The Government Needs to Ensure Value for Money Given to HŽ

The Croatian railway sector has made progress in reforms, but these may not be sufficient for the sector to be competitive and sustainable, and measures are necessary to achieve the sustainability and adaptability of the railway, according to the World Bank study presented today, ‘Croatia: Railway Sector Policy Report’.

Croatia has made the most progress in the legal regulation of the railway, but now it needs to work on its sustainability and adaptability to the challenges of an open market, said Jean-Francois Marteau, a transport expert from the World Bank, during the presentation. He stated that despite the level of state subsidies to the railway reaching up to 0.7 percent of Croatia’s GDP, they were only sufficient to ensure the basic operability of the system.

– Despite high subsidies, traffic intensity has remained low, and the Croatian railway sector lags behind foreign counterparts in performance indicators – said Marteau. Therefore, he considers it necessary for the Government to devise a longer-term vision and ensure the financial independence of the sector. The Croatian railway sector faces three key challenges, according to the World Bank. First, the Government needs to ensure that it gets value for the money it gives to HŽ and to direct more of it towards investments, and less towards covering operating costs.

Second, the Government must ensure the sustainability of the railway to reduce its dependence on state funds, and third, according to the World Bank study, the Government will need to work on utilizing funds from EU structural funds for the necessary modernization of the railway network and achieving better business results. Additionally, the World Bank recommends the use of incentives allowed by EU regulations.

The Minister of the Sea, Transport and Infrastructure, Siniša Hajdaš Dončić, stated that the Government plans to privatize HŽ Cargo, with a sales contract potentially being signed at the end of August or the beginning of September, while HŽ Infrastruktura and HŽ Putnički prijevoz will remain in state ownership.

In the next few years, according to him, the number of employees in the railway sector will be reduced from the current 13,000 to 10,000. Most of the workers leaving HŽ will go to companies outside the core railway business, which will be privatized and separated from the HŽ system, the minister said.

He expects that most investments in the period up to 2020 will be in the Rijeka transport corridor and the tenth corridor. Regarding Passenger Transport, he announces the signing of ten-year transport contracts with the state and local government units and the optimization of lines. He states that on unprofitable lines, instead of trains, buses owned by HŽ Putnički prijevoz will operate, meaning that Passenger Transport will no longer hire private bus operators.

Croatia is offered a unique opportunity to leverage its accession to the European Union and strengthen its role as a gateway to Central and Southern Europe through the development of a transport-logistics system that would connect ports, railways, and other transport infrastructure, believes Hongjoo Hahm, head of the World Bank Office for Croatia. In this context, the railways in Croatia must adapt to contribute to economic growth, Hahm believes.