KOSOVO RAILWAYS 329. Kosovo Railways (Hekurudhat e Kosovës; KR) is a joint stock company created in December 25 and previously known as UNMIK Railways. It was originally formed as the United Nations Interim Administration Mission in Kosovo (UNMIK) Railway from the lines of the former Yugoslav Railways that lie on Kosovo territory, and is owned by the state. This transfer was developed within the framework of a restructuring of public companies Kosovo Railways is now a commercially-oriented company. It is governed by the Railway Law (Law 3/L-76), which became effective on June 5 28. 137 Kosovo Railways is divided into two bodies in one legal entity: one responsible for infrastructure and the other for trains operations and commercial activities. 3. The rail network is small, with 333km of single track non-electrified rail with standard gauge. Despite limited maintenance, it is mostly in good to fair condition due to low traffic. The network consists of a main north-south line with two major branches, and a number of smaller branches. The main line starts in Hani i Elezit on the FYR of Macedonia border running through to the Serbian border at Leshak a distance of 148 km, of which 141.3 km is on the SEETO Core Network Route 1. However, from the declaration of independence of Kosovo in February 28, Kosovo Railways trains are restricted to operating on the network south of Mitrovica, and Serbian Railways operates trains on the northern most section of the line in Kosovo. The North East to West line is comprised of three branches: (i) the East Line from the border with Serbia to Fushë Kosovë (42 km); (ii) the West line from Fushë Kosovë to Pejë (81 km); and (iii) the West-South line from Klinë to Prizren (58 km). Operational performance 331. Freight and passenger rail traffic have been moving in opposite directions, with significant growth in freight traffic from 25, albeit starting from a low base. With only 13 million ton-km of traffic in 21, freight traffic nearly tripled by 29, to reach 51 million ton-km (Figure 145). Over 28-29 freight traffic declined by only one percent despite a difficult context due to the global international crisis reflecting in part the 4 percent real GDP growth rate in Kosovo. To put the traffic volumes in perspective, prior to the conflict in Yugoslavia, the railway lines in Kosovo carried 2.5 million tons annually, compared to 911,8 tons in 29. 138 137 Before June 28 there was no Railway Act, apart from Regulation No.26/56 of December 6, 26, which set out the basic legal framework for the operation, maintenance and use of railways in Kosovo. 138 At the time 9 percent of rail freight traffic was imports, primarily oil from FYR Macedonia. European Commission Liaison Office to Kosovo (28). Railway Transport in Republic of Kosovo, Draft Report, Review of the Current Situation. Technical Support to the Ministry of Transport and Communications to continue the development of a Multi-Modal Transport Strategy and Action Plan, December 28. 187
Figure 144: The Rail Network of Kosovo Source: World Bank. 188
Figure 145: Railway Traffic in Kosovo, 21-29 6 5 4 2 1 21 22 23 24 25 26 27 28 29 Passenger (million pass-km) Freight (million ton-km) 332. Rail freight volumes are dominated by imports. This reflects the lack of competitiveness of the economy and the small volume of exports exports are ten times less than the level of imports. In 29, imports constituted 65.9 percent of total freight volumes, albeit declining from 8 percent in 25. Comparing freight traffic volumes of the first two quarters of 29 with 28, there is a decline in import volumes, which are driving the lower freight volumes in the first half of 29 compared to the first half of 28. 333. Passenger volumes have been declining over the decade, from 39.9 million passenger-km in 21 to 15.9 million passenger-km in 29. However, this in part reflects differences in the way passenger volumes have been measured since Kosovo Railways was established after it took over from KFOR, which operated trains between 2 and 23. Since April 24, Kosovo Railways has registered the number of passengers on the basis of sold tickets and an estimation of the total number of UNMIK permits, which are issued by municipalities for displaced persons. Although the number of permits are about 1, per month, Kosovo Railways does not know how many times these are used by passengers, leading to serious underestimation of passenger volumes, explaining the large drop after 23 (Figure 145). Consultants have estimated that the ratio of actual number of passengers, compared with the number of sold tickets and number of UNMIK permits, is 19.1. 