Implementation of Infrastructure Projects on Railway
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2020 Republic of Serbia GOVERNMENT OF THE REPUBLIC OF SERBIA ANTI-CORRUPTION COUNCIL 72 No: Official July 29, 2020 B e l g r a d e IMPLEMENTATION OF INFRASTRUCTURE PROJECTS ON RAILWAY Table of Contents 1. INTRODUCTION .................................................................................................. 2 1. INFRASTRUCTURE RAILWAYS OF SERBIA JSC ......................................... 3 2.1. Belgrade-Budapest high-speed rail line project ............................................. 3 2.2. Main Railway Lines ........................................................................................ 7 2.3. Regional railways ............................................................................................ 8 2.4. Žeželj's bridge, road crossings and other projects ......................................... 8 3. “SERBIA CARGO” JSC ....................................................................................... 9 4. “SERBIA TRAIN” JSC ....................................................................................... 10 5. CONCLUSION..................................................................................................... 12 6. RECOMMENDATIONS: .................................................................................... 14 7. ANNEXES TO THE REPORT: .......................................................................... 15 Annex I ..................................................................................................................... 16 Annex II ................................................................................................................... 30 Annex III .................................................................................................................. 36 1. INTRODUCTION Corporate restructuring of the “Serbian Railways” JSC Belgrade started in accordance with the project task of the World Bank. Assembly of the “Serbian Railways” JSC, at its session held on May 11, 2015, passed a decision on the change of the status of “Serbian Railways” JSC. The Government of the Republic of Serbia, by Decision 05 number 023-7362 / 2015 of July 2, 2015, gave consent to the Decision on the status change of the “Serbian Railways” JSC, (separation with the establishment) of new joint stock companies, as follows: Joint Stock Company for the Management of Railway Infrastructure “Infrastructure Railways of Serbia”; Joint Stock Company for Railway Transport of Goods “Serbia Cargo”; Joint Stock Company for Railway Passenger Transport “Serbia Train”. These three companies represent different technological and business units, marketable in the long run, while the fourth company, the “Serbian Railways” JSC, should primarily solve the problems of redundancy, property and “historical debts”. The separation of the mentioned companies and the reduction of the number of employees, who left the railway with severance pay, is only the first step in the restructuring of the Serbian railways. However, the departure of redundant employees did not solve the problems, on the contrary, many technical jobs were entrusted to private companies and not only technical jobs but also certain administrative ones, which significantly increased the price of those services compared to the same jobs performed by employees for salary. Also, in some services, new employment was performed instead of retraining a certain number of workers, which would avoid paying severance pay. A large number of workers with specific railway experience, after being paid severance pay, went to private railway operators or other companies that do business with the railway. In addition to the above, one of the most important problems that did not even begin to be solved after the restructuring are the unprofitable railways. According to the data published by the internal newspaper “Pruga” in 2016, the traffic on over 800 kilometers of railway is economically unsustainable, and on railways longer than 400 kilometers the traffic does not take place, i.e. trains have not passed for more than a quarter of a century. According to the available documentation, the Council will present in its Report, for each company individually, how much has been invested and how much is being invested in the newly formed companies after the restructuring of the railway and how that investment reflects on the improvement of the condition of the railway and rolling stock, in relation to the invested funds. The subject of the Report is also the spending of credit and budget funds, which are measured in billions of foreign currency and dinar funds from the moment of railway restructuring until today. Such large investments, in the absence of transparent procedures, which refer to the selection of contractors and the source of financial resources, contracted on the basis of interstate agreements, raise suspicions of the possibility of large-scale corruption. 2 1. INFRASTRUCTURE RAILWAYS OF SERBIA JSC According to the data from the website of the company “Infrastructure Railways of Serbia”, this company performs the activity of protection and management of public railway infrastructure in the part of: maintenance of public railway infrastructure; organization and regulation of railway traffic; providing access and use of public railway infrastructure to all interested train operating companies, as well as legal and natural persons who perform transport for their own needs. Based on the financial statements submitted by the company to the Business Registers Agency, in the period from mid-2015 to 2018, the company's revenue from the sale of products and services and other revenues in the total amount of 13.8 billion dinars was stated. In the same period, the company was awarded subsidies, grants and donations in the amount of 31.2 billion dinars, i.e. 17.4 billion dinars more than the income from the core activity. In addition to the fact that subsidies were awarded, the Infrastructure of the Serbian Railways realized a net loss in the amount of 8.5 billion dinars in the observed period. According to the data also published on the website of “Infrastructure Railways of Serbia”, the total construction length of railways in public transport without station tracks is 3,735 kilometers, of which the main ones are 1,759 kilometers long, while the other lines are 1,976 kilometers long. The total length of electrified railways (open railroad and main passing tracks in stations) is 1,546 kilometers. The carrying capacity of the railway is between 12 and 22.5 tons per axle, with the maximum carrying capacity of 22.5 tons at only 1,886 kilometers, which is a serious obstacle to the development of railway traffic. Bearing in mind that no serious investments have ever been made in the development of the railway infrastructure, this situation on Serbian railways is not surprising. In the previous decades, the state allocated for the railway through subsidies mostly to service obligations towards employees, while for the development of infrastructure and rolling stock, credit funds were necessary. The Council does not have data on how much the railway borrowed on that basis before the restructuring, except for data on borrowing and investments after the restructuring. Namely, according to the data submitted to the Council by the company “Infrastructure Railways of Serbia”, investments were made primarily in the main and regional railways, as well as the Belgrade-Budapest high-speed rail line project. There were smaller investments in road crossings and other projects, as well as in Žeželj's bridge, which can be seen from Annex I of the Report. 2.1. Belgrade-Budapest high-speed rail line project The Council requested data on sources of financing, financing costs, costs and scope of works, materials and services, as well as data on the degree of realization of each project from “Infrastructure Railways of Serbia” company, the Ministry of Finance and the Ministry of Construction, Transport and Infrastructure. 3 Information was received from all the above-mentioned entities that the High-Speed Rail Line Construction Project was financed on the basis of interstate agreements and that contractors had been selected on that basis. Namely, part of the Stara Pazova - Novi Sad railway line and the Chortanovci viaduct are financed from a loan from the Government of the Russian Federation, while part of the railway line from Belgrade to Stara Pazova and from Novi Sad to the border with Hungary is financed from a loan from the Republic of China. The participation of the Republic of Serbia in the loan of the Russian Federation is 15%, and according to the data submitted to the Council by the “Infrastructure Railways of Serbia” company, for the part of the open railway Stara Pazova - Novi Sad of 40.44 kilometers, the construction price was agreed in the amount of 247.9 million dollars, of which the participation of the Republic of Serbia is 37.2 million dollars. A value of 337.6 million dollars was agreed for the construction of the viaduct "Chortanovci", in which the participation of the Republic of Serbia is 50.6 million dollars. On December 31, 2019, the degree of physical realization on the open railway in the length of 40.44 kilometers was 44.64%, and a total of 131.2 million dollars was spent, of which from the budget of the Republic of Serbia 37.2 million dollars and 25 million dinars, and the rest were credit funds in the amount of 94 million dollars. For the viaduct "Chortanovci", the physical realization is 72%, and on December 31, 2019, 274 million