The beginning of the renaissance

Today, Serbian Railways cover the entire railway network in Serbia, and with approximately 22,000 employees and all available capacities, it is the biggest railway enterprise in the Balkans and one of the biggest in this part of Europe.

Serbian Railways possess approximately 12% of the entire state property in the Republic, and we were in first place concerning the value of capital in 2004.

The first railway line in Serbia was built in 1884 between Belgrade and Nis. Today, the Serbian railway network is 3,809km long with 276km of double-track lines. There are 1,247km of electrified tracks, while the main lines are 1,767km long. Currently, 5,536km of railway lines in Serbia are used for the traffic. Serbian Railways possess approximately 300 accurate motive power units, 220 passenger cars and 3,700 freight cars, although, according to the inventory, the number is notably bigger, but with a high per cent of immobilisation.

Serbian Railways maintain business relations with over 2,000 domestic enterprises, and several hundred thousand people depend directly or indirectly on the business and functioning of the railways.

According to the evaluation of republic statesmen and international consulting companies, compared to other domestic public enterprises, Serbian railways were the most active during the restructuring process. In accordance with the decision of the Republic Assembly, Public Enterprise ‘Serbian Railways’ officially started working on 17 May 2005. During the process of restructuring, the former Public Railway Transport Enterprise ‘Belgrade’ has been reorganised into one efficient, market oriented traffic system in accordance with European standards, with full support of the international consulting firm, Booz Allen Hamilton.According to this new organisation, Serbian Railways are divided into two organisation entireties:

• Direction for Infrastructure (managing public railway infrastructure)
• Direction for Transport

While the transport part of the enterprise is oriented towards market and profitability, the infrastructure mostly remains under the authority of the state. This new organisation and elimination of monopoly on Serbian Railways created the atmosphere in line with European standards and international legislation in this field, with the final aim to organize the Railways in Serbia as a holding company by the year 2007.

Considering all measures and solutions undertaken so far within the restructuring process, along with the contracts signed with European financial institutions and with the realisation of ambitious plans for infrastructure and rolling stock, in conjunction with full support from the Ministry of Capital Investment and Ministry of Finance (as well as the Republic Government), it is obvious that the restructuring process could be completed, as planned, by the beginning of 2007, and that better days are ahead for Serbian Railways.

In the past two years, since I have become the manager of Serbian Railways, we have confronted numerous inherited problems and difficulties, obliged to make great efforts to move everything from the ‘dead point’. For the past few decades, the railway system in Serbia has been severely damaged. There was no investment for the railways, and the tough period began at the end of the 70s, culminating in 15 years of sanctions, war and bombing, which disabled the progress and development. The Serbian Railways entered the restructuring process:

• With a rolling stock average age of over 25 years
• With a high per cent of immobilisation
• With a lack of locomotives and wagons
• With old infrastructure
• With the number of employees much higher than needed and economically justified

The average age of our tracks is approximately 40 years, with some sections over 100 years old. On half of the lines there is a maximum speed of 60km per hour, while only 3% of the track allows a speed of over 100km per hour. For the past 30 years, only 770km of the track have been repaired, but the actual annual needs were 150km. Many of our vehicles are over 20 years old, with a high per cent of immobilisation. These figures do not match our needs. However, this is the reality and the result of an inadequate position for many decades which we cannot change over night, since that would require great resources. Last year, we had an average daily lack of 160 freight cars to satisfy the necessities of economy – at times we needed 700 cars.

In our situation we have chosen new, great, strategic plans which should speed our recovery and bring high quality development, guided by the fact that modernisation of the railways should encourage economic development in Serbia and contribute to the business revival of several thousand domestic enterprises that co-operate with us, which will also improve the standard of railway workers. It is very important that the unions, with which we have very good co-operation and all the employees accepted this business concept, were aware that this is the only way for the railways to overcome this crisis. Serbian Railways are equally entering the developed network of European communication tracks.

Carrying out these reforms on the railways with a more efficient work organisation and a much better business management, in spite of lower state subsidies, we managed to decrease some huge debts of the enterprise by raising the level of liquidity, fulfillment of the obligations towards suppliers and creditors and obtaining great savings in the business process. During 2005, for the first time in the last decade and a half we achieved better results than expected. Serbian Railways reached some significant business successes and results, above all those regarding the volume of work, restructuring of the enterprise, increasing of incomes, financial discipline and rationalisation of expenses, as well as the modernisation of equipment and infrastructure capacities, with the final aim of gaining a more favorable transport position on the market.

In the next few months, we expect to sign a contract with the European Investment Bank for €80 million for the modernisation of railway infrastructure, primarily on Corridor 10. The project ‘Renewal of Serbian Railways 2’ includes the capital repair of certain sections on Corridor 10: Batajnica- Stara Pazova-Golubinci, Jovac-Gilje and Cele Kula-Stanicvenje.

