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Report No: AUS0001925 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Tracks from the Past, Connectivity for the Future: Revitalizing Moldova’s Railway Sector October 2020 Public Disclosure Authorized Document of the World Bank © 2020 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. 2020. Moldova Railways Policy Note. © World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. Document of the World Bank ACKNOWLEDGMENTS This report was prepared by a World Bank team led by Elena Lungu (Transport Specialist, Task Team Leader), Fiona Collin (Lead Transport Specialist, Task Team Leader), Victor Aragones (Senior Transport Economist), Vasile Nicolae Olievschi (Consultant, Lead Railways Specialist), and John Arnold (Consultant). Jamie Lee Brown (Transport Specialist), Iuliana Stratan and Graciela Tejeda (Program Assistants) supported the team throughout the study. The team would like to acknowledge the contribution of Gregoire F. Gauthier (Senior Transport Specialist), Sevara Melibaeva (Senior Transport Economist), Dominic Patella (Senior Transport Specialist), Svetlana Vukanovic (Senior Transport Specialist) and Ramon Munoz-Raskin (Senior Transport Specialist). The team is grateful for the guidance provided by Karla Gonzalez Carvajal (Practice Manager for Europe), Anna Akhalkatsi (Country Manager), Baher El-Hifnawi (Program Leader) and Carolina Odobescu (Senior Country Officer). The World Bank team would like to formally thank the Ministry of Economy and Infrastructure of Moldova and Moldovan Railway Company (CFM) for fruitful discussions, consultations, ideas, information and data. Document of the World Bank Table of Contents Table of Contents .......................................................................................................................................... i Note on COVID-19 ........................................................................................................................................ iii Document Structure ...................................................................................................................................... v EXECUTIVE SUMMARY ................................................................................................................................. 1 WHY DOES MOLDOVA NEED RAILWAYS? ................................................................................................... 7 GENERAL ASSESSMENT OF RAILWAY SECTOR ON TRANSPORT MARKET .................................................. 8 ORGANIZATION AND ASSETS OF RAILWAY ........................................................................................................ 8 DEMAND FOR FREIGHT TRANSPORT SERVICES AND THE MODAL CHOICE ................................................................ 10 SUPPLY CHAIN PROBLEMS .......................................................................................................................... 13 TRAFFIC OPERATED BY THE CFM .................................................................................................................. 15 LIMITATIONS IN THE OPERATING PLAN OF CFM ............................................................................................... 18 BENCHMARKING TO MEASURE THE PERFORMANCE OF THE RAIL SECTOR ............................................. 21 CHALLENGES FACED BY THE RAILWAY SECTOR......................................................................................... 22 DECLINE OF THE RAILWAY TRANSPORT MARKET ............................................................................................... 22 CHRONIC UNDERINVESTMENT IN THE RAILWAY ASSETS ...................................................................................... 26 AGING OF CFM’S LABOR FORCE ................................................................................................................... 30 DOWNGRADING OPERATIONAL PERFORMANCE OF CFM .................................................................................... 31 CFM'S FINANCIAL PERFORMANCE ................................................................................................................ 36 GENERAL RAILWAY SECTOR REFORM CONCEPTS ..................................................................................... 43 GENERAL RAILWAY SECTOR RESTRUCTURING PRINCIPLES IN MOLDOVA ................................................................. 43 ENHANCEMENT OF RAIL SECTOR COMPETITIVENESS IN MOLDOVA ........................................................................ 48 GOVERNMENT ROLES IN ENHANCING RAIL SECTOR PERFORMANCE ....................................................................... 51 GOVERNMENT AS POLICYMAKER .................................................................................................................. 52 GOVERNMENT AS BUYER OF SERVICES ........................................................................................................... 53 GOVERNMENT AS OWNER .......................................................................................................................... 54 GOVERNMENT INSTITUTIONAL CAPACITY STRENGTHENING ................................................................................. 54 ORGANIZATION FORMS TO SUPPORT RESTRUCTURED RAILWAYS ......................................................... 55 PROPOSED ACTIONS FOR RAILWAY SYSTEM RESTRUCTURING IN MOLDOVA ........................................ 57 ORGANIZATIONAL FORMS FOR SUPPORTING RAILWAY RESTRUCTURING PROCESS .................................................... 57 HOW TO ACHIEVE RAILWAY INSTITUTIONAL UNBUNDLING IN MOLDOVA?.............................................................. 60 WHEN TO OPEN ACCESS TO RAILWAY INFRASTRUCTURE IN MOLDOVA? ................................................................ 61 IS SEPARATE TRACTION COMPANY USEFUL IN MOLDOVAN CONTEXT? ................................................................... 63 RAILWAY REFORM IMPLEMENTATION ..................................................................................................... 64 Annex 1: Comprehensive Action Plan for Railway Reform Implementation in Moldova........................ 71 Annex 2: Time Sequence of Execution of Main Tasks for Railway Reform Implementation in Moldova 78 Annex 3: Recommendations on Existing Railway Reform Documents in Moldova ................................. 81 Annex 4: Regional railway network map, Central and Eastern Europe ................................................... 85 i Abbreviations and Acronyms ABC Activity-based costing system CFM Railway Company of Moldova DAP Delivered at Place (Incoterms) DMU Diesel multiple unit – multiple-unit train powered by on-board diesel engines EBRD European Bank for Reconstruction and Development EC European Commission EIB European Investment Bank EU European Union EU NIF European Union Neighborhood Investment Facility EUROSTAT European Commission Directorate-General that provides statistics to the European Union institutions ICT Information and communications technology INCOTERMS International Commercial Terms or shipping trade rules GDP Gross domestic product HR Human resources IFRS International Financial Reporting Standards are accounting standards issued to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries Kph Kilometers per hour KPI Key performance indicator MACRI Multi-Annual Contract for Railway Infrastructure Quality MoF Ministry of Finance MEI Ministry of Economy and Infrastructure (absorbed MoT in 2017) MoT Ministry of Transport (absorbed by MEI in 2017) OECD Organization for Economic Co-operation and Development Pass-km or pkm Unit equivalent to the movement of one passenger by one kilometer PSC Public Service Contract Route-km Kilometers of commercially operated railway route in network R50 Rail track with load capacity of 51.7 kg per meter R65 Rail track with load capacity of 64.7 kg per meter SoE State-owned enterprise SYSTRA International engineering and consulting group in the mobility sector, whose fields of activity include, but are not limited to, rail and public transport TAC Track access charge TEU Twenty-foot equivalent unit, standard unit for containers Ton-km or tkm Unit equivalent to the movement of one ton of freight by one kilometer Ton Metric ton of 1,000
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