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Reforming the Rails in FYR Macedonia

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Reforming the Rails in FYR Macedonia
Reforming the Rails in FYR Macedonia

Milan Jankulovski, Head of the Macedonian Railway's electro-installation department, has seen the Macedonian Railways company go through difficult times over the years. At its lowest point in 2004, the company was €143 million in debt and unable to pay staff salaries. The future was bleak: operating losses were predicted to increase by another €100 million over a decade if the railway did not radically reform its institutional and operational practices, going far beyond what was required to align with the European Union directives.

"Times were difficult, and the stakes were high. Macedonia is strategically located on one of the most important European international routes—Corridor 10—which links Europe with Greece, Turkey, and Central Asia," said Jankulovski. "Efficient and effective operation of the roads and railways which link FYR Macedonia to the rest of the region are extremely important to realizing the country's growth potential."

It was clear that a complete organizational makeover of the Macedonian Railways was in order. Against this background the government decided to partner with the World Bank to reform its railway system.

Jankulovski was part of the team that negotiated and signed the Railways Reform Project with the World Bank in 2005 which aimed to improve the financial viability, productivity, and effectiveness of railway operations. The project balanced investment in track machinery and rolling stock with institutional and organizational reforms. The urgency of the reforms required all this to be done in a short time, and multiple changes had to be tackled simultaneously. The government, too, needed to overhaul policies and institutions to better support the railway.

Milan Jankulovski, Head of Electro-installation Department, Macedonian Railways Infrastructure
Milan Jankulovski, Head of Electro-installation Department, Macedonian Railways Infrastructure

As Jankulovski puts it, "It was a time of tough decisions. We knew we had to reform in order to survive, and we knew it was not going to be easy. We had to be part of the complex reform process, changing both the legal and institutional framework in order to create a sustainable railway system that is in line with the EU requirements."

These efforts are paying off. Through the project, the railways have procured four shunting, two mainline locomotives, track maintenance machines and rail sleepers, and introduced centralized track control systems. These have all contributed to improving their operational capacity and increased safety. Speed restrictions on Corridor 10 were reduced from 30 percent to 13 percent. Completion of the delivery of 36 new flatbed wagons and installation of a railway infrastructure management system will further increase the contribution of the railways to Macedonia's economic development.

On the institutional side, the formerly monolithic Macedonian Railways has been transformed into two new market-oriented companies— Rail Infrastructure Company (MR-I) and a Rail Transport Joint Stock Company (MR-T) and the Rail Transport Joint Stock Company (MR-T). A system of track access charges for all users of the railway tracks have been introduced. These steps have opened the door for more operators to use the rails, allowing healthy competition.

On the legislative front, a number of new laws have been adopted, bringing the railways in conformity with the European Union requirements (Railway Law, Transport Safety, Contracts for Carriage by Rail, Transport of Dangerous Goods, and Railway Agency).

In order to establish the regulatory framework for a market with more than one operator, Jankulovski’s infrastructure company published a network statement describing the transport services available, the characteristics of the railway network, the level of track access charge, and conditions for contracting transport services.

In essence, the joint effort of the two Macedonian Railways companies, the Ministry of Transport and Communications, and the World Bank team, has turned the previously inefficient, closed, and non-profitable state-owned enterprise into companies that are now more accountable and transparent. And they are increasingly adopting a commercial approach to operations as they implement newly developed business plans.

The challenge now facing the government and the railway companies is to safeguard and deepen the reform process. This will require full implementation of the legislative and regulatory framework, and rehabilitation of critical sections of Corridor 10. Remaining steps are to increase safety and operating speeds, and for the government to fully compensate rail operators for passenger services they request. These steps are necessary for a financially viable railway system which is an essential element of the Former Yugoslav Republic of Macedonia's economic and social development as a member of the European Union.

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