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1 (1) March - May 2005

1 (1) March - May 2005
COOPERATION GOES FIRST: According to the Strategic Programme of the company its mission envisages market demand on transportation satisfaction, operation efficiency increase as well as services improvement and deep integration into Euro-Asian transport system.

RUSSIA AND CHINA: TRANSPORT INTEGRATION: On cooperation perspectives of Russia and China, in particular, within freight railway transportation sector OAO RZD Senior Vice-President Khasyan Zyabirov speaks.

PER ASPERA AD ASTRA: On the current situation of the ports sector speaks the Chairman of the Directors Board of the Association of sea port of Russia Vitaly Yuzhilin.
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				232.34431577534				monthAccess: 1				
|Да|
РЖД-Партнер

Panorama

RUR 109 for Railway Crossing Barrier Systems
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    [DETAIL_TEXT] => OAO RZD plans to spend RUR109 million on installing barrier equipment at railway crossings and 49 million on automatic signal equipment in 2005. In line with the programme to increase rail traffic safety in 2005 RZD is to equip 132 crossings with barrier systems and another 117 crossings with gates.

However, in accordance with instructions from the Transport Ministry, OAO RZD will equip rail crossings with barrier systems as a more efficient way of barring auto transport from the crossing when a train is approaching, instead of simply installing gates. The cost of equipping the crossings with barrier systems and installing additional gates is practically the same: RUR900 thousand to 1 million 200 thousand for each crossing (depending on the location and technical peculiarities).
Railways are to perform the follows: to equip crossings with automatic signals; to install industrial rubber surfaces, radio communications and signals with light-emitting diodes; to improve power supplies, electric lighting and other facilities. This will take place annually in accordance with the programme of rail traffic safety enhancement.
At present 12 thousand 384 crossings are in use on the railway network, of which 2 thousand 477 crossings are operated by signalmen. In the past year there were a total of 288 accidents on rail crossings (compared with 330 in 2003). As a safety measure rail crossing maintenance with the participation of representatives from the State Transport Safety Control was checked up. In addition responsibility of crossing signalmen was increased. Crossing signalmen are officially registered as voluntary public order vigilantes. In 2004 they carried out 20 thousand 152 surprise inspections on crossings together with rail maintenance management and transport safety workers.
In 2004 77 rail crossings were set for re- equipment. To achieve this goal the railways were allocated RUR52 million 620 thousand. And extra sum of USD34 million 830 thousand was allocated by OAO RZD to install barrier systems at 49 crossings. In addition 105 crossings were equipped with barrier systems using the railways' own resources. Totally, on the Russian railway network barrier systems were implemented at 231 crossings in 2004.

Key Objective to be Reached
To provide safety of rail traffic is the key objective for all heads of rail administrations of CIS states.

OAO RZD President Gennady Fadeyev noted that safety of rail traffic is the key objective for all heads of rail administrations. Within framework of the objective Council members decided to develop strict requirements with regard to technical condition of rolling stock when preparing it for handing over on international junction points.
To improve the safety level of rail traffic the rail administrations in 2005 are to develop a concept of failure proof operation up to 2010. The concept calls for timely drafting and modification of normative and technical documents with regard to maintenance of hardware, introduction of an automated traffic safety control system, modern technical means of control and logistics with a view to eliminating human factor.

Things Go Better with E-Invoice
OAO "Russian Railways" has worked out electronic invoice for freight trains crossing overland border check points.

According to the company's president Gennady Fadeyev, current situation of customs inspection procedures decrease competitiveness of some of freight transportation compared to trucking. It works in such a way due to paper work takes a lot of time, sometimes several days. The project introduced can help avoid it
Speaking of passenger trains G.Fadeyev claimed customs inspection will be implemented while train getting to the border check point.

Far-Eastern Transport Group in China
In the beginning of 2005 the leading carrier of Russia Far-Eastern Transport Group established its first official headquarter in China.

The opening ceremony took place on January 21 in the Embassy of the Russian Federation in China People's Republic.
The priority tasks of the headquarter are development of transit flow via Russia from the countries of South-Eastern Asia to the Middle Asia and European countries, also export-import transportation volume increase between Russia and China with help of the TrabsSiberian route capacities.
Today the company is a leader in container handling transported from China to Russia and European countries. The share of handled cargo by the company reaches 20% from the total volume. Thus in 2004 the transportation volume of the company amounted to 18 mn.t.
The company plans to expand its presence in China. During 2005 it is planned to open headquarters in Peking, Shanghai and Harbin

From Transport Committee to Commission on Cooperation
In Warsaw the 7th meeting of the Russian-Polish Committee on transport took place. The Russian participants' delegation was headed by the RF Minister of Transport Alexander Misharin.

