Railway Reform in South East Europe and Turkey On the Right Track?

Transcription

1 Railway Reform in South East Europe and Turkey On the Right Track? THE WORLD BANK Vasile Olievschi Lead Railway Specialist Brussels, June 14, 2011

2 Overview Scope and Structure of the Study Main Findings of the Study Conclusions THE WORLD BANK Brussels - June 14,

3 Scope of the Study Wake-up call for the relevant authorities (MoT, MoF, Rail Companies) of the urgent need for stepping up the railway reform process in the Region Guide for candidate and potential candidate countries to move quickly in order to receive a positive opinion from EU regarding rail transport regulations Message to governments to use more efficiently scarce public resources for financing necessary upgrades of infrastructure and passenger rail services THE WORLD BANK Brussels - June 14,

4 Elements of the Study Elements of analysis Progress in institutional reform Operating and financial performance State of international integration Sources of data Operational Performance: UIC Statistics 2010 and Kosovo Reports Financial Performance: or 2009 data reported by railways/mot THE WORLD BANK Brussels - June 14,

5 Railways Included Albania Bulgaria Bosnia & Herzegovina Croatia FYR Macedonia Kosovo Montenegro Romania Serbia Turkey THE WORLD BANK Brussels - June 14,

6 INSTITUTIONAL REFORM THE WORLD BANK Brussels - June 14,

7 Position of Railways Relative to EU MEMBERS Bulgaria Romania CANDIDATES Croatia FYR Macedonia Turkey Montenegro POTENTIAL CANDIDATES Albania Bosnia & Herzegovina Kosovo Serbia THE WORLD BANK Brussels - June 14,

8 Bulgaria and Romania - Strong points - New commercial oriented railway companies in place Infrastructure charging systems Regulatory agencies Successful liberalization of the market More local and international private operators licensed THE WORLD BANK Brussels - June 14,

9 Bulgaria and Romania - Weak points - Poor operational and financial performance of newly created stateowned railway undertakings: Unclear contractual relationships with the state for the PSC Cross-subsidies of passenger traffic by freight clients (non-commercial track access charge) Weak Infrastructure Managers (under-financed infrastructure, poor absorption capacity of funds) Instability and lack of accountability of managers Inability to respond to changing market conditions Large financial losses of railway companies Lack of independence of the Regulatory Body in Romania (structure in the MoT) Track access charges higher than the direct costs in Bulgaria Improving the performance of state owned railways and implementing the EU Acquis are two separate objectives to be pursued in parallel THE WORLD BANK Brussels - June 14,

10 Candidate and Potential Candidate Railways Institutional Framework Updates since 2005 Country Rail Law Organizational Changes Separation of Infrastructure Albania No No No No B & H Law in 2008 No No No Croatia Rail Act Holding To be achieved No FYROM New Law Companies Yes No Kosovo Rail Law Joint Stock Co. To be achieved No Montenegro Rail Law Companies Yes No Serbia No No No No Turkey No No No No New Entrants THE WORLD BANK Brussels - June 14,

11 Key Financial Arrangements included in the EU Rail Acquis Country Multi-annual contract between State and IM Track Access Charging (TAC) Multi-annual Public Service Contracts for Passenger Services Mechanisms to Reduce Indebtedness of Rail Incumbents Albania No No No No Bosnia & Herzegovina No Partly implemented Yes in RS, not fully aligned with EU Directives No Croatia Yes since 2008 Yes, but not aligned with EU directives Yes, but not aligned with EU directives Debt taken over by State as of 1 Jan FYR Macedonia Yes Yes, from 2010, but exceeds direct costs Yearly contracts, level and structure under revision Yes, government decision in 2009 Kosovo No Lump sum, not in line with EU Yes, but not aligned with EU provisions No Montenegro No Not for PSC for passenger services No Debt taken over by State as of 31 Dec 2008 Serbia No No No No Turkey No No No No THE WORLD BANK Brussels - June 14,

