On 1 May 10 countries joined the European Union. Their economies are set to receive huge sums to upgrade infrastructure to EU standards. Mark Hansford reports on the burgeoning opportunities for engineers.
Western Europe's barrier free trading area saw the greatest expansion in its history when 10 countries join the European Union (EU) on 1 May. The acceeding countries - Estonia, the Czech Republic, Cyprus, Latvia, Lithuania, Hungary, Malta Poland, Slovenia and Slovakia can expect a major resulting boost to their economies.
In all 24bn ($28.8bn) is up for grabs until 2006 to increase the economic competitiveness of the regions and improve the living conditions of their citizens.
The money is made available as part of the European Union's overall objective of 'reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions', as laid down in the treaty establishing the European Communities.
The 'instruments of solidarity', structural funds and the Cohesion Fund cover about one third of the EU budget (roughly 36bn in 2004).
The structural funds usually finance multi-annual programmes drawn up in partnership with administrations at national and regional level and aim to enhance regional growth, competitiveness and job creation.
The cohesion fund helps member states to comply with the requirements of economic and monetary union by granting subsidies to major investments in the area of transport and environment.
Between 2000 and 2006, the total allocation for all structural instruments amounts to $225bn for the 15 existing member states.
Of the $28.8bn earmarked for the 10 countries acceding to the EU on 1 May (see table) roughly a half will go on infrastructure improvements, and of this most will go on transport and the environment - roads, railways and, particularly, the heavily-EU legislated water industry (see box).
Poland is a good example of the scale of work required. The country has a population of 40M, is four times the size of Britain, and has just 400km of motorway.
The Polish government has access to up to $14.4bn in EU funds and there will be opportunities for international firms to help spend it. But only those firms putting in a sustained effort and making a strong commitment to the region are likely to succeed.
Bloated expats breezing in from rich western European states will not be welcomed with open arms.
'We've been doing things in central Europe for 14 years, with a local business in Poland since 1993, but it is not easy, ' says Atkins Polska managing director Chris Moore. 'Britain is one of the best providers of consultancy worldwide. But there is a very different culture here. Central and eastern Europe has its own history and issues that any new entrant would have to deal with.
'The society is more product than service based and there is natural resentment towards highly paid expats. The standard language of the EU is English, but more and more business is conducted in Polish. We are predominantly Polish staffed for that reason, ' says Moore.
It's a similar story just down the road in Arup's Poland office. 'Our policy is to indigenise, ' says Arup director Keith Seago. 'The only way to go is to form an expat presence and then take on local staff. So in Warsaw - now 60 strong - the great majority of staff is Polish with very strong links to the UK.
'Some of our competitors have bought local firms. But the difficulties there are cultural. We as a company are jealous of our culture, ' adds Seago.
Similarly, in Prague Babtie is well set with its Czech Republic subsidiary Babtie Spol. 'We've had an office in Prague for 10 years which we've used as a base for work coming from the preaccession countries. With so many languages and cultures, you need to be there, ' says chief executive Bill Mitchell.
The importance of having a local presence goes beyond a knowledge of local customs, however. Funds will be distributed through government ministries in the accession countries, so good local contacts with officials are vital.
'With EU funds it used to be easier as the projects were run from Brussels, ' explains Seago. 'But now the money is remitted to country ministries.
So you've got to get to the individual ministries: they know their local consultant base and have an interest in putting work with that base.
Likewise the local engineering base in these countries is pretty well organised, they can see the work coming up and are not about to give it away.
'So to really succeed you need to partner and collaborate with local firms, ' concludes Seago.
Fortunately for the West, there are motivations for local firms to partner with international firms. EU rules will demand that, for major projects, consultants and contractors have previous experience of work of a similar scale. Equally critically, to claim the EU funding, accession countries must provide matching funds of 25% to 30% themselves. As a result opportunities are expected to surface in privately financed infrastructure.
Thirty percent of $21.6bn will take some finding from the public purses of the relatively poor accession countries.
This should play strongly into the hands of UK consultants. PFI experience is something UK firms have in abundance.
'Private finance is something we've been pushing a lot, ' says Mott MacDonald western Europe director for Jeff Mardon. 'These projects will be financed by a combination of private finance, lending and direct grants. But the really big projects - such as the proposed motorway across Slovakia and the Prague ringroad - will have to be privately financed.'
But there is much work to be done before a privately financed infrastructure programme can really kick off.