139 This would suggest over 5, passengers in 26, as opposed to the 359,733 passengers recorded by Kosovo Railways. Even factoring in the passengers with UNMIK permits, this indicates a very significant problem of ticketless passengers and a need to strengthen inspections and the penalty regime. Focusing on the period since Kosovo Railways was established, passenger traffic has remained largely stagnant and has declined from 18.9 passenger-km in 25 to 15.9 passenger-km in 29. 334. Kosovo Railways operates three types of passenger services. First, there is the Freedom of Movement Train, with 2 services a day from Fushë Kosovë to Hani i Elezit. This passenger 139 European Commission Liaison Office to Kosovo (28) Railway Transport in Republic of Kosovo, Draft Report, Review of the Current Situation. Technical Support to the Ministry of Transport and Communications to continue the development of a Multi-Modal Transport Strategy and Action Plan, December 28 provides details regarding the estimates between passenger numbers as reported by Kosovo Railways and projected passenger numbers based on actual counting of passengers at all stations. 189
service is fully subsidized by the Ministry of Transport and Post-Telecommunications, and mainly serves to transport the Serbian minority. In 29, this line served 7,37 passengers down from 12,624 in 28, which reflects the interruption of services in the northern part of the line since Kosovo declared independence; the 28 figures have two months of full operation along the entire line. Second, an international train operates from Prishtinë to Skopje twice a day from Prishtinë to Hani I Elezit, and once a day from Hani I Elezit to Skopje and back. Third, the Prishtinë-Pejë opened on October 1 27 it has seen a considerable number of passengers, and offers twice daily services. Some of these trains have only two passenger coaches, with passengers needing to stand up, indicating significant demand despite speeds of 31 km/hour. Figure 146: Kosovo - Rail Traffic Intensity Figure 147: Kosovo Traffic Units per Staff and Staff Levels 45, 14% 2, 45 4, 41, 39, 37, 35, 3, 31, 29, 27, 25, 25 26 27 28 29 Kosovo % of EU average 13% 12% 11% 1% 9% 8% 18, 16, 14, 12, 1, 8, 6, 25 26 27 28 29 Traffic units/staff Staff 4 395 39 385 38 375 37 365 36 355 335. The bulk of passenger operations are on the domestic train services, with only a small proportion using the international train to FYR Macedonia. The volume of international passenger services nearly halved in 28, from 3.2 million passenger-km in 27 to 1.7 million passenger-km in 28. In 28, according to Kosovo Railways statistics, there were 42,95 international passengers representing 12 percent of passenger traffic. This international train generates significant financial losses: Euro 62, of losses with only Euro 97, of ticket sales in 28. 14 In turn, this reflects delays of trains from the FYR Macedonia section, as well as the requirement for those travelling to FYR Macedonia to have insurance. On these grounds, Kosovo Railways requested in 28 the Ministry of Transport and Post-Telecommunications to consider terminating this train service. Rationalization of operations on this line should be considered. 336. The maximum speed limit on the rail network is 7 km/hour. The entire network suffers from speed restrictions even though the geometry of parts of the network would permit speeds of up to 16 km/hour. Reconstruction has been the main objective of donor assistance to date, focusing on urgent repairs on the main network, leaving the issue of accumulated maintenance backlog unaddressed. Reflecting this, only 14.6 km of track renewal works have been completed in the last 1 years, while nearly 15 km of such works were done between and 4 years ago. 14 Kosovo Railways J.S.C (21), Annual Report 29, Pristina, January 21. 19
337. The rolling stock is characterized by its old age, although its overall condition is satisfactory thanks to good maintenance. Of Kosovo Railways 1 locomotives, only one dates from this decade, with the others having been acquired before the 197s. Kosovo Railways has less than 2 passenger wagons 1 donated by Sweden in the 196s, and 7 donated by Austrian Federail Railways (Österreichische Bundesbahnen; OBB) in 29 and 7 freight wagons, again dating from the 196s. While the quality of rolling stock is sufficient given current traffic volumes and services, if there are investments for the electrification of lines and signaling which would allow higher speeds, then more recent rolling stock could be required. 