12 Continuing Necessary Institutional Reform Ensure managerial independence of the infrastructure manager Ensure contractual relationships between the infrastructure manager and the rail operators Set the infrastructure charging framework based on the direct costs of operating transport services Review passenger fare regulations Permit rail operators to set ticket prices for services not covered by the PSC Improve corporate governance in state rail companies Implement financial accounts according to IFRS published and audited THE WORLD BANK Brussels - June 14,

13 Strengthening Regulation of the Rail Sector Put an end to self-regulated rail monopolies Establish pro-active and strong rail regulators Strengthening licensing bodies as foreseen in the EU Rail Directives Require authorization of the rolling stock and safety management systems by the safety authorities Ensure that process for rail related services are transparent (services in terminals or sea ports, passenger stations, fueling, supply of traction power, etc.) THE WORLD BANK Brussels - June 14,

14 Good Momentum for Accelerating the Reforms in Railways To ensure the compliance with the relevant EU Directives contained in the EU Rail Acquis, as a prerequisite for accession to EU To get the advantages of being part of the seamless transport market To ensure that state rail incumbents will be able to compete with the new operators Global Crisis good opportunity for initiating / continuation of railway reforms fighting against: market reduction, higher costs for governments, lower competitiveness, vulnerability on the open transport market Invest for modernization and rehabilitation of railway infrastructure recommendable component in stimulus packages: Much expenditures spent domestically Labor intensive due to nature of works Retains current traffics, and is well-placed to benefit from the upswing THE WORLD BANK Brussels - June 14,

15 Appropriate Environment for Supporting Rail Reform Signature of the Addendum to the MoU for enhancing the South East European Rail Transport Area Harmonization of programs and dissemination of information promoted by the SEETO Railway Working Group Western Balkan Transport Community Treaty potential important mechanism for moving rail reform agenda THE WORLD BANK Brussels - June 14,

16 OPERATING PERFORMANCE THE WORLD BANK Brussels - June 14,

17 TRAFFIC TRENDS THE WORLD BANK Brussels - June 14,

18 Rail Market Characteristics Three types of railways: large, medium, and small Aggregate traffic developments are driven by Turkey and Romania and are not characteristic for the whole region Regional statistics to be evaluated with care For accuracy purposes the Study separates Western Balkans from Turkey, Romania, and Bulgaria Romania, 33.02% Turkey, 33.41% Kosovo, 0.15% Albania, 0.17% Montenegro, 0.46% BH ZRS, 0.78% FYR Macedonia, 1.44% BH ZFBH, 1.55% Serbia, 7.33% Croatia, 9.93% Bulgaria, 11.75% THE WORLD BANK Brussels - June 14,

19 Traffic Evolution 60,000 58,000 56,000 54,000 52,000 50,000 48,000 46,000 13,000 12,500 12,000 11,500 11,000 10,500 10,000 9,500 9,000 Total traffic declined sharply after 2007 Better evolution of traffic in Western Balkans than in the whole region 44,000 42, Study countries Western Balkans 8,500 8,000 75% of traffic in the region is freight THEBrussels, WORLD BANK 6/21/2011 Brussels - June 14,

20 Freight traffic (million ton-km) Severe Loss of Passenger Traffic 40,000 38,000 36,000 34,000 32,000 30,000 28,000 26,000 24,000 22,000 20, Freight Passenger 23,000 22,000 21,000 20,000 19,000 18,000 17,000 16,000 15,000 Passenger traffic (million pass-km) THE WORLD BANK Brussels - June 14,

21 Traffic Trends compared with EU 115 Passenger 110 Freight EU-27 Study countries EU-27 Study countries THE WORLD BANK Brussels - June 14,

