THE REPUBLIC OF HUNGARY
MINISTRY OF TRANSPORT AND WATER MANAGEMENT
NATIONAL ISPA STRATEGY
TRANSPORT SECTOR
PREAMBLE
This initial ISPA Strategy document for the Transport sector, covering the 2000-2006 period, was prepared by the Ministry of Transport and Water Management in June 2000. Many factual data and strategic orientations will need to be updated, adapted and modified over time, therefore this document should be reviewed and revised on a regular basis, as needed, in consultation with the European Commission. In the same perspective, the initial list of projects and corresponding financing tables which are included in the text shall be considered as indicative, and subject to many changes over the coming months and years.
TABLE OF CONTENTS
1- Introduction and background 3
2- Hungary in Central Europe: constraints, challenges and prospects
for transport infrastructure development 4
3- Administrative, legal and financial framework 7
4- Strategies for transport infrastructure upgrading and development 9
5- Selection criteria for transport projects submitted for ISPA support 16
6- Projects submitted for cofinancing by ISPA 18
7- Financing strategies for transport projects supported by ISPA 24
8- Conclusion 26
9- Annexes 26
1- INTRODUCTION AND BACKGROUND
Hungary is one of the ten Central European countries being candidates for membership of the European Union. The Agenda 2000 document adopted by the Berlin Council in March 1999 confirmed that the successful integration of the candidate countries into the European Union will be largely dependent on the development and modernisation of transport networks. Therefore, a long-term investment programme for infrastructure and the launch of a related structural instrument for pre-accession (ISPA), planned to operate from the year 2000 over a period of seven years, were approved. Although the national budgets have to bear the major share on financing transport infrastructure, the ISPA and international financing institutions (IFIs) will play an important role by providing substantial grant and loan support, particularly for the projects related to the development of Trans-European Networks.
The ISPA was established by the Council Regulation (EC) 1267/99, as the main EU instrument for the development of transport and environment infrastructure in candidate countries for the 2000-2006 period. Community assistance will take the form of non-repayable grants, repayable grants or other types of support. The rate of the Community's contribution under the ISPA will be up to 75% of the total public financing need of individual projects in standard cases, and up to 85% in exceptional cases. Measures will be of sufficient scale to have a significant impact on the development of infrastructure networks, and each measure in principle will not be less than € 5 million. Maximum leveraging of ISPA funds will be sought by calling the EIB and other IFIs to participate in project financing plans, as well as private sources through public-private partnerships (PPPs) when appropriate. Loans provided by IFIs will be considered as equivalent to national public funds.
In addition, the ISPA may also provide for assistance to the preparation of studies and technical support (up to 5% of the total budget), e.g. for project economic/financial or environmental studies, preparation of tender dossiers, project management, etc. Community contributions in that case may exceptionally amount to 100% of the total costs.
The main focus of the ISPA in the transport sector is: (i) transport infrastructure measures which promote sustainable mobility, in particular those that constitute projects of common interest based on the criteria of the Decision 1692/96/EC; and (ii) measures enabling the beneficiary country to comply with the objectives of the Accession Partnership, including interconnection and interoperability of national networks with Trans-European networks and development of access to these networks.
The National Programme for Adoption of the Acquis in Hungary (NPAA), besides tasks related to the harmonisation of regulations, institutions and procedures in various parts of the transport sector, includes the acceleration of investment programmes for road, inland waterway, railway and combined transport. The mobilisation of the ISPA for Hungarian transport infrastructure projects should be a key instrument to fulfil this task successfully - all the more successfully if a high multiplying effect of the use of ISPA funds can be obtained. According to preliminary orientations approved by the ISPA Management Committee, the global ISPA contributions to Hungarian transport projects should be in the range of € 45-50 million every year in average over the 2000-2006 period in terms of euro 1999 value.
This document sets out the strategy for identification and selection of transport projects submitted for financing by the ISPA. It will be fully consistent with the strategy and priorities presented in the sections of the National Development Plan related to transport.
