Achieving the goal of positive business activity

The year 2007 for Croatian Railways has been marked by intense action in two basic areas. In one of the areas, the aim was to carry out the restructuring process which entered its key phase during the year. Pursuant to the Railways Law and the Act on the Division of Croatian Railways, a holding company was created, comprising five companies: HZ Passenger Transport, HZ Cargo, HZ Train Traction, HZ Infrastructure and HZ Holding.

Within the scope of mentioned activities, intense efforts were resumed with the purpose of increasing passenger and freight traffic volumes, rationalising business activities, boosting productivity and improving work ratio. This approach proved a success because the trend of the previous period also continued in 2007. Transport performance expressed in net tonne kilometres is up by 15%, and the number of passengers and passenger kilometres has also increased.

Restructuring process

At the beginning of the year, the new organisation of Croatian Railways came into force, consisting of five companies within HZ Holding. This new organisation resulted from prior intense efforts which entailed starting a restructuring team, analysing experiences of railways which have undergone such processes and also consulting social partners, that is, unions which operate within Croatian Railways. We opted for the creation of a strong holding company within which its companies can remodel their business activities in order to harmonise costs and gains for the achievement of the final goal – positive business activity. This new organisational structure has also been harmonised with European Union developments; therefore, after Croatia’s EU accession, there should be no major difficulties for Croatian Railways in the process of joining the competitive market of the liberalised European railway network.

Within the restructuring process, a privatisation of dependent companies owned by Croatian Railways is being carried out. These companies employ one third of system’s employees. Their business activities under the protection of the system have frequently failed to be efficient and their capacities exceed the needs of Croatian Railways. The purpose of privatisation is to achieve greater business efficiency and increase the level of orientation towards contractors outside Croatian Railways.

Transportation

In view of the fact that – despite all previously deployed measures – the productivity of Croatian Railways is still visibly lagging behind the productivity of developed railway authorities, one of the most important tasks still remains to increase transported passenger and freight volumes, rationalise employees and reduce other costs. Owing to intense marketing and other actions, in the period from January to August, transport volumes in reduced tonne kilometres have increased by 16.2% and natural productivity, measured in reduced tonne kilometres, by 20.5%. According to estimates for 2007, approximately 61 million passengers have been transported, which is 32% more than in 2006 (42 million passengers in Zagreb urban-suburban transport alone – a 48% increase) and approximately 17.8 million tonnes of goods, 5% more than in 2006.

Freight transport is on the increase, especially on Croatian Railways’ corridor directions, that is, on railway lines connecting Central Europe with Adriatic ports and Central and Eastern Europe with the southeast. In passenger transport a great increase is recorded in the development of urban and suburban transport, and there are also good results in traffic between major Croatian cities. International traffic is expected to rise after the acquisition of 24 new high quality wagons, which can develop speeds even faster than 200km/h.

What is needed to enable Croatian Railways’ entry into market competition on a liberalised railway network is an investment into rolling stock, permanent way and buildings. One major investment is the acquisition of 15 multi-system locomotives. Electric and diesel-powered trains will be acquired for the needs of urban and suburban regional traffic, as well as new freight and passenger cars. A considerable number of cars are also to be modernised.

With regard to infrastructure, the National Railway Infrastructure Programme is to be passed, enabling over the next five years the investment of major funds into the development of permanent way and buildings.

If all previous results are considered, I expect Croatian Railways to be ready when Croatia accedes to the EU, that is, to be successful in finding its way in a market competition on a liberalised railway network.

Forecasts for the year 2008

The process of restructuring will continue in 2008. This means that there are a further three objectives:

To adjust business activities to EU directives

This includes the adjustment of the organisation, courses for employees dealing with new technologies, creation of new services and everything else within the array of requirements which are aimed at enabling Croatian Railways to give prompt answers to market’s demands, acting as an efficient company. This also includes a plan of business activities with reduced costs, an increase in realised investments and reduced staff numbers.

To continue several years’ upward trend in passenger and goods transport

This involves connection with transported passengers and tonnes, as well as with regard to financial results. This year’s liberalisation of the freight transport market in EU member countries made it a necessity for us to prepare for these circumstances before EU accession. The division into separate societies is aimed at increasing the effectiveness of railways and will make us behave more rationally. The liberalisation would be a good opportunity for the railways if their transformation is achieved in due time. A timely adjustment to the changes is very important, because a cheaper and more effective railway system is in everyone’s interest, and it is only in this way that the upward trend in business activities can be maintained.

To adopt the National Railway Infrastructure Programme

This will be put forward before the Parliament by the Croatian Government. According to this Programme, over the next five years, 12.6 billion kuna would be assigned to Croatian Railways for projects, the realisation of which could contribute to competitiveness on the transport market. 7.7 billion kuna out of this amount are to be invested into upgrading new railway lines and tracks, with 4.9 billion kuna to go into building of new railways. Out of major investments, we would like to single out the following:

• Building of the second track of the Dugo Selo – Botovo railway line section (76,3km) and Hrvatski Leskovac – Karlovac (41,8km) as well as building of a new Karlovac – Josipdol – Rijeka railway line (112,1km)
• Building of new railway lines (Sveti Ivan Zabno – Gradec, Podsused – Samobor – Bregana and Bibinje detour)
• Renovation and modernisation of railway lines and stations (Sunja – Novska, Vinkovci – Osijek, Zapresic – Zabok, railway stations Rijeka, Sisak, Zagreb Glavni, Zagreb Zapadni, Sesvete and Dugo Selo)
• Rehabilitation and reconstruction of railway lines and stations on the sections of the Pan-European transport corridors
• Replacement of electric traction system Moravice – Rijeka – S˘apajane and Skrljevo – Bakar
• Completion of upgrade for the Josipdol – Gracac – Knin railway line and adjustment and installation of safety signalling devices on the Ostarije – Knin – Split section
• Higher safety levels on road railway level crossings
• Renovation of Vinkovci – Tovarnik and Okuãani – Novska railway line

Considering the fact that 70% of freight is being transported by Croatian Railways in transit, it would be very significant for us to additionally strengthen regional economic co-operation as well as political stability in the wider region, which would enable us to further increase transport and potentially reach new major clients. In this context, we expect to make even tighter bonds between major market entities in the region and the ports of Ploãe and Rijeka; railways’ orientation on the Adriatic, as proclaimed by this Management Board at the beginning of its term, has proved an excellent choice. Croatian Railways cannot be seen as an isolated segment, but are rather mutually connected and dependent. The focus on the Adriatic means the use of river and sea port capacities, where a great increase has been recorded so far. An even greater increase of demand for intermodal transport of goods is to be expected, in which case the synergy of all modes of railway transport is prominent. Croatian Railways endeavour to meet these expectations through their business plan, which for next year envisages the delivery of new freight cars and modernised locomotives, based upon contracts concluded this year, with subsequent contracts to follow in the upcoming year. The increase in industry production is also to be expected in the near future, which will have a positive effect on railway transport volumes.

About the author

Davorin Kobak

Mr. Davorin Kobak graduated from the Interfaculty Traffic and Transportation Study in Zagreb, Croatia and then joined the railways in 1975. He had a very rich career in railways and was appointed to a number of high-level positions such as: Director of Transport Zagreb, Member of the Management Board of Zeljeznicki prijevoz Zagreb, Director of Croatia-express Zagreb freight agency, Director of AGIT d.o.o. and Executive Director of HZ-Cargo.

In September 2005, Mr. Kobak was appointed President of the HZ Management Board. When the new reorganisation of the company took effect on 1 January 2007, Mr. Kobak became the President of the HZ Holding Management Board.