Bulgarian State Railways from Planned to Market Economy Vladimir Inkov and Stefan Pauntchev

Feature Transition to Market Economy

Bulgarian Geography and currency reserves to cover all lev in The Railway Network People circulation as well as commercial bank reserves in the central bank. By restricting Bulgaria covers 110,100 km2 extending new borrowing, the International Monetary The Bulgarian State Railways (BDZ) from the west shore of the Black Sea to Fund (IMF) believes that the government network was constructed over a 70-year Serbia, Montenegro and Macedonia in the can make timely payments on its US$9.5 period beginning in 1860. It consists of west. The Danube forms the greater part million international debt. Inflation approximately 4300 route-km (including of Bulgaria’s common northern boundary dropped from 484.2% in the first half of 245 km of narrow-gauge track), 960 km with Romania. Greece is to the south. 1997 to 3.7% in July 1997. Ironically, (22%) of which is double tracked. Electrified The country consists of three parallel high inflation helped to greatly reduce sections (25 kV/50 Hz) account for east–west zones: the Danubian tableland the BGL-denominated domestic debt of 2640␣ km (61%) of the total route-km. The in the north, the Balkan Mountains in the businesses and the government. The network is classified into two categories: centre, and the Thracian Plain and number of bankruptcies has been low, trunk lines, and branch lines. Trunk lines Phodope and Pirin Mountains in the south but weak players have been eliminated. form 2718 km (67%), and the remaining and southwest. About 75% is lowlands and In July, the European Bank for 1313 km are branch lines (Fig. 1). the remaining area is hills and mountains. Reconstruction and Development (EBRD) The track consists mainly of 49-kg/m rails Nearly 30% of the area is forests. and Oppenheimer participated in on concrete sleepers but there are some The climate is moderate continental with Bulgaria’s first privatization of a major exceptions at crossings, switches, and on dry, hot summers and cold, wet winters. state bank. Five other such banks are to curves, where timber sleepers are used. be privatized in the next 12 to 18 months. About 13.4% of the track-km have welded Government and Political The new government has accelerated the joints; just 9 km has 60-kg/m rails. Environment pace of privatization in order to attract For safety, most BDZ passenger trains foreign investment, halted the slide in operate at maximum speeds of 80 to 100 In the Soviet Era, Bulgaria was a member production, and focused efforts on km/h. One 93-km section from Zvanichevo of COMECON, but since the collapse of increasing exports to generate revenue. to Pazardjik allows maximum speeds of communism in 1991, it has followed the The government is concentrating on 120 km/h. road towards a market economy. In April privatizing some 1500 companies valued 1997, the reform-minded United Demo- at $943 million. Forty-three percent of cratic Forces (UtdDF) coalition won a the state ownership of these companies Investment Priorities majority in parliament. With a new has been exchanged at three auctions for government and a currency board stocks held by citizens or turned over to The European Commission has announced inaugurated in July 1997, the UtdDF investment funds, following the Czech an action plan aimed at establishing a embarked on an ambitious agenda of model. A Bulgarian stock market opened Pan-European railway network covering legislative reform, including new laws in the fall of 1998 and is expected to play Western Europe, Central and Eastern and amendments on banking, insurance, a vital role in capitalizing newly privatized Europe (CEE), and the countries of the and concessions. The new government enterprises. former USSR. also launched a campaign against crime and Bulgaria’s strategic location between Bulgaria has demonstrated its interest in corruption. In the fall of 1997, further Europe and Asia is a primary asset. The establishing a transport corridor between market-oriented changes were promul- South Balkan Development Initiative, Europe via the Caucasus to Central Asia, gated in laws on foreign investment, which stresses the East–West Crete Corridor as well as extension of the Crete Corridors taxation, and land ownership by foreigners. No. VIII linking Bulgaria, the Former towards the Near East and North Africa. In 1998, parliament resumed debate on Yugoslav Republic of Macedonia, and The government has signed an agreement laws regarding telecommunications and Albania (thereby linking the Black Sea with Georgia, Azerbaijan, Turkmenistan development of mineral resources. with the Adriatic), is strongly supported and Uzbekistan, permitting free transit of The currency board is producing the by the government and should lead to freight, a prerequisite for increasing traffic desired effect and the Bulgarian lev (BGL) project tenders over the next 12 to 18 along the Asia–Europe corridor. has been pegged to the Deutsche mark months. This initiative is receiving funding Considerable experience has been gathered (DM) at the rate BGL1000 = DM1. The from the US Trade and Development in determining the national priorities related government is required to maintain hard Agency (USTDA). to the Crete Corridors. Between 1993 and