22 Structure of Freight Traffic [2008] Railway Ton km (Mil.) Average haul (km) Composition (%) Domestic Export Import Transit Albania BH ŽFBH BH ŽRS Bulgaria (BDZ) 4, Croatia 3, n/a n/a n/a Kosovo FYR Macedonia Montenegro Romania (CFR Marfa) 8, Serbia 4, Turkey 10, Most of the railways are preponderantly oriented on import/export and transit traffic Fragmentation of traffic due to small size networks does not support efficient operation THE WORLD BANK Brussels - June 14,

23 OPERATIONAL PRODUCTIVITY THE WORLD BANK Brussels - June 14,

24 Indicators for Operational Performance Indicators used to measure the operational performance: Traffic Density Rolling Stock Productivity Labor Productivity EU-27 values of each of selected indicators considered as basis for comparison (100%) Three EU Member States chosen for comparison: Germany high performing EU railway Poland important new member of EU Slovenia new member of EU from the same region and part of the same corridors THE WORLD BANK Brussels - June 14,

25 Network Size [km] and Million Traffic Units 2009 Germany Study countries Poland Romania Turkey Bulgaria Serbia Croatia Slovenia BH FYR Macedonia BH ZFBH Albania BH ZRS Kosovo Montenegro 10,776 8,686 4,150 3,809 2,723 1,228 1, ,764 33,706 32,864 Germany Poland Study countries Turkey Romania Bulgaria Croatia Slovenia Serbia BH BH ZFBH FYR Macedonia BH ZRS Montenegro Albania Kosovo 46,394 45,059 15,055 14,877 5,296 4,476 3,508 3,305 1, ,720 Regional rail network comparable THE WORLD BANK Brussels -with June 14, Germany 2011 operating four times less traffic 25

26 Germany EU Slovenia Poland Turkey Croatia Romania Bulgaria BH ZFBH BH FYROM Serbia BH ZRS Montenegro Kosovo Albania 7 6 Traffic Density in 2009 [EU-27 = 100%] Rail services are subject to economies of density, offering declining average capital costs per unit of service and declining unit operating costs per route-kilometer. Low traffic density saddles the incumbent rail companies and infrastructure managers with high costs. 164 THE WORLD BANK Brussels - June 14,

27 Labor Productivity compared with EU-27 [EU = 100%], 2009 Germany EU Turkey Slovenia Poland Croatia Romania FYROM BH ZFBH Serbia Kosovo Bulgaria BH Montenegro BH ZRS Albania Less than 50% of EU-27 average (except Turkey and Croatia) Low staff productivity may indicate: obsolete technologies, poor operational practices, bad management THE WORLD BANK Brussels - June 14,

28 Freight Wagon Productivity compared with EU-27 [EU = 100%], 2009 Germany Slovenia EU Turkey Poland Croatia FYROM BH ZBH Serbia Kosovo BH Romania Bulgaria Montenegro BH ZRS Albania Low rolling stock productivity may indicate poor operational practice, low fleet availability and aged fleet (i.e. in 2008 at Serbian Railways only 54% of freight wagons and 28% of passenger coaches were operational) THE WORLD BANK Brussels - June 14,

29 Passenger Coach Productivity compared with EU-27 [EU = 100%], 2009 Germany EU Turkey Croatia Poland Slovenia Romania Bulgaria Montenegro FYROM Kosovo Serbia BH ZBH Albania BH BH ZRS THE WORLD BANK Brussels - June 14,

30 Locomotive Productivity compared with EU-27 [EU = 100%], 2009 Germany Turkey EU Slovenia Croatia Poland FYROM Serbia Bulgaria Romania Kosovo BH ZBH BH Montenegro BH ZRS Albania THE WORLD BANK Brussels - June 14,

31 Summary of Operational Performance Country compared with EU-27 [EU = 100%] Traffic Density Productivity [%] Coach Wagon Locomotive Labor Average [%] Turkey Croatia FYROM Romania Bulgaria Serbia Kosovo Montenegro BH Albania THE WORLD BANK Brussels - June 14,

