How Poles are Working on Reform of Ukrainian Railways - Interview

In an interview with the CFTS portal, Paweł Kopczyński, the head of the rail transport department at the Polish Ministry of Infrastructure, and Ireneusz Majcher, an adviser to the Polish Minister of Transport, discuss the reform of Ukrzaliznytsia.

Ireneusz Majcher, an adviser to the Polish Minister of Transport, feels quite comfortable and relaxed in the Ukrainian Ministry of Infrastructure. He moves around freely in the 28-story building and speaks excellent Russian. In addition, he is already saying, "in our ministry" when referring to the Ukrainian rather than the Polish ministry. Majcher has been working in Kiev for two years, providing consultations on railway reform to the Ukrainian authorities on salary paid by the European Union. He argues that it has become much easier to work since the Maidan.

"Initially, there was a lot of resistance. I remember a serious conversation with the former director of the ministry’s rail transport department in 2013. At the time, he did not understand what we are doing here. However, following the signing of the Association Agreement between Ukraine and the European Union, I have the impression that – on the contrary – we are being sucked into some giant cycle," he said as we rode in a lift to his office on the 13th floor.

Paweł Kopczyński, the head of the rail transport department at the Polish Ministry of Infrastructure, is late for a plane, but he still managed to find more than one hour to explain why reform of Ukrzaliznytsia along European lines is so important. He exudes confidence that Ukraine will definitely join the European Union.

How long have you been working in Ukraine?

Majcher: My first visit was in March 2013 because, at the time, the European Union’s Delegation to Ukraine was selecting candidates for implementation of a Twinning project aimed at supporting railway reforms in Ukraine. We, together with our Spanish colleagues, came to make a presentation to a commission on how we intended to implement this project. In addition to us, a Lithuanian-French consortium and Germany made presentations. We were very pleased to learn on 15 March that we had won, but we already knew then that it would be a great challenge.

The so-called Resident Twinning Adviser – the permanent onsite advisor/project manager in Ukraine – José Samyn arrived in the autumn of 2013, and formal implementation of the program began from that moment. The first Polish-Spanish mission arrived in Ukraine at the beginning of December 2013 to analyze rights related to rail transport. The first recommendations were prepared at that time.

The twinning idea is a collaboration. It is not about some wise Westerners coming here to train people who are not as wise. It is not like that. We share experiences and we (Poles, Spaniards, and Ukrainians) work together to try to draft proposals that will enable us to move in the best direction.

The Ukrainian society believes that the authorities have no desire to implement reforms and that everything is being done just for show. Have you seen a real desire to implement reform in your two years of working here or your task is still to push officials toward these reforms?

Majcher: I will use the example of the Twinning project: I confess that the attitude to it was initially very difficult.

On the part of the Ukrainian authorities?

Majcher: Yes. I remember a serious conversation with the former director of the ministry’s department of rail transport. At the time, he did not understand what we were doing here and said that he needed only freight and nothing more. We felt needed after Ukraine and the European Union signed an association agreement (in June 2014), which spelled out Ukraine’s obligations to implement the European Union’s railway directives. I calculated that about three-fourths of all working days have been used up over the two years (2014-2015). This shows how the attitude to the project has changed. We previously felt resistance, but I now get the impression that – on the contrary – we are being sucked into some giant cycle following the signing of the Association Agreement between Ukraine and the European Union. In short, we see that the will to reform now exists.

Kopczyński: We see that reforms are being implemented on Ukrainian railways. The legislation is changing. A draft law on rail transport has already been prepared with our participation. It will be a very big step if the parliament supports it. There is still much to do, but the direction is right.

More than 400,000 people worked on the railway in Poland in the early 1990s, compared with 80,000 now. That is five times fewer people. As is currently the case in Ukraine, the railway was also a separate state within a state in Poland. However, things have changed and they are moving in a good direction. We now look at train stations and rolling stock from the viewpoint of the passenger, but it initially requires a lot of effort and work. Changing the mentality of the people working on the railways is not a task that can be accomplished in six months or even one year. It is an entire process, but it has already begun. We also made mistakes, and you now have the opportunity to learn from our mistakes from us. This is important.

