Three Seas Initiative offers common vision for promoting transport infrastructure investment climate in Central and Eastern Europe
Aug 02, 2017
The ‘Three Seas Initiative’ has been proposed by several key stakeholders in the region as a way of facilitating investment and development in order to address this imbalance and boost economic figures. Central and Eastern European countries in the region joining the Baltic, Black and Adriatic Seas account for 28% of the EU’s territory and 22% of its population, but only 10% of its GDP.
The inititative is presented as an opportunity for Central and Eastern Europe (CEE) to address its most important challenges. One of the main challenges is the financing of transport infrastructure development. More than EUR 150 billion has been invested in transport infrastructure in the Three Seas region from EU Structural Funds. But the need for further investment in transport infrastructure remains large, with another EUR 615 billion needed through 2025 in the broader CEE region. The keys to unlocking further investment for countries in the Three Seas region are discussed in a new report by PwC and the Atlantic Council entitled The road ahead – CEE transport infrastructure dynamics.
The new PwC-Atlantic Council report outlines the key challenges and opportunities for the Three Seas Initiative in the area of transport infrastructure. One of the main goals of the Three Seas Initiative is to establish closer connections among the countries along a North-South Corridor, and transport infrastructure is one of the key components of such a corridor. The new report outlines the current state of play and provides a picture of remaining infrastructure bottlenecks in the region – analysing policy, regulatory and financial hurdles, and outlining a series of recommendations for speeding up development.
Agnieszka Gajewska, Partner at PwC, CEE Capital Projects and Infrastructure Leader, says:
“Despite progress in recent years, there is still a great need here in CEE for more efficient and modern transport infrastructure to support our growth aspirations. Given the need, we expect construction market growth in CEE to be 3.1% and outpace that of Western Europe over the next five years. For this to happen, we will need to continue to attract investment from both public and private sources. There are several good examples of private investors committing to key transport infrastructure projects in our region. However, CEE is still perceived as riskier for investment than Western Europe, so stakeholders in our region need to work together to offer to the market a sound pipeline of well-prepared projects with a balanced risk-return ratio. This is relevant to all countries in the region, and initiatives like the Three Seas Initiative can bring additional confidence to investors by demonstrating a common vision and the political will to make major projects happen.”
Baiba Apine, Director at PwC (Latvia) Advisory, says:
“To continue as a competitive part of the global transport network, we need to develop and maintain our railways, motorways and waterways, as well as the surrounding infrastructure. Latvia has already completed large infrastructure development projects, such as Riga International Airport, a significant airline hub, and the Southern Bridge, which is increasingly used by traffic from the Riga metropolitan area. We’ve bravely started Rail Baltica, the largest and most complex transport infrastructure project in EU history. The survey suggests that the period of simple projects is over; going forward they’ll become increasingly complex due to technological advances, requirements for improved efficiency and transparency, stakeholders with differing opinions being increasingly involved in decision-making, and a higher expected return on each euro invested. While this scale and the factors involved might seem daunting, Latvian businesses are well placed to take opportunities in terms of technology, raising funds, and learning from their own mistakes. We’re definitely able to compete with foreign designers and builders on transport infrastructure development projects of this scale and to work together in novel ways.”
Following decades of underinvestment, CEE has made unprecedented progress in infrastructure development in recent years: approx. 5,600 kilometres of new motorways have been built over the last 20 years. This has been thanks in large part to EU funding: over EUR 150 bn has been invested from EU Structural Funds, with additional money made available from the Connecting Europe Facility and the European Investment Bank. Additionally, private investors have invested billions of euros in key transport projects in Poland, Slovakia, Hungary and Croatia. The authors of PwC and Atlantic Council report underline that although investor interest continues, they are looking for well-prepared projects with a balanced risk-reward profile. Striking the right balance between risk and reward will be key to unlocking continued investment, an important consideration given that regional needs for transport development is estimated at EUR 615 bn through 2025 in wider CEE. With the right conditions in place, CEE is expected to outpace Western Europe over the next five years, with construction market growth of 3.1% per annum, creating good opportunities for domestic and international companies and investors.
The report provides a detailed look at the five key transport corridors that are expected to play a paramount role for connecting the Three Seas region (North Sea-Baltic, Baltic-Adriatic, Rhine Danube, Orient / East-Med and Mediterranean). More than EUR 384 billion across over 2,000 projects is still needed to complete these five transport corridors.
According to the report, one of the most crucial challenges for the Three Seas Initiative is to build an effective process of financing transport infrastructure that will help close the gap between East and West – the average citizen of the “old EU” has twice as many kilometres of motorways to drive on than his/her counterpart from CEE.
Michał Kobosko, Director of the Atlantic Council in Poland, says:
“The infrastructure gap between East and West is very much on the minds of business leaders in the CEE region, who stress that inadequate infrastructure is a substantial barrier to business growth. The Three Seas Initiative offers real opportunities for addressing that gap. Through this infrastructure investment, the Three Seas Initiative will yield a more prosperous and economically resilient Central and Eastern Europe, growth across the European continent, and a Europe economically more capable of partnering with the United States in addressing the global economic and security challenges and opportunities now defining this century.”
Based on PwC's own project experience in CEE and discussions with stakeholders, the report makes
six recommendations for delivering the transport infrastructure required to achieve the Three Seas
region’s growth ambitions - political consensus, coordination on a regional level, prioritisation of projects, mobilising the private sector to overcome financing constraints, increasing the efficiency of existing projects, monitoring of lessons learnt.
What will transport infrastructure in the region look like in the future? The report posits that 75% of the infrastructure that will exist in 2050 does not exist today – new technologies will impact not only the way transport infrastructure will be designed, built and operated, but also the demand for transport services. This suggests that a regional approach to the challenges of infrastructure development offers the best chance of efficiency and success, and the Three Seas Initiative can play a key role.
The Three Seas Initiative was established to create a platform for Central and Eastern Europe’s integration and solidarity with the European Union as a whole: strengthening political ties, facilitating cross-border cooperation and enabling large, pan-regional projects that will stimulate sustainable economic growth. The initiative includes 12 European Union member states between the Baltic, Adriatic and Black Seas.
The full report can be found at: www.pwc.pl/theroadahead
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services.
PwC has been active in Central and Eastern Europe for the past 25 years. PwC Central and Eastern Europe (PwC CEE) is a network of firms, consisting of separate legal entities in accordance with applicable local laws and regulations. We work to help our clients in local markets become more successful and globally competitive. Today we have more than 8,800 people, including 260 partners, working in 55 offices across 29 countries in the region.
“PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Please see www.pwc.com/structure for further details.
©2017 PricewaterhouseCoopers. All rights reserved
Contact us