32 Improving Operational Performance (1) Railways Infrastructure Refocus rail network development plans Focus on cost-benefit analysis not on past traffic volumes Distinction between upgrading, rehabilitation, maintenance Consider the need for network rationalization and focus maintenance on high-density lines (core network) Implement multi-annual contracts for infrastructure development Provide equitable support to road and rail transport sectors Set infrastructure charges at not-excessive level (avoid crosssubsidizing passenger services by freight) THE WORLD BANK Brussels - June 14,

33 Improving Operational Performance (2) Operation of Transport Services Divest or scrap non-economic assets Identify and address factors affecting low productivity (surplus assets, surplus staff, poor operation practices) Implement multi-annual PSC using performance indicators Utilize performance indicators by lines of business for increasing accountability of staff and managers Organize railway companies around customer needs instead of classical territorial structures or railways branches (i.e. Reassess the logic of maintaining traction as separate line of business or company - avoid creating companies which do not face market demands) THE WORLD BANK Brussels - June 14,

34 FINANCIAL PERFORMANCE THE WORLD BANK Brussels - June 14,

35 Indicators for Financial Performance Cost Recovery Ratio, defined as the ratio of the total revenue, including all forms of state support, divided by total operating costs Viability Ratio, defined as the ratio of commercial revenue (excluding state support) divided by total operating costs [expressed in %] Average Track Access Charge per train-km per type of traffic Wage Bill indicators: Percentage of total operating costs Percentage of operating revenue excluding state support THE WORLD BANK Brussels - June 14,

36 Cost Recovery Ratio, 2008 [%] Croatian Railways Kosovo Railways Bosnia & Herzegovina (ZRS) Bulgaria (BDZ) Romania (CFR Marfa) Romania (CFR) Serbian Railways FYROM (MZ-T) Albania Railways Romania (CFR Calatori) Bosnia & Herzegovina (ZFBH) Bulgaria (NRIC) Turkey (TCDD) Montenegro (ZICG) FYROM (MZ-I) Loss making companies even including state support THE WORLD BANK Brussels - June 14,

37 Viability Ratio, 2008 [%] Romania (CFR Marfa) Kosovo Railways Romania (CFR) FYROM (MZ-T) Romania (CFR Calatori) Bulgaria (BDZ) Croatian Railways Bosnia & Herzegovina (ZRS) Bosnia & Herzegovina (ZFBH) Albania Railways Serbian Railways Bulgaria (NRIC) FYROM (MZ-I) Turkey (TCDD) Montenegro (ZICG) Only one company was viable in 2008 (in 2009 it had financial losses due to the crisis) THE WORLD BANK Brussels - June 14,

38 Wage Bill as Percentage of Operating Revenue, 2008 Turkey (TCDD) Bosnia & Herzegovina (ZRS) Bulgaria (NRIC) Serbian Railways Croatian Railways Romania (CFR) Bosnia & Herzegovina (ZFBH) FYROM (MZ-I) Albanian Railways Romania (CFR Calatori) Bulgaria (BDZ) Romania (CFR Marfa) Montenegro (ZPCG) Kosovo Railways FYROM (MZ-T) THE WORLD BANK Brussels - June 14,

39 Track Access Charge [Euro/Train-km] Passengers Freight Bosnia & Herzegovina (ZRS) 2.79 FYROM (MZ-I) 7.29 Romania (CFR) 2.44 Romania (CFR) 5.17 Montenegro (ZICG) 1.46 Bulgaria (NRIC) 3.35 Bulgaria (NRIC) FYROM (MZ-I) Croatian Railways Bosnia & Herzegovina (ZRS) Bosnia & Herzegovina (ZFBH) Bosnia & Herzegovina (ZFBH) 0.00 Croatian Railways THE WORLD BANK Brussels - June 14,

40 Improving Financial Performance Poor financial performance consequence of: Poor operational performance Underinvestment in infrastructure and rolling stock Lack of commercially oriented management = Unsatisfactory management Each railway has its specific mix of the above factors Commercially oriented management Strict control of costs Tariff policy based on market rules Quality transport services according to market expectations THE WORLD BANK Brussels - June 14,

