Vít Bárta and the Chinese: driving a hard bargain

Perhaps outgoing Transport Minister Vít Bárta wanted to use Chinese construction firms to put pressure on Czech counterparts

Politics & Policy|Companies
Kateřina Menzelová | 14.04.2011
Last year Vít Bárta met with Yu Qingtai to discuss cooperation

Outgoing Transport Minister Vít Bárta (Public Affairs, VV) says unpopular steps he initiated are behind his departure from the ministry. Indeed, Bárta made many promises upon becoming minister last July. One plan was to attract Chinese construction companies to compete with local ones in tenders to build motorways.

Vít Bárta was in charge of a problematic ministry; it’s no secret that Czech transport infrastructure is not in great condition. To compound problems, the Transport Ministry’s annual budget has been slashed by roughly Kč 28 billion —this means a more than 37 percent annual spending reduction.

Taking inspiration from Poland, Bárta intended to reduce motorway construction costs by inviting Chinese construction firms to participate in public-private partnerships (PPPs). Bárta’s govenment colleagues were wary of the plan. Minister of Industry and Trade Martin Kocourek (Civic Democrats, ODS) urged caution, especially concerning the formulation of offers by Chinese construction companies and the potential impact of their activities upon the local market.

“I will closely monitor the conditions for attracting foreign firms to build infrastructure and guard against foreign firms taking work from domestic firms just because they can use subsidies from foreign governments,” Kocourek said last autumn.

Nevertheless, Bárta insisted on implementing his plan. Last autumn Czech Position asked the Transport Ministry when  a Chinese construction firm could realistically be expected to start road building work in the Czech Republic. “The minister says: the sooner the better,” the ministry’s press department replied. More than four months later it has become clear that Bárta’s vision was overoptimistic.

Expression of long-term interest

The Transport Ministry says it is still interested in PPPs with Chinese firms. “[The ministry] declares its long-term interest in the participation of Chinese construction companies in tenders prepared in the Czech Republic. Among other things, it’s about achieving a certain cultivating factor,” ministry spokeswoman Květa Kočová told Czech Position. ‘We are gradually informing them about the conditions in the Czech Republic.’

A timetable and guidelines for implementing cooperation with the Chinese firms has not been completed, and it is possible that Bárta simply wanted to use Chinese construction companies to put pressure on domestic firms. Similar tactics have been employed in other countries. The tender issuer invites Chinese companies to bid with the expectation that the competitors will reduce their price offer as much as possible. But in the Czech Republic, no such competition has happened.

“The ministry’s experts are beginning consultations with the Chinese side and we are gradually informing them about the conditions in the Czech Republic,” Kočová said. However, according to Czech Position’s information, the Czech and Chinese sides were due to appoint members to working groups on cooperation, but the Chinese have not acted. Czech Position asked the Chinese Embassy in Prague whether any Chinese construction firms are genuinely interested in building roads in the Czech Republic, but the embassy did not respond.

Plans for cooperation with Chinese firms are at practically the same stage as last autumn, when Vít Bárta met with Yu Qingtai, the Chinese ambassador to the Czech Republic, and agreed that Jakub Hodinář, the deputy transport minister for international affairs, would together with the Chinese trade attaché in Prague quickly forge a cooperation agreement.

It was considered that a Chinese firm would compete with other construction companies in an open tender. The possibility for concluding an intergovernmental agreement setting specific terms of delivery was also discussed. The Transport Ministry hasn’t reported any progress being made since then. ‘We are carefully watching how cooperation between our Polish colleagues and the Chinese is progressing.’

“We are carefully watching how cooperation between our Polish colleagues and the Chinese is progressing,” spokeswoman Kočová told Czech Position. Chinese firm Covec is due to participate in the construction of two motorway stretches in Poland between Warsaw and Łódź, the last still uncompleted sections of a motorway from the German border to Belarus.

In the tender for these sections, Covec was selected ahead of several well-known western construction firms. According to media reports, the Chinese firm’s bid was 60 percent lower than the cost estimate of the project by the Polish transport Ministry.

According to Czech Position’s information, last summer Covec representatives met with Ústi nad Labem region Governor Jana Vaňhová. The region has a cooperation agreement with the Chinese province Anhui, where Covec is based. “At the time, the Chinese were interested in building motorways in the Czech Republic, but not at any cost. For them, Poland was important because that is where they got their first reference on the European market,” our source said.

Attractive Poland

At the end of March, Mark Frydrych, Covec’s executive director in Poland, was quoted in Polish daily Rzeczpospolita saying the Chinese firm is looking for further opportunities in Poland, including PPPs.

The Polish market is now full of construction opportunities. The government has earmarked €40 billion for investment into the country’s infrastructure between 2008 and ’12, and the 2012 UEFA European Football Championship — Euro 2012 — that Poland and Ukraine will host next year has lead to a construction boom for stadiums, hotels and municipal projects.

In terms of attracting Chinese companies, the Czech savings programs can’t compete with Poland’s grandiose projects, but that’s not Bárta’s fault. 

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