SwedeRailKOSOVO RAILWAY PROJECTSIDA
DRAFT FINAL REPORT
31-12-2003
RESTRUCTURING OF RAILWAYS
IN
KOSOVO
MANAGEMENT SUPPORT
Contract number C 81357
TABLE OF CONTENTS
1.INTRODUCTION
2. BACKGROUND
2.1 Railway Network
2.2 Rolling stock and maintenance
2.3 Railway traffic
2.4 Organisation
2.5 Recovery plan for the Railways in Kosovo
2.6 Restructuring of the Railways and railway business
3. THE PROJECT
3.1 Objectives
3.2 Fulfilment of the Main, Specific and the Immediate Objectives
4. COMMENTS TO THE LFA MATRIX.
4.1 Development objectives
4.2 Immediate objectives
4.3 Outputs
4.4 Activities
5. OUTPUT FROM SEPTEMBER 2001 TO DECEMBER 2003
5.1 Organisation
5.2 Human Resources
5.3 Finance
5.4 Marketing
5.5 Operation and Rolling stock
5.6 Infrastructure
5.7 Gender Equality
5.8 The work environment
6. METHODS FOR TRANSFER OF KNOWLEDGE
7. PROJECT MANNING
8. FINANCIAL MATTERS
9. PRE-CONDITIONS AND RISKS DURING THE PROJECT
10. MONITORING AND REPORTING
11. LESSONS LEARNED
12. SUMMARY
13. FUTURE
14. OTHERS
APPENDIX
1.LFA Matrix10. Management Handbook
2.105-Points Program11. Management Training Program
3.Actual Budget Project12. Gender Report
4.Manning Schedule13. Program Seminar in Sweden
5.EAR Investments14. Audit Operational Review and
6.Railway Network Financial Statements
7.Organisation15. Summary Recovery Plan
8.Business Plan16. Legislation Railways in Kosovo
9.Development of transport volumes, revenue
and costs. Annual Report 2001, 2002. Result Jan-Aug 2003
1.INTRODUCTION
After the war of Kosovo, Sida allocated considerable resources for humanitarian
aid mainly directed to the refugee camps in Albania and Macedonia. When the refugees had returned to Kosovo the humanitarian assistance continued with mine-clearance, staff-support to the health sector, agricultural support and construction of houses and health centres. On top of that 17 MSEK of the Swedish annual contribution to the UNHCR was used for the Kosovo refugees.
In addition, Sweden supports the UN administration of Kosovo (UNMIK) and has contributed to the examination of war crimes. Swedish civilian police and a peacekeeping battalion are stationed in Kosovo.
A large part of Swedish assistance to Kosovo focuses on rebuilding the province’s infrastructure, and house reconstruction through integrated area programs.
Sida has assisted the Railways in Kosovo with rehabilitation of workshops and procurement of spare parts.
Sida has also financed a study resulting in a recovery plan for the Railways in Kosovo.The study provides all information and facts collected, including an assessment of the findings, which constitute the basis for the recovery plan. The recommendations given in the report support the view that the railways need urgent attention in order to fulfil the requirements assumed in the lowest estimate scenario i.e. “moderate economic recovery, low railway competitiveness”. Except for the main issues, i.e. transport policy and reorganisation, there was an immediate need for management and equipment support for the infrastructure recovery as well as within operations, rolling stock, administration, marketing and finance.
2. BACKGROUND
2.1 Railway Network
The railway network in Kosovo consists of 330 km of single track, non-electrified,standard gauge, mostly passing through relatively mountainous terrain with steepslopes and sharp curves. Due to the topographic conditions, the railway lines are characterised by a multitude of bridges, tunnels and other structures. In total, the network comprises 115 bridges with an average bridge length of 23 metres. About 60% of the bridges are steel bridges of different types, 36% are concrete bridges, and the remaining are old stone bridges.
The network comprises two lines, one north-south and one east-west that cross at Fushe Kosove/Kosovo Polje, and one branch line between Kline/Metohija and Prizren. There are also numerous industrial sidings.
In principal, Kosovo is connected by railway lines to its northern neighbouring regions(Serbia, Montenegro) and further to the western Balkan countries as well as Central Europe. The southern exit connects Kosovo and Macedonia directly, with transport routes to Greece, Bulgaria, Romania, etc. The northern routes to Serbia were, however, interrupted. Kosovo had thus only one access to the international railway network, i.e. through Macedonia. The Northern route was opened for traffic in December 2002.
Kosovo is not integrated directly in the system of Pan-European Corridors.
Traffic on the lines to Peje/Pec and Prizren ceased in early 1998 due to security concerns. On the line to Besiane/Podujevo, traffic has been discontinued since a number of years back. The section between Fushe Kosove/Kosovo Polje and the airport suffered bomb damages during the war. In August1999, KFOR, re-established traffic between the Fushe Kosove/Kosovo Polje and Volkovo in the south for KFOR and humanitarian supply needs.
At present the North-South line is opened for traffic from Volkovo in FYROM to Leshak/Lesak in the North.
