Railway to get massive overhaul

VILNIUS - The state-owned Lithuanian railway Lietuvos Gelezinkelai announced an ambitious plan to solve the railway's money problems and its incompatibility with the rest of Europe. By late 2000 the company could be restructured into several different components, some of which will then be privatized, said Rimantas Rackauskas, vice minister of transport and communications.

Rackauskas predicts that the company could be divided into four to six joint stock companies concerned with different aspects - infrastructure, freight, passengers, locomotives and wagons, and property management. There could be a new rail technology institute as well as a new company to work on narrowing track gauges.

Track gauges pose a behemoth of a problem for Lithuania. Most Lithuanian track gauges are 1,520 millimeters wide, while the standard European gauge is 1,435 millimeters. This means that Lithuanian trains have to stop at the Polish border to have their wheels modified to fit the narrower tracks. This slows them considerably and scares off business travelers.

However, one consultant working on the restructuring opposes changing the track gauge. Aleksandras Abisala, of A. Abisala and Partners, thinks leaving the gauge half-integrated between the EU's system and that of the former Soviet Union might pose "a good business opportunity" for Lithuania.

"It may be beneficial for Lithuanian railways to serve as a sort of bridge," Abisala said. "I understand that business between Russia and EU will increase and therefore providing possibility to transport goods. I am not an optimist about changing the gauge."

The catalyst for changing the rail company is a law currently being drafted by the Ministry of Transport and Communications, Lietuvos Gelezinkelai, and consultants. Approval, said Rackauskas, should happen before 2000.

"When Parliament approves the new law, our ministry will be able to do this restructuring. In our plans this restructuring will continue into the next year."

By the end of 2000, Rackauskas expects some but not all of the companies to be privatized.

"The infrastructure company will remain state-owned," he said. Restructuring will be financed by the railway and should cost roughly 600,000 litas, Rackauskas added.

Compared with the other Baltic States, Lithuania has perhaps the most ambitious restructuring plan. The Estonian railway, Rackauskas said, was divided into two companies, freight and passenger. The passenger company has already been privatized. In Latvia, there is only one privately owned company concerned with rail transportation, and it works only in the Port of Ventspils, says Rackauskas.

But there still could be a long way to go before even a privately held Lithuanian rail company would make a worthy investment. A railway worker who asked his name be withheld said that the railway company was riddled with old, outdated equipment and slow service.

"They have to look at freight to become profitable," he said. " If it is a crossroads, and it is a transport state, you've got to talk about freight. Passengers just won't do it. Fares are low here, but service is slow. [Trains are] not fast enough for business people."

"Nobody knows whether moving passengers [will be] a profitable business or not," said Abisala. "First, what a restructuring can bring is transparency and an understanding of whether the mode of transportation is profitable at all. But the more important thing is, without external assistance by the state, it is not possible to make passenger transportation a profitable business. And the state has yet to decide."

One of the biggest hurdles facing the restructuring is dealing with the singular massiveness of Lietuvos Gelezinkelai, said Abisala.

"The company is huge in Lithuania terms. The railways themselves, in any country, are a kind of state within a state," he said. But then again, he said, there are some good success stories in Sweden, Germany and the U.K where they created privatized systems from sprawling state-run rail systems.

The restructuring, Abisala said, will have enormous benefits for the Lithuanian rail system in terms of transparency, capacity, and efficiency.

But so far, attitudes within the railway industry could be providing the best foot forward, Abisala said.

"The people in it understand that there's no way to avoid change, therefore they are starting at least to think how and where to move, how to make things work."