We are also closing negotiations with the European Bank for Reconstruction and Development (EBRD) worth in the region of €60 million for the procurement of approximately 1,700 new freight cars and one underfloor lathe. Beside that, negotiations on the Spanish state credit are nearing its final phase, and from the total sum of €45 million, €32.5 million will be intended for the railways, precisely for the improvement and modernisation of passenger traffic. The government of the Republic of Serbia gives the warrants for all these credits, and the best confirmation of the accuracy of business decisions made by Serbian Railways is the support of international financial institutions. Great interest has been shown in investing in the railways of Serbia by Japanese, American and numerous European investors.

After eight and a half months of tender procedure we have chosen the company Trigranit Holding from Cyprus for the construction project of the railway-business centre at Prokop. The entire project is estimated to be worth €200 million and should be finished in three years – which implies that, in three years, Belgrade will get the most advanced railway centre in this part of Europe.

As predefined by the tender, phase one of this project includes the construction of 128,000 square metres of business-residential area, placed on a reinforced concrete plate located on level 105. There is also 10,000 square metres of commercial area below the plate on level 105, as well as the construction of infrastructure connecting the station with nearby communication tracks. The second phase consists of the construction of another 150 to 170 thousand square metres of business area. The value of the entire job is several billon Dollars.

With the construction of Prokop and moving the Central Belgrade Railway Station to this location, our capital city would get one modern railway station with a large commercial-business complex.

At the same time, in the centre of Belgrade we aim to free approximately 80 hectares of the most exclusive area at Sava Amphitheatre, which would be offered to investors under market conditions. Sava Amphitheatre would then become the most important business, commercial, tourism and cultural centre in this part of Europe, and one significant source of income for Serbia.

Regarding the traffic, this would eliminate the bottleneck of railway transport in the capital city, and hazardous goods would no longer be transported through the centre.

Last year we invested almost two billion Dinars in infrastructure, while the European Investment Bank set aside €70 million for the renewal project of Serbian Railways. We repaired 15km of the line Cvortanovci-Petovaradin, 140km between Pancvevo, Orlovat and Novi Sad, 6km of railway line between Resnik and Valjevo; currently we are modernising and electrifying the railway lines Nisv-Dimitrovgrad and Cvacvak- Kraljevo, and are finishing the reconstruction of numerous station buildings all over Serbia.We have also started the repair of railway bridges near Ostruzvnica and Bogojevo, damaged during the 1999 bombing, which will be finished this year with support from the Government of Republic of Serbia. Other plans include investing approximately €45 million in electrification of the line Pancvevo-Vrsvac in co-operation with Alcatel, construction of the railway line Valjevo-Loznica, and with one of the biggest world systems ‘General Electric’ and ‘Telekom’ we are planning the implementation of fiber optic cables along all railway tracks in Serbia.

Serbian Railways have undertaken a number of activities in order to improve the condition of rolling stock and create circumstances for more quality and higher traffic volume, passenger and freight. Only in the last year and a half Serbian Railways provided ten new shunting locomotives from Czech Republic and six used diesel locomotives from Slovenia. We will soon introduce to the traffic ten used, but modernized, Swedish diesel trains while we plan to procure another ten trains of this type.

Currently we are performing the modernisation of 38 electro-locomotives in Koncvar from Zagreb and MIN-Nisv , as well as the repair of another ten in Romania. Today we have 80 electro-locomotives running the railways, which is 30% higher than two years ago. Soon we will complete the tender for another ten, meaning that by the end of this year we will have 100 electro-locomotives on our lines, which will provide us with significantly higher transport volume and income. In co-operation with all domestic enterprises, we have reconstructed and modernised 369 of 500 freight wagons – of course in accordance with our financial capacities.As a result of that, and according to the business policy of the enterprise, we ceased the lease of rolling stock from abroad, which used to take us great financial resources.

Thanks to these activities, in the first quarter of this year, Serbian Railways achieved, in the freight traffic section, results showing that we have reason to be satisfied and optimistic. In the first three months we transported 2.9 million tonnes of freight, which is 20.6% higher than the same period last year, and 16.4% more than planned.With 812 million net tonnekilometres we surpassed last year’s volume of work by 24.4% which is 17.5% more than planned for the first quarter of 2006. The income of 2.12 billion Dinars in freight traffic is 37.7% higher than last year’s and 29.3% bigger than planned for the first quarter of 2006. Regarding domestic freight traffic, Serbian Railways have increased the loading for 8.4% and unloading for 3.7%.

This shows that we have continued a positive trend in freight traffic, which began in 2005. Last year, Serbian Railways transported approximately 13 million tonnes of freight, 4% more than planned.We achieved 3.6 billion net tonne-kilometers in 2005, 8% above the plan – mostly as a result of the increasing long distance and transit freight transport. In the freight transport section, we achieved an income 25% higher than in 2004 and 11% above the plan. With total transport income, Serbian Railways surpassed the plans by approximately 7%, and for the first time earned the amount higher than state subsidies. It is important to mention that 80% of the total net tonne-kilometres are obtained within international traffic, with 63% in transit. Concerning the total number of passengers transported in Serbia, the railways get 8% compared to 62% in freight transport.

Participation of freight traffic in the total transport income of the railways has increased from last year’s 80 to 87% in the first quarter of this year.