KFOR also repaired the Fushe Kosove/Kosovo Polje – Peje/Pec line in November 1999 as well as the Peje/Pec-Prizren line. Major repair works performed by KFOR since June 1999 have comprised replacement of damaged rails and sleepers, reconstruction of bombed stretches of railway bridges in Mitrovice/Mitrovica and Pantina, as well as overall maintenance.
Two adjacent railway under-bridges, about 10 km north of Zubin Poroks/Zvecane, were blown up on 22 March 2000. The design and reconstruction work for the bridges was financed by Sweden and the new bridges were completed in early 2001.
The track and infrastructure were in need of extensive rehabilitation. Rails on most of the system had reached the end of its useful life and the ballast was either soiled or was too thin.
The state and the level of the signalling system varied between the more or less well equipped North-South Line to Lines with only very basic and obsolete systems without exit signals and exclusively manually operated turnouts or without any installations at all.
The backbone of the telecommunication system consists of buried copper cable along part of the North-South Line, open wire lines and open wire lines on
wooden poles. Train radio systems did not exist. The telecommunication system
was in a bad condition, lines were damaged or destroyed, cut through or even stolen.
A radio communication system covering the whole track network was installed during 2002.
2.2 Rolling stock and maintenance
The situation of the Railways in Kosovo in terms of locomotives and passenger coaches was, despite a delivery of four locomotives from Norway, very poor and of a large variety of brands. There were only three operational locomotives and 12 passenger coaches remaining from the war. There were a lack of proper maintenance documentation, spare parts and tools, and the staff was inexperienced.
The existing fleet of freight wagons is quite large. The updating of available inventory has shown that at least 422 freight wagons, of which 150 4axle wagons, exist in the railway network and are estimated to be mainly in poor condition.
There is a locomotive and a wagon workshop in Fushe Kosove/Kosovo Polje. These workshops have been built in the year 1985 and used for light maintenance and repairs and were used only for urgent repairs before the war, not for preventive maintenance.
Track maintenance work was heavily neglected. The maintenance back log and reconstruction demand will take years to catch up, and the present organisation for inspection and maintenance as well as track machinery are not sufficient for the future maintenance volume.
2.3 Railway traffic
In the 1980s, the railway freight traffic amounted to about 3 million tons per year. Most of this was bulk commodities needed in or produced by the mining, metallurgical and chemical industry. Passenger traffic was about 4 million passengers, mainly over short distances.
At present the freight traffic is much lower and varies significantly from month to month, transporting mainly KFOR supply and commercial goods.
The commercial traffic has increased radically since 2001.
The freight transport demand is mainly covered by road transport. Therefore, the railway operator must increase the commercial railway business in an established competitive market that has all the attributes of being fully liberalised.
The demand for passenger services is well covered by bus services and by private car transport at present, with the exception of the passenger service by rail between Deneral Jankovic/Hani I Elezit and Leshak/Lesak called the Freedom of Movement Train. The Freedom of Movement Train is based on a commercial contract between UNMIK and UNMIK Railways. The passengers can use the train for free.
2.4 Organisation
UNMIK took over the railway administration on 1 November 1999. Since December 2000, salaries have been paid regularly to the work force, which has been trimmed down from 2,500 to 620 employees today. The Railways in Kosovo is thus a relatively small business operation.
UNMIK and the Railways have been working to restart railway operations on a commercial basis in order to generate revenue. Once the commercial operations begun, all users, including humanitarian and military organisations, had to pay for transporting their goods. These fees helped the Railways to balance its budget on operating costs, which were the requirements from UNMIK as temporary owner of the Railway.
The organisation had a very wide control span.Under the Management
Board there were six operative departments and four support departments.Three levels make the organisation deep.There were a total of 20 service areas, two to four in each operative department.
The size of the departments varied from 250 to 3 employees.The Operation Department was by far the largest one, comprising almost half of the employees of the Railways. The commercial and revenue control services had a remote position in the structure. They were also separated from each other, whereas the technical services were situated near the centre.
The organisational structure was not designed for meeting market demands.The organisation had to be flatter, with fewer levels and with built-in flexibility. Roles and responsibilities had to be defined. The authorization had to be clarified on management level. All employees had to be fully trained and prepared to meet the demands of the enterprise, coherently and pro-actively, fully comprehending the consequences of every operative step.
A radical transition of the organisational structure was required to enhance efficiency and flexibility.
Freight transport services, and the passenger services, are the main revenue generators together with earning from Railway real estate. They occupy the dominant positions in the proposed organisation structure.
2.5 Recovery plan for the Railways in Kosovo
As part of the international relief and reconstruction efforts for Kosovo, Hifab International AB was assigned by Sida to undertake the study of, and prepare a recovery plan for the railways in Kosovo for the benefit of UNMIK´s Department of Transport and Infrastructure and the Railways in Kosovo. The work was carried out from July to November 2000. Summary Recovery Plan see Appendix 15.
The recovery plan for the railways was to cover a period of 2 to 3 years, and to make recommendations within the overriding objectives that the organisation should be adapted to the demand for railway services, be managed commercially, require minimum subsidies and not employing more staff than necessary.
