Privatization of railways transport

Estonia is the most advanced country in the region concerning the privatization of the railway industry, with the sale of 100% of EDELARAUDTEE (passengers) to a British company (GB Railways) in December 2000, and of 66% of EESTI RAUDTEE (freight) to a consortium of British, Americans and Estonians in April 2001. EVR, the company maintaining the infrastructure, was also privatized, sold to a German investor. So, almost all the sector is in private hands from now. EESTI RAUDTEE being owner of the infrastructure, one can thus regard those as private. The Estonian authorities seem today to regret the decision, and wish to withdraw.

Other countries should follow in the years to come.

Slovenia wants to privatize as soon as possible but the social impact would
be too significant to attract strategic partners who should moreover wait for the liberalization of the network before investing. The first step would be to attract a strategic investor for the freight transport.

The Latvian government considers to privatize certain activities of LATVIJAS DZELZCELS in the coming 2-3 years. However a similar dispute might occur as during the attempt to sell the electricity sector.

Lithuania also envisages to sell branches of the LG, the "passenger" and
"freight" activities in particular, infrastructure and traction remaining public.
These privatizations might be proposed at the end of 2003.

The privatization of subsidiaries (freight, main network, some regional
networks) of the Polish railway sector before 2005 is registered in a law. The infrastructure (PLK) will remain public in this country too.

Croatia considers privatizing HZ in the 5 years to come but in 2 stages: first and before the end of 2002 HZ companies not directly engaged in the
transport service ; it will then look for productivity increases and externalize the profitable units .

Lastly, five countries are still reluctant to privatize their railway sector.

Romania does not consider selling its passenger transport, because of the
subsidies still received. On the other hand, the capital of CFR MARFA,
freight transport, could be opened to an operator in 3 to 4 years ; an
international public tender would then take place.

Bulgaria privatized 13 companies of its railway sector but does not consider further moves in the short term.

MAV in Hungary will stay public in the short or even in the medium run,
except may be a strategic partner taking a minority stake.

In the Czech Republic, the opening of the capital of ČD a.s. to a private
investor is not excluded in the long run. However the state will preserve at
least 2/3 of the capital and it is necessary first of all to complete the
modernization of the company. No privatization project of the infrastructure is being studied.

The law on railways in Slovakia was implemented on the 01/01/2002. ZSR and ZS remain 100% public entities, under supervision of the Ministry of Transport, with a monopoly in their respective branches.

Opportunities to invest in the railway industry in the region are thus limited
in the short term and must be considered with caution. The commercial
potential for railway equipment suppliers and the construction sector seems more significant, because of modernization efforts in order to integrate the national networks in the pan-European corridors.

Revue Elargissement No29 - English edition – September 02, 2002