1. Transportation Infrastructure in the Western
Balkans
March 24, 2015
Kenneth Lefkowitz
Managing Partner
New Europe Corporate Advisory
Strategic Infrastructure & Investments 2015

2. Sources of Financing 3
Challenges to Involve the Private Sector 4
Tirana - Priština Motorway 5
Priština – Skopje Motorway 6
Prospective Road Projects in Macedonia 7
Western Balkans Road Network 8
Contacts 9
Table of Contents

3. Sources of Financing
3
0%
20%
40%
60%
80%
100%
Albania FYROM Kosovo Serbia BiH Montenegro Region
Sources of Financing for Transport Infrastructure by Country for the
Past 10 Years (%)
National Budget IFI Loans Concessions EU funds Other
• The national budgets and lending by IFIs have been the major sources of funding for
the past 10 years.
• Funding from countries outside of the EU including Russia, Turkey, China and some
Arabic states is increasing.
• Private sector involvement in transport infrastructure is still at a low level in the region.
Source: SEETO Multi – Annual Plan 2015

4. Challenges to Involve the Private Sector
4
• Lack of transparency and tender discrimination
• The World Bank estimates that the cost of corruption can reach 13-35% of road
transport projects in developing countries
• A transparent, competitive and regulated bidding process is essential for the
functioning of Public Private Partnerships
• High upfront capital costs, lower returns and longer development periods
• Investment projects in transportation infrastructure are generally constrained by
large initial CAPEX investments with prospects of low return
• As such these projects are economically attractive only to a very limited
segment of the private sector – infrastructure funds, certain pension funds, and
infrastructure units of large construction companies
• Weak institutions in the region
• Lack of strong institutional framework in the region makes infrastructure
investment in the region unpredictable and consequently deters private
investors, who value stability of cash flows in long-term projects
• Commercial risks
• Notable failures in private sector involvement have hinged on commercial risks:
• Disagreement on allocation of risks, esp. traffic risk, with private partner
• Availability of alternate routes
?

5. Tirana - Priština Motorway
5
Length (km) 272
Cost (EUR m.) 2 000
Financing
National
Budgets
Status
Mostly
complete
 The costly 4-lane highway from Pristina to Tirana has generated light traffic so
far, although Durres Port has benefited from increased container throughput.
 The two capitals are now only a 3 hour drive from one another (down from 12).
 Important sections remain incomplete in both countries.
 Albania has issued an invitation to prequalify for a 30-year concession/PPP to
construct, upgrade, operate, and maintain the Albanian section.
 A similar process in 2012 failed.

6. Priština – Hani e Elezit Motorway
6
…..
Length (km) 55
Cost (EUR m.) 600
Financing
National
Budget
Status
Under
construction
 This highway will relieve chronic traffic congestion and greatly improve safety.
 The Bechtel-ENKA consortium is the general contractor.
 When complete, this segment will make the route via Priština definitively the
faster connection between Skopje and Tirana, compared to Ohrid-Elbasan.

7. Prospective Road Projects in Macedonia
7
…..
Length (km) 13
Cost (EUR m.) N/A
Financing
Not
determined
Status
Under
Consideration
Length (km) ≈ 35
Cost (EUR m.) N/A
Financing
Not
determined
Status
Not
considered
 Macedonia can leverage Albania’s and Kosovo’s huge investments with minimal
additional investment to greatly increase its own accessibility and integration.
 Rankovtse – Deve Bair would be the last east-west bottleneck.
 With its well-established toll system and a mountainous terrain limiting alternate
routes, Macedonia credibly can seek PPPs as a source of finance.
Hani e Elezit – Skopje Rankovtse – Deve Bair

8. Western Balkans Road Network
8
 Historically, the region’s infrastructure ran north-south, a legacy of Tito.
 An integrated east-west road network in region can create economic benefit
from what was originally a wasteful political project.
 Albania’s planned PPP together with matching Macedonian initiatives could
achieve this.

9. Contacts
NECA
New Europe Corporate Advisory Ltd.
9 Narodno Sabranie Square
BG-1000 Sofia
Tel: +359 (2) 988-7390
www.necadvisory.com
Kenneth Lefkowitz
Tel: + 359 (88) 863-7053
kenneth.lefkowitz@necadvisory.com