Within the framework of the session some issues on different modes of transport were considered. Among above-mentioned are the following ones: container transportation from the Far East to the Western Europe opportunity implementing LHS and logistic center in Slavkov (Poland); transportation perfecting via the pan-European transport corridor №2; ferry bridge line for freight and passenger transportation between the ports of Gdansk and Baltyisk; etc.
Speaking at the session A.Misharin stated that the last four years are characterized by intensifying of economic cooperation between Russia and Poland. Trade turnover between the two countries has increased by 60% and amounted to $9 bn. since 2004. That demands more productive cooperation of the countries in the transport sector.
Concerning the opportunity of joint company establishment on controlling the logistic center in Slavkov, the Minister said this project would be of competitive character to sea containerized shipping in the direction South-Eastern Asia- Europe. Now the working group on the project development has been made.

New Terminal to be Built in Ventspils
Ventspils Sea Commercial Port JSC in cooperation with Dutch company Inditec Finanse B.V. plans to construct a modern coal terminal in the port of Ventspils. It is going to be the first specialized coal terminal in the Baltic countries.

The project envisages construction of the modern ecologically safe terminal which won't allow pollute environment with slack.
Private and public investment is going to be attracted for the project as well as funds provided by the Ventspils Free Port. Expected terminal capacity is about 5 mn.t. of coal per year.

New Logistic Centers to be Opened in Estonia
In the nearest future two new companies will start operating on the Estonian logistics market, they are Belgium company Scanfor and the Russian one - Eurosib.

The Belgium company plans to open its headquarter in Tallinn. Earlier the Belgiums cooperated with the Estonian company which is one of the five largest logistic companies on the market. According to Tomas Hirve, "Scanfor" representative in Estonia, their business can be considered as a attractive one as they plan to enter the Russian market soon.
Eurosib plans to provide Estonian transport companies with special opportunities and logistic solutions. The company providing Russia and the CIS with logistic solutions in 2003 transported 17.03 mn.t. of cargo.

Russian Ports Post Results
In 2004 Russian ports handled 355.4 mn tons of cargo, 22.2% up year-on-year.
According to the port regulatory body Rosmorport port of the North-Western basin performed best, they handled 143.3 mn tons, which is 42% up comparing with 2003. Southern ports' handling amounted to 142 mn tons, 11.8% improvement year-on-year. The result of the Far-Eastern ports was 70.3 mn tons, 11.9% increase.

Stevedoring companies of the Saint-Petersburg port took the first place among the Nort-Western complexes handling 96 mn tons, 60.1% up. They are followed by Murmansk port terminals (20.7 mn tons), which faced volume decrease of 4.2% comparing with 2003. Considerably fell down volumes of Vitino and Kandalaksha ports (by 52.1% and 72.5% respectively). Vitino stopped operations in December due to re-routing of LUKOIL's oil to Primorsk, where the oil corporation built new terminal. As "RZD-Partner" was told in BaltTransService, who delivered oil to Vitino by railway, there have been no orders for transportation to the port since November. Market participants believe that cargo owners are not satisfied with Vitino's infrastracture. However, the port plans recommence handling by summer.
Kaliningrad ports increased throughput by 8.5% to 13.8 mn tons.
Handling of Vyborg and Vysotsk sharply grew by 25.9% to 1.4 mn tons and 116.3% to 5.2 mn tons respectively.
Throughput of Arkhangelsk was up by 73% to 5.5 mn tons.
Among the Southern ports best dynamics was showed by the Olya port, where throughput was up by 94.8% to 135.4 thousand tons. Stevedores of the Astrakhan port handled 5.6 mn tons, 47% up year-on-year.
The Novorossiysk port increased handling volumes by 7.3% to 97.5 mn tons. Throughput of Novorossysk Commercial Sea Port increased by 10.3% to 70 mn tons, that of KTK-R was up by 50.5% to 22.5 mn tons, of Novoroslesexport - by 14.8% to 1.6 mn tons.
Stevedoring companies of the Vostochny port rose handling by 32.1% to 20.8 mn tons. Nakhodka Commercial Sea Port handled 7.9 mn tons, 27.9% up year-on-year. Vanino decreased volumes by 7.4% to 9.5 mn tons.
Vladivostok terminals increased throughput by 7.9% to 14.9 mn tons.
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However, in accordance with instructions from the Transport Ministry, OAO RZD will equip rail crossings with barrier systems as a more efficient way of barring auto transport from the crossing when a train is approaching, instead of simply installing gates. The cost of equipping the crossings with barrier systems and installing additional gates is practically the same: RUR900 thousand to 1 million 200 thousand for each crossing (depending on the location and technical peculiarities).
Railways are to perform the follows: to equip crossings with automatic signals; to install industrial rubber surfaces, radio communications and signals with light-emitting diodes; to improve power supplies, electric lighting and other facilities. This will take place annually in accordance with the programme of rail traffic safety enhancement.
At present 12 thousand 384 crossings are in use on the railway network, of which 2 thousand 477 crossings are operated by signalmen. In the past year there were a total of 288 accidents on rail crossings (compared with 330 in 2003). As a safety measure rail crossing maintenance with the participation of representatives from the State Transport Safety Control was checked up. In addition responsibility of crossing signalmen was increased. Crossing signalmen are officially registered as voluntary public order vigilantes. In 2004 they carried out 20 thousand 152 surprise inspections on crossings together with rail maintenance management and transport safety workers.
In 2004 77 rail crossings were set for re- equipment. To achieve this goal the railways were allocated RUR52 million 620 thousand. And extra sum of USD34 million 830 thousand was allocated by OAO RZD to install barrier systems at 49 crossings. In addition 105 crossings were equipped with barrier systems using the railways' own resources. Totally, on the Russian railway network barrier systems were implemented at 231 crossings in 2004.

