Serbia and Montenegro: Awaiting for railway liberalization

As the liberalization of the railway market is a prerogative of the free market and democracy, finally we can take a look on Balkans too, due to the democratization process started in year 2000 and as of a pro-EU government has been established this year in Serbia. Bulgaria and Romania as already member states of the European Union had to face with this challenge few years ago. Today they are involving more and more competitors to their market increasing the competition and the quality of services.
Meantime what is happening in Serbia and Montenegro? Why we can not hear about entering of new players on the railway business? Why only those departments are offered to be privatized which have no direct contact with railroad transport? There are yet lot of questions we try to give an answer to have a better overlook about the situation in two former Yugoslavian republics. Today the legislation already offers the base of a competitive market, however the real obstacle is in the monopolistic behavior of ZS (Serbian Railways) and ZCG (Railways of Montenegro).The regulations are defined in “Law of Railways” in Serbia enforced at 1.March.2005, in Montenegro form 1.January 2005. As the law was written and prepared still in the Union of Serbia and Montenegro the final act has almost no differences between the states after peaceful separation.
In both of the states: "infrastructure is, except private sidings, asset in general use, state owned and is available for use, under equal conditions, to all interested operators" (Art.1 MN) It means national railway companies does n`t owe the infrastructure, they have no autonomous right to dispose with it but only have the right to use it as other "interested operators". As so far only national companies owe the Security certificate and License for management of infrastructure, they are the only authorized subjects to deal with assets . State administration does n`t have any independent legal entity to practice its right directly. Therefore restructuring and dividing on infrastructure and passenger parts of the national monopoles would be vital to solve this delicate legal relation.In Serbia municipalities have the right to request management of infrastructure, only if the state exclude those assets from general use, while In Montenegro it is possible to take infrastructure in concession for local as well as international legal entities. (Art 8.MN)Despite the law is on force already more than 3 years, so far any section was not given to municipalities neither in concession. It has his reason in fact that European funds still are not available in that amount which could cover the costs of such capital projects while on the other hand there is no adequate co-ordination between municipalities to take a common action. In Vojvodina Autonomous Province which has an extensive railway network, inherited from the period of Austro-Hungarian Monarchy this law article could allow and give a chance to revitalize big part of the ruined routes closed few decades ago. Most of this routes lost their through route character only due to the changes of the borders after the World War I. By the liberalization of the frontier control between EU (Hungary, Romania) and Serbia private capital can do more than any state policy to connect these regions. For example the “Budapest-Constanta” High Speed rail line project is passing through the Timisoara(RO)-Kikinda(SRB)-Szeged(HU) line, closed after the World War II. .
In Montenegro giving concession to build infrastructure is great chance to move the railway sector. The country has year by year biggest investments in real estates on the seaside however big potential has the Port in Bar too, which has a constant grow of traffic mainly in container loading.

The transport management is available without limitation if the subject fulfill basic requirements. "Infrastructure may be used by an operator for public transportation, as well as by an enterprise, that performs transport for its own needs, if it has:1) A Transport License; and 2) Transport Safety Certificate, issued by the competent authority of state management in the State Union of Serbia and Montenegro, i.e. in other country on the reciprocity basis" (Art.10MN) Mentioned documents are issued by the Directorate of Railways in Serbia while in Montenegro by Directorate of Transport.
In Serbia the Directorate formed by the Law of Railways issued few certificates since the beginning of its activity (05.May.2005) but these certificates without exception are referring to the monopolistic railway operator ZS and its subsidies. However the problem lays in the national operator "Zeleznice Srbije" and "Zeljeznice Crne Gore".
In both of the countries the third condition is to sign a contract about infrastructure exploitation with the mentioned state owned companies . In Serbia we have to wait until "ZS" works out the methodology to quote the fee of the use of infrastructure. The second task is to establish a program of financial consolidation which includes to divide previous debts - accumulated by the predecessor of title JZ (Jugoslovenske Zeleznice) from the costs of current activity.
So far there was no interest to take the necessary action in lack of a clear strategy and because of unstable political environment. The internal communication in the company to employees also emphasizes the black side of competition, repeating what could happen if "strong international companies take the most profitable routes". It is obvious, this railway policy obstructs generally the changes on the market. As the new general director Mr.Milovan Markovic appointed at the beginning of November still we can not say anything about his activity and strategy. Soon we will give him a chance to share more details about his visions and plans regarding ZS with readers of Railway Market.
In Montenegro "Zeljeznice Crne Gore" after restructuring divided on 2 limited liability companies: Infrastructure Ltd (doo. Infrastruktura). and Transport Ltd (doo. Prevoz). The tender for privatization "Transport Ltd" is planned to be appointed until the end of the year. The transport department includes freight and passenger transport and rolling stock maintenance. State of Montenegro declares that wants to sell its shares to a strong regional leader which can integrate existing route Bar-Podgorica-Serbian border into European railway system. It is possible only with connecting to Corridor X which intercept Serbia from Hungary and Croatia toward Macedonia and Greece. Public invitation for concession arrangements on railway stations and plots on attractive locations will be announced also until the end of the year.
Common characteristic of the 2 railway companies is the lack of rolling stock - freight and passenger cars as well as locomotives. Due to this fact there is no transport at all or partly even on such a routes where infrastructure could serve market needs. Good example, which globally reflects the whole situation in the region is the newly rebuilt rail bridge at Bogojevo on Danube river between Croatia and Serbia. This line could open a transit corridor from Subotica hub toward Zagreb and Adriatic region, connecting it with South-East Hungary and Romania, but there are no plans to launch regular traffic in the new time table, as neither ZS nor HZ (Croatian Railways) have no enough rail cars to serve Subotica-Vinkovci route.
Changes are already question of time, let`s hope a short time!

Basic datas of ZS (source:zeleznicesrbije.com)
Line mileage 3,808.736 km
Electrified lines (25 kV, 50 Hz AC) 1196.051 km
Main arterial route 1,767.488 km
Private sidings 772.568 km
Track gauge 1,435 mm
Maximum gradient 27,41´
Maximum axle load 22.5 t
Tractive stock 417
Passenger rolling stock 797
Wagon stock strength 16,288
Number of employees 22,271

(published in Railway Market magazine - December 2008)