PKP staves off new strike wave with public investment plan
PKP has been in dire need of massive investment for many years, but frequent calls for assistance have fallen on deaf ears as successive governments have put public transport at the bottom of a list of spending priorities.
Political backing for the subsidy was found after rail unions threatened a season of industrial action. In November, state austerity proposals that would hit PKP hard were thwarted by a similar threat by rail workers.
A nationwide strike was avoided by a matter of hours thanks to some shrewd negotiating by Jerzy Hausner and the Solidarity trade union.
Then, PKP managed to preserve its already difficult position and could only expect funds from the EU. Now, and also thanks to the threat of strikes, direct subsidy from the Polish government itself has been found to the tune of zł.550 million, bringing PKP's investment budget up to the zł.1 billion mark.
The funds had been promised for many years, though PKP's needs had been put at the end of the line behind other spending priorities. Of much concern to transport sector specialists, the government only appears to act to help the industry when threatened with industrial action.
"Infrastructure and transport links are possibly the biggest problems in Poland for investors," says Bruno de Thomas, head of the European Commission Delegation in Warsaw. Indeed, every new FDI report that has focused on Poland during the last two years points to the country's slow transport system upgrade as a failing that may be costing the country valuable foreign investment. Finally, and only thanks to being intimidated, politicians are starting to think the same way.
"Fierce competition will arrive when the market liberalizes in 2006," says Boston Consultancy Group Transport Consultant Peter Ulrich, "so PKP has two years to upgrade its rolling stock before major European rail companies arrive." Ulrich calls for a long-term strategy to be employed as soon as possible, which takes into consideration alternative sources of funding to complement subsidies, such as public-private partnerships and sale-and-leaseback agreements.
The new funds will be mainly used for the purchase and upgrade of new rolling stock that will be able to compete with private-sector rivals in the near future. "More of these upgrades would be available with private sector money," says Ulrich, "but investors need a business plan and they need to know that the government is serious about making a lasting improvement to Poland's desperate rail system."
The main issue looming ahead is rail privatization, which needs to be prepared for with adequate investment, strategic planning, and financial mechanisms. Ulrich fears that without early commitment from the government, the eventual privatization process is at risk. "Committed state involvement with the sector is vital," says Ulrich, "Certainly, track must not be privatized as it was in the UK, which was a failure."
In related news, the state rail company's regional subsidiary, PKP PR, is proposing to convert its zł.1.7 billion debt into equity. PKP PR President Janusz Dettlaff argues that being relieved of debts will allow him to regionalize transport and boost attractiveness to future private investors.
Political backing for the subsidy was found after rail unions threatened a season of industrial action. In November, state austerity proposals that would hit PKP hard were thwarted by a similar threat by rail workers.
A nationwide strike was avoided by a matter of hours thanks to some shrewd negotiating by Jerzy Hausner and the Solidarity trade union.
Then, PKP managed to preserve its already difficult position and could only expect funds from the EU. Now, and also thanks to the threat of strikes, direct subsidy from the Polish government itself has been found to the tune of zł.550 million, bringing PKP's investment budget up to the zł.1 billion mark.
The funds had been promised for many years, though PKP's needs had been put at the end of the line behind other spending priorities. Of much concern to transport sector specialists, the government only appears to act to help the industry when threatened with industrial action.
"Infrastructure and transport links are possibly the biggest problems in Poland for investors," says Bruno de Thomas, head of the European Commission Delegation in Warsaw. Indeed, every new FDI report that has focused on Poland during the last two years points to the country's slow transport system upgrade as a failing that may be costing the country valuable foreign investment. Finally, and only thanks to being intimidated, politicians are starting to think the same way.
"Fierce competition will arrive when the market liberalizes in 2006," says Boston Consultancy Group Transport Consultant Peter Ulrich, "so PKP has two years to upgrade its rolling stock before major European rail companies arrive." Ulrich calls for a long-term strategy to be employed as soon as possible, which takes into consideration alternative sources of funding to complement subsidies, such as public-private partnerships and sale-and-leaseback agreements.
The new funds will be mainly used for the purchase and upgrade of new rolling stock that will be able to compete with private-sector rivals in the near future. "More of these upgrades would be available with private sector money," says Ulrich, "but investors need a business plan and they need to know that the government is serious about making a lasting improvement to Poland's desperate rail system."
The main issue looming ahead is rail privatization, which needs to be prepared for with adequate investment, strategic planning, and financial mechanisms. Ulrich fears that without early commitment from the government, the eventual privatization process is at risk. "Committed state involvement with the sector is vital," says Ulrich, "Certainly, track must not be privatized as it was in the UK, which was a failure."
In related news, the state rail company's regional subsidiary, PKP PR, is proposing to convert its zł.1.7 billion debt into equity. PKP PR President Janusz Dettlaff argues that being relieved of debts will allow him to regionalize transport and boost attractiveness to future private investors.