2- HUNGARY IN CENTRAL EUROPE: CONSTRAINTS, CHALLENGES AND PROSPECTS FOR TRANSPORT INFRASTRUCTURE DEVELOPMENT
Among the candidate countries of Central Europe, Hungary is the third in terms of GDP per capita, just after Slovenia and the Czech Republic: the current level of this indicator is in the range of 11,000 € per inhabitant based on purchasing power standards (PPS). The economic growth has been gaining speed over the past two years, the GDP growth for 2000 being now expected to be in the order of 5-6% in real terms. Macroeconomic stability is ahead, with a decreasing inflation rate (below 10% in 2000 for the first time since 1990), a public budget deficit of about 3.5% of the GDP (planned to be less than 3% as from 2002), and a net foreign debt now reduced to around 25% of the GDP.
The country of 93,000 square kilometres occupies only about 1 percent of the territory of Europe in the Carpatian Basin, but a much larger sphere is served by Hungarian infrastructure because of its central position. Hungary has seven neighbouring countries with a borderline of nearly 2,250 kilometres. Its road, rail, waterway, airport and air traffic control networks constitute a central and critical part of Europe’s « vascular system », ensuring the movement of people and goods in all main directions of circulation across the continent.
Hungary is crossed by four Pan-European road and rail corridors (see TINA Annex and TINA map attached):
Corridor IV Austrian and Slovakian border to Budapest and the Romanian border
Corridor V Slovenian border to Budapest and the Ukrainian border with two branches (V/B to Croatia and V/C toward Bosnia-Hercegovina)
Corridor VII The Danube corridor
Corridor X/B Budapest to the Yugoslav border
With a most important hub in Budapest, these corridors link Hungary to the European Union (Austria, Germany, Italy, Greece through Yugoslavia), provide connections to other accession countries (Slovakia, Romania, Slovenia, Poland, Czech Republic) and to Ukraine. In addition to the previous links belonging to the TINA “Backbone Network”, 14 additional network components define other eligible projects in the rail and road sector. Finally, the TINA multimodal network includes the entire section of the Danube waterway on Hungarian territory, 6 major Danube ports, 19 combined transport terminals, and Budapest Ferihegy International Airport.
The Danube river (Corridor VII), connecting Budapest West to Austria and South to Yugoslavia, the main navigation artery between countries of the Rhine - Main basins and countries of the Black Sea, ever played an essential role in Hungary’s history and development - even if its relative role was decreasing throughout the XXth century. Inland navigation trade suffered enormous losses as a result of the 1999 Kosovo war. But the Danube should find back its traditional role as a major piece of European transport networks, as soon as pending problems are solved and navigation through the Yugoslav territory may restart.
With regard to passenger transport, the volume of traffic has followed the developments of economic activity, particularly as reflected in household income. Between 1990 and 1995, the overall volume of public passenger traffic dropped sharply: around –6% per year for railways and –4.5% for roads. A main factor in this decline was a jump in user costs, as governments cut subsidies and transport companies had to raise fares to recover lost subsidy revenue. Higher transport costs have also been accompanied by a relative decline in the quality of services provided by the financially strapped transport companies. Since 1995, public passenger transport in Hungary has been growing again (+2% per year for railways), whereas decline was continuing in most of other Candidate Countries of Central Europe.
Table 1: Passenger transport performance, (million passenger km)
1990 / 1995 / 1998 / 2000 / 2005Railway passenger transport / 11,402.5 / 8,441.0 / 8,671.8 / 8,800.0 / 9400.0
Coach service / 10,808.1 / 10,775.0 / 10,920.3 / 11,240.0 / 11,320.0
Local public transport / 12,392.0 / 10,679.2 / 9,358.6 / 9,300.0 / 9,270.0
Water transport / 55.7 / 49.0 / 38.0 / 40.0 / 42.0
Air transport / 1,344.3 / 2,383.4 / 3,049.2 / 3,200.0 / 3,500.0
Total / 36,002.6 / 32,327.6 / 32,037.9 / 32,580.0 / 33,532.0
The overall volume of freight transport declined even more sharply between 1990 and 1995, as a result of the economic depression and industrial restructuring. Rail freight traffic expressed in tons-km was divided by two, an average fall of -13% per year, whereas road freight traffic remained more stable with a reduction of –3% per year over the same period. In the second half of the 1990’s, as relationships with the European Union became closer, exchanges were facilitated and freight traffic rose again - especially as far as the building and construction industry was concerned, which generates demand for transport. Railway freight traffic flows increased slightly in Hungary, whereas they just stabilised or even decreased further in many other candidate countries. Road freight flows also increased in Hungary but much more slowly than in other candidate countries (source: ECMT statistics).
