How do you maintain and modernize the infrastructure you have inherited?
There are two major things we need to do: to maintain the infrastructure and to modernize it. The operation parameters of the 22,000 km railway infrastructure depend on speed and infrastructure condition. The average speed on main railway lines is of 105 km/h and on the Romanian sections of European corridors 4 and 9 it will reach 160 km/h. The problem is that 105 km/h is a useful speed for the time being, but 160 km/h will be a better one for more demanding clients. In 1999, we managed to maintain the infrastructure with 16 million dollars less than in 1998 due to the fact that we had very good equipment for railway mechanization. We benefited from a loan of US$ 120 million from the World Bank with which we have bought equipment. We succeeded to maintain the infrastructure in good conditions with less money and we used the difference for the liquidation of equipment.
Presently what is your main goal? To maintain the infrastructure or to modernize it?
Both of them, however depending on traffic demand. We will not modernize the infrastructure if it is not necessary. Our goal is not to have a beautiful and modern infrastructure if there is no one to sell the services to. We have to commercialize it, to have trains and activity. Of course, we are trying to give access to the infrastructure at much better parameters.
It seems that European corridors numbers 4, 7 and 9 have to be in very good shape because they will make the link between East and West, North and South and they have to be at the same level as the rest of Europe.
Generally, the transport market in Romania is decreasing because the national economy has decreased and the industrial production as well. Of all the modes of transport operating on the transport market only the road transport is growing. Generally, transport market is decreasing with rail transport falling, maritime transport almost disappearing, air freight transport being at very low levels, pipe transport being kept at a constant level, but the road transport has experienced a slight increase, especially through the increase in number of transport cars. From the data we have, the year 2000 is better year than 1999 - there is a slight increase. We could say that last year we touched the lowest stand.
Under the present circumstances, when Romanian roads are much worse than its railway lines, we cannot put the blame on infrastructure condition to justify the market decrease. We can say that there is no marketing or that marketing does not reach its objectives. My opinion is that in Romania there is a mutation in the national economy. We are passing from the centralized property to the private property and the first ones to be affected are the big clients of railway freight. I am talking about the ones transporting mass goods: salt, wood, steel or minerals. In order to be able to obtain an adequate price they passed through a zero production level and consequently, merchandise was affected. Now, that we are into the market economy phase, goods are produced to be sold. The new company owners did not buy only to boast of their new acquisitions but they intend to produce and sell goods as in any other market economy, and then rail transport will regain its activity. Our main goal is to obtain profit from infrastructure operation.
How are you planing to do that?
Offering a good quality infrastructure to our clients. At present, we have 9 clients in passengers transportation and 2 for the freight transportation, and this year we are going to have 2 more for freight. As flight slots are offered for the planes, we are also trying to offer paths to the trains operating on railway infrastructure.
Could a commercial operator utilize a particular line exclusively for its own use?
No, it cannot do that. A company could tell us that it wants us to allow them to go on a particular railway line with four trains a day. We are in the same situation as on highway when in order to use it you have to pay a fee. Another example would be that of goods transportation. Until now, there was only one operator to transport goods - "CFR Marfa", which is paying, let us say, 5 Euro/km. Now, imagine that someone else comes, and that law allows it in Romania. If he has locomotives and wagons and is able to get a license as an operator he can also transport goods. We will also be paid about 5 Euro/km, but the new company may perform the operations 20% less expensive than "CFR Marfa", and so there appears competition. So far, CFR Marfa was a monopoly that decided over such processes and whether it wanted to transport the goods or not. The client was the last to be taken into consideration. Now, client comes the first, and if he is not satisfied with "CFR Marfa" he can go to another operator. We are interested to have as many operators as possible and sell them as many paths to reach the network capacity. The same as with airplanes, the more they fly, the more benefits they bring to the air company. It is the same with the railway infrastructure, it is better when used as much as possible.
Do you have any agreement with international companies that are going from one part of Europe to another through Romania?
We have agreements with rail administrations from countries around us that transit through Romania. Generally, the commercial contracts belonged to "CFR Marfa", but we are party to the international organizations under the framework of European regulations. Of course, further to the railway reforms certain administrations from Europe will also be interested to operate in Romania. Basically, we have applied Directive No.91/440 of the European Community. Our country is a candidate to become a member of the European Union, and in this field we have already met most of the conditions. There are a lot of countries - members of the European Union - which do not meet all these conditions - in fact, most of them.
The trend in Western Europe is for high-speed trains (TGV). Do you have such kind of plans for the future?
We have a study for the implementation of the 300 km/h speed on CFR lines. Now we are in the phase of preparing a pre-feasibility study to find out how much it costs and how to justify such investments. I believe that within the next 10 years we will have high-speed networks in Romania, as well, but these investments are under discussion. Of course we would want this and it would be wonderful if we did not have to take into consideration the construction costs.
There are countries in Europe with a very developed economy that cannot afford high-speed networks. Such examples are well-known so I would not specifically refer to them. TGV is a high-speed train that runs with at least 230 km/h. Eurostar is coming with 300 km/h on the French side and from the border it runs at 150 km/h. High-speed projects are, currently, being developed in Spain, Belgium and Holland.
