Bulgarian construction sector fears for EU funds

(SOFIA) - Bulgaria's crisis-hit construction sector fears that many EU-funded infrastructure projects will be mothballed as the general election approaches and EU aid remains blocked over corruption concerns.

"The government must urgently seek ways to unblock the (EU) money so that the big infrastructure projects can get off the ground as soon as possible," Nikolay Mihaylov, chairman of the transport section of the construction industry association, told AFP.

"Companies are nervous. The crisis has left 75 percent of them without work and these projects are now a matter of survival for a sector that used to be a major driver of economic growth," said Veliko Zhelev, executive director of the road construction industry association.

Both Mihaylov and Zhelev were pessimistic, however, about getting any big projects started by end-2009.

"Don't forget the election is coming. If the EU money isn't unblocked, tenders aren't called and contracts aren't signed before the election campaign starts, things will stall until the next government is office," Zhelev said.

"Then winter will be upon us and the sector will be in big trouble," he added.

Bulgaria's outgoing government, strapped for infrastructure cash, had been counting on EU money to finance major and most costly road building projects, including the country's first border-to-border Trakia highway.

Poor road maintenance, patchy repair and only occasional new building since the fall of communism in 1989 has left two-thirds of the country's 19,425 kilometres (12,070 miles) of roads in serious need of repair, according to data by the national road agency.

For a country that wants to become a major tourist destination and a centre of foreign investment, Bulgaria has only 418 kilometres of motorway, with none of the five planned EU corridors yet completed.

Until the global economic crisis caused the property market to go bust, building companies had been flourishing thanks to a boom in resort and holiday home construction.

Regular building companies were lured into the road construction business by the promise of EU money once Bulgaria joined the bloc in 2007.

"Road companies reinvested profits to develop capacity, hire more qualified workers and buy heavy equipment in order to be ready to undertake major projects," said Mihaylov, who also heads one of Bulgaria's biggest construction companies, Trace Group Hold.

But "the big EU bucks" stalled last year amid concerns over corruption and conflicts of interest.

At the national road agency, which was to be the main beneficiary of the programmes, work was virtually frozen by a series of scandals and management changes.

In addition, the agency cancelled the results of tenders for two major and dozens of smaller road stretches in a bid to clean its record with Brussels.

That meant the winning companies, some of which had already started on the projects, were left high and dry and in doubt as to whether they would ever be compensated.

The workers of one of the companies staged a series of road blockades this week to demand their pay.

Brussels still has to issue a report on progress at the road agency. None of the government or company officials contacted by AFP were willing to predict when EU money will be unblocked and new tenders called.

"Companies need clarity -- set deadlines and a plan. Billions of much-needed money is at stake here," Mihaylov said.

At a recent congress in Sofia, construction industry association chief Simeon Peshov begged a top EU official to "unfreeze the money so that the major tenders can go ahead."

Bulgaria "needs help now, not after the elections," he said.

But the EU's regional development chief, Carsten Ramussen, was unbending.

"Bulgaria has to some extent got off on the wrong foot and won a rather bad image in a short period. If there is something I cannot promise you, it is to leave the road agency alone," he said.