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PRESS RELEASE December 7, 2017

Bosnia and Herzegovina Committed to Modernizing Transport Sector with World Bank Support

WASHINGTON, December 7, 2017 — WASHINGTON, December 7, 2017 — Key transport sector reforms in Bosnia and Herzegovina (BiH) are given a boost with a new €51.30 million loan, approved today by the World Bank in support of the Republika Srpska (RS) Railways Restructuring Project. The Project will support railway sector restructuring, one of the key priorities of the RS Government, by creating a sound framework for public financing, and supporting a more commercial approach to railway management.

The aim of the Project is to improve the operational efficiency and financial sustainability of the RS Railways through financial, workforce and organizational restructuring. The overall railway restructuring plan would be implemented over the period 2018-2021 with Bank loan proceeds supporting all three areas of restructuring. 

“We expect that once this process is completed the RS Railways will become financially sustainable and will provide better services,” said Antonio Nunez, World Bank Senior Transport Specialist and Task Team Leader of the project. “This is needed in order to improve the competitiveness of the railways vis-à-vis road transport, which will result in large economic and environmental benefits and will enable companies to transport goods in a cost-effective way”.

Currently, the RS Railways transports daily fewer than 500 paying passengers for a total cost of about BAM 20 million a year. Each passenger return trip costs almost BAM 170. The vast majority of this cost is borne by the whole community in the RS, through direct public subsidy, cross subsidy from freight services and by consequent underinvestment in infrastructure and maintenance. The RS Railways offers good freight transport services and carries more tonnage per kilometer of track than most of the railways in the Western Balkans, even close to the EU average, and is in good financial health.  In order to overcome the fierce competition from road haulage, the RS Railways needs to keep freight rates competitive and reconsider the cross subsidy to passenger services that also undermines business competitiveness.

The restructuring is expected to bring productivity levels closer to regional and EU averages. For example, labor productivity in the RS Railways is the second lowest in the region and about a quarter of the EU average; the average train occupancy is less than a tenth of most other countries in the region and less than two percent of the EU average. By addressing the different elements of the restructuring, the overall performance of the railway sector is expected to improve and to reduce the burden on the public purse.

“We also expect to see positive benefits for the overall RS society”, said Emanuel Salinas, World Bank Country Manager for Bosnia and Herzegovina. “Less money spent on railways, will enable the RS Government to focus on priority areas, such as health and education; better railways infrastructure; and better passenger transport”.

This Project is part of the second phase of the BiH Transport Sector Modernization Program (TSMP) the goal of which is to improve transport connectivity of the country along priority transport links and to support improvements in transport operations and asset management practices. The Federation Road Sector Modernization Project approved in August 2016, was the first phase of TSMP aimed at improving road connectivity and safety.

The World Bank portfolio of active projects in BiH now includes 11 operations, totaling $556.68 million.  Areas of support include transportation, employment, energy efficiency, local infrastructure, environment, forestry, and water management.

For more information about this project please visit: https://www.worldbank.org/projects/P161122?lang=en

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