Key Objective to be Reached
To provide safety of rail traffic is the key objective for all heads of rail administrations of CIS states.

OAO RZD President Gennady Fadeyev noted that safety of rail traffic is the key objective for all heads of rail administrations. Within framework of the objective Council members decided to develop strict requirements with regard to technical condition of rolling stock when preparing it for handing over on international junction points.
To improve the safety level of rail traffic the rail administrations in 2005 are to develop a concept of failure proof operation up to 2010. The concept calls for timely drafting and modification of normative and technical documents with regard to maintenance of hardware, introduction of an automated traffic safety control system, modern technical means of control and logistics with a view to eliminating human factor.

Things Go Better with E-Invoice
OAO "Russian Railways" has worked out electronic invoice for freight trains crossing overland border check points.

According to the company's president Gennady Fadeyev, current situation of customs inspection procedures decrease competitiveness of some of freight transportation compared to trucking. It works in such a way due to paper work takes a lot of time, sometimes several days. The project introduced can help avoid it
Speaking of passenger trains G.Fadeyev claimed customs inspection will be implemented while train getting to the border check point.

Far-Eastern Transport Group in China
In the beginning of 2005 the leading carrier of Russia Far-Eastern Transport Group established its first official headquarter in China.

The opening ceremony took place on January 21 in the Embassy of the Russian Federation in China People's Republic.
The priority tasks of the headquarter are development of transit flow via Russia from the countries of South-Eastern Asia to the Middle Asia and European countries, also export-import transportation volume increase between Russia and China with help of the TrabsSiberian route capacities.
Today the company is a leader in container handling transported from China to Russia and European countries. The share of handled cargo by the company reaches 20% from the total volume. Thus in 2004 the transportation volume of the company amounted to 18 mn.t.
The company plans to expand its presence in China. During 2005 it is planned to open headquarters in Peking, Shanghai and Harbin

From Transport Committee to Commission on Cooperation
In Warsaw the 7th meeting of the Russian-Polish Committee on transport took place. The Russian participants' delegation was headed by the RF Minister of Transport Alexander Misharin.

Within the framework of the session some issues on different modes of transport were considered. Among above-mentioned are the following ones: container transportation from the Far East to the Western Europe opportunity implementing LHS and logistic center in Slavkov (Poland); transportation perfecting via the pan-European transport corridor №2; ferry bridge line for freight and passenger transportation between the ports of Gdansk and Baltyisk; etc.
Speaking at the session A.Misharin stated that the last four years are characterized by intensifying of economic cooperation between Russia and Poland. Trade turnover between the two countries has increased by 60% and amounted to $9 bn. since 2004. That demands more productive cooperation of the countries in the transport sector.
Concerning the opportunity of joint company establishment on controlling the logistic center in Slavkov, the Minister said this project would be of competitive character to sea containerized shipping in the direction South-Eastern Asia- Europe. Now the working group on the project development has been made.

New Terminal to be Built in Ventspils
Ventspils Sea Commercial Port JSC in cooperation with Dutch company Inditec Finanse B.V. plans to construct a modern coal terminal in the port of Ventspils. It is going to be the first specialized coal terminal in the Baltic countries.

