P R O G R A M
FOR RESTRUCTURING OF THE PUBLIC ENTERPRISE
“MACEDONIAN RAILWAYS” FOR THE PERIOD
2000-2003
Skopje, March 2000
P R O G R A M
For restructuring of the Public Enterprise
“Macedonian Railways” for the period
2000-2003
This PROGRAM for Restructuring of the Public Enterprise “Macedonian Railways” for the period 2000-2003 is prepared by Aleksandar Petrovski Ph.D. in accordance with the Agreement No. 08-499 dated December 30, 1999 between the Ministry of Transport and Communications and the Agency “Makedonija Patent”.
Author
Aleksandar Petrovski Ph.D.
Scientific Advisor – Full Professor
CONTENTS
1. INTRODUCTION 5
2. GENERAL DATA ABOUT PEMR 5
2.1. Background 5
2.2. PEMR Organization and Structure 6
3. TECHNICAL AND TECHOLOGICAL SITUATION
OF INSFRASTRUCTURE 7
3.1. Railway Lines7
3.2. Construction of Railway Line Kumanovo-Border with
Republic of Bulgaria (Deve Bair)10
3.3. Electrical and Telecommunication Facilities 13
3.4. Signaling and Safety Facilities 13
3.5. Road Crossings 14
3.6. Communication 14
3.7. Other Infrastructure Facilities 14
3.8. Sources of Infrastructure Financing 15
3.9. Investments in Infrastructure Maintenance 16
3.10. Overhaul 18
4. TECHNICAL AND TECHNOLOGICAL
CONDITION OF ROLLING STOCK19
4.1 Towing Vehicles 19
4.2. Passenger cars 20
4.3. Freight cars 21
4.4. Procurement of rolling stock 22
4.5. Financing of rolling stock maintenance23
5. EMPLOYMENT24
6. LEVEL OF OPERATION27
- TARIFFS32
8. PEMR ECONOMIC AND FINANSIAL SITUATION30
8.1. Financial Results 33
8.2. Generated Losses 38
8.3. Debts 39
8.3.1. Credit debts and debt level 39
8.3.2. Convention liabilities 41
8.3.3. Outstanding wage contributions 41
8.4. PEMR Total financial problems 42
8.5. Claims 42
9. BASIS FOR PEMR RESTRUCTURING43
9.1. Law on Macedonian Railways 43
9.2. European Commission Directive 91/440 42
9.3 Current Activities According to the REMR
Transformation Program as agreed
with the World Bank for Reconstruction
and Development-Washington 46
10. RESTRUCTURING OF RAILWAY SYSTEMS
IN COUNTRIES ACCEDING TO EU AND
COUNTRIES IN TRANSITION50
11. PROPOSED MEASURES57
1. Infrastructure 57
2. Rolling stock 58
3. Employment 60
4. Level of Operation 62
5. Tariffs 63
6. Losses 63
7. Credit Debts 64
8. Convention Liabilities 64
9. Outstanding Contributions 65
10. Law on Macedonian Railways 65
11. Implementation of European Commission
Directive 91/440 66
12. Implementation of Transformation Program for PEMR
agreed with the World Bank for Reconstruction and Development 66
RECAPITULATION OF PROPOSED
MEASURES71
TIMETABLE OF ACTIVITIES73
BIBLIOGRAPHY74
1. INTRODUCTION
The railroad transport on the territory of the Republic of Macedonia is a unique technical and technological system operating within the Public Enterprise “Macedonian Railways” (PEMR).
For a long period this technical and technological system has neither been adjusted to the changes in the society and economy nor economically resolved, and consequently has accumulated financial problems that need prompt addressing.
The main reason for this situation within this system, is the precipitous drop of its business. Compared to the PEMR level of operations in 1990, presently it is less than half, resulting in dramatically reduced revenues, which has very negative impact on the total economic and financial viability of PEMR. The financial results are negative, i.e. PEMR is operating with losses.
In the beginning of 1998 a new Law on Macedonian Railway was enacted in which, among others, there are provisions regulating the economic relations between the State and PEMR that would contribute for improving the economic situation of PEMR. However, these legal provisions were not implemented in 1999 and 2000, i.e. the state budgets did not anticipate any financial resources for this purpose, and therefore the economic and financial situation of PEMR remained unresolved.
In order to speed up the activities aimed towards PEMR adjustment to the new economic reality, this PROGRAME for restructuring of PEMR for the period 2000-2003 is developed.
2. GENERAL DATA ABOUT PEMR
2.1 Background
The beginning of the railway in Macedonia dates back in 1873 when the railway line Thessaloniki – Skopje was put into operation.