41 Identify and Eliminate Factors Adversely Affecting Financial Performance State as owner of railways: Supervision but not interference in daily management of railways Transparent merit based selection of managers Stability and accountability of managers Set monthly, quarterly, and annual targets for measuring the achievements Railway Managers Divest or scrap non-economic (surplus) assets Outsource non-core activities not financially sound Replace obsolete assets Ensure existing staff is in line with traffic needs Eliminate poor operation practices: Allocation of locomotives and crews Obsolete methods of maintenance of infrastructure and rolling stock No commercially viable tariffs for transport services THE WORLD BANK Brussels - June 14,

42 INTERNATIONAL INTEGRATION THE WORLD BANK Brussels - June 14,

43 International Rail Corridors in SEE The South East Europe Transport Observatory (SEETO) core rail network (4,615 km) overlaps with the Pan-European corridors except that they are limited to SEETO member states In 2008, only 12.8% of the Core Rail Network was in good condition, with 70.8% in medium condition (SEETO Report) The three main corridors which coincide with the Pan-European corridors in the region are Corridors Vb, VIII, and X The total length of corridors is 3,083 km and 1,532 km of routes, including Corridor VIII (210 km missing between Albania and the FYR Macedonia) THE WORLD BANK Brussels - June 14,

44 RailNetEurope Corridors C09 and C11 RailNetEurope (RNE) is an association set up by a majority of European Rail infrastructure managers and allocation bodies to enable fast and easy access to European rail RNE has defined 11 rail corridors, defined to meet market demand with the explicit aim to improve corridor performance Each corridor has a steering group which detects the weak points along the corridor and develops an Action Plan THE WORLD BANK Brussels - June 14,

45 Major Barriers to International Traffic on Rail Long stopping time planned in border stations Large delays during processing time in border stations inefficient organization of state rail undertakings due to lack of efficient communication non-availability of locomotives incorrectly assembled trains border police and customs controls Absence of full interoperability in rail sector Traction systems (electric, Diesel) Signaling systems Safety rules Critical element = effective cooperation among incumbent rail undertakings and rail infrastructure managers THE WORLD BANK Brussels - June 14,

46 Corridors Operational Performance Corridor IV (Budapest-Curtici-Russe- Svilengrad) Length (km) 1,180 Average transit duration: passenger trains (hours) 25.7 Curtici (HU-RO) 0.3 Ruse (RO-BG) 1.4 Svilengrad (BG-TR) 0.8 Average speed pass. trains (km/h) 45.9 Average transit duration: freight trains (hours) 44.3 Curtici (HU-RO) 3.0 Ruse (RO-BG) 4.3 Svilengrad (BG-TR) 5.0 Average speed freight trains km/h 26.6 THE WORLD BANK Corridor X (Budapest-Subotica-Nis- Dimitrovgrad-Sofia-Svilengrad) Length (km) 1,076 Average transit duration: passenger trains (hours) Subotica (HU-SR) 0.6 Dimitrovgrad (SR-BG) 1.3 Svilengrad (BG-TR) 0.8 Average speed pass trains (km/h) 43.0 Average transit duration: freight trains (hours) 43.0 Subotica (HU-SR) 3.8 Dimitrovgrad (SR-BG) 4.5 Svilengrad (BG-TR) 5.0 Average speed freight trains km/h 25.0 Brussels - June 14,

47 Border Crossing Points (BCP) Stops BCP Stop (minutes) Border Station Average real Timetable time Subotica Freight Passenger Curtici CFR Marfa Private freight trains Passenger Svilengrad Freight Passenger Dimitrovgrad Freight Passenger Much longer duration for freight than for passengers Private trains operation in border stations much shorter Lack of predictability (estimated time of arrival at destination) THE WORLD BANK Brussels - June 14,

