Railwaymen hope that the law on reforming railroad transportation will have been passed by the end of this year, and the reforms themselves will be implemented starting January 2012, said Ukrzaliznytsia (Ukrainian Railroads) CEO Volodymyr Kozak in his interview to Kommentarii. “I think that the draft law on reforming railroad transport in Ukraine will be approved by the government as early as this June, and that it will be sent for approval by the Verkhovna Rada of Ukraine,” he added.
The most important goal of the railroad transportation reform set by the government is transforming the entity into a joint stock company capable of providing good quality transportation services. Indeed, at present the country’s railroads are in a dire state. According to Kozak, today Ukrzaliznytsia’s credit portfolio is worth 11.5 billion hryvnias, with nearly three billion made up by short-term loans whose only purpose is maintaining liquidity. He believes that this immense debt is responsible for the railroad’s present condition.
However, the loans pose less of a problem than the depreciation of rolling stock. “It might seem that, given our annual turnover of 50 billion hryvnias, the 11.5 billion credit portfolio should not be much of a problem. Yet with a 80 to 90 percent depreciation of the cars and engines, we lack investments for development,” asserted Ukrzaliznytsia’s CEO. Thus, according to him, a speedy reform of the industry is the only way out of this predicament.
Kozak emphasizes that the first thing to do is to conduct a realistic assessment of the capital assets value and to separate accounting by financial activity. Such measures will create conditions for private investment, first and foremost in cargo transportation. At the same time, free access to the infrastructure, regardless of the form of ownership, will be guaranteed.
Ukrzaliznytsia’s CEO also informs that social responsibilities are to be divided between the railroads and state, since cross-subsidization of passenger transportation at the cost of cargo carriage (roughly totaling an annual five billion hryvnias), is unsustainable.
Kozak mentioned that international investment institutions have a favorable outlook for the reforms, as long as they are initiated. “I have already met with the representatives of the World Bank, the European Bank for Reconstruction and Development (EBRD) and others, who assured us of their willingness to cooperate once reforms are underway,” said the CEO.
“We will invest in Ukraine’s railroad transport only after it has been reformed. This has long been settled with the ministry of transport and Ukrzaliznytsia,” said Anton Usov, leading adviser to the EBRD, in his comment on Kozak’s statement to The Day.
Usov assures that as soon as the EBRD feels that the reforms have started, it will come back to the negotiations table. “This is not a new requirement. We have stated more than once that we will only support railroad projects if the authorities start taking real steps towards the privatiation of the national railroad operator,” said the expert.
Concerning the possibility of the EBRD becoming a stockholder in the prospective JSC, Usov claims that they have not yet considered this option. “Since this is a state company, we only can participate in the pre-privatization preparations, or act as consultants,” he said. Usov also adds that the EBRD lacks relevant experience in terms of owning a part of a joint stock company. Therefore, so far the bank is only considering the continuation of crediting projects for Ukrainian railroad transport. “However, everything is possible in the future,” said Usov and adding, “This is rather a question for the Ukrainian party, how they are going to incorporate this company: by making it completely state-owned, or by involving private investors. In case of the latter option, we are looking forward to there offers.”
The Day asked Ukrzaliznytsia to explain what changes ones may expect from the prospective reforms and what plans the state had in store for it, notably how the current stocks would be distributed. However, at the time of this publication The Day’s office had not received any response.