In 1945 the Federal Railways Directorate – Belgrade established the State Railways Directorate in Skopje.
In 1963 the State Railways Directorate was transformed into Railways Transport Enterprise – Skopje (RTE Skopje).
In 1977 RTE – Skopje was transformed into Railways Transport Organization – Skopje (RTO Skopje) consisting of 18 BOALs (Basic Organization of Associated Labor – enterprise in the old system; Z.Bog.) and two Working Units (RTO-Skopje and RAS-Skopje).
In 1990 there was another organizational transformation when its first name RTE – Skopje was given back, within which operated 6 Plants with a joint Administration, while the remaining organizational units were merged in a Limited Liability Company dealing with freight, catering and tourist activities and car traffic.
Its present name is Macedonian Railways (MR), and on September 10, 1993 it became a member of the European Railways Association – UIC – Paris.
With its accession to the UIC, MR became a member of several international associations and organizations in the field of international railway transport.
2.2. PEMR Organization and Structure
The Public Enterprise “Macedonian Railways” was founded by the Assembly of the Republic of Macedonia, Decision No. 21-4046/1, dated November 22, 1989 (Official Gazette of SRM No.41, November 24, 1989).
In 1999 PEMR consisted of the following basic organizational units:
- Transport unit
- Train towing unit
- Rail lines maintenance unit
- Electrical and technical devices unit
Administrative, professional and technical operations fall within the Directorate, consisting of three sectors and 12 departments.
PEMR is a founder of 9 companies with limited liability, operating as separate legal economic entities.
The managerial function in PEMR is performed by the Managing Board consisting of 9 members, 6 of whom are external members appointed by the Government of the Republic of Macedonia, and the remaining 3 are PEMR employees.
PEMR has a General Manager, Deputy General Manager, six assistants to the General Manager, four directors of basic organizational units – plants and three sector directors in the Directorate.
3. TECHNICAL AND TECHOLOGICAL SITUATION
OF INFRASTRUCTURE
The Law on Macedonian Railways defines that:
“ The railways infrastructure consists of railway lines with the upper and lower blocks and the facilities on the lines, the vehicles for electric train towing, facilities for signaling and safety devices, the facilities for telecommunication and information devices in the railway transport, the buildings, depots and other civil engineering facilities at the railway stations, as well as the functional land belonging to the line and the facilities”.
The PEMR railway infrastructure is old and obsolete (56.73% written-off book value, December 31 1999). The railway infrastructure value accounts for 60.95% of the PEMR fixed assets.
The railway infrastructure is not at adequate technical level, except for the line Tabanovce-Gevgelija, which has relatively good technical characteristics due to the increased engagement by PEMR in improving the technical level of this line.
3.1. Railway lines
The railway lines network in the Republic of Macedonia is not sufficiently developed and has dead ends towards the neighboring countries in East-West direction.
Comparison between the railways network development in the Republic of Macedonia and other countries:
In 1991
S T A T E
/ Track lengthPer million inhabitants
(km) / Track length
per 1000 km2
(km)
Austria
/ 747 / 70CSSR / 842 / 103
France / 586 / 61
Greece / 247 / 19
Macedonia / 339 / 27
Hungary / 751 / 83
Romania / 490 / 48
Slovenia / 600 / 58
Sweden / 1238 / 24
Turkey / 139 / 11
Source: Simoncic Marjan, “Transportna infrastruktura”,
Strategija gospodarskeg razvoja Slovenije, 1995
PEMR has 699 km of railway line, 226 km station tracks and 102 km industrial tracks.
All the lines have a normal track with a width of 1435 mm. The railway lines have the following characteristics:
Line / km / Year of construc. / Constru-ctedRails / Life span
upper block / Rolling speed
km/h
Tabanovci – Skopje / 51.5 / 1888 / 49 / 25 / 100/90
Skopje – Veles / 46.20 / 1873 / 49 / 19-27 / 80/90
Veles – Gevgelija / 115.80 / 1873 / 49 / 11-31 / 90/100
Skopje - G. Jankovikc / 31.70 / 1874 / 49 / 17-27 / 85/100
G. Petrov – Kicevo / 103.00 / 1952/69 / 49 / 30 / 40/100
Veles – Bitola / 128.10 / 1931/39 / 49 / 5-32 / 65/100
Bitola – Kremenica / 17.40 / 1894 / Greek / 66 / 40
B. Gumno – Sapotnica / 29.40 / 1957 / 356 / 42 / 65
Gradsko – Sivac
/ 16.30 / 1983 / 49 / 15 / 80Kumanovo – Beljakovci / 30.30 / 1956 / 45.81.10a / 42
Veles – Kocani / 85.60 / 1925 / 45.8a.35b / 7-32 / 65/75
Zajas – Tajmiste
/ 6.60 / 1969 / 49 / 29 / 40Skopje joint / 37.30 / 1971 / 49 / 27 / 40-100
Total / 699.20
The technical situation of the lines in relations with the capacity to develop speed is as follows:
Structure km/h / Permitted speed/km. / % ofparticipation / Designed rolling speed
(km) / % of
participation
- Up to 60 km/h / 74.0 / 11.2- / - / -
- Up to 61-80 km/h / 130.0 / 18.2 / 138.0 / 19.2
- From 81-100 km/h / 495.0 / 70.4 / 237.0 / 34.2
- From 100-120 m/h / - / - / 324 / 46.6
Total / 699.0 / 100.0 / 699.0 / 100.0
The above Table shows that the capacity of the lines for a given speed differs from the designed capacity.