338. In 29, the central traffic control system of trains was completed, enabling the control of train traffic from the center. This has improved safety in the stations and will enable higher maneuvering speeds and higher capacities, and will also improve safety at level crossings. The relaying system and telecommunication installations date from over years ago reflecting limited investment to date. In September 24, Kosovo Railways established a new container terminal at Fushë Kosovë, where sea-going containers and swop bodies can be transferred from road to rail. This is an important intermodal platform, because Kosovo is a landlocked country without access to sea ports or significant inland waterway ports. 339. Given the size of its network and train operations, the number of Kosovo Railways employees is small, at fewer than 4 in 29. Staffing for freight and transport services are under 1 and have risen modestly from 71 in 25 to 92 by the first half of 29; the majority of staff, 221, work in the infrastructure division. Nevertheless, given the low levels of overall traffic, labor productivity is not high, although it has risen by 69 percent over 25-29, equivalent to 28 percent of the EU average (Figure 147). Financial Performance and Investment Plans of Kosovo Railways 34. Kosovo Railways is a profitable public company, with net income of Euro 3.8 million in 28. With a working ratio considerably below 1, at.46 in 28, Kosovo Railways is able to recover operating costs. Ticket sales represent only a small fraction of passenger revenues, equal to 21.3 percent of passenger revenues excluding subsidies, but this has been rising steadily from 5.8 percent in 25. One reason for this is that the Freedom of Train service, one of three services, is fully paid by the Ministry of Transport and Post-Telecommunication. However, as already mentioned, it is estimated that the number of passengers circulating without paying for tickets is very high, and could be equal to those actually paying for their seats. As also already mentioned, the international train is a significant loss-maker, and Kosovo Railways management has proposed that this service be discontinued. 341. Freight operations are profitable and the source of Kosovo Railways positive financial results. From 25 to 28, there was generally a large positive gap between total operating revenues and total expenses, although this narrowed in 29, reflecting the impact of the international economic crisis on traffic volumes, particularly for key metal commodities. However, these freight service financial results do not include the cost of using infrastructure, which is priced at zero at present, as is the case for passenger services. In the future, once infrastructure access charges are introduced, ceteris paribus, the profitability of freight services would be dampened. 191
Table 33: Financial Performance of Kosovo Railways (Euro millions) 25 26 27 28 28 29 29 28 Q1 Q2 Q1 Q2 TOTAL REVENUE 6.5 8.5 1.7 2.3 2.6 11. 2.2 2.3 Passenger 1.5 1.6 1.7.3.3 1.1.3.3 Tickets.1.1.1.1.1.2.1.1 Freight 1.4 1.8 2.6 1.1 1.1 4..5.6 Other.7 1.2 1.5.4.4 1.6.4.4 Total operating revenues 3.5 4.5 5.7 1.8 1.8 6.7 1.1 1.2 State operating subsidies 3.1 4. 5..4.9 4.3 1.1 1.1 Passenger 1.5 1.5 1.5.4.3 1.3.4.4 Freight 1. 1. 1.8.. 1.5.3.3 Infrastructure.6 1.5 1.6..6 1.5.5.5 TOTAL EXPENDITURE 5.4 4.9 5.4 2.2 1.8 7.8 1.6 1.5 Materials.2.3.2.1..2.. Fuel, electricity.9 1. 1.2.5.4 1.4.2.1 Salaries and allowances 1.2 1.4 1.3.5.4 1.8.5.5 Outsourcing and other services.6.8 1..5.3 1.7.2.2 Depreciation 1.2 1.1 1..5.5 2.1.6.6 Total operating expenditures 4.1 4.5 4.9 2.1 1.6 7.2 1.5 1.5 Non-operating expenditures 1.3.4.5.2.1.6.1.1 NET INCOME With state contribution 2.48 3.93 5.85.21.97 3.83.73.86 Without state contribution (.6) (.3).87 (.21).11 (.46) (.37) (.24) WORKING RATIO With state contribution.44.41.36.69.43.46.41.38 Without state contribution.82.77.67.84.65.76.81.72 342. The wage bill as a percentage of operating cost stood at 31.6 percent by the first half of 29, up from 25.1 percent in 28. However, this hides considerable variation among the lines of business, with the wage bill lowest for passenger services (22.9 percent) and highest for infrastructure services (42.2 percent). Total staff productivity has been rising over 25-28, from 138,444 traffic units per staff in 25 to 237,342 traffic units per staff, a 7.9 percent rise over the four-year period. Productivity declined in the first half of 29, reflecting lower traffic volumes and higher staff levels. However, freight staff productivity is considerably higher, at 1,9,776 traffic units in 28; passenger staff productivity more than fifty percent lower, at 435,25 traffic units. Staff per km of track is low, at.88 in 28, and if one looks exclusively at infrastructure staff, this falls to.6. 192
