VZCZCXRO7164
RR RUEHKW
DE RUEHKW #0014/01 0821347
ZNR UUUUU ZZH
R 231347Z MAR 09
FM AMCONSUL KRAKOW
TO RUCPDOC/USDOC WASHDC 0006
RUEHC/SECSTATE WASHDC 0896
INFO RUEHWR/AMEMBASSY WARSAW 0839
RUEHKW/AMCONSUL KRAKOW 0998

UNCLAS SECTION 01 OF 02 KRAKOW 000014 
 
SBU SIPDIS  COMMERCE FOR HILLARY SMITH, STATE FOR TOM YEAGER 
 
E.O. 12958: N/A 
TAGS: EINV ELTN ELAB ENRG SENV
SUBJECT: POLISH ROAD NETWORK EMERGING FROM DECADES OF CRIPPLING 
NEGLECT 
 
SENSITIVE BUT UNCLASSIFIED 
 
Subject: Polish Road Network Emerging from Decades of Crippling 
Neglect 
 
¶1. (U) Summary: Government and private sector analysts now hold 
that, after two decades of failed policies and mismanagement, 
the Tusk administration is making real progress towards 
developing a modern highway network, overcoming a major 
stumbling block which stunts investment and hinders Poland from 
meeting its economic potential. Even the global economic crisis 
shows little sign of retarding the development, and may in fact 
add impetus to government efforts to spend EU funds and 
stimulate the economy.  End summary. 
 
A Country of Two Lane Roads Paved with . . . 
 
¶2. (U) While U.S. business has made sizable investments in 
Poland (an estimated $15 billion since 1990), a major barrier to 
such investment is the neglected state of infrastructure, in 
particular roads. Road infrastructure in Poland is woefully 
underdeveloped.  In 2005 Poland only had a total of 510 miles of 
limited access, divided, multiple-lane motorways and divided, 
multiple-lane expressways; in comparison, the Czech Republic, 
one-fourth the size of Poland, has 660 miles of such roads, and 
in Belarus, a single motorway, from the Polish border to the 
Russian one, totals 370 miles. Clifford Chance, a major 
multinational law firm, identified in a February 2009 report to 
clients that infrastructure, and in particular roads, was the 
most important barrier to business in Poland. 
 
¶3. (SBU) Poland's accession to the EU and the upcoming Euro 2012 
soccer championships in Poland and Ukraine have provided 
significant motivation and external funding for rapid 
improvement of roads.  121 billion Polish zloty (35 billion 
USD), half of which comes from the EU, is budgeted for road 
investment up to 2012, but skepticism remains over whether 
Poland can absorb these funds and build the planned roads.  A 
major US company held the concessions for road building 
throughout much of the last decade.  They abandoned the project 
in 2004, complaining that the government lacked the ability to 
design, procure, or execute major infrastructure projects. 
Adding to the lack of coordination, each affected locality could 
block their part of a national project such as a highway. 
 
Polish Road Construction Finally on the Right Track 
 
¶4. (SBU) In meetings with regional directors of General 
Directorates for National Roads and Motorways (GDDKiA) in Krakow 
and Wroclaw in December 2008 both directors pointed to concrete 
progress made in road construction since the new government has 
been in office in late 2007. 170 miles of motorways and 
expressways have been opened since that point. A further 340 
miles of such roads are under construction and contracts have 
been concluded for 475 more miles, of which 250 miles are 
motorways. They explained progress as a result not only of EU 
money and pressure from Euro 2012, but also of concrete 
legislative and political changes. 
 
¶5. (U) The Tusk government has pushed through several pieces of 
legislation to streamline the construction process. One 
important piece of legislation was the introduction of the 
so-called special road law in September 2008, enacted with the 
goal of shortening the pre-construction process by up to one 
year. The law, drafted by the Ministry of Infrastructure, 
combined two existing laws on the location of roads and building 
permits, provides the governmental bodies with incentives (read 
fines) to make quick decisions, and limits appeals and protests. 
The legislation also strengthens the eminent domain mechanism, 
which has already been used to acquire all the land in an 
important corridor on the A4 motorway between Krakow and Tarnow 
and will enable the long-delayed project to be completed by 2012. 
 