48 Bosphorus Europe Express on Corridor X Bosphorus Europe Express on Pan-european Corridor X Ljubljana Slovenia Dobova/Savski Maraf Croatia Tovarnik/Sid Zagreb 3 kv DC 25 kv/50 Hz diesel Bosnia- Herzegovi na Montenegro Belgrade Serbia Nis Dimitrovgrad total length : 1577 km (out of it 260 km of non-electrified railway lines, 200 km of single tracks, on some sections gradients up to 29%o crossing 5 countries /Dragoman Sofia Description of the route 4 (x 2) border-crossings, EU and non-eu borders different power supply systems 8 times changing the locomotives different max train length ( m) and weight ( tonnes) Bulgaria Mihailova Svilengrad/Kapikule Turkey Istanbul/Halkali *BAC Business Advisory Council South-East Eurpoe Consortium of rail & container operators led by AdriaCombi (Slovenia) and Kombiverkehr (Germany) Rail in competition with other modes. Traffic distribution and average duration from Turkey to Central Europe: 80% by sea hours 16% by road 72 hours 4% by rail hours Trip duration according to timetable on Bosphorus route = 60 hours and 43 minutes Achieved target = 35 hours (by reducing the stoppage time from 19 hours to 6 hours) THE WORLD BANK Brussels - June 14,

49 Initiatives to Improve Rail Corridor Performance SEETO Project in aimed to reduce border delays proposed a regional plan including: passenger border controls on moving trains proposals to introduce electronic data interchange (EDI) for freight operations action plan for greater integration of rail border-crossing policies Framework Border Crossing Agreement was presented in May 2009 to SEETO Rail Working Group The Agreement on Infrastructure Interconnection (AII), signed between IM s (document approved by the SEETO Commission representing the transport ministries of the Western Balkan countries) to be implemented THE WORLD BANK Brussels - June 14,

50 Joint Border Zone The Vital Element for Changing the Current Situation Single window principle for freight customs. All customs services should be carried out by the customs authorities of both countries at one location in the Joint Border Zone One Stop Shop for the use of rail infrastructure meaning a body that designs an international train path Passenger control on moving trains. Border police and customs of both states carry out controls while the train is moving At present, every BCP on Corridor IV and X has a BCC that meets regularly for improvements of border services and arbitration on any differences between the contracting parties resulting from the BCA THE WORLD BANK Brussels - June 14,

51 Recommendations for Improving Integration Utilize selective investments in order to establish joint border stations or move clearance to defined inland terminals Transfer certain border-crossing activities to major inland terminals Adapt procedures for single wagonload or wagon groups to block trains (due to private operators) Coordinate marketing of services across rail corridors Coordination of rail operators along corridors to improve services (address the fragmentation of traffic), while ensuring the independence of the partners on pricing Ensure coordination of TACs across freight corridors Excessively high freight TACs across one segment can shift freight rail traffic onto trucks Introduction a pilot scheme to test EDI transmission between select border stations (ICT at border stations, RU, IM, shippers / forwarders) THE WORLD BANK Brussels - June 14,

52 Conclusion The SEE governments must continue the reform process of railways on multiple aspects (institutional, operational, financial, and international integration) EC has a vital role for stimulating the process (SEETO Railway Working Group) International donors must continue to support the development programs of railway transport in SEE THE WORLD BANK Brussels - June 14,

53 Rail Report Website Available at: Full report in English, Executive Summary of the report available in English, Albanian, Bosnian, Croatian, Macedonian, and Serbian Press release, Q&A, photo slideshow, interview with author THE WORLD BANK Brussels - June 14,

54 Railway Reform Toolkit To provide a one stop shop for best practice information on railway industry To make more accessible the rich base of previous studies and intellectual work in the railways To develop and provide new resources not available before: A logic structure for how to choose the reform path A guide to governance of the railways A high quality financial model A set of case studies and references to other relevant documents on railways THE WORLD BANK Brussels - June 14,

55 Thank you for your kind attention! THE WORLD BANK Vasile Olievschi Lead Railway Specialist Brussels, June 14, 2011