Poland, an important country in Central Europe, borders Germany to the west, the Czech Republic and Slovakia to the south, Ukraine and Belarus to the east, Lithuania, Russia, the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the North. It also has a maritime border with Denmark and Sweden. The country’s overall surface is of 312,683 square metres, which ranks Poland the 69th country in terms of surface. Poland has 38.1 million inhabitants living mainly in large cities, such as the historic capital, Krakow or the current capital, Warsaw. Poland is administratively divided into 16 principalities. Although, currently, the Polish economy develops fast, there are still many challenges. The most important economic task in the future is preparing the Polish economy to meet the criteria necessary for adopting the euro as national currency. Many people living outside East European borders had, let’s say, preconceived ideas about Poland, such as a big, but poor country, with chaotic governments, horrible roads and eccentric habits. It is indeed a fact that old stereotypes are more difficult to overcome, but current data show an every day more different image. In fact, according to latest standards, Poland has never been safer, richer or better run and has proven economic growth and stability.
6th position in Europe in terms of economy
In 2007, Poland was considered an emerging country. In 1999, it became a NATO member and in 2004, a European Union member. In 2007, Poland entered Schengen area. After the fall of communism in 1989, Poland sought a policy of economic liberalisation and, today, it’s one of the examples of successful transition from state-controlled economy to market economy.
The privatisation of small and medium sized companies managed by the government and the free right of establishing new companies encouraged the aggressive development of the private sector. The reorganisation and privatisation of “sensitive sectors” such as mining and metallurgic industries, railways and energy were initiated in 1990. Between 2007 and 2010, the Polish Government planned to list 20 state-owned companies on the stock exchange, including companies in the mining industry. For the moment, the railways are still state-owned although there had been various attempts of privatisation, especially of the national railway freight transport operator, PKP Cargo. There is, however, a series of problems, mainly due to the lack of investments in certain economic sectors. The GDP growth was strong and stable between 1993 and 2000, with a short slow-paced period during 2001-2002. The close perspective of accessing the European Union has determined a constant economic development with an annual growth of 3.7% in 2003 compared to just 1.4% in 2002. The GDP growth was of 5.4% in 2004, 3.3% in 2005 and 6.1% in 2006. Poland was the only country in the European Union that had an economic growth in 2009 of at least 1.2%. According to the Polish Ministry of Finances, Jacek Rostowski, “GDP per capita increased from 50% to 56% of the EU average, thus proving a record jump. Poland’s economy ranks 6th in Europe”. Therefore, we can say that investors liked what they saw and creditors’ generosity allowed the Polish Government to have a budget deficit of 7% of the GDP in 2009. Although it came late, it is, however, admirable that the Polish Government has initiated a programme of railway infrastructure modernisation that must be finalized until 2012, when Poland and Ukraine host the European Football Championship. In regards to the business environment, Poland made various long-awaited changes to eliminate the overwhelming bureaucracy and is, now, more opened to business. A World Bank classification places the Polish fiscal system on the 151st position of the 183 countries included in the study. Recently, through the actions of Polish Minister of External Affairs, Radek Sikorski, Poland managed to improve relationships with its neighbours. In industrial production (constructions non-included) European Commission’s data in 2007 show, that Poland had a 9.5% production growth.
“Poland, the only EU-27 member state that had an economic plus in 2009, might know an economic growth of 2.75% in 2010 and 3.25% in 2011”, the International Monetary Fund announced on March 16, 2010.
Railway transport
The biggest company in railway transport is Polskie Koleje Państwowe SA Holding (Polish State-Owned Railways) which includes 17 independent companies, the most important of which are PKP Polskie Linie Kolejowe SA (PKP PLK), the national railway infrastructure manager, PKP Przewozy Regionalne Sp. z o.o, responsible for railway passenger services, PKP Cargo SA, the national railway freight transport operator and PKP InterCity Sp. z o.o., which deals with the operation of fast trains, EuroCity, InterCity, Tanie Linie Kolejowe, as well as express trains. According to studies elaborated by the Community of European Railway and Infrastructure Companies (CER) in 2009, PKP Cargo owns 83% of the Polish railway freight transport market. According to the same studies elaborated by CER, Poland invests EUR 8,226 per track km every year. In certain principalities, PKP SA and local bodies created independent companies, for example Koleje Mazowieckie (Mazovian Railways) in Mazovia principality. In Trójmiasto (territorial administrative area including the cities of Gdynia, Gdansk and Sopot) and Warsaw there are also urban lines on the network owned by Polskie Linie Kolejowe, called Fast Urban Railways (Szybka Kolej Miejska). The latter also includes the commuter line Warsaw Commuter Line (Warszawska Kolej Dojazdowa).