'We are the independent engineer for one of the first toll motorways in Poland and are putting a lot of emphasis on private finance. But there is a long way to go, ' says Moore. The government has only just published draft private finance legislation and the country is just not as economically stable as its western European counterparts. As a result investors are nervous about being the first to put their money in.
So the expectation is that accession countries will first push ahead with smaller projects that can be funded by loans and grants. 'For larger projects criterion such as experience will count. But a lot of EU money goes directly to local firms, ' says Moore.
This means building relationships with local companies will be key. Most western European and especially UK consultants admit to being keen to put local central European engineers - at a much reduced rate (see table ) - to work on UK or other international projects.
'That is very much the case, ' says Moore. 'Atkins as a company feels resource constrained rather than work constrained. We already have 10 Poles working in the UK on highways maintenance, and a further 18 doing bridge assessments here in Poland on UK bridges. The quality of work is very good and we are very pleased with it. We are now thinking of recruiting from here for some of our Middle East projects.'
Being able to communicate with the UK in daylight hours is a major advantage over other popular satellite office locations such as India and Hong Kong. And travel is much quicker and cheaper.
'Our Sharjah office in the United Arab Emirates has been very successful. If you're just churning out drawings then frankly you could be on Mars.
But for a lot of our work now you need to be able to communicate in real live time, ' says Moore.
'Although our bridge assessment programme is now huge, each bridge is individual and requires discussion. All we've been doing so far is establishing confidence. But it works, and could grow.'
These feelings are shared by Mott MacDonald's Mardon.
'There is an opportunity for us to get their people working for us in the UK and other countries. They have very good engineers and we can use that, ' he says. 'We already have a number of people from Prague, Poland and Bulgaria and it is very helpful to a company like ours, particularly in transport where there are extreme shortages of engineers. Our Prague office is geared up to work on bridges around the world.'
Despite this massive inward investment, there have been fears in European superpowers France and Germany that enlargement will trigger a mass exodus of unskilled labourers from central European states seeking lucrative jobs in the west.
So scared are they that they intend to impose their own restrictions on immigration from the accession states. The UK, which has imposed no such restrictions, could see an influx of cheap labour flooding the market.
But educated wisdom suggests not, with workers more likely to stay at home while the EU cash cow is milked. Certainly, there has been pre-accession ISPA money for all 10 countries, but it is nothing compared to that available now.
Laying the foundations for 2007 EU accession does not end in 2004. Smart companies are already turning their attention to Romania, Bulgaria and Croatia, all seeking accession in 2007.
'Opportunities for building new relationships with construction clients are becoming more limited in countries like Poland and the Czech Republic, where western European firms are pretty well established.
'There's quite a bit of competition. But the next wave of accession countries offers openings - there is more to play for, ' says British Consultants & Construction Bureau Europe & Americas director Nigel Peters.
Romania and Bulgaria are on the central European crossroads and have strategic importance for transcontinental transport and as manufacturing and distribution centres.
Both countries have relatively under-developed road networks, while ageing rail systems need upgrading. Their energy, water, sewerage and municipal waste disposal systems also require intensive attention to comply with EU environmental directives.
Water industry trade body Water UK puts the bill for upgrading water and sewerage in Romania alone at $38bn.
Andrew Mylius Liquid assets British expertise could help the accession states with their water and sewage treatment upgrade programmes.
Over the past 15 years the UK water industry has invested $90bn to meet European Directive standards. A similar challenge now faces the 10 accession countries.
On top of this many water companies are still state owned and will have to totally revolutionise their businesses if, as expected, they are to begin charging for water services. This is something British engineers know all about.
For Britain's water industry this means that there is a massive range of work to get involved in.
'Generally eastern Europe has fantastic civil engineers and there is no shortage of skills but they do lack experience in areas such as network optimisation and cost benefit analysis, ' says Water UK policy advisor and independent consultant Jacob Tompkins.
Tompkins is the UK advisor on drinking water to the European Union of National Associations of Water Suppliers & Wastewater Services (EUREAU).
'There is also the issue of customer relations and tariffs.
In some of these countries people have not had to pay for water until now so the companies have never done any modelling on revenues, reporting leakage, customer service and generally having a cost efficient network, ' says Tompkins.
While the environmental drivers in the accession countries may well be the same as they are here, meeting them might involve very different work from what is done in the UK.
Tompkins says this could require UK consultants and contractors to change their skills base and a partner in the target country could be invaluable. Pollution levels of contaminated land in some eastern European countries may well be higher than UK firms are used to, thanks to the heavy metals and radioactivity left over from ex-military facilities.