26 Japan Railway & Transport Review 21 • September 1999 Copyright © 1999 EJRCF. All rights reserved. Reproduction in whole or in part without permission is prohibited. 1999, business and general plans have Term National Investment Programme for concessions, foreign loans, aid, etc. been elaborated, pre-investment and the period 1998–2001 and beyond. The The railway infrastructure development feasibility studies have been carried out, programme encompasses 40 projects, programme includes the following main and financing schemes for the construction, including 15 railway projects of regional projects: etc., have been prepared for all transport importance; nine projects have 144 infrastructure in the country, including: sub-projects. The total investment Corridor VIII (Durres–Kaftan/Kafassan– railways, roads, seaports, and the airports. needed to implement all the objectives Skopje–Gjueshevo–Sofia–Plovdiv– Projects to rehabilitate BDZ, and the amounts to more than 420 million euro Bourgas/Varna) Bulgarian motorway and road networks (US$1 = 0.98 euro). This corridor has political, economic, have been prepared by European consultants In addition to the Medium-Term National regional, and national significance. In with funding from the EU Phare Investment Programme, the Ministry of addition to the three countries that it programme. Transport has drafted an Investment passes through, Corridor VIII is attracting The backbone of the Pan-European transport Programme for National Transport Priorities, great interest from Italy, Turkey, Greece, network in Bulgaria has been defined by encompassing 35 national transport the Commonwealth of Independent the Transport Infrastructure Needs Appraisal projects, covering railways, roads, combined States (CIS), and countries in the Near in the Central and Eastern European transport, sea, river and air transport East. The project is also strongly supported Countries (TINA) project. Links between located along the corridors crossing by the European Commission and EU corridors have been determined and Bulgaria. The total sum amounts to about Phare programme, and countries from the prioritized with the aim of achieving 5 billion euro. The implementation plan Caucasus to Central Asia have expressed them by 2015. includes state investment as well as their support too. To reach these goals, the Ministry of credits from international financial The USA is also lending political and Transport has adopted a 4-year Medium- institutions, public–private and private financial support via President Clinton’s

Figure 1 Transport Corridors through Bulgaria

VIDIN

ROMANIA RUSSE

IV IX

PLEVEN VARNA

GORNA ORIAHOVITZA X

YUGOSLAVIA KALOTINA IX VIII BLACK SEA

SOFIA VIII BOURGAS GYUESHEVO IV VIII

IV PLOVDIV IV

SVILENGRAD TURKEY

IX KULATA MACEDONIA GREECE

Source: BDZ

South Balkan Initiative. The US Bechtel industry, with financing provided by improvements to road and rail access Group Inc. has conducted a pre-investment USTDA and Sea Land. Operation of in both Bulgaria and Romania. study funded by USTDA. a special container shuttle-train • Reconstruction, modernization and Development of the corridor in Bulgaria between Sofia and Thessaloniki in electrification of the Doupnitza– includes: Greece is planned to start by May Koulata line (136 km). • Construction of a direct railway link 1999. The estimated investment is The design and tender procedures between Sofia and Skopje through a about US$50 million. have already been completed and a new 2.3-km cross-border tunnel, contract will soon be signed with the reconstruction of Gjueshevo Station Corridor IV (Dresden–Prague–Bratislava– German company, ADTRANZ. The on the Bulgaria–Macedonia border, Gyor–Budapest–Arad–Craiova–Sofia– estimated cost of 32.8 million euro and reconstruction of the Radomir– Thessaloniki/Plovdiv-Istanbul) with will be provided by the Phare Kjustendil–Gjueshevo branch line. branches IVA (Nuremberg–Prague), IVB programme. The first construction stage will total (Wien–Gyor), and IVC (Arad–Bucharest– • Modernization and electrification of some US$10 million with partial funding Constansa) the Plovdiv–Dimitrovgrad– Svilengrad of 0.9 million euro from the Phare The main projects related to this corridor line at an estimated cost of US$358 programme to start reconstruction of in Bulgaria are as follows: million. Gjueshevo Station. • Construction of a new combined • Completion of electrified double-track (road and railway) bridge over the Corridor X (Salzburg–Ljubljana– Plovdiv–Stara Zagora–Karnobat– Danube between Bulgaria and Romania. Zagreb–Belgrade–Nis–Skopje– Varna line at an estimated cost of 77 The British consultants GIBB have Veles–Thessaloniki million euro. conducted feasibility studies on the The main investment for the Bulgarian • Construction of combined transport bridge location and design. Corridor section of this corridor is modernization terminal in Sofia. Feasibility studies IV studies by the consultants TEAM of the railway line from Sofia to the former were completed in late 1998 in and Italfer suggest that Vidin (Bulgaria) Yugoslav border at an estimated cost of cooperation with Sea Land Service, – Kalafat (Romania) is the best location US$50 million. Inc., the largest US-based ocean carrier for the bridge which is estimated and a leader in the global shipping to cost US$190 million including Corridor IX (Helsinki–St. Petersburg– Pskov–Vitebsk–Kiev–Ljuba shevka– Kishineu–Bucharest–Rousse–Dimitrovgrad– Alexandroupolis) The main projects related to this corridor in Bulgaria are as follows: • Expansion and modernization of the Rouse–Gjurgeu border crossing, including repair of the existing combined (road and railway) bridge over the Danube. This project has a considerable number of sub-projects financed by the Bulgarian budget and Phare programme. • Modernization and development of road and railway infrastructure in the Rousse–Veliko Turnovo–Stara Zagora– Dimitrovgrad direction, including electrification of non-electrified railway sections. • Development of the border crossing infrastructure at the Greek border using Class 44000 Skoda-built electric locomotive standing at Plovdiv Station (Y. Akiyama) Bulgarian state funding, credits from the

