Банкеръ Weekly

Briefs

MERGER IN BDZ DISCUSSED

On Thursday (March ...) the deputies from the Parliamentary Commission on Transport and Telecommunications discussed if the two independent companies (one in charge of transportation and one, in charge of infrastructure) within the structure of the Bulgarian State Railways (BDZ) should again merge under a common umbrella. The MPs were faced with the dilemma if they should keep the railway carrier as a separate company from BDZ's infrastructure. Due to the requirements set by the European Union, the Act on the Bulgarian State Railways was passed in November 2000, and enforced in the beginning of 2002. Under the act, as of January 1 the monopoly was juristically divided and BDZ's trade activities were separated from the repair and maintenance of its infrastructure. The State wanted to control the money allocated to railroads and prevent redirection of the funds for covering losses from transportation of passengers. The law on railway transport had not yet entered into effect when the first bill for amending and supplementing it was drafted. On December 11, 2001 it was moved to Parliament by the deputy from the Coalition for Bulgaria Petar Mutafchiev. The Council of Ministers set a new record, submiting to the National Assembly a second bill for amendments to the Act on the Bulgarian State Railways on January 2, 2002. The peak in law-making was marked by the parliamentary group of the National Movement Simeon II, which filed three weeks later (on January 23, 2002) a third (presently the last) bill for amendments to the same act. So, this week, only three months after the railway carrier was separated from BDZ's infrastructure, Parliament began discussions on a draft bill, projecting that the two independent companies should merge again.The ideologist of the eventual merger Patar Mutafchiev, who presented the motives of the left opposition, is adamant that the two companies should be under a common umbrella, to be looking after the railway's share, control the finances and property, and make decisions independently of the two companies. The Council of Ministers has proposed the establishment of a new consortium Bulgarian State Railways EOOD (as of January 2002), unifying Railway Infrastructure and BDZ EAD. The idea was that the consortium should control the rehabilitation project for BDZ and regulate the relations between the railway carrier and the enterprise whiche received its infrastructure during the transitional periiod till the two companies are entirely separated. In fact, the ideas of the left opposition regarding the way BDZ should be operating have not changed since 1999 when a similar proposal was rejecetd by the then ruling majority, the UDF-coalition.Now the Parliamentary Commission on Transport and Telecommunications did the same thing - it did not accept the proposed new provisions. According to the commisssion's Chairman Yordan Mirchev, a unified structure of that kind should not be set up by a law. Two commercial companies usually establish a temporary consortium for particiaption in a certain project. Mr. Mirchev specified that the proposed structure would neither solve the problems, which both the infrastructure company and the transport company presently encounter, nor create opportunities for their overcoming. As the BANKER weekly learned, the MPs' initial intention was that the two structures would unite into a holding company. But a private Bulgarian Railway Holding AD already exists in this country. So, the railway's unification cannot be registered as a holding company. For that reason probably the Parliamenatry Commission on Transport and Telecommunications has proposed that the consortium BDZ EOOD would be transformed into a holding company not earlier than three years.Back in 2002 when the Act on BDZ was drafted it was clear to both its initiators (the Ministry of Transport and Telecommunications) and to all employed in BDZ's system that its provisions would be repeatedly amended, because the change was so fundamental that it affected the mechanism of the wheel-rail unity by which the BDZ has been operating since its establishment. The executive Director of Railroad Administration Georgi Nikolov explained for the BANKER weekly that the most important target of the new law was to make the people employed at the railways to say good-bye to their monopolistic position and learn to work in conditions of market economy.However, there are many rational provisions in the proposed draft. First of all, the money for the maintenance of railway infrastructure shall be raised. The Council of Ministers has proposed that 99% (instead of 95% so far) from the fees, paid by the carrier, should be set aside for infrastructure.The amount for maintenance of the executive agency Railway Administration has been reduced as well. The commission has also approved the principal proposal of the Transport Ministry that a certain percentage pf the fees on liquid fuels, charged under article 48 of the Roads Act, should be allocated for maintenance of railroads.The BANKER weekly has information that the railway carrier presently owes to the infrastructure company almost BGN14MN in fees for usage. The Executive Director of Railway Infrastructure Iliya Pastoushanski said he could not comment the carrier's liabilities as their were a tarde secret, but did not deny the existence of such a problem. According to him, the only way to solve it is to amend the effective law. But the draft bill for amending and supplementing the Act on BDZ, approved at second hearing by the Parliamentary Commission on Transport and Telecommunications, does not project any provisions in that respect.

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