Think Railways

The policy of the European Union on public passenger railway transport focuses on open markets and controlled competition. This means that companies need to ensure competitive levels of costs and abide certain quality standards. The Bulgarian government’s policy towards the Bulgarian State Railways (BDZ) however is defeatist and anti-market[i]. But this is not since today. More than two decades after the country began its transition towards a market economy, many governments have refused to allow BDZZ to go out and compete as a normal market participant. The result is visible to everyone - old wagons and locomotives, constantly decreasing speed of the compositions and the continuing need for more government subsidies so that this mastodon does not default, while it has fewer and fewer customers each year.

When Bulgaria joined the European Union in 2007 a new hope emerged. Maybe things will get better and BDZ would start to operate like a normal company and to offer its passengers a service with improving quality. The key geographic position of the country and the diminishing of borders in Europe creates the opportunity for rail transportation to evolve and once again be the backbone of the local transport network – after all, it is the cheapest land transport, and most economical and most eco-friendly. With the development of rail technology, trains are already moving at speeds of 200-300-400 km per hour, which opens the possibility of significantly shortening the distances on the continent. That would make railways strongly competitive with other alternatives, as is the intention by the General European railway area and European railway legal framework.

Unfortunately, the state in Bulgaria still excludes competition in passenger traffic, and its activity as owner of BDZ has lead the company to, to put it mildly, deplorable results in almost every respect. Just a few examples: the capital Sofia is home to the biggest portion of working people in the country and a huge part of them travel every day to work there. One of the biggest contributors to this traveling workforce is the local city of Pernik, where nearly a third of the population travels at least once a week to the capital. Most people travel the distance of around 40 km by car, despite the existing railway. The reason is that this short distance takes more than an hour for the local train to maneuver, averaging around 30 km/h. The main line between the capital and the seaside port of Burgas takes between 6 and 8 hours to traverse, despite being a measly 350 km. And the trains were not always this slow – in the 60s, they were actually faster.

Several months ago Bulgaria elected a new government that came with promises of reform and change. During his election campaign, referring to BDZ, the Minister of transport Ivaylo Moskovski made promises of a right-wing politician: that he should protect the competitiveness and pro-market orientation of the country. However, this is what we read in a press release from the Ministry from 16 March this year:

"The completion of the single European railway area and the increase of the share of rail transportation in the total volume of shipments within the EU should not be accompanied by competitive pressure, which leads to adverse social consequences in some Member States.

With the introduction of the principle of competitive awarding of public service contracts in the rail sector it is necessary to account for appropriate exceptions.

In the context of this discussion, with the proposition of Minister Ivaylo Moskovski, Bulgaria supported Luxembourg, Lithuania and Ireland to keep the exception for smaller markets, which account for less than 1% of the total share of the European rail sector, from applying the general rule for tenders and the direct awarding of public service contracts".[ii]

In other words, this is a refusal to carry out what may be painful in the short term, but extremely necessary reforms. The comparison between Bulgaria and these three countries in terms of rail transport is extremely misleading. Luxembourg and Lithuania have much smaller areas and it would be expected that there would be no serious development of trans-European rail transport. Ireland on the other hand is located on an island and will logically focus on other modes of transport (the country has a rapidly growing market of low cost airlines such as Ryanair).

This is most definitely not the case with Bulgaria. Commerce has traveled through the country for millennia from Europe, Asia and Africa and even today a considerable part of the land transport of goods still passes through there. Being the cheapest transport, rail transportation can and must create a healthy environment in which to develop so that there are faster trains - and the easiest and quickest way this can be achieved is in a competitive environment with more than one carrier. A few months ago there was some hope for the creation of a parliamentary strategy for BDZ – but there are still no results. Most media were laconic; most train specialists to whom I turned refused to comment before the strategy appeared.

"The ministry's position is not in the favor neither of the rail users, nor of the Bulgarian society," independent rail expert Mr. Varujan Apelian commented. "It should be absolutely clear that the first item on any railway strategy in Bulgaria must be the full implementation of European legislation for rail transport[iii], because its purpose is the actual development of the sector and the increase of the market’s share of the railways".

Moreover, if we look at the country’s neighbors, we can see that the development of railway transportation also opens opportunities from which we the country can benefit.  In Istanbul the Turkish government began the construction of a second tunnel under the Bosphorus, which will include a railway route. This creates the prospect (in the very near future) of an increased flow of goods to and from the region, and opens the option for the creation of a truly comprehensive European high-speed railway, like the ones already developing in China and Japan.

In neighboring Greece there are also plans for the electrification of the lines between the capital Athens and the Bulgarian-Turkish-Greek border and the Bulgarian-Greek border. The aim of the Greek government is to speed up the line to facilitate the imports of goods from the eastern Mediterranean to a commercial hub and move them north by rail. Currently, this project is stalled due to government mishaps, but the completion of the project is expected in the next few years (the money from the EU are there; the country just needs will).

Even if we account just these two projects, together with long awaited opening of the second bridge over the Danube with Romania, there is a historic opportunity for the country to develop its railway network, which would bring net income for the country. The side effect of all this will be an increase in the quality of service which Bulgarian passengers are given.

Just an example – the private railway company MTR operates in several countries, including China, Australia, Sweden and the UK and manages railway and subway lines. In Hong Kong it has achieved 99.9% accuracy of their trains[iv] (compare this with BDZ’s near constant delays) and has over 50 awards for quality, service levels and sustainability. According to many estimates, it is one of the most efficient in the world. Logically, it is valued at £17 billion, and its revenue reached £1.3 billion. Today MTR plans to expand and build new railway lines in Hong Kong with a total length of 56 km. by 2020 totaling £14.9 billion. Its managers see the future railways railway transportation offer and are reluctant to invest, from which all the inhabitants of the metropolis benefit.

Bulgaria cannot be compared with Hong Kong either in wealth or population. But if the country bets on the right policy for its transport, it is not impossible that the difference between the two starts to shrink. The majority of Europeans also want to see increased competition in the national and regional railway transport – a whopping 71% are in favor[v]. With such massive support and the apparent bankruptcy of the current management of BDZ it really is surprising that the government refuses to reform the sector.

[i] The European Commission scolds Bulgaria for NOT implementing European rules for safety of railway transportation http://transportal.bg/rail/ek-ni-mamri-zaradi-ne-vavezhdane-na-evropeiskite-pravila-za-bezopasnost-na-zhelezopatniya-transport.html

[ii] https://www.mtitc.government.bg/print.php?category=92&id=8107&print=yes

[iii] European railways are at a Fork in the road: The European Commission presents proposals for the Fourth "Railway Package" http://europa.eu/rapid/press-release_IP-13-65_bg.htm

[iv] Rail Liberalisation in the UK: “From early mistakes to recent success?” http://www.erfarail.eu/UPLOADS/pageimages/events/erfa%20gam%202015/Jeremy%20Long.pdf

[v] Eurobarometer: 71% of European citizens support the strengthening of competition in the national and regional rail transport http://www.chambersz.org/eu-network/index.php?option=com_content&view=article&id=1096%3Aevrobarometyr-jelezopyten-transport&catid=40%3Avn-news&Itemid=87

by Georgi DRAGANOV, “EKIP” (Expert Club for Politics and Economics)