Liberalisation of Rail Freight in Hungary REORIENT Final Conference Brussels, 31 st May 2007

1. Liberalisation of Rail Freight in Hungary REORIENT Final Conference Brussels, 31st May 2007 Dr. Zoltán Bokor Associate Professor BUTE Dept. of Transport Economics (ex) Senior Counsellor HU Ministry of Economy and Transport

2. Contents • The national legal framework • Results so far • Ongoing procedures • Conclusions

3. 1. National railway acts • national acts (mainly) correspond to EC directives constituting the so called EU railway packages • 1993: • - independence from state • - limited access to the infrastructure • - separation of accounting systems of infrastructure managers and (integrated) rail services • 2005: • free access for RUs with operating permits • organisational separation of business units within MÁV* • - independent regulatory authorities *national (incumbent) railway company

4. 2.1. Main institutional changes • creation of legal conditions for the multi player market model • transformation of the state’s institutional involvement: • - responsibilities of the transport minister for regulating rail markets decreases • - National Transport Authority (NTA) – responsible for technical issues • - National Railway Authority (NRA) – market supervision • - Rail Capacity Allocation Unit (RCAU) – independent capacity allocation organisation

5. 2.2. MÁV reorganisation 2003 • creation of rail operations and infrastructure provision business units with separate accounting systems MÁV Ltd. Central management Background services Traction Infra- structure Passen-ger Cargo Subsidi- aries

6. 2.3. MÁV reorganisation 2005 • organisational separation of cargo unit • remaining functional separation within the integrated company → limits the autonomy of the IM* ↔ independent RCAU** MÁV Ltd. Central management Background services Traction Infra- structure Passen-ger MÁV Cargo Ltd. Subsidi- aries *These dependencies will be discussed by Dr. Péter Rónai. ** Rail Capacity Allocation Unit

7. 2.4. The Hungarian institutional management of railway system IM Divisions of MÁV, GySEV Ministry MÁV (passenger, traction) NTA GySEV (passenger, cargo) MÁV Cargo NRA Private RUs (11) (cargo) RCAU Regulatory and Allocation bodies IMs RUs

8. 3.1. The new railway policy of MET* (1) • Change of state’s roles… • owner’s role – transformation similar to the road model: • - freight – no direct operational subsidies (but indirect trough inflated access charges…); privatisation • - infrastructure management – differentiation of state owned national trunk lines and regionalised side lines; maintenance shall be covered by access charges, state investment funds are managed by the National Infrastructure Development Organisation • regulator’s role – how to answer challenges of multiplayer market: • - applying traffic organisation and safety standards (elaborated by MÁV Infrastructure unit according to the corresponding EC directives) to all market actors: appendices of the Network Statement → general regulations • - guaranteeing free access, enforcing non-discriminatory access conditions by ensuring the legal framework and supervising the relevant authorities *Ministry of Economy and Transport

9. 3.2. The new railway policy of MET* (2) • Change of state’s roles (cont.)… • order giving’s role – fair contractual relationships (instead of ad-hoc agreements affected by the current grants coming from the state budget): • - contracts with IMs for operation of the state owned infrastructures • - public service contracts with passenger transport operators

10. 3.3. Tasks at MÁV’s level • privatisation of MÁV Cargo Ltd.: • - procedure has started • - the new owner will be the strategic stakeholder (min 75% of the shares is to be sold) • - completion: 2007 • organisational separation of passenger transport unit: • - state (MÁV) owned MÁV Start Ltd. • - start of operation: 01.07.2007 • creation of a new structure for „remaining” MÁV Ltd.: • - simplifying the management hierarchy (less levels) • - HR rationalisation

11. 3.4. Alternative operation models for „remaining” MÁV Ltd. A: MÁV Ltd. as infrastructure manager and central service company B: MÁV Ltd. as infrastructure manager company MÁV Ltd. MÁV Ltd. Central management Central management Central services Infra-structure MÁV Start Ltd. Service companies Infra-structure MÁV Start Ltd. Service companies C: MÁV Ltd. as holding company with central management and service functions D: MÁV Ltd. as holding company with central management functions MÁV Holding Ltd. MÁV Holding Ltd. Central management Central management Central services Infra-structure Ltd. MÁV Start Ltd. Service companies Infra-structure Ltd. MÁV Start Ltd. Service companies

12. 3.5. Different organisational models for Hungarian IMs (1) I. degree of professional decision-making freedom from RUs: - granted in case of all models (A-D)* II. degree of professional decision-making freedom from the state owner: - A, B: higher dependence - C, D: lower dependence III. responsibilities for managing infrastructure maintenance and new investments: - A, C: like currently – maintenance: IMs, investments: centralised - B, D: higher independence for IMs – maintenance, investments: IMs *A, B, C and D refer to the alternative operation models of „remaining MÁV” (identified in 3.3. on slide #11).

13. 3.6. Different organisational models for Hungarian IMs (2) IV. financing infrastructure maintenance and new investments: - in case of all models (A-D) the same – maintenance: user charges, investments: state/EU funds V. responsibilities for investments required by the Interoperability Directive: - TSIs affect mainly RUs – managing and financing are their responsibilities (no state contribution, own resources) - TSIs for IMs: standardised border crossing technologies and IT interfaces – managing and financing like in III. and IV.

14. 3.7. Financial problems and possible solutions in Hungarian rail transport system • public contracts – limitations of subsidies from state budget (concentrating on public passenger transport services and infrastructure development) • private capital has to be also attracted – e.g. by issuing bonds • making use of redundant properties (real estates) – renting or selling • leasing of rail vehicles (instead of buying)

15. 4.1. Conclusions • existing national legal environment supports liberalisation • practically opened rail freight market • considerable steps towards market-driven operations of the incumbent railway company • a few new comers in the freight transport market but still high level of concentration (MÁV Cargo 86%, GySEV 9%, new RUs 5% of total market volumes – estimates) • high level of state’s commitment to implement liberalisation in practice

16. 4.2. Rail competitiveness versus road in the Hungarian freight market – further tasks • applying long-term strategic thinking instead of short-term problem-solving – predictable operation framework • enhancing the transparency within rail freight transport system (e.g. in the field of tariffs and discounts, unified terms of service contracts, etc.) • reliable infrastructural services – higher professional independency for IMs and ensuring necessary investment funds

17. THANK YOU FOR YOUR ATTENTION Dr. Zoltán Bokor Budapest University of Technology and Economics Department of Transport Economics zbokor@kgazd.bme.hu