Bridging Romania's infrastructure gap

  1. One study said the Romanian government deliberately provided no incentive for regional development.
  2. Romania trades mostly within the EU and particularly with Germany.

Since Romania joined the European Union in 2007, its north-east (Nord-Est) region has been consistently rated one of the union’s poorest areas.

In a study on accessibility released by The European Observation Network for Territorial Development and Cohesion (ESPON), the agency claimed was not only that nothing, or too little, was done to improve this, but that Romanian government deliberately provided no incentive for regional development. As a result frictions have escalated between local and national politicians .

A region’s accessibility and openness to global markets are key to its economic growth and a high standard of living. However, the type of accessibility, whether by road, by air or sea, can be particularly important.

The purpose of this article is to briefly explore matters at stake in the north-east of Romania, as well as the relationship between transportation infrastructure and prosperity.

A question of accessibility

Whether by road, rail or water, nearly every region or metropolitan area that flourished worldwide had access either to maritime transportation or good land infrastructure. In contrast, many of the poor countries around the globe, apart from those afflicted by war, are landlocked with very poor terrestrial infrastructure (for instance, Moldova and Bolivia are two of Europe’s and South America’s poorest nations).

There are however poor regions in the European Union, such as northern Portugal, Yugoiztochen (eastern and south-eastern Bulgaria) or northern Hungary, which enjoy a good degree of accessibility, with highway links.

There are also remote regions, in northern Sweden and Norway, with a high GDP per capita ratio and a high standard of living. There are also countries like Ireland at the geographical outskirts of Europe, but whose main airport, in Dublin, is an important air hub.

Land links compared to air and sea

For a country like Romania, most of whose trade is within the EU, particularly with Germany, with whom it trades nearly two times greater than with any other EU country, terrestrial infrastructure is key to growth. Access to Western Europe is key to regional growth. Geography nevertheless plays an important role here. Western regions, closer to central European highways, can more easily access foreign investment and experience faster and more sustained economic growth. Eastern, especially north-eastern regions, located beyond the Carpathian Mountains and close to recent instability in Ukraine, have no such opportunities.

The Romanian government has in this sense even a greater responsibility to tackle this situation and rectify these inequalities. Since it has a centralized administration, ultimate power resides in the capital. It can be then easily inferred that the efforts are targeted at first in linking Bucharest to the rest of European highway network, still an unrealised project, this being still the only EU capital not connected by highways with the rest of Europe.

A1 highway, meant to connect Bucharest with Hungary, is along with A2 part of a strategical South-Eastern commercial corridor bridging Western Europe with Black Sea. This is still incomplete, it still misses the 160 km highway section, between Pitesti and Sibiu, across the mountains. Furthermore most of the motorway construction works in the past ten years have been mired in countless delays and corruption scandalsto the concern of public opinion.

On top of that, the government also planned to suspend the proposed East-West A8 Highway, threatening to widen the infrastructure rift in the country. Though building this highway is still considered a national priority, its initial €4 billion costs have since been re-evaluated and have more than doubled, now topping €9 billion.

Obstacles to regional growth

For a country whose exports rely on cheap manufacturing goods, a terrestrial link with its main trade partners, notably Germany, Hungary, Italy and Austria, is essential. A West-East commercial corridor, stretching across the upper half of Romania enjoys little political and economical lobby due to disadvantageous geography, as outlined above.

The view that this could simply result in a white elephant project, a motorway to nowhere, may sound reasonable. Moreover the Romanian road network, in general, is already well developed and gains brought by such a motorway could be dwarfed by its costs.

Also the rumors circulated in the national media that western regions drew their growth mainly out of extension of the A1 in Transylvania do not quite hold true. This can be seen at the National Statistics Institute webpage which tracks exports at the county level. One could notice that  Romania’s western counties, having access to A1, like Alba or Hunedoara, did not experience a boost in their exports after 2014-2015, when most of motorway sections began to be operative. For instance, Cluj-Napoca, Romania’s IT hub is one of the most dynamics cities in the country with a constant budget growth over the last decade, despite no motorway connection.

This issue is not only about economic growth and fostering business development, but about saving lives. 2015 EU Statistics show that countries with some of the lowest highway densities in Europe, as Romania and Bulgaria, are also the ones with the highest number of people involved in road accidents.

To sum it up, at the regional level, in the north-east, as well as national level, these issues require addressing.

  • In the case of Romania, whose exports are mainly based on electronic equipment, vehicles and machinery, access to highway infrastructure is essential for regional development.
  • The relationship between domestic infrastructure and prosperity is a multi-dimensional one and is not always subject of a direct causality
  • Each region in a country is free to attract foreign investment on its own without support from the capital. Moreover, each region has its own levers to foster local entrepreneurship and local growth and here north-east region has under-performed, as the point below will show it.
  • A country as centralized as Romania must ensure that public investment addresses national imbalances and prevents regional disparities. This is more important, even a national security issue, when there are huge FDI disparities. In Romania, the north-east region has gained only 2.3% of total Foreign Direct Investment

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