Ready for the challenges

Steering the global recession to an upswing assumes new ideas and solutions from all economic sectors, and a well-functioning transportation system is one of the most important success factors in this process – we can accelerate growth of the economy only with efficient logistics.

The UN and IMF both forecast approximately 2.5% of average growth for global economy in 2010. This growth will naturally mean an increase in international carriage of goods, around 1% this year according to IMF estimates, but we have to focus on subsequent years of growth.

The railway system of Estonia has to function properly in both eastern and western directions. The first priority of foreign policy with respect to the Estonian railway, next to safety, is to ensure the regulatory and technical compatibility of railroads of different track widths on the European-Asian axis.

In this respect we have great expectations from the new EU Transport Commissioner Siim Kallas from Estonia, to achieve even closer cooperation on the EU-OTIF-OSJD axis and harmonisation as far as possible of the regulations of the OSJD and CIS member countries and those of OTIF and the EU.

The aim of compatibility with the 1,520mm railway system, however, does not mean turning our back upon the main values of the EU transport policy. It is the mission of the transportation system to provide services to businesses and to our population – goods and services have to reach from point A to point B as efficiently as possible.

There is unfortunately still too much focus upon just one particular country or particular mode of transport. The aim of artificially maintaining one’s market share is understandable, but such an approach will not be effective or sustainable in the long term.

There are many examples of the advantages of open economy in Estonia. Estonia was probably the first EU Member State to open its rail transport market to competition, creating more choices for clients and adding positive price pressure to transport rates. At the same time, the state carried out reforms in its rail authorities and restructured state-owned AS Eesti Raudtee, enabling the railway system to function more transparently and reduce the inhibiting effect of the railway monopoly on the open market. As a result, we are almost the only EU country where the market share of state-owned railway is lower than that of private railway company.

In recent years our understanding of transport systems has changed considerably and for the first time, the state is participating in the financing of railway investments in very large volumes for Estonia. The state, as owner, has not taken and does not intend to take dividends from state-owned AS Eesti Raudtee – the aim is to direct all available funds to railway investments, and Koidula Station, as the most modern railroad border check-point of the region, will soon be completed on the connection with Russia. In the next few years, it will be possible to travel at speeds of 80km/h for freight trains and 120km/h for passenger trains along the length of the Rail Baltica section, and we will ensure connections of the same quality in the direction of both St. Petersburg and Moscow. We intend to finance the development of rail traffic to the extent of approximately 25% of EU funds allocated to the Estonian transport sector directly from the state budget – although the proportion of Estonian road network is approximately 50 times higher than that of railroads!

We have made both our Railways Act and the Methodology for Calculation of User Fees for Railway Infrastructure considerably more entrepreneur-friendly – the process of capacity distribution has become much more flexible and we will avoid raising user fees. This new approach means real business risks to AS Eesti Raudtee for the first time – forcing the company to improve its cost efficiency; but on the other hand it is a positive message for the whole transit sector – the tariff policy effective in Estonia is stable, which in turn means a stable business environment. This has created excellent economic preconditions for signing long-term supply contracts through the Estonian transit network.

We have to note separately that these changes in essence constitute the implementation of the so-to-say social agreement with the transit sector in our legislation.

We will also develop our road network, but we would be blind if we did not make use of the shortcomings in road traffic for the success of the railway business – low capacity of roads and long queues of heavy trucks in border check-points do not help trade with the EU and are a direct obstacle to economic growth in several areas of business. Railway companies have a great opportunity to be much more competitive here.

Both railways and harbours have enough capacity in Estonia; the labour market is flexible and the business environment very favourable. Estonia will soon adopt the Euro, which will add solidity to our monetary system and confidence to investors – the Estonian logistics sector is ready for the challenges that will be brought by new economic growth!