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How are we going to benefit from Euro 2012?

Published on July 16, 2012 by: in: Economy

In the midst of the soccer hype, we can’t forget that the world is not over after the Euro 2012. In several different reports, we could find out that Poland spent PLN 100 billion (which is an astonishing number for a not-so-rich country). After a while, it turns out that the stadiums cost us PLN 5 billion and the rest was spent on highways and airports. In our euphoria of opening a complete A2 highway and bragging about it to the entire world, it’s important that we calm down and think analytically about the Euro Cup investments; what’s in it for the future? The reason for asking this is that on multiple occasions I met with accusations from journalists that Poland organized quite an expensive fiesta; there may be no money to live on but there will always be enough money to dazzle your guests, or something of this sort. It wasn’t easy to explain to them that the stadiums were the only tournament-specific expenses, and not the rest that we need in order to keep developing and to function normally as a country. It’s important to clearly separate the championships from day-to-day needs.

As far as the density of highways and expressways is concerned, Poland is one of the lowest ranked countries in Europe. Consequently, we come first in Europe with regard to the number of road fatalities per capita. The construction of the basic road network was and is still needed in Poland to unblock the inefficient road system. Of course, you can ask yourself if Euro 2012 was really necessary to do all that. Theoretically, it wasn’t because this process was our development priority anyway. On the other hand, consider all turns of events regarding the highway and road network planning; from the idea of a toll pass to toll roads; from a plan of the bypass roads network to making our main routes more efficient and connecting them with the European road network. Knowing all of that, we have to admit that Euro 2012 realigned our thinking and set the priorities. The majority of politicians has a tendency to avoid setting priorities because it requires making choices; someone is going to get it first and someone is not going to get it at all. That’s probably why the old idea of the bypass roads network would satisfy many people but wouldn’t solve the crucial problems of our country. Thanks to Euro 2012, we were able to agree on a specific strategic plan and follow it. What’s important is that it was done in the atmosphere of a political consensus. Nobody in Poland was questioning the structure of the ongoing investments!

picture: BojPhoto

The second important factor was the deadline. It was, of course, specific and unalterable. It remains to be seen what the quality of the open A2 parts will be but, without the deadline, the construction would drag on for years. Despite the budget constraints, the decision had to be made and we had to focus on what was most important. It’s a truly business approach that is rarely present in the political world. For years, missing deadlines has been our trademark and this mainly applies to the public sector now. However, it doesn’t mean that it always has to be like that. The lesson is that specific deadlines motivate contractors as well contractees. And the latter element has been missing up until now.

The other important lesson should be taken from the entire government procurement system. Certainly, it’s not like the construction companies go bust one after another because of the imperfect procedure of choosing the contractor offering the lowest bid. The contractors themselves are not without fault here. Nevertheless, the procedure that uses the lowest price as a basic criterion of choice, without even evaluating the contractor’s financial and technical capabilities to complete a project, should never be employed again. It is important if we actually want to learn from past mistakes.

The situation is worse with the Polish State Railways that didn’t seem to worry about any deadlines regarding Euro 2012, except for the renovations of a few important railway stations. It’s a giant immune to even this kind of incentive. This is also an important lesson showing that the railway issues can’t be solved with the standard methods of incentives, deadlines, or feeding the railway with the European Union money. It would be premature to announce abandoning the idea of a high-speed rail. Paradoxically, it would be a cheaper project to execute than the modernization of rail tracks that has been dragging on for years; a textbook example here would be renovating the Warsaw-Gdansk route year after year. As in the case of the Euro 2012, we’d be dealing with a strategic and prioritized choice instead of constantly making imperfect repairs.

It would be great to draw conclusions from good and bad experiences. This entire soccer tournament should serve as a base of positive and negative experiences. It’s important that the conclusions are constructive and this is what we should focus on right now.

Translation: Paweł Szczepkowski

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About Ryszard Petru

Economist, until recently director concerning strategy in BRE Bank. He was also an advisory to Leszek Balcerowicz and a specialist of the World Bank.

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