While there are currently no new transport projects for the Czech Republic in the World Bank's lending program, following the Government's request the Bank prepared a comprehensive report that analyzes economic development in the Czech Republic since 1997. It focuses on assessing the status of the Czech Republic's economy from the perspective of its pursuit for European Union membership, and suggests possible improvement of the public sector expenditures. The report is based on the findings of several missions that visited the Czech Republic during 1999. An introduction to the transport section of the report follows below.
National Transport Strategy of the Czech Republic Public Expenditure Review in the Transport Sector (introduction) The Czech Republic (CR) has made good progress in privatizing some transport operations, and now needs to concentrate on commercializing activities, identifying which activities, will remain in the public sector, and completing remaining privatization. CR published its transport policy in 1998, which commendably drew together different political views and sought to retain a significant role for the State Transport Policy of the Czech Republic, (Resolution No. 413 of June 17, 1998. However, CR is preparing to join the European Union (EU) where transport is overwhelmingly market oriented. This is going to put pressure on transport organizations, particularly Czech Railways (CD), to compete successfully or become increasingly marginalized. In addition, the public cost of supporting transport activities, more than two percent of GDP in the case of the railways, is becoming increasingly unaffordable. There is a widespread consensus in the EU, other countries and academia that most transport services are best performed by the private sector, with companies performing specific social services compensated by public service obligations (PSOs). The role of the Government in ex-socialist countries is thus reoriented from its former task of directly managing transport enterprises, to assuring that competition among private transport operators is fair, protecting the public interest in safety, the environment and social working conditions.
While the Bank currently does not have a new transport project for the Czech Republic in its lending program, the Bank and the Government continue to have a policy dialogue on the Transport Sector.
Recommendations in this chapter include (a) restructuring the railways, including redrafting currently proposed railway legislation, (b) catching up with the maintenance backlog in roads, railways and public transport because of its high economic justification, (c) phasing railway and motorway corridor investments because of their lower economic justification, (d) reducing road costs by consolidating road maintenance districts and contracting out routine and periodic road maintenance, (e) increasing charges on heavy road vehicles so that they cover their road costs, (f) increasing public transport tariffs for railways, buses and urban transport to reduce uneconomic subsidies and generate funds for asset renewal, (g) expanding the parking program in Prague and considering introducing a system of congestion charges, (h) avoiding Government guarantees because they are scrutinized less carefully than the budget, (i) avoiding Government participation in financing or guaranteeing investments for CSA or at Prague Airport because these operations are profitable, and (j) increasing the use of, and reliance on, objective cost/benefit analysis for all investments, including rehabilitation and equipment renewal, taking into account external costs.
Undertaking the proposed reforms is estimated to reduce Government transport expenditures by roughly CZK12 billion per annum during the first five years. The main savings would come from reductions in railway and motorway corridor investments, reductions in railway operating costs as the restructuring program begins to take effect, and increases in road taxes on heavy vehicles. These would be partly offset by increases in road, railway and urban transport maintenance expenditures as the backlog begins to be addressed. In the second five years, annual savings should increase to the order of CZK33-46 billion per annum (1.9-2.6 percent of 1998 GDP) as the full effects of railway restructuring become evident, with the range determined by the speed with which rail freight and long-distance passenger services can be privatized. There will also be substantial benefits to CR from improving the quality of transport services, facilitating 'just-in-time' manufacturing and promoting the development of the service economy, and decreasing the cost of trade. This is a link to the Transport Section of the Public Expenditure Review: Transport (460kb, MS Word). |
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