What do you mean by change of mentality?

Kopczyński: This is very important. In Poland, we once did this, too. Some believed that people working on railways do not work and that they are in government service. We have eradicated this view at home. It is not a service but work.

Former Ukrainian Deputy Transport Minister Oleksandr Kava said he unsuccessfully discussed the prospects for a Lvov-Warsaw high-speed rail link with Poland. Did this happen? Is it true that Poland is not interested in this?

Kopczyński: The issue of investment in the infrastructure for such an expensive project arises immediately...

The European Union’s money, for example...

Kopczyński: Yes, for example. However, it is necessary to remember that it is about EUR 15 billion. At the same time, we (Poland) have several thousand kilometers of railways that are 100 years behind. The problem of electrification of railway border crossings with Germany remains unsolved. We are not abandoning this project but saying that it is necessary to study its economics. A high-speed rail link between our two countries – not only to Lvov, but also to Kiev – is important to us. However, it is necessary to resolve the issue of funding.

Majcher: The relevant passenger traffic is already emerging because Ukrainians form the largest group of foreign students in Poland - about 40,000. Secondly, economic ties between the two countries will develop, and this will help justify these investments.

Kopczyński: There will be funds that we can use to implement this project when Ukraine joins the European Union. We will definitely return to it when there is money.

Do you believe that Ukraine will join the EU?

Kopczyński: I believe that Ukraine will join the European Union. I was proving this to the Germans back in 1997 (he laughs).

Do I understand your answer correctly: the EU cannot finance a project that is not within the EU?

Kopczyński: I cannot say precisely, but as far as I understand, it cannot invest in railway infrastructure.

Majcher: There are some cross-border projects, but I do not know exactly how far they can go beyond the territory of the European Union.

In Ukraine, the main argument of the opponents of the Polish and European experience in railway reform is that Ukrzaliznytsia accounts for over 80% of railway traffic in the country while the railway has a much smaller role in freight transportation in Poland and Europe as a whole. What can you say to that?

Kopczyński: In the case of Poland, it is true that the railway plays a lesser role in transportation than it plays in Ukraine, but we can look at other countries and see that the balance between transportation by rail and by road is also usually 30 to 70 percent in favor of transportation by road.

Majcher: In addition, it is necessary to add what the concept of "market conditions" means. It means equal access for all on equal terms. Actually, I have serious doubts about the 80% figure. That was possibly the case in the past, but a lot has changed in the past two or three years and Ukrzaliznytsia no longer plays such a role in freight transportation. If you look at the Polish experience, you will see that there is now fierce competition from motor transport. I remember an interview by an employee of our ministry in the 1970s. Transportation by rail was also in full swing in Poland at that time, and we were thinking of building an additional 20,000 kilometers of railway. Then transportation by road began to develop. In the past seven years, Poland has built about 800 kilometers of highways and more than 1,200 kilometers of roads, which has completely changed the transport picture in the country. Undoubtedly, transportation by road is unbeatable in many respects, and this must be understood. I think that the same process has started in Ukraine. Additionally, I can say that 319,000 vehicles were registered in Poland at the end of 1989, and this number had increased to 19 million by the end of 2013.

What was your involvement in the drafting of the rail transport bill that will be submitted to the parliament soon?

Majcher: Direct involvement. We advised the authors of this bill.

Kopczyński: I would like to point out that railway reform involves not only adoption of this bill. For example, railway reform in the European Union has been continuing non-stop for decades. For example, the so-called Fourth Railway Package was adopted recently, and we will try to implement it in Poland as quickly as possible.

Major shippers – Ukrzaliznytsia’s customers – criticized the rail transport bill during a meeting of the European Business Association in Kiev last week. They argued that their proposals were ignored and that the document in its current form benefits only Ukrzaliznytsia. They dislike the fact that competitive mechanisms are not stipulated in it and that it all boils down to declarations. What is your answer to that?