¶6. (SBU) Another important change is the amendment to the public 
tender law, introduced in September 2008, to allow the 
government more flexibility in administering tenders and limit 
the ability of losing parties to protest awards.  Previous 
problems included late notification of tenders, technical 
specifications favoring one bidder, disqualifications of bidders 
on trivial technicalities, and the potential for endless appeals 
and protests by losing bidders.  This is widely cited as a 
problem in all government procurement and infrastructure 
development.  The change in tender law has resulted in greater 
competition and a faster award process - currently 32 tenders 
are open and a further 35 in the final stages of preparation. 
While it took three years for the 1994 project to expand the A1 
motorway from Gdansk to Lodz to award a tender, and eight years 
from that point to reach a concession agreement and begin 
construction (construction that is still not scheduled to be 
completed until 2012 according to GDDKiA), this government moved 
a 2007 project to expand the A1 from Lodz to Katowice from 
 
KRAKOW 00000014  002 OF 002 
 
 
pre-qualification of bidders through awarding of a tender to 
signing of a concession agreement in eighteen months, and the 
concession agreement reached in January 2009 will go to 
construction in four months and be completed within 5 yrs. 
Aleksander Granowski, the Chairman of the American Chamber of 
Commerce Infrastructure Committee and Vice-President of WS 
Atkins-Poland, on February 5,  characterized the government's 
decision to award this contract using a concession-based scheme 
as "brave", considering that the hesitancy of previous 
governments delayed the project by several years. 
 
¶7.  (SBU) Beyond legislative changes, political changes have 
also had an important impact.  Poland's EU membership has 
increased road funding by ten-fold, according to Andrzej 
Kollbek, Deputy Director of the Malopolska GDDKiA in Krakow. 
And the increased professionalism in government road agencies is 
exemplified by Robert Radon, now Director of GDDKiA Wroclaw, who 
came to the government from the private sector and proclaimed 
that he "would not have taken [his] job" if not for his belief 
that this government will succeed in eliminating decade-long 
bureaucratic inaction. While not political, even the world 
economic crisis seems fortuitous in this limited case; Jacek 
Gryga, Director of Malopolska GDDKiA, stated that the crisis has 
actually resulted in increased participation in tenders and 
lower costs.  Government officials frequently cited labor 
shortages as impediments to road development, 
 
Experts Impressed 
 
¶8. (SBU) Sobieski Institute infrastructure expert Dr Krystyna 
Bobinska and Institute Chairman Pawel Szalamacha in a January 22 
meeting seconded the government assessment that progress is 
being made and gave credit to the government for its efforts to 
hasten road infrastructure development. They also noted the 
legislative changes to the eminent domain law and the tender 
process, and ascribed "a great deal of recent progress" to those 
changes. Granowski also praised the government's positive 
efforts in road construction, noting the importance of the issue 
to American companies working or considering work in Poland. Dr. 
Bobinska also added her belief that the economic crisis won't 
slow road construction. Mr. Szalamacha believes the government 
will manage to double the existing amount of motorways and 
triple the amount of express roads by 2012. 
 
Mission Accomplished? 
 
¶9. (SBU) While the progress is impressive, the experts were 
careful to ensure their praise was not too fulsome.  Szalamacha 
noted that the government's current construction goals are still 
too high, even after a significant downward revision.  Granowski 
noted that current progress will not be sufficient to make up 
for the delays of years past and to absorb all of the allocated 
EU funds.  Experts and government officials alike believe 
Poland's decision to fully adopt the EU's Natura 2000 
environmental program when acceding to the EU was "overzealous" 
and will continue to hinder construction.  Adjusting to this 
program is cited by the Ministry of Regional Development 
(responsible for disbursing EU funds) as the reason EU-funded 
projects were stalled for most of 2008 (only about PLN 1 billion 
or USD 290 million was spent in 2008).  Granowski sees the 
amended eminent domain law as a vast improvement, but believes 
it is being ineffectually used. He also feels the public tender 
reforms are an improvement, but the process is still too heavily 
price-based, raising concerns that long-term road quality will 
suffer. 
 
¶10. (SBU) Comment: The Tusk Administration, while it will not 
meet its initially high road construction goals, has finally 
broken the major roadblocks that have stalled road 
infrastructure development in Poland for decades.  While the 
GoP, particularly the Minister of Infrastructure, are still 
criticized for inadequate progress, if they can build on these 
initial breakthroughs they can bolster the PO Government's 
business friendly credentials. The financial crisis has helped 
the process, not only in lowering project costs but in putting 
pressure on the political process to expedite the expenditure of 
EU funds and create jobs.  If the government can maintain this 
momentum, Poland will overcome a long-term impediment to 
investment and help itself get through the current economic 
downturn. End comment. 
HALL