CER view on South East Europe: Balanced investment and financial stability Zagreb, 17 June 2005

CER - 2005

The Voice of European Railways

CER view on South East Europe:Balanced investment and financial stability

Zagreb, 17 June 2005

Ad ToetAdvisor Central and Eastern European CountriesCommunity of European Railway and Infrastructure Companies, CER

CER - 2005


The CER brings together 44 railway companies and infrastructure managers from the EU Member States, the EU accession countries Norway, Croatia, Serbia/Montenegro,

Bosnia/Herzegovina and Switzerland

The CER deals with all policy areas of significance to railway transport

The CER offers advice and recommendations to policy makers in Brussels

The CER works in close collaboration with the Paris-based UIC

CER – Community of EuropeanRailway and Infrastructure Companies

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sContent of this presentation

5 Issues for rail in Central and Eastern Europe

South East Europe

(Re-)Balancing investment in EU transport infrastructure

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Unbalanced taxation between transport modes– Taxes vs. environmental damage

0

2

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12

14

UK Netherlands Germany Finland

external costs

taxation

Source: ECMT (2003), CER

(1) Rail is significantly less environmentally damaging(2) Road taxes less than environmental damage;

rail taxes more than environmental damage

Environmental damage in Euros per thousand ton-km

Taxes on operations in Euros per thousand ton-km

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10

20

30

40

50

60

UK Netherlands Germany Finland

external costs

taxation

(rail) (road)

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Unbalanced development Railway Lines and Motorways (in KM) in EU-15 (Index 1970 = 100)

50

100

150

200

250

300

350

1970 1980 1990 2000

Motorway Railway

Highways Rail High Speed Lines

1990 40.000 km 900 km

2000 50.000 km 3.000 km

2010 70.000 km 6.000 km

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The result of unbalanced taxation and development:

Source: European Environmental Agency

Change in EU greenhouse gas emissions by sector (1990-1999)

Transport sector:30 % of total CO2

emissions

Transport sector is only sector with still increasing CO2 emissions (+20%, 90-99)

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Planned infrastructure bottlenecks by 2015(NORMAL SCENARIO)

> 100%

85-100%

70-84%

< 70%

Degree of use

Source: Study on “Infrastructure Capacity Reserves for Combined Transport by 2015”, Combined Transport Group (UIC, GTC), May 2004

The result of unbalanced taxation and development:

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Re-balancing: Future investment in EU-15

Source: PLANCO 2003

Emphasis on rail for investment in TEN’s

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Short reminderEuropean Union rail policy objectives

The central aim of the 2001 White Paper is to rebalance the modes i.e. shift from road to rail

This is to be achieved by

1. Prices reflecting all (internal + external) costs discussion on Eurovignette Directive most important issue on European

transport policy agenda!

2. Rail market opening/liberalisation

3. Modern interoperable international rail corridors improve and extended infrastructure

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European rail infrastructure

Enormous backlog in investment in both rail Infrastructure and Rolling stock

Trans-European NetworksTEN Priority Projects:• 30 projects, 21 rail related, 5 relevant for CEEC• cost 2007-13: 140 bln Euro• EU budget proposal:

20 bln Euro TEN-T +

20 bln Euro Cohesion/ERDF for rail

+6 bln Euro ERTMS

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South East Europe


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Issue 1: Backlog in infrastructure investment

Source: PLANCO 2003

It is vital that national authorities give priority to rail in National Development Plans (NDPs)!

Will mistakes made in EU-15 be repeated?

EU Cohesion and Regional Development Funds

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Almost the entire rolling stock base in the CEECs is virtually life-expired in technical terms

Total CEECsless than 10

years old10 to 20 years

old20 years and

older

locomotives 290 1912 10262

Electric and Diesel Motor units (EMU/DMUs) 233 314 2958

passenger coaches 1219 3829 8253

freight wagons 4442 74664 165401

Euro 10 billion investment in traction and passenger rolling stock is needed before 2012, if

system failure is to be avoided!

Issue 2: Backlog in rolling stock investment

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Joint CER / European Commission conference on Public Service financing, 27 January 2005

Issue 3: Cross-subsidisation still a common practise

Terminating cross subsidisation between freight and passenger operations

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Track access charges and financial stability

Issue 4: Infrastructure access charges

Track access charges for freight train 1400 ton

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€ pe

r tr

ain.

km

High track access charges can undermine competitive position of rail and cause financial instability

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Example: South East Europe Routes

Corridor X• Upgrading of infrastructure stagnant.

• Deterioration of transport systems and extra costs resulting from (additional) border crossings place South-East- Europe region at distance from EU.

Corridor IV• Upgrading of infrastructure progressing.

• Restructuring of rail sector in Romania and Bulgaria based on EU legislation.

South-East-Europe Region • Rail and Road are competing for market share.

• Restructuring of rail sector must place rail sector on financially sustainable basis through improved business performance and appropriate budget support mechanisms.

Issue 5: Traffic between EU and its (new) neighbours – the EU “Wider Europe” initiative

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South East Europe



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• Dramatically changed geo-political conditions since 1991 hinder road and rail transport.

• Freight and passenger flows of equal importance.

• Strong competition between road & rail freight.

• Restructuring of transport sector and investments aimed at EU integration.

• Vast maintenance/investment backlog in both infrastructure and rolling stock.

• Wide variation in track access charges.

South East Europe: Characteristics:

Border procedures and inadequate technical condition of infrastructure and rolling stock erode competitiveness

of rail.

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• Upgrading of TEN corridors must be accompanied with investment in national networks (modernisation and ‘pruning’).

• High level cooperation between States is needed to streamline border crossings.

• Restructuring with policy on track access charges must bring financial stability.

South East Europe: Conclusions CEO meeting, Prague, 24 May 2005

Difference between SE EU and the rest of CEEC:

‘There is already investment backlog, while work on TEN corridors still has to start’.

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At national level: investments and policy measures must take place in parallel !

South East Europe: What next?

Threats:• Investments in upgrading TEN corridors may not

delay investments in national networks and RS.

• Streamlining border crossings is prerequisite for making rail attractive for customers.

• Public obligations on passenger services, track access charges and national network undermine financial stability.

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At supra-national level: extra attention and funding from EC, World Bank, EIB and others

is needed to:

South East Europe: What next?

1. Elaborate investment funding strategy for the WHOLE rail transport sector in SE-EU and negotiate who does what and when.

2. Develop a policy on track access charges and (state) budget support instruments.

3. Develop practical solutions for streamlining border crossings.

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Thank you for your attention.

CER view on South East Europe: Balanced investment and financial stability Zagreb, 17 June 2005

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