Kopczyński: Discussions between large and small have always existed and will always exist. Whenever you are conducting deregulation, you think about not offending those that are small or – vice versa – those that are big. However, there are strategic issues. It is important to note the movement towards European standards. In Poland, we say that an elephant must be eaten bit by bit and not swallowed as a whole. You can move slowly if you choose right direction, and you will arrive at your destination if you keep moving. Any change is accompanied by nervousness. They probably want a lot, but there must be a balance between those for whom the railway is being reformed and those who are reforming it.

Poland once implemented brilliant reforms in its rail freight sector. However, it cannot boast a passenger sector: passenger traffic cannot withstand competition from motor transport. What are you doing to change the situation?

Kopczyński: In Poland, passengers are returning to the railways. The upgrade of rolling stock and the successful competition between trains and motor transport in terms of travel time have already yielded good results. In recent years, we have made very large investments in rolling stock to ensure passenger comfort and emphasize cleanliness, punctuality, and service.

Are you setting PKP-Intercity the task of becoming profitable?

Kopczyński: No, it is always a subsidized sector. We currently have a plan to subsidize passenger traffic until 2021. It involves large amounts of money. People would not be able to afford to travel on these trains if ticket prices were high enough to cover all the costs. The Pendolino trains are an exception: tickets for them are expensive and they are not subsidized. It is pure commerce. Provincial authorities subsidize regional transportation.

Ukrzaliznytsia is currently being reformed primarily in the freight sector while the passenger sector is not being reformed at all. Did the Twinning project also analyze this sector?

Majcher: Two experts from Poland and Spain will come to Ukraine in the final week of October. They will talk about tariffs in the context of the government’s responsibility to subsidize passenger transportation. There is interest in this issue. Ukraine’s regional authorities are very interested in reform of passenger transportation.

We have long-distance transportation and so-called regional transportation. In 2003, a decision was made to create the first company out of these regional transport services and subordinate it to a province. The company’s entire rolling stock was leased. However, the company managed to reduce costs by PLN 20 million after operating only on electricity for one year. This was because regional transporters covered the entire country and calculated the average tariff while this company had its own tariff. Now, the company already owns its entire rolling stock, which is new. There are about ten such companies in Poland.

Can a private investor build infrastructure with its own funds in Poland?

Majcher: No, only the owner, i.e. the state-owned PLK. Moreover, it is not a secret that about 70-80% of the money invested in railway infrastructure in Poland is European Union money.

Kopczyński: A program that provides for investment of PLN 66 billion (EUR 15 billion) in railway infrastructure was adopted in Poland two months ago.

What interest does the EU have in investing so much money in infrastructure in Poland? After all, it is not a loan but simply a non-repayable financial aid. What interest do the Dutch and Germans – for example – have in doing that? Why do they have to do it?

Kopczyński: There is an idea of the European Union as a single organism. Brussels is interested in leveling the economic and living standards of all members of the union. It is not perceived as an investment in Poland, the Czech Republic, or Slovakia but as an investment in the European Union. If we are going to ask what interest a country has in investing in another country, the answer will be obvious: none.

Still, the EU invests much more in Polish infrastructure than it invests in Romania, Bulgaria, or Lithuania, for example

Kopczyński: Poland has a population of 38 million. Investments are proportional to the population, and our population is simply much larger. I agree: it is true that we are currently getting more money than everyone is getting. However, in five years, we will no longer get money in such amounts. It will go to poorer regions.

Majcher: It will go to Ukraine.

Kopczyński: This is really the case. Back in 1997, I asked one official in Brussels why they had such a secretariat despite the fact that they traveled a lot – one week in Strasbourg and one week in Brussels, other countries – constantly going back and forth. This costs huge amounts of money, and it all has to be financed. He replied that the annual cost of maintaining the entire EU administration was lower than the cost of financing a single day of fighting during World War II. Let us also not forget that we currently have the opportunity to sit here, talk, and write this interview thanks to the European Union.

Why is the EU investing so much money in railways specifically?

Majcher: Preference is given to rail transport because it is more environmentally friendly. In addition, this mode of transport is supported by administrative measures in the European Union because road transport is more competitive in some ways.