28 Japan Railway & Transport Review 21 • September 1999 Copyright © 1999 EJRCF. All rights reserved. Reproduction in whole or in part without permission is prohibited. BDZ, especially from the aspects of safety and efficiency. In particular, the following EU Phare projects are at an advanced stage: • Delivery of axle-counters for safety control, totalling 1.36 million euro • Delivery of train dispatcher radios, totalling 2.0 million euro • Delivery of 19 digital PABX, totalling 3.0 million euro • Delivery of an Automatic Train Protection System (ATPS) for the Plovdiv–Stara Zagora–Bourgas section, Portal of cross-border tunnel in B02 network (BDZ) ATC Control room in Sofia (BDZ) totalling 10.15 million euro

European Investment Bank and the EU EBRD, the Bulgarian Export Credit In 1999 and 2000, the EC Large-Scale Phare-ITNERREG programme for Agency, Phare and local resources. Infrastructure Programme will provide cross-border cooperation. About 40 sub-projects connected with financing totalling 20.0 million euro to • Development of combined haulage overall restructuring and rehabilitation of rehabilitate 62 km of permanent way. After and improvement of the combined railways in Bulgaria are being implemented the new Railway Transportation Law comes transport terminal at Dimitrovgrad at at a total cost of US$300 million. The into force, we hope that the Bulgarian an estimated cost of US$30 million. major sub-projects are as follows: railway system will switch to a real market • Renewal of the permanent way of main economy including a market for higher Corridor VII (Rhine–Main–Danube) lines management skills and knowledge. The main project is construction of a • Provision of equipment for track The new environment will require less combined transport link for haulage in maintenance and repair day-to-day government involvement the Rousse–Varna direction in order to • Provision of rail welding equipment and will secure much better financial speed cargo transport from and to the CEE • Provision of information management performance. ■ along the Danube using river port– systems for freight transport, passenger railway–sea port links. services, accounting, and data transmission Rehabilitation of BDZ • Renewal of signalling and telecommu- A comprehensive study on the status of nications equipment BDZ carried out in cooperation with the • Provision of spare parts for locomotives Phare programme has defined the and wagons projects needed to improve the functioning • Rehabilitation of passenger carriages of BDZ. World Bank and EBRD missions to Bulgaria helped set the priorities and The EU has played a major role in supporting funding by loans from the World Bank, the rehabilitation and development of

Vladimir Inkov Stefan Pauntchev

Mr Inkov is Expert in Investment Policy and Euro-integration with Mr Pauntchev held a number of positions in the Track Maintenance special responsibility for the Pan-European Transport Corridors Unit of BDZ and was an Expert in the Project Implementation Unit passing through Bulgaria. He has a Masters degree in mechanical until May 1999, when he left the company to join Union Miniere Pirdop engineering from the Todor Kableshkov College of Railway Copper. Engineering in Sofia.