The project envisages construction of the modern ecologically safe terminal which won't allow pollute environment with slack.
Private and public investment is going to be attracted for the project as well as funds provided by the Ventspils Free Port. Expected terminal capacity is about 5 mn.t. of coal per year.

New Logistic Centers to be Opened in Estonia
In the nearest future two new companies will start operating on the Estonian logistics market, they are Belgium company Scanfor and the Russian one - Eurosib.

The Belgium company plans to open its headquarter in Tallinn. Earlier the Belgiums cooperated with the Estonian company which is one of the five largest logistic companies on the market. According to Tomas Hirve, "Scanfor" representative in Estonia, their business can be considered as a attractive one as they plan to enter the Russian market soon.
Eurosib plans to provide Estonian transport companies with special opportunities and logistic solutions. The company providing Russia and the CIS with logistic solutions in 2003 transported 17.03 mn.t. of cargo.

Russian Ports Post Results
In 2004 Russian ports handled 355.4 mn tons of cargo, 22.2% up year-on-year.
According to the port regulatory body Rosmorport port of the North-Western basin performed best, they handled 143.3 mn tons, which is 42% up comparing with 2003. Southern ports' handling amounted to 142 mn tons, 11.8% improvement year-on-year. The result of the Far-Eastern ports was 70.3 mn tons, 11.9% increase.

Stevedoring companies of the Saint-Petersburg port took the first place among the Nort-Western complexes handling 96 mn tons, 60.1% up. They are followed by Murmansk port terminals (20.7 mn tons), which faced volume decrease of 4.2% comparing with 2003. Considerably fell down volumes of Vitino and Kandalaksha ports (by 52.1% and 72.5% respectively). Vitino stopped operations in December due to re-routing of LUKOIL's oil to Primorsk, where the oil corporation built new terminal. As "RZD-Partner" was told in BaltTransService, who delivered oil to Vitino by railway, there have been no orders for transportation to the port since November. Market participants believe that cargo owners are not satisfied with Vitino's infrastracture. However, the port plans recommence handling by summer.
Kaliningrad ports increased throughput by 8.5% to 13.8 mn tons.
Handling of Vyborg and Vysotsk sharply grew by 25.9% to 1.4 mn tons and 116.3% to 5.2 mn tons respectively.
Throughput of Arkhangelsk was up by 73% to 5.5 mn tons.
Among the Southern ports best dynamics was showed by the Olya port, where throughput was up by 94.8% to 135.4 thousand tons. Stevedores of the Astrakhan port handled 5.6 mn tons, 47% up year-on-year.
The Novorossiysk port increased handling volumes by 7.3% to 97.5 mn tons. Throughput of Novorossysk Commercial Sea Port increased by 10.3% to 70 mn tons, that of KTK-R was up by 50.5% to 22.5 mn tons, of Novoroslesexport - by 14.8% to 1.6 mn tons.
Stevedoring companies of the Vostochny port rose handling by 32.1% to 20.8 mn tons. Nakhodka Commercial Sea Port handled 7.9 mn tons, 27.9% up year-on-year. Vanino decreased volumes by 7.4% to 9.5 mn tons.
Vladivostok terminals increased throughput by 7.9% to 14.9 mn tons.
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    [DETAIL_TEXT] => OAO RZD plans to spend RUR109 million on installing barrier equipment at railway crossings and 49 million on automatic signal equipment in 2005. In line with the programme to increase rail traffic safety in 2005 RZD is to equip 132 crossings with barrier systems and another 117 crossings with gates.

However, in accordance with instructions from the Transport Ministry, OAO RZD will equip rail crossings with barrier systems as a more efficient way of barring auto transport from the crossing when a train is approaching, instead of simply installing gates. The cost of equipping the crossings with barrier systems and installing additional gates is practically the same: RUR900 thousand to 1 million 200 thousand for each crossing (depending on the location and technical peculiarities).
Railways are to perform the follows: to equip crossings with automatic signals; to install industrial rubber surfaces, radio communications and signals with light-emitting diodes; to improve power supplies, electric lighting and other facilities. This will take place annually in accordance with the programme of rail traffic safety enhancement.
At present 12 thousand 384 crossings are in use on the railway network, of which 2 thousand 477 crossings are operated by signalmen. In the past year there were a total of 288 accidents on rail crossings (compared with 330 in 2003). As a safety measure rail crossing maintenance with the participation of representatives from the State Transport Safety Control was checked up. In addition responsibility of crossing signalmen was increased. Crossing signalmen are officially registered as voluntary public order vigilantes. In 2004 they carried out 20 thousand 152 surprise inspections on crossings together with rail maintenance management and transport safety workers.
In 2004 77 rail crossings were set for re- equipment. To achieve this goal the railways were allocated RUR52 million 620 thousand. And extra sum of USD34 million 830 thousand was allocated by OAO RZD to install barrier systems at 49 crossings. In addition 105 crossings were equipped with barrier systems using the railways' own resources. Totally, on the Russian railway network barrier systems were implemented at 231 crossings in 2004.