Service quality provided forwarding agents in 2005 which enabled us to redirect important freight flows from Corridor IV to Corridor X. Tank container trains, passing through Romania, have now begun running across the Serbian rail network. This should contribute to the Serbian Railways an income of €3 million, and from 15 May, the Marshalling yard in Makisv will take over all the works that have been done so far in the Hungarian town of Sopran and Zalog in Slovakia.

Although the results in passenger transport were lower than planned, we are gradually improving the quality, primarily within international traffic.We maintained all direct railway connections to European cities, introduced the system for electronic issuing of international train tickets, begun the application of the Charter on the quality of the international passenger traffic as one of 24 railway companies on the continent, and, thanks to numerous commercial concessions, we kept the competitiveness and became closer to the passengers.

In 2006 we had the best indicators of traffic safety for the past decade and a half.

What contributes very much to these indicators is certainly the geographical position of Serbia. There is a Pan European railway-road Corridor 10 passing through our country, being at the same time the shortest connection between West and far South of European continent. It is defined and assigned to the network of European corridors back in 1997 and represents one of the main directions of passengers and freight flow in the next period of time.

Corridor 10 directly connects eight European countries (Austria, Slovenia, Croatia, Hungary, Serbia and Montenegro, Bulgaria, Macedonia and Greece), and indirectly another six countries (Germany, Italy, Bosnia and Herzegovina, Romania, Turkey and Albania). The corridor is 2,360km long and goes from Salzburg, via Ljubljana, Zagreb, Belgrade, Nis and Skoplje to Thessalonica, with branches Nis-Sofia and Belgrade-Budapest. Of the total length of the corridor, 767km pass through Serbia. By modernising and developing the part of Corridor 10 which passes through our country and by achieving European traffic standards, we will significantly bring Serbia closer to Europe, and the problem of Balkan traffic bottleneck will be solved enabling faster and cheaper transport from Western Europe to Greece and further towards the south. That is why the modernisation of this traffic route is a great chance for economic and common development of the country, where the railways have already greatly contributed.

Working as professionals, frequently in very tough conditions, railway workers have certainly given the biggest contribution, and thanks to that, last year Serbian Railways could praise with achieved results in front of the public. For the past five years, the number of employees decreased to almost 10,500, but today we have 22,250 employees. After the present round of dismissal wages in Serbian Railways, at the end of 2006 there will be approximately 19,000 employees working at the enterprise, which is an optimal number. The number of employees at Serbian Railways has been decreased on a voluntary basis, with stimulating dismissal wages and with no social ‘shocks’, and full support from the unions in the enterprise.

Within the restructuring process of ‘Serbian Railways’ which is in line with European standards, this year decisions have already been made about the beginning of privatisation of ten railway ‘dependent’ enterprises. So far Serbian Railways had 16 ‘dependent enterprises’.

In 2005, Serbian Railways started the fulfillment of the project ‘Thousand apartments for railway workers’, which will be realised by exchanging the railway properties for apartments. This project has been fully approved by the employees and got full support from the Ministry of Capital Investment. It is based on more intensive commercialisation of approximately 15,000 hectares of unused railway properties. In 2006, Serbian Railways should provide several hundred apartments for railway workers and continue with the action during the year. The action will begin in Belgrade, Nis, Novi Sad, Kraljevo and Cacak, and then be realised in 36 towns all over Serbia.

Serbian railways strive to become a modern, efficient, market oriented transport system, as a part of the developed European transport network. Our common goals include:

• Creation of an efficient transport and business system
• Achieving financial consolidation and the decrease of budget subsidies
• Increase the volume of traffic and the quality of transport service
• Improvement of technology and work efficiency in all segments
• Revitalisation of the infrastructure primarily on Corridor 10
• Refurbishment of the equipment
• Continuation of the restructuring process
• Further rationalisation of the number of employees and utilisation of personnel potentials
• Coordination of regulations with European standards
• Increase of profitability
• Decrease of business expenses.

It depends on ourselves how quickly and what level of quality we will integrate into the developed European traffic system. The European Union is certainly wiling to make the railways in this part of Europe modern and developed, and for the entire system to be irreproachable and efficient. Of course, for the modernisation of Balkan railways, which are mostly all in extremely bad conditions, and their coordination with the requests of the European market, we will need great financial resources. But, our previous experience tells us that we have common interests with Europe, that international institutions offer full support for the realisation of mutual plans and that Balkan railways, parallel with European integrations, have a historical chance to develop and improve their railway network.

We should also keep in mind that the railways, as the cheapest, safest and environmentally friendliest traffic system, enjoy great support on the old continent, including finances and transport organisation. In this instance, our activities have to be gathered towards one single aim – for an advanced and modern railway network in Serbia which will provide us with the high quality services, the most efficient and fast transport, whilst gaining new passengers and goods on the transport market.

Once completely developed, the railway network will also bring us developed and modernised integral transport, as a traffic system of the future. I repeat, this is not only the interest of ‘Serbian Railways’, but that of the entire European Union, which is at the same time the best guarantee that our plans will be successfully and efficiently realised.