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'Put Germany's flagship projects in private hands'

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'Put Germany's flagship projects in private hands'
Berlin's new airport has become a byword for failed public sector projects in Germany. Photo: DPA.
10:40 CET+01:00
Cost-explosions and huge delays at large-scale infrastructure projects are the norm rather than the exception in Germany. Economist Frederik Roeder argues the private sector should be put in charge.

Public projects such as the Stuttgart train station project, ‘Stuttgart21’, the new philharmonic hall ‘Elbphilharmonie’ in Hamburg, the new headquarters of the European Central Bank (ECB) in Frankfurt, or Berlin’s attempt to build an international aviation hub, are just the most prominent examples that illustrate Germany’s problems with budgeting and realizing public infrastructure projects. 

The odyssey of the new airport Berlin Brandenburg International (BER) is a particularly good example of why infrastructure projects are better planned, funded and realized by private investors rather than the public sector.

German aviation export Dieter Faulenbach da Costa called the construction flaws in BER so dramatic that the city should tear down the entire airport and rebuild it from scratch.

After German reunification, Berlin had three airports coping with growing passenger numbers. Political considerations meant planners spent 15 years selecting a location to bundle Berlin’s air traffic to one large airport.

Two annulled public tenders later, the mayor of Berlin and the governor of Brandenburg decided to discard the common concept of having a general contractor overseeing the construction and supervise hundreds of contractors by themselves.

That decision transferred any liability from the private sector to the taxpayer.

No end in sight

Invitations for the grand airport opening party in June 2012 had been already sent out when management had to admit that they would not meet the deadline. The fire safety authorities had not approved the airport’s smoke extraction system.

Der Spiegel reported that planners decided the terminal building would not have any smoke extraction tips on its rooftop for purely aesthetic reasons.

Smoke would be pumped into exhaust pipes located below the building - a very unique way to direct smoke, as hot air naturally rises up.

The airport management and politicians overseeing them still cannot give a precise estimate for when the airport can actually start facilitating air traffic.

The last 18 months have mainly consisted of assessing what is not working at the airport. So far more than 66,000 deficiencies have been identified.

Handelsblatt newspaper estimates the additional costs of maintaining three airports at the same time - with just two of them generating revenues - are up to €40 million a month.

This does not include costs for potential compensation vendors and airlines are suing the government for.

Rental car companies and restaurant operators had already equipped their stations and shops at the new airport, but do not generate any revenues while their assets depreciate. Airlines had already scheduled new routes and sold tickets for those.

Once BER will actually start operating it will already be at maximum capacity and extensions will be immediately necessary in order to cope with growing passenger numbers.

A lesson from the private sector

The decisions to fund, build and operate BER by the public sector neglects the success stories of the two largest German airports, Frankfurt and Munich.

While Berlin’s airport story developed into a never-ending tale of scandals and failure, Frankfurt and Munich expanded their capacities by benefiting from private capital and know-how that helped shape the future of those hubs.

Frankfurt’s publicly listed Fraport owns and operates airports around the world. Munich’s airport planned the two most recent extensions jointly with Lufthansa, which owns 40 percent of the main terminal.

But in Berlin the failures of politicians to directly oversee the construction of an airport has led to cost explosions and continuously deprives Berliners of the ability to be well-connected to the rest of the world.

So far construction costs have jumped from the initially planned €2 billion to more than €5 billion. Further increases are very likely since no-one knows when the airport will actually start catering flights to the world.

The lessons of BER and other prominent public infrastructure projects in Germany show that the liability for large infrastructure projects should lay in private hands and that excessive state spending leads to a waste of taxpayers’ money. It delays the realization of much-needed infrastructure.

Stories about the construction of bank towers or private airports being delayed for decades and costing four to ten times more than budgeted are rare. And even when they occur, shareholders, and not taxpayers are on the hook.

Frederik Roeder is an economist and director at NGO Young Voices.

READ MORE OPINION: 'Why Germany can't produce a breaking bad'

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