Railway reform in the Central and Eastern European (CEE) economies

In May 1992, the World Bank hosted a Railway Rountable in Vienna, Austria, attended by transport ministers, advisors, and senior railway staff from the Central and Eastern European (CEE) countries. The Roundtable reviewed recent trends in the railways'roles in these countries and identified appropriate actions to address emerging transport issues in the CEE region. The Bank prepared this strategy paper based on the discussions and the apparent widespread consensus that emerged at the Rountable. The financial situation of the CEE railways is beginning to deteriorate rapidly, and the CEE railways are not well positioned to provide good, reliable service to their increasingly market-driven customers. These countries are thus under increasing pressure to restructure their railways to relieve financial pressures and meet future needs. Railways in market economies have faced a steadily declining role in the transport market, and have typically dealt with emerging problems by tinkering at the margin - for example, by debt write-offs - and thus delaying attacking their underlying structural problems. Many of these governments have come to the conclusion that drastic surgeryis required - as illustrated by the British, German, and Japanese railways. The agenda for change that emerged from this Roundtable emphasized developing a strategic plan for restructuring the railway. This plan should define the market; project the level of activity (tons, ton-kilometers and freight tariffs, passenger-kilometers and passenger fares) for all business activities; include a five-year financial plan for the different lines of railway business (to make options concrete); and define all government policies and changes that would put the railway on a level playing field with competing modes of transportation. One item on the agenda for change is to convert the current railway enterprise operating under normal commercial law. The board of directors should include representatives from government, the railway executive and high-level business or public representatives from outside of government. Formation of JSC or independent enterprise does not necessarily imply privatization of the railway because the underlying assets may well remain in public hands. The objective is to change the enterprises'authority and enhance their commercial orientation. The other item on the agenda for change is to have the explicit mission of the railway be to operate freight and intercity passenger services on a commercial basis, with revenues from services covering all costs, including a return on investment. Social services such as urban passengers, should be identified and supported by the appropriate governmental agencies.