In countries like France or Germany where high-speed
system has been introduced, there is a very powerful
lobby of the railway industry which supports it
at the level of the German or French Parliament
in order to create a very powerful state subsidy
system. Further on, the railway company places orders
to the rail industry for the construction of high-speed
trains and thus, the circle is closed and everybody
is happy. This happens in countries with developed
economies, eager to promote successful stories for
politics, which further on turn to successful business
and the example of TGV in France is a telling proof
of how things go. |
We cannot say the same thing about Romania. We are in a transition period and we have problems to maintain the public services at an acceptable level. We have problems with health and education, so one cannot ask for funding of high-speed systems while there are problems in such other, more urgent, fields. This does not mean that we do not think ahead and that we do not carry out projects. Of course, we will promote them but no matter how hard we try, for the time being, the help from the State is not sufficient. We will try to promote projects, as much as possible, using our own resources. For example, we intend to calculate the costs of a high-speed railway line between Bucharest and Constanta. We know that all the raw materials needed for such a project are already existing in Romania. This project will be presented to the decision-makers for political support. We will tell them that the 230 kilometers of railway line which are currently covered in 2.5 hours could be covered in 1 hour. There are several advantages we have over the roads, we do not mess the roads, we do not pollute, we do not kill people in accidents and we do not occupy the fields. All the money we are going to need, let us say around US$ 1 billion, would be horizontally allocated to orders for Romanian enterprises in order to procure: crushed stones, concrete sleepers, rails, switches and others. Besides, we could pay back these amounts in fifteen years. We need to find international funding sources - and we can find it. The state has only to give us the required guarantee. We will prepare a serious business plan in order to be able to attract our customers which should feel secure while benefiting of high-quality and reliable services at adequate competitive costs.
Is CFR S.A. State owned or is it a private company?
C.F.R. - S.A. is an integrally state owned company. Pursuant to the Romanian Constitution this company cannot be privatized because it manages the country's public infrastructure. Anyway, we will have to adapt ourselves to a market-oriented environment and prepare the commrcialization of various businesses.
But in England there are private companies which do precisely so
There are companies like ours, which manage the infrastructure -Railtrack - and also the commercial operators are private. However, several unpleasant events took place that were caused by an insufficient safety level. With only 100 million £ of the profit reaching 900 million £ in 1998, a sufficient safety level could have been insured. The entity managing the infrastructure considered that the operators had to pay, while the operators considered that Railtrack had to pay, nobody took a decision and the tragic accident at Paddington took place.
Privatization is a solution but a regulatory authority is mandatory to maintain the traffic safety at the required parameters.
Our company has in view some other interesting projects. For example, we are preparing our entrance on the international telecommunication market and we might become a serious competitor to Romtelecom. We have four advantages against the other operators:
no problems with the property
the optic fiber cable will be installed above the electric wires so it will be very well guarded
an already existing network covering almost the whole territory
we can reach regions in the mountains.
Our program provides for the installation of 9,000 km of optic fiber of which we have already installed 3,000 km. Such optic fiber lines are to be found all over the country, covering the whole railway network and we intend to become associated with a partner who will have the capillary system that will go to the clients. We could provide an optimum service based on an adequate capacity and high-standard quality. The Finance Ministry has already asked us for rental of the optic fiber network.
In the year 2000 we will take care of the strategy and partnerships, in 2001 we will be licensed as operators, in 2002 we will enter the GSM market and Internet and for 2007 we envisage a net profit of US$ 55 million.
Another project concerns the development of real estate assets, i.e. restaurants and shops within the railway stations that we are renting. We want to define the railway station as a big shopping area where people come and shop and where by chance there are trains coming and going. In 1998, we obtained US$ 3.6 million from space rental. We have re-invested this money and in 1999 we reached US$ 11,2 million. Half of these amounts was used for railway station cleaning and modernization. A budget of US$ 18,6 million is foreseen for the year 2000. This business grew 6 times from 1998 to 2000. In 2010 our objective is to reach a turnover of US$ 112 million which we are almost sure to attain.
During the last two years I have been in Bucharest I decided the opening of 5 restaurants in "Gara de Nord" Railway Station. Each time a new restaurant was to be opened, I thought the other ones might go bankrupt, but no, all restaurants are full. At two o'clock at night people are coming to the railway station because the restaurants are open.
Our objective is to get as much profit as possible from these auxiliary services in order to be able to ask for a rail transportation fee as small as possible. In 2010, with US$ 110 million per year - meaning US$ 9 million/month - we will insure the wages of our workers and we will be almost independent from the freight and passengers transportation. We will be able to lower tariffs and consequently, to have more clients. Thus, if there will be more clients, especially for the transportation of passengers, they will order more food in the railway stations and we will cash in more money from rents. A new system of collecting money from this activity will be operated from May 1st, 2000 with City Bank, which has created an entire system for tele-banking, and we have on computer all daily incomes.
We also have five hotels that are going very well and they are going to become a network. Beginning with June 1st 2000 we intend to promote railway tourism with nostalgic trains and steam locomotives. We are going to diversify the services even more.
Projects of railway station modernization are well
advanced with different companies from France and
Italy, which are going to participate together with
us for the modernization of these facilities. Our
biggest investment objective at this moment is to
continue the railway electrification in order to
avoid the import of gasoline and replace diesel
traction with electric energy. The first project
we are going to promote is the electrification of
143 km between Cluj and Oradea. We have a proposal
from Eximbank in the USA for US$ 340 million, and
we hope to get the governmental approval to start
works this year. The loan is for 20 years with a
grace period of 10 years, and the investment is
to be paid off in 11 years. |
NATIONAL RAILWAY COMPANY 