Tag Archives: Fegyvernek

The European Union has had enough: No money for a 110 billion project already underway

Not only does Quaestor’s collapse and the government’s involvement in this scandal weigh heavily on the third Orbán government. Viktor Orbán just heard officially that the European Union is refusing to finance a 30 km section of a new Hungarian superhighway, the M4, that would be 230 km long and would lead all the way to the Romanian border just north of Oradea/Nagyvárad. This is a first. And this time there is no possibility of any further negotiations. The project must either be abandoned or be built from purely Hungarian sources. Trying to resubmit the same project based on another, lower bid seems pretty hopeless since the European Union considers the whole project a “luxury item.”

I would be hard pressed to recall all the dates that were mentioned in the press about the imminent beginning of work on the project. It was in 2003 that civil engineers and experts on transportation came up with a 15- and a 30-year plan which included two much-needed superhighways, M8 and M4, that would transverse the country from the Austrian border to Romania. The point was to avoid Budapest, which has for far too long been the epicenter of the Hungarian transportation system. By 2005 it looked as if both M8 and M4 would be built.

In December 2012 Index reported that work on the planned 30 km section of M4 between Abony and Fegyvernek would begin in 2013. At that time people familiar with the price structure of Hungarian highways predicted that it would cost “tens of billions of forints,” but by the end of 2014, when all the bids were in, the cost was 110 billion or almost 4 billion per kilometer. That is four times the price of similar road construction in Western Europe where wages are considerably higher. Such a blatantly overpriced project was too much for the European Union. Moreover, they suspected price fixing. But what is really devastating for the Hungarian government is that the EU didn’t just stop this particular section of M4 but refused to finance the entire 230 km of M4 during the 2014-20 budget period.

An unfulfilled dream: "M4's construction began at Abony / szolnoknaplo.hu

An unfulfilled dream: “M4’s construction began at Abony” / szolnoknaplo.hu

The European Union’s decision about the Abony-Fegyvernek section of M4 couldn’t have come as a surprise to the government. Although by January 2014 all necessary permits were obtained and therefore work could begin, the green light from Brussels wasn’t forthcoming. In December 444.hu learned that in general there are problems with the Hungarian projects waiting for approval in Brussels. “Among other reasons, the European Commission did not pay because the officials consider the prices submitted too high.”

Benedek Jávor (PM MEP) turned to OLAF (European Anti-Fraud Office) to initiate an investigation into the M4 highway project. He wanted to know whether there were any signs of corruption, specifically any possibility of kickbacks to parties by the five firms involved in the construction of the project. Colas USA and the Austrian Swietelsky were to build 13.4 km for 46.76 billion forints. Lajos Simicska’s Közgép together with another Hungarian company, Híd, was entrusted with a short 2.4 km section, but it had three bridges, including a new 756 meter-long bridge across the Tisza River. For this work they signed a contract for 32.5 billion. For the rest Strabag International was to receive 31.5 billion.

The Hungarian government was so eager to launch the project that in January they began construction, which means that about 30% of the project has already started. It is not at all clear what the government will do in light of the EU decision. After all, it is not the fault of the companies involved that the Hungarians decided to begin construction without the final okay of Brussels. If, however, price fixing can be proven, Nándor Csepreghy, assistant undersecretary in charge of communication on matters related to the European Union, said, the construction companies will be responsible to the Hungarian taxpayers for the loss of 110 billion forints.

Although the Hungarian government now echoes the EU and says that the construction costs are too high, back in 2013 when Benedek Jávor first began his investigation of the case neither Mrs. László Németh, then minister of national development, nor János Lázár found anything wrong with the winning bids. In fact, both insisted that they “were not irrationally high.” But now, suddenly they’re talking about price fixing. It is hard to escape the conclusion that Benedek Jávor’s suspicions about possible kickbacks to individuals and perhaps also to Fidesz’s coffers are well founded.

As far as I know, up to this point it was only Simicska’s Közgép that reacted to Csepreghy’s threat of passing the lost EU money on to the companies involved. Közgép published a statement in which they explained that it was Közgép that offered the lowest price in a proper bidding process and that their job was not simple road building but the construction of three bridges. The new Tisza bridge will require 8,500 tons of steel. In addition, two smaller bridges, on either side of the Tisza, must be built over wetlands. Közgép called attention to the fact that the January issue of the Official Gazette announced that the government would finance from domestic sources a road that “connects M5 with M4.”

Indeed, János Lázár only recently reiterated the “government’s long-standing desire to have at least a four-lane highway between M5 and Szolnok.” Apparently, it is for political reasons that the Orbán government wants to make this road a priority. It was in Szolnok last September that Viktor Orbán announced his ambitious plan for building four-lane highways that would connect each county seat to the larger superhighway system of the country. Moreover, he planned this expansion of the roads not from EU money but from domestic resources. Such a road would “bring spectacular economic development to the city,” said Ildikó Bene, a Fidesz member of parliament. Budapest could be reached from Szolnok in less than an hour, she promised.

As for the charge of cartel activities and price fixing, I’m not sure that this is the real reason for the extraordinarily high prices asked for the job. Colas-Swietelsky bid 3.49 billion/km and Strabag 2 billion/km. Közgép is a different story because their work consists mostly of building bridges. I’m almost sure, however, that officials demanded kickbacks. A conversation between Nándor Csepreghy and Egon Rónay of ATV on Friday morning supports this supposition. When Csepreghy went on and on about the cartel activities of the firms involved, Rónay asked him why Hungary had to wait for the European Union to suggest that price fixing might be behind the high prices. Why didn’t they investigate these suspiciously high prices themselves? Csepreghy refused to answer. He tried every which way to bypass the question until Rónay said, “Well, you just refuse to answer my question.” Probably a wise decision.