Some sections on the railway line have a capacity to develop a rolling speed of 100 and 120 km/h, but due to the inappropriate state of the line upper block and lack of safety conditions, respectively lack of automated stopping devices, this speed is not permitted. This situation results in low commercial speed in transport of passengers and goods, which has an adverse influence on the quality of transport services.
The situation of the PEMR railway lines related to the capacity for axle loading is the following:
Axle Load
/ Kmlines / %
lines
Up to 160 kN / 30 / 4
Up to 180 kN / 130 / 19
Up to 200 kN / 151 / 22
Over 200 kN / 388 / 55
Total / 699 / 100
It should be noted that in the European railways network the capacity of axle loading accounts for 220 kN and beyond.
The major characteristic of the PEMR railway lines is its old upper block resulting in permanent reduction in the rolling speed at separate section of the lines.
Such deterioration of the upper block is a result of insufficient investment in overhaul of the lines and their regular maintenance.
Taking into account that the total PEMR railway line length of 699 km, and that the cycle of overhaul is 20-25 years, there is a need of providing material and financial conditions for annual overhaul of 35-28 km. of lines.
During the period 1980-1993 the overhaul of PEMR lines was very small, in average accounting for only 7 km annually, while during 1993-2000 no capital overhaul was done
This situation should not be permitted in future specially bearing in mind the security aspect of the railway transport.
3.2. Construction of Railway Line Kumanovo-Border with Republic of Bulgaria
(Deve Bair)
At the second pan-European Conference on Transport held in Crete – Greece, transport corridors that should be given priority in funding and construction and that should serve as a link between the Central, Eastern and Southeaster Europe and Western Europe were indicated.
Corridor VIII connecting the Black Sea and Adriatic Sea, respectively its main route Varna-Sofia-Skopje-Tirana-Dures stretching through three countries – Republic of Bulgaria, Republic of Macedonia and Republic of Albania, with a possibility for connecting East and West was also indicated.
These pan-European corridors primarily included roads and railways.
The railway transport Corridor VIII should be complemented with two railway lines in the territory of the Republic of Macedonia, if the goals of the railway connection of the Bleak Sea with the Adriatic Sea are to be achieved. The first section is 55 km long and will connect the railways network of Republic of Macedonia and Republic of Bulgaria, and the second section is 65 km long and will connect the railways network of Republic of Macedonia and Republic of Albania.
The project for construction of the railway line Kumanovo – Border with Republic of Bulgaria (Deve Bair) consists of two parts. One is the reconstruction of the existing line from Kumanovo to Beljakovci, 30 km long, that will enhance the technical elements of the international railways line, and the second part is the construction of a new line 55 km long that will connect the railway network of Republic of Bulgaria.
Article 126 of the Law on Macedonian railways regulates that: “Financial resources for financing construction of railways infrastructure shall be provided from the:
-Budget of Republic of Macedonia
-Own financial resources,
-Credits and loans, and
-Other sources”.
According to Article 126 of the Law on Macedonian railways, the “Law on Provision of Financial resources for Financing the Program for Construction of Railway Line Kumanovo-Beljakovci-Kriva Palanka-Deve Bair (border with Republic of Bulgaria) for 1994, 1995 and 1996” was enacted.
According to this Law, the financial resources for financing the construction of this line will be provided from the Budget of Republic of Macedonia.
During the period 1997-2000, symbolic financial resources were allocated for funding the construction of this line. All this resulted in totally reduced intensity of construction.
Overview of annual inflow of financial resources from the Budget of Republic of Macedonia earmarked for construction of the railway line:
In Denars
Source / Year / Amount-InflowBudget of R.Macedonia (BoM) / 1994 / 880.000.000
- BoM / 1995 / 919.500.000
- BoM / 1996 / 1.497.573.687
- BoM / 1997 / 419.980.000
- BoM / 1998 / 412.000.000
- BoM / 1999 / 537.678.313
- BoM / 2000 / 522.000.000
Total: / 5.188.732.000
It has been estimated that 240 million dollars are required in order to complete the project for constructing the line Kumanovo-Border with Republic of Bulgaria (Deve Bair). There are no financial sources for this investment so far.
