Moldova to restructure state railway company to stave off bankruptcy

Moldova to restructure state railway company to stave off bankruptcy
By bne IntelliNews October 6, 2017

The Moldovan government plans to restructure Calea Ferată din Moldova (CFM) by splitting the public railway company into three separate units — to manage freight transport, passenger transport and infrastructure respectively. 

The current situation of the country’s railway system and of CFM have deteriorated to an alarming extent, the report drafted by consultancy Egis (and attached to a government bill on the issue) concluded.

The consultant argues that the bankruptcy of the company cannot be avoided unless deep reforms are implemented taking into account the current technical, financial and market situation in the railway sector, Mold Street magazine reported. While cargo transportation has been profitable in recent years, passenger transport is generating wide losses.

The government has now approved a bill on CFM’s restructuring, envisaging its division into three separate companies — one of the nine options suggested by Egis, which was hired by the executive to explore options for the troubled company. 

A concept for the reorganisation of the railway sector and CFM for 2018-2021, developed on the initiative of Prime Minister Pavel Filip and the European Bank for Reconstruction and Development (EBRD), was adopted at a cabinet meeting on October 4, a government statement said. 

“The divisions of CFM’s assets in three sectors, which will autonomously carry out their activity on the transports’ market, will allow a strict separation of the tasks, guaranteeing the independence of the companies and orienting them towards competitiveness and business,” according to the statement. 

CFM needs €300mn of investments by 2020 in order to improve the safety and the quality of the services delivered, under the 2014-2020 investment plan previously approved by the government. The restructuring of CFM is aimed at implementing the investment programme.

The ministry of economy and infrastructure will draft an action plan to implement the strategy within six months.

The wages of the 9,948 employees accounted for nearly 40% of the expenditures of the public railway company in 2016, the consultant underlined, suggesting significant personnel downsizing may be needed.

Chisinau also envisages opening up the railway market in Moldova to private competition, according to the government.

 

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