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Baltic Express: Europe has already invented the bicycle; we just have to adopt it

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU13 March marked a historic event for Ventspils railway hub – for the first time in the history of Latvia’s railway a private cargo carrier – Baltic Express – delivered wagons to Ventspils 1st station and private infrastructure’s railway terminal. Why is this event so important and what is the future for Latvia’s cargo railway system? – Baltic Express chairman Māris Bremze told ventspilnieks.lv.

Baltic Express has been delivering locomotive trains to and from the terminal for 20 years. What has changed?

The existing business model was formed with the thought in mind that Baltic Express would do its business under LDz flag. We would simply provide locomotive services to LDz and LDz Cargo after the 2007 reorganization. However, the laws that govern the railway market have changed over the course of many years. The European Union opened its market for free competition in 2007. This means Latvia, as an EU member state, should have opened up its railway market to free competition a decade ago. Directive 2012/34/EU should be used to enhance free access and free competition principles in railway transports. This includes application of its principles with EU borders.

You mentioned free competition and free access opportunities are already secured by EU railway transport policy and laws.

In reality, EU railway-governing changes started much earlier than that – at the end of 80’s of the 20th century. Similar to our railway system inherited from the Soviet Union, Western European countries were ruled by a railway monopolist. All rails, traffic lights, wagons and employees were in the same hands, concentrated in enormous state-owned companies. As market relations continued developing, transport services started rapidly developing. Dinosaurs left from the old age could no longer offer clients competitive services. Railway maintenance costs increased and transport volumes decreased.

This was one of the main reasons for the railway reform. Basically EU railways could no longer sustain competitive services and offer creative solutions. Car transport, aviation, river transport companies became more capable of offering quality services, satisfy market demand. This allowed them to outplay the market’s monopolists. This created enormous ecological problems and external costs, as well as increased road congestion. The railway system remained unused in the meantime.

All these enormous, ineffective infrastructure costs were put on the shoulders of taxpayers. It was clear that this situation cannot continue. It was necessary to start using the railway network in addition to the road transport network. This is why EU member states had made the decision to separate railway infrastructure from commercial activities back in the 80s. Respectively, infrastructure remained in the hands of the state. Commercial activities, on the other hand, were liberalized and opened for competition.

Railway transport market was opened for any player with ambition and qualification to offer services on the market. Two birds were killed with one stone from a political viewpoint – on the one hand the state managed to secure bigger load for railway infrastructure and on the other hand the state successfully reduced maintenance costs.

This topic was not particularly important in Latvia at the time. It was clear, however, that after joining the gentlemen’s club in the EU new game rules appeared. Latvia then had to change railway-associated legislation to include EU directives and regulations. Unfortunately, Latvia’s railway business model did not change. Instead it remained dependent on attraction of cargoes from former Soviet territories for Latvia’s ports. This situation was being used for years, and no new solutions were being offered. As a result, the established business model no longer works – cargo volumes continue to decline. We have ended up in the same situation many EU countries were at the end of the 80s.

From this we can conclude Latvia has been pushed back 30 years in railway industry.

Exactly – we have to find a way to change this situation. We have an expensive railway infrastructure network. A lot of people work in the industry. Latvia has to resolve the same problem Europe had experienced 30 years ago. The situation in Latvia is similar – no transports, sufficient infrastructure and many people employed in the industry. It is necessary to think of ways to balance everything. Europe’s chosen solution was competition, free market, free access to infrastructure and equal game rules for everyone.

In 2007, Latvia performed reorganization in LDz. The goal of this reorganization was adapting the country’s railway system to the new labour market’s conditions. LDz, as the manager of infrastructure, has been separated from the network and all carriers have been provided with equal access opportunities and game rules.

Sounds good, and yet information reported in the public space makes it look like the system does not work. Why is that?

I think the main reason is the excessive reaction environment in the railway transport network. Unfortunately, there is an impression that the controls are in the hands of people who would rather go back to the way things were in the past – ‘one railway, one port, one bank’. This means no competition, and only LDz together with LDz Cargo are allowed to provide services in the railway industry…

This is not how things should be! This system will not work if there are no future perspectives. We have to reassess the result of the reorganization process that took place ten years ago: did the reformation of LDz into a concern with many subsidiaries help achieve planned results or were increased administrative costs the only result. We have to start making serious steps forward. It is necessary to separate from LDz Concern state-owned carrier, ensure equal game rules to all market participants and prevent discrimination of private carriers for cross-border traffic or the freedom to deliver cargoes from railway stations to terminals.

There is no need to re-invent the bicycle. We just have to use the recipe that was previously used by European member states. This is the only way to save the industry. Otherwise there is no reason to be optimistic – the industry will have to spend considerable amounts of taxpayer money to resolve problems.

Does this mean cargoes from Russia will be crossed out?

There has to be some sort of alternative. If there is railway infrastructure, there is potential for cargo transports in north and south directions, domestic transports, and less cargoes from the east. We need normal and comprehensive game rules and more cost-efficient railway infrastructure. We don’t need useless investment exaggerations, such as the railway electrification project. We cannot ask 11 euros per 1 km of road. A more reasonable price would be 5-6 euros!

It’s all in our hands. As I’ve said before – there is no need to re-invent the bicycle. This experience is already included in our legislation. We just need to ensure everything is complied with.


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