MINSK, February 21, 2019 – Organizational restructuring, tariff reforms, and strategic use of digital technologies would boost the competitiveness of the Belarusian railway sector, improving rail passenger experience and contributing more to the economy, says a newly published World Bank Railway and Logistics Sector Study for Belarus.
Over the last decade, the railway sector’s share of transit traffic in Belarus has fallen from 35% to 29%, a decline caused largely by increased competition from road transport, combined with challenges in the railway sector’s organizational structure and tariff policies.
“Belarusian Railways isn’t a company in the conventional sense – it’s a Public Association that supervises 29 different state-owned legal entities, each with its own balance sheet, statement of accounts and assets, and decision-making processes,” says Alex Kremer, World Bank Country Manager for Belarus. “Consolidating all these entities into a single state-owned enterprise would help improve the sector’s overall management and competitiveness.”
The study recommends a new strategy for Belarusian Railways that includes revaluation of assets, changes to accounting practices, and development of commercial strategies and business plans both for freight and passenger units. The study also calls for the strategic use of digital technologies to improve customer service, increase operational efficiency, and support infrastructure management.
In Belarus, most rail prices are regulated by the state. While international passenger tariffs have increased, regional and local passenger service tariffs have declined considerably, compared with inflation and earnings. As such, Belarusian Railways has had to cross-subsidize passenger services by charging higher tariffs on its freight business, which adversely impacts its competitiveness against foreign carriers and road freight.
“Prices for passenger transport by rail are so low that a 30km rail journey costs less than a metro ride in Minsk,” says Winnie Wang, World Bank Senior Transport Specialist. “An obligation to cross-subsidize loss-making passenger services, which should be a public service, has prevented Belarusian Railways from making critical investments in its freight network, and even threatens the railway’s financial viability. To enhance competitiveness, therefore, Belarusian Railways should review its tariffs and set its own prices.”
As an important first step in the long-term process of transforming the railway sector, the study suggests that Belarusian Railways undertakes analyses of freight and passenger markets and forecasts, investment needs and requirements, and organizational structure.