Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Case Study: Polish Railways
2000, Government passed the Railway Restructuring and Privatization Law as
part of the EU Directive 91/440/EEC. The law established PKP SA as a fully
state-owned joint stock holding company in January 2001. In October 2001, 24
subsidiaries were established, including PLK, which manages railway infrastructure;
PKP Cargo, which operates freight services; PKP InterCity Passenger Services,
which operates long distance and international passenger transport; PKP
Energetyka, which operates energy and traction services; and PKP Informatyka,
which is in charge of telecommunications. Urząd Transportu Kolejowego (UTK)
was established to regulate the railway market.
The railway industry reform process, under the 2003 Law on Railway Transport,
initiated private sector involvement and encouraged competition. The law replaced
railway concessions for operating on the network with more liberal licenses,
thus encouraging private sector participation and competition in railway
industry. During 2003-05, the regulatory body issued 57 licenses to independent
operators. In 2006, under EU regulations, the Polish railway network opened to
international operators. During 2008-10, reform efforts focused on reducing unneeded
facilities, and seeking financial resources for railway network investment.
For example, PKP Cargo reduced 42 divisions to 16 during 2008-09, and in 2010
it aims to issue convertible bonds worth US$ 111 million.
5 Comment on the Reforms
Insufficient political support and management which was incapable of running subsidiary
companies within the joint stock company structure were the biggest obstacles
to railway reform. As politicians and trade unions dragged their feet, private sector
involvement in PKP Cargo was deferred, and for other subsidiaries, substantially
delayed. The lack of capable management meant that PKP financial stability failed to
improve immediately after the joint stock company was established.
During 1990-09, PKP reduced its labor force by 60 percent. The railways mitigated
negative social impacts with early retirement and severance packages. The
packages were negotiated among PKP, trade unions, and Government, and financed
by PKP from loans, own funds, and bonds. Negotiations resolved many
conflicts, such as passenger transport regionalization, which was resolved
through a tripartite agreement among trade unions, national government and
local governments.
Reforms were adjusted as they progressed. The 2000 law, which established the
joint stock company holding structure, was amended in 2001, 2002, 2003, and
2004. The 2003 law on railway transport was amended in 2004. These amendments
responded to the realities of politics, economics, and acquis communautaire
requirements.
6 Reform Process Results
6.1 Financial Performance
Since the formation of PKP as joint stock holding company, combined revenues
from subsidiaries have increased by 30 percent (Figure 5).
The World Bank Page 384