Apart from PKP S.A., there are also other railway operators dealing mainly with freight transport. Among them there is PTKiGK Rybnik S.A., PCC Rail Szczakowa or CTL. Except for PKP, there are few operators certified for passenger transport services, only companies operating on narrow gauge railways.
Poland promotes railway transport
The total length of Poland’s lines is of 19,419 kilometres, 11,831 of which are electrified railways. Most of these lines are property of PKP Polskie Linie Kolejeowe SA, which in turn, as infrastructure manager, receives the railway infrastructure access charge from rail operators. Many railway lines were closed after 1990 due to lack of funds. The reduction in the number of railways is especially notable in the areas that used to be part of Germany, because the railway network is vaster in those areas than in other regions. The entire Polish railway network includes 1,600 railway stations, all managed by PKP PLK. There are also 14,200 level crossings and PKP PLK manages over 26,000 buildings, 7,000 of which railway bridges and viaducts. The most important railway lines in Poland are E20 (German border – Poznań Główny – Warszawa Centralna- Belarus border), E30 (German border – Wrocław Główny – Katowice Główne – Kraków Główny – Ukrainian border) and E65 (Czech border – Katowice Główne – Warszawa Centralna – Tczew – Gdynia Główna). The most important railway lines in Poland have been under modernisation since 2000, most of the projects being scheduled for completion until 2012. Part of E65 line between Katowice Główne and Warszawa Zachodnia is known as the Central Railway Line (Centralna Magistrala Kolejowa) and has already been rehabilitated for high speed trains. According to European Commission’s statistical data elaborated in 2007, which include all companies on the market irrespective of the type of transport provided, there are 92 railway companies in Poland, while road cargo transport comprises 76,398 companies and road passenger transport 47,789 companies.
In 2007, a number of 4,581 locomotives and multiple-units, 7,255 coaches and EMUs for passenger transport and 74,146 cargo wagons were authorized for transport in Poland.
A report of the United Nations Economic Commission for Europe (UNECE) elaborated in 2007 reveals the fact that in Poland, railway transport is still inefficient because, although the entire railway network is dense, rail transport is characterised by poor competitiveness and services. At the same time, rail transport absorbs a great part of public funding. UNECE has then characterised the modernisation of Polish railways as a great challenge for the government. The situation is not very alarming for investors because recently, Poland has begun investing in railway modernisation for rising quality standards. Poland has divided its railway lines into national interest lines, urban interest and international interest lines, the latter being already included in the AGC and AGTC Agreements. The official web site of PKP PLK informs on the fact that lines of strategic interest for international traffic will be gradually upgraded to European standards, but also to ensure the interoperability of the Polish network included in the Trans-European network of high speed lines, as well as the interoperability of the Trans-European conventional railway system. In general, the modernisation of railway lines in Poland is made with the help of state-budget funds and through non-reimbursable European funding, as well as various agreements signed with EIB, EBRD and World Bank; Poland and World Bank have concluded a USD 110 Million agreement, the funds being used by the government when it initiated the railway reform in 2001.
Railway reform
In February 2005, the Polish Government adopted a strategy on the reorganisation of Polish Railways (PKP SA). The strategy aimed at increasing railway transport competitiveness and improving PKP PLK’s efficiency. The strategy consists in four main elements: the law on railway funding, the law on railway transport financing, the new law regarding the efficiency, reorganisation and privatisation of Polish Railways and last but least, the new law on railway transport. The railway reform also aims at the reorganisation of Polish Railways. Previous attempts of reorganising PKP SA have proved unsuccessful. The key points of the new strategy are the division of PKP into the company that would manage the state infrastructure and the Railway Asset Fund including privatised intercity companies, as well as free access freight operators and semi-private operators. The Railway Asset Fund will be the legal successor of PKP SA and will take over all the assets and liabilities of PKP SA Group. However, the Fund will not participate in the functioning and operation of investment activities. The reform aims at creating regional passenger companies operating between PKP Regional Services and local administrations, reducing railway access charges, improving infrastructure, as well as selling the broad gauge mineral transport line (LHS). Polish Minister of Finances, Aleksander Grad, announced that the privatisation of the state-owned industrial sector would be finalized withine the next four years and the Polish Government approved the Privatisation Programme for 2008-2011 which includes state-owned operators PKP Intercity and PKP Cargo, but excludes PKP PLK. However, the Undersecretary of State within the Ministry of Infrastructure in Poland, Juliusz Engelhardt, has recently said that due to the uncertainty around the railway freight transport operator, PKP Cargo, caused by the financial crisis, the company’s privatisation might be postponed until the end of 2011. This will happen if there is no improvement in PKP cargo’s activities over the next 2 to 3 months. Uncertainty also surrounds the privatisation of passenger transport operator, PKP Intercity. Engelhardt said that although the privatisation was postponed, the restructuration process continues. According to UIC statistical data, in 2008, PKP Intercity carried 223 million passengers with 17.95 billion passengers per km. In 2008, PKP Cargo carried 141.8 million tonnes of freight, reaching 39.2 billion tonnes per km.
