Croatia to Lease its Highways to Private Company

Croatia is to offer a tender to a private company to run the country’s 1,017 kilometres of highways, currently managed by indebted state company Croatian Highways, HAC.

The concession will be offered to lease the highways for 30 to 50 years for an estimated price of 2.5 to 3 billion euro.

The Ministry of Transport says it will finish the tender documentation by mid-September, setting out the sum that the concessioner will have to pay for the contract. The exact length of concession will depend on the sum paid.

The HAC will be downsized radically as a result. Its only remaining functions will be to monitor the future concession agreement. It will not compete for a concession itself.

The leasing arrangement was effectively imposed by the European Commission after Brussels forbade the Croatian government from guaranteeing the HAC further loans.

From the early 2000s, with government support, the HAC invested 5.8 billion euro into Croatia’s highway network.

Between 2001 and 2012, 686 kilometres of new highways were built, the most important being the long-awaited highway from Zagreb to Dubrovnik via Split, which is crucial for the further development of tourism.

But the cost of the work plunged the HAC into debt. The company borrowed 3.3 billion euro for the new roads – 4 billion euro, including interest – and the sum has to be repaid by 2031.

Initially, after the completion of the Zagreb – Split highway in 2004, the government planned to recoup the money from tolls and gas excises. But extensive further borrowing since 2004 has thrown these repayment plans into disarray.

While the government is pushing ahead with the leasing project, unions and many members of the public remain opposed to a private company – possibly foreign owned – taking control of such an important national asset.

Croatia’s motorways bring in over 370 million euro in tolls a year. Some fear that the already expensive tolls could soar if a private company, bent on maximising profits, is in charge.

The toll to drive from Zagreb to Split on the coast – and back – already costs 46 euro. There are no flat-rate weekly rates, either. Neighbouring Slovenia, which admittedly has less highways, charges a week-long flat rate of 15 euros for use of its motorways.

Although the government has promised that it will not allow tolls to go up, as one of concession conditions, the public remains uneasy.

A survey conducted in July 2013 by the research company IPSOS PULS showed that 61.1 per cent of respondents were against a leasing arrangement, while 30.3 per cent backed it.

Unions accuse the government of “giving away” the highways for an amount that will not even cover the total debt run up by the HAC.

They also say is that it is wrong to give concessions to companies that did not invest in building or modernizing the highways.