air transport is faster, but more expensive. It is used exclusively by travellers from rapidly expanding towns. Bulgarian air transport was born in 1947, when the first national route, Sofia-Bourgas, and the first international route, Sofia-Budapest, were opened.
Bulgarian maritime and river transport are well developed and the country has maritime and river trade fleets, including more than 100 maritime vessels.
A World Bank report on Bulgaria’s transport sector says that the sector is important for Bulgaria in view of the country’s major goals of improving the competitiveness and efficiency of its economy and preparing for EU accession.
International trade (the sum of imports and exports) amounts to more than 90 per cent of Bulgaria’s GDP. Meanwhile, the peripheral location of Bulgaria in Europe and its mountainous geography also make transport a special constraint to its development.
Transport, according to the World Bank, is important for Bulgaria for many reasons, including:
Bulgaria is a small country of less than eight million people, with very low labour costs, for which international trade is essential to economic growth as shown by the very large share of trade in GDP.
Much of Bulgaria’s trade is with Western Europe (mainly the European Union) and its exports are largely raw materials and semi-processed goods that are sensitive to the cost of transport. This is an issue, given the largely inland location of Bulgaria’s economic activities that requires transport mostly by road or rail, which are more expensive than maritime transport.
Few large cities exist and the population and factories are spread over many small settlements, which makes transport demand higher than usual.
As social and administrative services are being restructured with many inefficient medium-sized facilities (hospitals and schools in particular) being closed, people will be more dependent on transport to access services.
Transport expenditures are a key part of the state and local budgets (with state support to the railway amounting to about 0.2 per cent of GDP and road expenditures about 1.2 per cent of GDP) and there is much potential for improving the efficiency of allocation and use of state funds in transport.
Except for road transport, the sector is still dominated by state-owned enterprises. Privatisation and competitively awarded public private partnerships in maritime, river, air, and urban transport are necessary to increase efficiency and supply necessary investment funds that the state does not have the means of providing.
Problematic infrastructure
The poor condition of the infrastructure is the largest problem the transport sector in Bulgaria faces.
The issue still remains in the hands of the state, which is on one side burdened by the lack of enough funds to take care of the infrastructure, and on the other, is limited by some administrative incapacity to act.
A conflict from earlier this year as to whether Bulgaria’s Roads Executive Agency, which is under the Regional Development and Public Works Ministry, should be transferred to the Transport Ministry highlighted some of the deepest problems. The proposed transfer was aimed at concentrating activities such as infrastructure maintenance, control over the collection of funding for repair works and the regulation of the relations between the state and transport sector companies, into the hands of a single institution. Now, all these activities are spread between the above mentioned ministries, which makes proper co-ordination tough to impossible.
Experts from the European Union have also demanded that the Transport Ministry take entire control over the management and the maintenance of the road infrastructure, i.e., of the funds needed for it. Transport companies also back the idea, stating that the move would help to set up fairer regulation in the sector.
Currently, carriers pay high road tolls and toll stickers (called vignettes in Bulgaria), and at the same time have huge repair expenses for their vehicles due to the bad condition of the roads.
Logistics companies also insist that the transport infrastructure should be modernised, which in turn would be conducive to the complete liberalisation of the market for transport and logistics services.
Speeding up the concession procedures for ports and airports and the setting up of intermodal terminals would also contribute a great deal to the further liberalisation of the services, experts from the logistics sector say.
Bulgaria has the worst transport and communication infrastructure when compared to the 10 countries that joined the EU in 2004.
The struggle of business to attract transit cargo through Bulgaria does not meet understanding from the state institutions.
The delay in the process of upgrading infrastructure in Bulgaria causes problems for neighbouring countries as well. The projects for the construction of a bridge over the Danube, linking the town of Vidin with Romania’s Kalafat, is a typical example. Romanian authorities are dogged by concerns over whether the project will be launched at all. The delay on behalf of Bulgaria does not allow Romania to launch a procedure for the selection of a contractor for the construction of the site.
At end-April, Bulgaria’s Cabinet decided that the operations of the Roads Executive Agency would be made more efficient by the creation of a new system and a special fund, the National Road Infrastructure.
