Political Liability. The Moldovan Railway’s "Clinical Death" and Its Consequences

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Anton SHVETS The 2021st year is becoming a defining year for the railway industry in Moldova. The enterprise is being in a critical situation and a commercial debt. The disaster with salaries to employees paying and the protests of the railway workers highlighted the colossal problems of the railway industry and the need for an urgent change in approaches to the administration of this asset. The fact that the Moldovan Railways (CFM) key state-owned enterprise has serious problems, became clear a long time ago. The emergency situation in the industry after the 2008 global financial crisis coupled with a radical drop in freight traffic is typical for the region as a whole. The railway enterprises of neighboring Ukraine feel no much better, since the falling apart period began even earlier there than it started in Moldova; however, in Ukraine this period is being delayed due to the significant transit potential of the huge country and the simply colossal size of the railway infrastructure inherited from the Soviet Union. Nevertheless, the CFM state-owned enterprise, even after the decrease in the volume of freight and passenger traffic, kept remaining an object of various illegal enrichment schemes and management quality problems. Starting with the first Alliance for European Integration coming to power, the CFM’s leadership used to be appointed on party-political principles and that did often allow people or financial managers with no experience in the industry appearing within this sphere; they were exclusively tooled for extracting commercial benefits with no analysis and planning. All significant investments within the infrastructure (both state and international ones), rolling stock and enterprise informatization did come each time across opaque gray schemes or plainly wrong investment object’s choices. Often, when choosing contracts, the geopolitical factor was taken into account; thus, for example, rail cars were carried out for modernization not to Russia but in Kazakhstan to use there some American technologies and at exorbitant prices. The company’s financial well-being was undermined when the Chisinau-Cahul-Giurgiulesti railway line construction project failed; it is worth noting it had a planned investment of one billion lei. None of the CFM’s leaders or the government wanted to take responsibility for revising the project in the context of the global financial crisis. As a result, the slop-built railroad track is in critical condition and the record low throughput makes it practically meaningless. However, hundreds of millions of lei were washed out of the enterprise's budget, 174 of which the Moldovan government still owes to the enterprise. It is worth recalling that this amount is exactly double the current 90 million in salary arrears to the CFM employees and provoked the February and March protests. However, after the railway to the Giurgiulesti port fiasco, the CFM leadership’s aspiration to projects with a geopolitical background continued. Over the past five years, there’s being actively discussed the Berezino-Basarabeasca railway restoration and partial construction for one of its section that dismantled at the end of last century. It is not clear what’s the financial benefit of this project. Unless there will be an opportunity to abandon using the Transdniestrian railway section that looks very attractive for Chisinau and Kiev within the framework of geopolitical logic. Moreover, you can always make money on contracts. Refusing to carry out urgent reforms in the railway industry and abiding the policy of temporary workers stopped the CFM in its development. As of today, the company employs at least 6 thousand employees whilst a few years ago there were about 10 thousand of them. For comparison, according to the local authorities, about 600 people are employed within the Transdniestrian region railway industry, i.e., 10 times less, while the size of the railway track on the right-bank Moldova’s territory is only 4 times less. The European Union recommended a reform and proposed dividing the CFM assets into three enterprises: for passengers; for freight transport; and for railway infrastructure maintenance, but the reform has been postponed for about 5 years. Although, transferring the railways repair and modernization item to budget financing could significantly improve the financial situation in the industry. The same goes for passenger transportation. The accelerated pace of development of the air transportation market, which made it possible to significantly reduce the cost of air travel and increase the number of flights and destinations, made the existence of a number of international routes meaningless. In turn, taking into account the overall compactness of the country, the internal passenger routes are used practically only by the CFM employees, who have appropriate benefits. A complete revision of passenger rail transportation concept is required in terms of cost, logistics and comfort. Meanwhile, part of the enterprise's problems could be solved if increasing freight rail traffic, including transit. This requires revisioning the approach to the transportation cost formation, as well as an active international work. Thus, transit traffic has been reduced largely due to mutual restrictions between Ukraine and Russia. Clear guarantees of transportation safety and a pragmatic depoliticized approach could return many forwarders to the traditional “Moldovan route” between Ukraine, Russia and the Balkan countries. Only a real increase in the volume of cargo transportation to 7-8 and even 10 million tons per year (depending on the types of cargo) could stabilize the CFM’s financial position and stop debt accumulation which reached 665 million lei in February this year. This largely depends on the import supplies of raw materials and the export of finished products from key industrial enterprises in Moldova, including the metallurgical plant on the left bank of the Dniester and cement plants in Rabnitsa and Rezina. Paradoxical as it may seem, the rise in prices for petroleum products resulting from a cartel conspiracy may have a beneficial effect on rail transportation since the cost of fuel there has a smaller share in the final transportation cost. Also, extremely important is the European Union support and Brussels’ financing in terms of modernizing the railway infrastructure and rolling stock. Measures to sell unused property - wagons, wheelsets and even buildings, as well as reducing the number of personnel can have a beneficial effect. However, this work must be taken up as soon as possible, which is impossible in the current state of a political crossroads turning into a dead end. No political force with a limited credit of confidence will be able to afford any radical measures to improve the financial situation at the enterprise. The current steps and comments are similar to attempts to disassociate themselves from the issue and shift responsibility to another party or the previous leadership of the roads. In this sense, railway workers’ protests get an additional political impetus, since they become not only a manifestation for their economic rights but also a call for good governance and overcoming the crisis of power in the country.