End of the road for private investor in highway construction plan

01-04-2003

After months of speculation over the future of a much-needed highway for north-east Moravia, the Czech cabinet has decided to pull the plug on previous plans involving a private construction investor. The cabinet reached the conclusion the highway could be completed faster - and cheaper - by the government alone. Left in the cold: Israeli company Housing & Construction, awarded the contract without tender, something many observers interpreted as controversial from the start.

Terminating the contract with Israeli company Housing & Construction won't come cheap; however, the government says it will pay off in the long run - the new plan should see the much-needed D47 highway in north-east Moravia cost 40 billion crowns less (over 1 billion euros) than under the previous proposal. Under the cabinet's new plan, issuing government bonds and applying for a loan from the European Investment bank, should see the new highway completed by 2008, one year in advance. Such circumstances have led even the opposition to agree that pulling out of the previous contract - will be better for the Czech Republic overall. Civic Democrat deputy chairman Petr Bendl:

"I think that we can only welcome the government's decision, even if it only remedies the earlier mistake to build the highway with Housing and Construction, a mistake that is going to cost us at least 450 million crowns (14.5 million euros). Even so, termination of the contract is worth it compared to the cost of the former plan."

There is no question over the new highway's necessity: bringing a much needed connection to a remote region struck by one of the country's highest unemployment rates: around 20 percent.

Meanwhile, on Monday representatives from the Israeli company Housing and Construction were unable to hide their discomfort that the deal had fallen through. The original plan had been seen as a pilot project in the Czech Republic, relying on a common model used in western Europe, under which private companies build public infrastructure. Housing & Construction would have operated the highway for an allotted period at no cost to users, while receiving compensation from the state.

The high cost, as well as what the government saw as a lack of fool-proof guarantees, buried the deal in the end - now questions remain over the previous proposal's overall transparency. With such an apparent difference in proposed construction costs, Interior Minister Stanislav Gross has revealed police have begun investigating aspects of the deal with Housing & Construction for possible corruption.

01-04-2003