Croatian road sector management challenges

Abstract

The road network in the Republic of Croatia is well developed and largely responds to traffic needs. The motorway network is largely built up and no major new investment is needed in the short term. The national road network is in good standing according to national and EU standards. However, public road management companies face operational and financial challenges in terms of: (a) overinvestment in the network; (b) weak governance; (c) high operating costs; (d) large debt stock; (e) short tenor of existing loans; (f) currency risk and (g) insufficient credit strength to access the loan market for long tenors on a stand-alone basis. The Government of the Republic of Croatia has therefore decided to address these chellenges and launched a project funded by IBRD called the Modernization and Restructuring of the Road Sector (MARS) aiming to enhance operational efficiency and improve the financial sustainability of the road sector. To these ends, the Government has approved a Sector Policy Letter, which contains a set of planned reforms. To ensure the contribution of the road sector to the overall economy, in addition to the financial sustainability of the sector itself, operational improvements are needed in the following key areas: (a) management of the road infrastructure sector; (b) planning, financing and implementation of investments in the road sector; (c) corporate governance and business operations. Much of the reform has already been implemented, but some of the most important are still in the process of being implemented.