Railways …head towards high speed
Currently, the main cities in Poland are linked through a railway transport system where trains reach speeds of 160 km/h. Several sections of the Central Railway Line allow trains to reach speeds of 200 km/h (the current speed record in Poland is 250 km/h). Nevertheless, Polish Railways don’t have rolling stock that can reach this speed. PKP SA has been planning to buy Pendolino trains ever since 1998, but the contract was annulled the following year by the Supreme Chamber of Control due to the Railways’ financial losses. But since 2008, PKP’s plans to buy rolling stock have been ambitious, PKP announcing investments of EUR 1.3 Billion in the renewal of the company’s rolling stock fleet until 2013. PKP bought the last passenger coaches in 2003. Current plans for the high speed line are known as the “Y Project”, a high speed line linking Warsaw, Lodz and Kalisz, with possible extensions to Wroclaw and Poznan. The line will be designed to reach speeds of 360 km/h. The construction is scheduled to begin around 2014 and to completion in 2019. In the centre of Lodz the “Y” line will go through an underground tunnel connecting the two existing railway stations. One of the two, Lodz Fabryczna, will be redesigned as an underground station (reconstruction scheduled to begin in July 2010). In April 2009, four companies qualified to the second stage of a public bid elaborated a feasibility study for the construction of the line. The draft feasibility study was estimated at EUR 80 Million and was financed through European Union funds. The overall cost of the “Y” line, including the construction of high speed trains was estimated at EUR 6.9 Billion and will be partially financed through EU funds. There is also a series of other plans for the modernisation of existing lines. For example, Warsaw-Krakow/Katowice line could be upgraded to reach speeds of 250 km/h by 2012, together with Warsaw – Gdanńsk line where reconstruction works have already been initiated (the latter being upgraded for speeds of 200 km/h). Long-term projects include a potential extension of the “Y” line to Berlin (from Poznan) and to Prague (from Wroclaw), most probably though the modernisation of the existing lines.
The official web site of PKP PLK has informed that recently, in March 2010, a contract was signed for the elaboration of a feasibility study “The elaborations of the technical specifications for the design, construction and modernisation of the railway infrastructure for speeds of 350 km/k”. The contract was signed with SENER Ingenieria y Sistemas SA (Spain) and estimated at EUR 288,430 thousand and will be entirely financed by the Spanish Fund for Development Aid.
PKP PLK initiates modernisation and expansion projects
Among the projects announced by the government there are also those on infrastructure improvement for the European Football Championship in 2012. Therefore, Polish Railways will expand and upgrade the railway network in view of the event. The company’s priority is to connect Warsaw, Wroclaw and Krakow with airports. Works are due for completion in 2011. PKP PLK will not be able to finalize all infrastructure modernisation projects, but it will, at least, reduce travel time between Warsaw, Wroclaw and Gdansk, where the football games will take place, and between these cities and Krakow. However, these are not the only projects. The Polish infrastructure manager, PKP PLK plans to invest PLN 5 Billion (EUR 1.2 Billion) in the extension of the transport network. “Currently, funds of PLN 3.7 Billion (EUR over 880 Million) have been approved. With European funding, the amount reaches PLN 4.2 Billion (EUR 1 Billion). This money will be undoubtedly invested. But we assume the total amount will exceed PLN 5 Billion”, PKP PLK President Zbigniew Szafranski declared. According to his declarations, big tenders will be launched in the near future. In the beginning of 2010, bids for the most important projects will be announced, including the modernisation of Warsaw – Gdansk and Warsaw – Lodz lines. Until 2015, the railway infrastructure has EUR 4.8 Billion investments approved from European funding. On March 24, Polish Railways asked for the environment authorization for the Rail Baltica project on Warsaw-Bialystok-Elk-Olecko-Suwalki-Trakiszki-Lithuanian border route. The final route was established by the General Directorate for Environment Protection in Bialystok. The Directorate will also issue the environment authorization necessary to the initiation of modernisation works on the existing line. Rail Baltica Polish segment is 341 km long and the modernisation of Bialystok-Lithuanian border will cost around PLN 700 Million (EUR 178.8 Million). In the end, the Rail Baltica project will link Warsaw, Kowno, Tallin, Ryga and Helsinki.
With over EUR 4 Billion announced for investments in the Polish railway infrastructure over the next 5 years, there is no doubt that the railway industry Poland now provides new significant investment opportunities for the efficient development of the business environment.
by Elena Ilie
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