The decision was meant to pool financial resources for road improvements and streamline agency co-ordination in carrying out major infrastructure projects.
The Finance minister will chair the board of the new funding operation. Also on the board will be the Regional Development and Public Works minister, the Transport minister and other state officials.
Currently, the Finance Ministry administers EU funding for road repairs and construction. The Regional Development and Public Works Ministry is in charge of capital construction. The Agriculture and Forestry Ministry finances the reconstruction of some municipal roads.
Under the new system, the Transport Ministry will be in charge of the tenders for the construction of motorways and first-grade roads, while the Regional Development Ministry will administer all other tenders, including second- and third-class road projects. Fourth-grade roads, those connecting small villages, will be managed by the Agriculture Ministry and financed with EU agricultural funds.
Bulgaria is to receive more than 800 million euro from the EU’s Transport Operational Programme after joining the union. Hopes now hang on the new National Road Infrastructure Fund to be able to make the best possible use of this money.
Privatisation
The current Bulgarian Government has on many occasions expressed the belief that the long-anticipated privatisation of state-run companies in the transport sector will boost its development.
The national flag-carrier Bulgaria Air is to be the first company in the transport sector to be offered up for privatisation by the Cabinet, hopefully by the end of 2006. A privatisation strategy for Bulgaria Air has already been approved by Parliament and now the respective authorities are expected to move forward with the process.
Concerning the national maritime fleet, Navigation Maritime Bulgare (Navibulgare), it is not yet clear as to whether it will be sold as a single entity or in self-contained parts. The Cabinet is not in a hurry over the privatisation of the fleet and the sell-off strategy for the company is unlikely to be ready by the end of 2006.
Regarding the railways, the Transport Ministry is considering a merger between the Bulgarian State Railways (BDZ) and the company that operates the domestic railway infrastructure to form a railway holding or consortium. No specific timetable has been approved for this yet, but the goal is to bolster the market share of railway transport.
Within the holding structure, passenger and cargo transportation, and possibly engine maintenance, would be split into separate divisions. The Cabinet views the decision made in 2002 to split the BDZ into two separate companies – one managing the railway infrastructure and another providing railway haulage – a mistake. The infrastructure operator relies mainly on BDZ for revenues because, of the two private companies licensed to compete with the national carrier, only one is conducting business. Meanwhile, BDZ owes the operator about 50 million leva in fees for the use of the railway infrastructure.
Working out a new national transport scheme connecting different types of transport is also among the key priorities of the Cabinet. The scheme envisages the enhancement of the quality of transport services. Safety, security and the modernisation of the transport system are the other focal points of the Government’s programme.
The upgrade of the transport system will be achieved mainly through the improvement of the infrastructure. The state will first define the priorities clearly, and then the support of private investors will be brought in to play.
The future
At end-March 2006, the Transport Ministry made public a 10-year programme for the construction of new roads and concession of major infrastructure facilities in Bulgaria.
Concession contracts for the central railway stations in Sofia and Plovdiv (the country’s two largest cities) will be awarded by the end of 2006, Transport Minister Petar Moutafchiev said. The Government plans to appoint a consultant for the concession procedures. The concession offer may include a package consisting of one large and one small railway station.
EU-based railway carriers will gain access to the Bulgarian market after Bulgaria’s accession to the EU.
Bulgaria has so far licensed only two private railway carriers, Bulmarket and National Railway Company. Newcomers will pay to the national railway infrastructure operator a user charge set by the Government.
The implementation of the programme for the development of transport in Bulgaria by 2013 will cost more than 2.5 billion euro.
Bulgaria’s Trakia, Maritsa, Strouma and Cherno More highways will be granted on concession. Construction works on the Trakia highway may commence as early as 2007 and be completed in 2009. The Strouma highway, linking Sofia with the Greek border, must be completed by 2012 at the latest.
A total of 352km of roads will be renovated under the Transit Roads IV project by 2008, according to the new programme. The construction of the Lyulin highway, which has been put off for years, must be completed by 2009.
Almost 900 million euro will be invested in the development of the road network in Bulgaria in the period 2007-09, according to the programme. Bulgaria will also apply for 593 million euro funding from the EU’s cohesion fund. A further 294 million euro will be secured from the state budget.