The recovery plan is commercially focused and was built up from a market demand base. The technical capacity of the railways was therefore evaluated on the basis of the ability of the railway to deliver services to meet the projected demand. The organisation was evaluated in terms of its ability to mobilise resources to supply the services required by the market.
2.6 Restructuring of the Railways and railway business
The Railways in Kosovo are not unique in the need to restructure and reposition itself in the market. Along with the other state-controlled enterprises, the railways must provide a “value added” service. The situation requires the railways to improve efficiency to support the economic recovery.In the short term, management contracts have proven to be the most useful means of restructuring state enterprises such as the Railways.
Rail transport operations in Kosovo should be considered as a new-business start-up. Many of the previous railway transport customers that were operating in the region are no longer present. The challenge facing “owners” and management now is to restructure and equip the present railway organisation to recognise the opportunities offered by the market and to be able to mobilise and motivate its resources to meet the demand.
The optimum solution would be to allow an incorporated entity to operate the railways and railways transport operations, i.e. a vertically integrated railway. Strategic decisions to make use of the best available options will need to be taken. In the meantime, action must be taken to support the demand for infrastructure recovery, operations, rolling stock and finance.
3. THE PROJECT
Following the recommendations in the HIFAB report, Sida decided to support the Railways with a Management Support project.
The Swedish Consultant Company SwedeRail was contracted for the management support and provided staff that temporarily took over the responsibility as managers in the railway organisation. The support was divided in two phases of six months each. The contract was in the end of year 2002 prolonged with additional 12 months. The work commenced in mid September 2001 and was finalised in mid September 2003.
The international management team was also responsible for a foundation of 3 MEuro from EAR. In co-operation with the local management and EAR an investment plan was elaborated and realised according to EU rules.
Railways in general and Railways in Eastern Europe in particular during the communist regime have always been an important part of the State organisation. Railway workers were employed for life and there was always money to be expected from the Government, sooner or later. UNMIK Railway employees have been brought up in this system. The transition into a market economy is consequently a dramatic change and the implications hard to convey in a convincing manner. The consequences concern not only the company as such but also the employees. To survive in a competitive environment, employees must learn to cooperate, to communicate, to inform and they must develop a joint focus for their actions. They must be made to understand that in a market economy it is mainly their success in the market place that decides the future and whether salaries can be paid or not.
Employees and in particular the managers must be brought to understand how their actions in their own areas of responsibility interact with other areas of responsibility and how this influences the financial situation of the whole company, directly or indirectly. In the olden days, staffs was not supposed to mix or interfere in other parts of the company, it was none of their business.
3.1 Objectives
The main objective of the restructuring of the railways in Kosovo was to create a railway that is adapted to the demand for railway services and managed commercially with a minimum of subsidies and not employing more staff than needed.
The specific objective of the Swedish assistance was to, by management support, increase productivity and local capacity to run the railway organisation commercially.
The consultant, SwedeRail, engaged for the management support should:
(a)Introduce a modified management system, including organisational changes, to achieve increased productivity of the Railways’ operations.
(b)Provide necessary transfer of knowledge in clearly defined areas within the Railways, to enable railway staff to run the organisation commercially.
The immediate objectives of the management support were thus:
- Increased productivity of the Railways in Kosovo; and
- Local capacity to run the organisation commercially
These objectives should influence all work, implying that preparation for a planned transfer of all functions to the responsible counterparts shall be made, enabling a successive phasing out of the consulting services.
3.2 Fulfilment of the Main, Specific and the Immediate Objectives
Main Objective
UNMIK Railways is now managed commercially. Passenger traffic is in function from Hani I Elesit/Deneral Jankovic in the South of Kosovo to Leshak/Lesak in the North. There is also passenger traffic from Fushe Kosove/Kosovo Polje to Gracanica. UNMIK Railways has a commercial contract with UNMIK to operate the so-called “Freedom of Movement Train”.
Neither on the East-West line from Prishtina/Pristin to Peja/Pec nor the line between Klina and Prizren has any passenger traffic. These lines are not profitable and UNMIK is not interested in a commercial contract.
All freight traffic is based on commercial contracts. Even if the Administrative Boundary in the North between Kosovo and Serbia is opened all freight transports are coming in and out of Kosovo from the south through Macedonia. The reason is mainly the 5% transit fee on the freight value if the Belgrade-Kraljevo-Leshak/Lesak line is used to enter Kosovo. On corridor 10 this fee dose not exists.
UNMIK Railways employed, during 2002, around 70 Kosovo Serb railway workers to enable traffic from Mitrovica to the Administrative Boundary to Serbia in the Northern part of Kosovo. The organisation is overstaffed but negotiations are ongoing to reduce number of employees.
Specific Objective
A modified management profile has been introduced and the organisation has been changed a number of times to increase the productivity. A more flexible way of working has been implemented. Still there are influences from the old way of working and the network and clan culture has an effect on the implementation of a modern management profile.
Transfer of knowledge has been provided to all Sections in the organisation.
Knowledge is only one component when you define competence. Other components are for example experience and willingness to use your knowledge. The knowledge is useless if you are not prepared to use it in the daily work. It cannot be stated that everyone in the daily work uses all knowledge transferred during the project.