Estonian railway privatization takes the first step forward

TALLINN - The state-owned Estonian railway company Eesti Raudtee has steamed up for privatization to get the required investment for the passenger transportation sector.

Eesti Raudtee has been struggling to make both ends meet since independence. Last year the company earned its first profit of 12 million kroons ($857,000) on cargo transit, but it still needs 400 million kroons to modernize and repair its infrastructure.

While the cargo transportation sector has been improving every year, passenger transportation has not been doing well. Consequently, the number of passengers has been decreasing since 1993. Over 16.6 million passengers used Eesti Raudtee's trains in 1993, but in four years their number shrunk to a mere 3.4 million.

"International cargo transportation has always been a strong side for Eesti Raudtee because railway accounts for 95 percent of Estonia's transit," said Liia Rikson, Eesti Raudtee public relations manager. Rikson could not say the same about passenger transportation.

The state tried to give the passenger transportation sector a boost by announcing an international tender for Eesti Raudtee's international passenger train traffic operator.

The Estonian railway company operates four international routes - two to Moscow through Narva and Tartu, one to Sestokai and one to St. Petersburg.

According to Rikson, the company received three bids from foreign and Estonian companies by the Aug. 1 deadline.

The winner of the tender will set up a joint venture with Eesti Raudtee, taking over at least 51 percent of shares in the new company, which will be responsible for passenger train operation.

The state railway company will in turn make a non-cash contribution to the share capital with coaches, engines and railway stations accounting for a total of 19.5 million kroons.

The competition rules keep the bidders anonymous, but the Baltic News Service (BNS) names the likely contenders.

According to BNS, the Finnish railway company, the British company Jarvis, the Russian Oktyabrskaya railway company, German and Swedish firms and the Estonian company Hoiupanga Investeeringud could be among the possible bidders.

The commission, appointed by the Estonian Ministry of Transport and Communication, must look through the bids in 15 days to determine whether they comply with state requirements. Transport and Communications Minister Raivo Vare will endorse the winner selected by the commission by mid-September.