Table 2: Developments and forecast for freight transport performance
according to transporting organisations (billion ton-km)
1990 / 1995 / 1998 / 2000 / 2005Transport companies / 25.4 / 14.6 / 15.9 / 16.4 / 18.7
Non-transport companies / 11.3 / 9.0 / 9.9 / 10.5 / 12.2
Individual enterprises / 2.7 / 3.3 / 3.6 / 3.8 / 4.0
Total / 39.4 / 26.9 / 29.4 / 30.7 / 34.9
Of which: domestic / 10.2 / 4.6 / 4.5 / 4.8 / 5.0
imports / 14.6 / 4.1 / 4.7 / 5.0 / 5.2
exports / 7.4 / 5.0 / 5.1 / 5.3 / 5.5
transit / 7.2 / 13.2 / 15.1 / 15.6 / 19.2
The overall result of these developments was a dramatic drop of the market share of railway transport, for passengers in relation to the acceleration in the increase of car ownership, and for freight in relation to the phasing out of obsolete industrial activities which previously generated large quantities of heavy freight. However this drop occurred mainly or exclusively between 1989 and 1993, and since 1995 the market distribution between rail and road was more or less stabilised in Hungary, at least for freight. Existing forecasts (see below) show that potentials exist for a new growth of rail traffic flows, for freight and passengers as well. However strong efforts will be needed to improve the efficiency and adequacy of rail transport services in order to stabilise the share of rail in transport markets. In 1998 the rail/road freight transport modal split was 14/73 in the EU, while 26/52 in Hungary.
In Hungary many studies concerning both passenger and freight transport have been carried out in recent years.
Private transport is expected to increase from approximately 53 billion passenger-km in 1998 to 54-55 billion around 2000 and to 60-62 billion around 2010. The yardstick for assessing private transport is usually the number of cars used. The number of private cars was 2.2 million in 1995, 2.3 million in 1997 and the forecast for the year 2000 are 2.5 or even 3 million – depending on the economic growth rate.
Public transport is expected to remain a most important mode of transport into the next millennium even if its market share will most probably fall. The actual figure was 32 billion passenger-kilometres in 1998, with a present share of 58 per cent in Budapest only. In 2000, it should account for 32 to 33 billion passenger-km, and in 2010 for 30 to 34 billion passenger-km. In this sector, the modal structure is not likely to change. Road and rail should therefore retain their present share of 57 per cent. Inland waterways should also continue to account for approximately 65 million passenger-km. Air transport is likely to see its traffic increase by 60 to 80 per cent by the year 2000. The domestic air transport activities increased although it represents charter type traffic only.
Forecast calculations show a probable moderate growth in freight traffic between 1998 and 2000. But the growth could be faster in the medium term beyond 2000, taking into account that export and transit traffic (representing in 2000 nearly 85% of the overall freight traffic in ton-km) is likely to grow more quickly than the average economic activity.
Over the years 2000, macroeconomic growth in Hungary should be very dynamic, partly depending on the success of EU pre-accession policies, and even more depending on the success of EU cohesion policies after accession. If such prospects are to become reality, a major conclusion of the studies mentioned above is the following: the demand for many kinds of transport services will be very dynamic as well. Growth rates could be very high for transport by private cars but also for some categories of local and regional public transport. Freight transport by road, rail, inland navigation and combined modes also could grow very quickly. Road transport would probably show the most rapid growth in terms of persons and tons of goods transported, because of increasing car ownership and predominance of short-distance freight flows favouring lorry transport, given the size of the country. But in terms of ton-km all modes would be likely to enjoy a rapid growth because of the very high share of export, import and transit flows in the overall freight traffic.
According to a NEA-INRETS-IWW study financed by PHARE, the overall growth of freight traffic (in terms of tons) up to 2015 could be in the range of 3-4% a year with a GDP growth in the order of 4% a year, with a more rapid growth for international and transit traffic. According to another forecasting exercises (see annex), the overall growth of freight traffic (in terms of ton-km) would be in the range of 4-5% a year over the 2000-2006 period under a moderate GDP growth scenario (4% to 4.5% a year), and in the range of 8-9% a year under a rapid GDP growth scenario (6.5% to 7% a year). These projections provide good hopes for a further growth for railway traffic in the coming years.