Figure 148: Kosovo Railways -Wage Bill Indicators 4 35 25 29 34 34 22 27 23 25 27 22 2 18 15 1 5 25 26 27 28 Wage bill as % of operating costs Wage bill as % of operating revenue (excl state contribution) Wage bill as % of total revenue 343. The infrastructure division s revenues are broadly sufficient to meet expenses incurred. In 28, Kosovo Railways spent Euro 2.52 million on rail infrastructure and received Euro 3.15 million from the state for operating the infrastructure, rent and other revenues. However, given that the entire network is operating with speed restrictions and that reconstruction has been the major focus of expenditures to date, this leaves an important and accumulating maintenance and rehabilitation backlog, which remains unaddressed. However, revenues are insufficient to upgrade existing rail infrastructure. Figure 149: Kosovo Railways Infrastructure Revenues and Expenses (Euro millions) 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, 25 26 27 28 Q1 28 Q2 28 29 Q1 29 Q2 Total revenues Total expenses 344. A recent study has estimated rail infrastructure investment needs at Euro 466.9 million over 29-2. 141 The total cost of all candidate infrastructure projects envisages the upgrading of existing lines, either electrification or converting single to double track, and the construction of a new line from Prizren to Vermice in Albania (Table 34). The Plan assumes EU 141 European Commission Liaison Office to Kosovo (29), Railway Transport in Republic of Kosovo, Action Plan and Investment Plan. Technical Support to the Ministry of Transport and Communications to continue the development of a Multi-Modal Transport Strategy nd Action Plan, March 29. 193
grant financing of Euro 233.4 million, out of which Euro 116.7 million would be covered from the central budget of Kosovo, and an equal amount by IFI loans. Investments are proposed under two scenarios: (i) without major modification of the modal split between road and rail; and (ii) with the development of integrated public transport services, combining urban public transport, inter-urban bus transport, and passenger rail transport. In the second scenario, the investments would be phased, with Euro 1 million over 29-215 encompassing the first five projects, with the remainder over 26-2 (Figure 15). Given the volumes, a rather more modest investment plan to kep the network open in the short to medium-term, until traffic builds up, or some of the regional aspects are addressed, would seem to be more appropriate. Table 34: Investment Plan for Kosovo Railways (Euro millions) Railway project Description Total Cost Completion date Fushë Kosovë - Prishtinë Double track electrification 16 km/hour 29. 215 Fushë Kosovë - Ferisaj Double track electrification 16 km/hour 38.1 215 Prishtinë multimodal station 1. 215 Fushë Kosovë - airport Single track 16 km/hour electrification 14.6 215 Rail/road freight terminals 8.5 211 Fushë Kosovë - Mitrovicë Single track 16 km/hour electrification 42.1 219 Bardh Pejë Single track 16 km/hour 77.9 221 Klinë - Prizren Single track 16 km/hour 58.1 222 Ferisaj - Hani I Elezit Double track electrification 16 km/hour 72.4 225 Prishtinë - Podujevë Single track 16 km/hour 39.7 226 Prizren - Vermice (Albania) New line single track 16 km/hour 13.4 227 Mitrovicë - Leshak Single track 16 km/hour electrification 63.1 2 Total 466.9 Source: European Commission Liaison Office to Kosovo (29). 345. As a share of GDP, state support to Kosovo Railways has been declining over 25-29. State support has fallen from.15 percent of GDP in 25 to.1 percent in 29 (Figure 151). This reached Euro 3.9 million in 29, with 28 percent for passenger transport subventions, 36 percent for both rail infrastructure investments and transport services investments (Figure 152). The decline in state funding occurred during a period of rising traffic 81 percent rise over 25-29, albeit from a low a base. In other words, state contributions on a per traffic unit basis have declined over the period in question. With this level of funding, it is unlikely that Kosovo Railways will be able to maintain expenditures even to rehabilitate its existing rail infrastructure. 194
Figure 15: Kosovo Railways - Investment Plan 29-2 (Euro millions) Cumularive investment (Euro millions) 5 45 4 35 25 2 15 1 5 29 211 213 215 217 219 221 223 225 227 229 Cumulative investment expenditure Source: European Commission Liaison Office to Kosovo (29). Investment expenditure 4 35 25 2 15 1 5 Annual investments (Euro millions) 5.5 5. 4.5 4. 3.5 3. Figure 151: State Contributions to Kosovo Railways (in units indicated).15.14 Sources: Kosovo Railways, IMF..13.1.11 26 27 28 29 21 (Planned) State contributions (Euro millions).16.14.12.1.8.6.4.2. % of GDP Figure 152: Breakdown of State Contributions to Kosovo Railways (percentages) 1 9 8 7 6 5 4 2 1 35 31 28 36 28 41 31 28 26 26 27 28 29 21 (Planned) Passenger transport subventions Investments in infrastructure Investments in transport services Source: Kosovo Railways, IMF. 41 36 37 36 37 195