On the other hand, due to the inaccessible configuration of the terrain and the overall characteristics of the design, the construction of the remaining part will require four years, as an optimum period, if financial resources are provided.
Consequently, this line cannot be constructed and put into operation within the period given in this Program for Restructuring of PEMR, 2003.
First, from what has been stated, it is evident that the projections given and the analysis made in this restructuring program are not realistic to include a scenario with this line constructed and in exploitation.
The second reason why in the analysis of restructuring program of PEMR a scenario with this line constructed and in exploitation should not be included, is the fact that its construction is with state funding and consequently it will not have any impact on the economic and financial situation of the PEMR balances at the time of construction.
Due to these reasons, the construction of the line and its funding should not be a subject of analysis in this Program for reconstruction of PEMR in this period.
All the necessary analysis could be made when conditions to complete the construction of this line are fulfilled, or the year when the line would be put into operation, and adjusted to the circumstances and conditions prevailing at that time, including its effects on PEMR economic and financial situation resulting from its operation-exploitation.
Regarding the present funding of the line and future funding of the remaining works for completion of the construction, several remarks and indications could be made.
1. Until now the only financial resources used for financing the construction of the line were from the Budget of the Republic of Macedonia.
2. In the years when allocations of considerable financial resources from the Budget (1994, 1995 and 1996) were provided by the Law, the physical execution of the construction of this line was made without any problems.
3. In the years when allocations of symbolic financial resources from the Budget (1997, 1998 and 1999) were provided by the Law, the intensity of the construction of this line was completely reduced.
4. With respect to the future funding of the construction of this line, it should be pointed out that in principle such capital investments are financed from state budgets. It should be emphasized that this principle has been acknowledged and implemented, i.e. the only financial resources used for construction of the line were from the state budgets.
However, what makes this problem difficult is the fact that for the completion of the construction of the line additional 240 million dollars are required, which under the present economic circumstances could not be provided from state budgets in the coming four years.
Nevertheless, the indicated principle for financing the construction of the railway line should be applied in future so that most of the required financial resources could be provided from the state budgets, and small portion from other sources.
3.3. Electrical and telecommunication facilities
From the entire railway network of PEMR, only the line Tabanovce-Gevgelija, 233 km long, and the station tracks, 83 km long is electrified.
The electrification of this line is of relatively recent date, hence the contact grid at the section Tabanovce-Skopje has been under exploitation for 22 years, respectively 12 years at the section Skopje-Gevgelija.
The electrified sections are equipped with modern telecommunication facilities.
The remaining network of the railway lines is not electrified and is equipped with telegraph-telephone devices and air lines with exceeded depreciation period.
3.4. Signaling-safety facilities
The same like with the electrification, all the station and road crossings on the line Tabanovce-Gevgelija have been provided with modern relay devices with automatic rail block.
The upgrading of this line will be made through the installation of automatic rail and locomotive devices, telecommands and radio dispatcher, whose implementation is underway through a credit from the World Bank for Reconstruction and Development – Washington.
On the PEMR railway line network, there are 32 stations secured with relay devices.
3.5. Road crossings
There are 290 road crossings on the railway network
Since all these road crossings at a level cover relatively small length of the railway lines (699 km), or in average there is a road crossing at a level on each 2.5 km, from the railway transport safety aspect the situation is rather unfavorable.
There are 63 road crossings equipped with automatic signaling, 19 with bumpers driven electrically or manually, 208 with traffic road singes, which also is not very favorable seen from the aspect of the railway transport reliability.
3.6. Communications
PEMR has communication ways for information distribution but they are not in compliance with the technical standards, except Tabanovce-Gevgelija line and the communication equipment that was installed in 1980. It is obsolete, depreciated and does not satisfy the needs for normal operation in the year 2000.
Due to lack of financial resources, for many years insignificant investments were made for regular and investment maintenance of these facilities and equipment.
PEMR will make some upgrading of its communication system through credit from the World Bank for Reconstruction and Development – Washington, whose implementation is underway.
3.7. Other infrastructure facilities
In passengers and goods transport by railways, PEMR also uses other infrastructure facilities such as: 114 official posts for passenger and goods entry and dispatch, of which 55 are station posts and approximately 353 bigger facilities, including loading-unloading ramps, warehouse space, tracks, workshops, etc.
3.8. Sources of Infrastructure Financing