Key Objective to be Reached
To provide safety of rail traffic is the key objective for all heads of rail administrations of CIS states.

OAO RZD President Gennady Fadeyev noted that safety of rail traffic is the key objective for all heads of rail administrations. Within framework of the objective Council members decided to develop strict requirements with regard to technical condition of rolling stock when preparing it for handing over on international junction points.
To improve the safety level of rail traffic the rail administrations in 2005 are to develop a concept of failure proof operation up to 2010. The concept calls for timely drafting and modification of normative and technical documents with regard to maintenance of hardware, introduction of an automated traffic safety control system, modern technical means of control and logistics with a view to eliminating human factor.

Things Go Better with E-Invoice
OAO "Russian Railways" has worked out electronic invoice for freight trains crossing overland border check points.

According to the company's president Gennady Fadeyev, current situation of customs inspection procedures decrease competitiveness of some of freight transportation compared to trucking. It works in such a way due to paper work takes a lot of time, sometimes several days. The project introduced can help avoid it
Speaking of passenger trains G.Fadeyev claimed customs inspection will be implemented while train getting to the border check point.

Far-Eastern Transport Group in China
In the beginning of 2005 the leading carrier of Russia Far-Eastern Transport Group established its first official headquarter in China.

The opening ceremony took place on January 21 in the Embassy of the Russian Federation in China People's Republic.
The priority tasks of the headquarter are development of transit flow via Russia from the countries of South-Eastern Asia to the Middle Asia and European countries, also export-import transportation volume increase between Russia and China with help of the TrabsSiberian route capacities.
Today the company is a leader in container handling transported from China to Russia and European countries. The share of handled cargo by the company reaches 20% from the total volume. Thus in 2004 the transportation volume of the company amounted to 18 mn.t.
The company plans to expand its presence in China. During 2005 it is planned to open headquarters in Peking, Shanghai and Harbin

From Transport Committee to Commission on Cooperation
In Warsaw the 7th meeting of the Russian-Polish Committee on transport took place. The Russian participants' delegation was headed by the RF Minister of Transport Alexander Misharin.

Within the framework of the session some issues on different modes of transport were considered. Among above-mentioned are the following ones: container transportation from the Far East to the Western Europe opportunity implementing LHS and logistic center in Slavkov (Poland); transportation perfecting via the pan-European transport corridor №2; ferry bridge line for freight and passenger transportation between the ports of Gdansk and Baltyisk; etc.
Speaking at the session A.Misharin stated that the last four years are characterized by intensifying of economic cooperation between Russia and Poland. Trade turnover between the two countries has increased by 60% and amounted to $9 bn. since 2004. That demands more productive cooperation of the countries in the transport sector.
Concerning the opportunity of joint company establishment on controlling the logistic center in Slavkov, the Minister said this project would be of competitive character to sea containerized shipping in the direction South-Eastern Asia- Europe. Now the working group on the project development has been made.

New Terminal to be Built in Ventspils
Ventspils Sea Commercial Port JSC in cooperation with Dutch company Inditec Finanse B.V. plans to construct a modern coal terminal in the port of Ventspils. It is going to be the first specialized coal terminal in the Baltic countries.

The project envisages construction of the modern ecologically safe terminal which won't allow pollute environment with slack.
Private and public investment is going to be attracted for the project as well as funds provided by the Ventspils Free Port. Expected terminal capacity is about 5 mn.t. of coal per year.

New Logistic Centers to be Opened in Estonia
In the nearest future two new companies will start operating on the Estonian logistics market, they are Belgium company Scanfor and the Russian one - Eurosib.

The Belgium company plans to open its headquarter in Tallinn. Earlier the Belgiums cooperated with the Estonian company which is one of the five largest logistic companies on the market. According to Tomas Hirve, "Scanfor" representative in Estonia, their business can be considered as a attractive one as they plan to enter the Russian market soon.
Eurosib plans to provide Estonian transport companies with special opportunities and logistic solutions. The company providing Russia and the CIS with logistic solutions in 2003 transported 17.03 mn.t. of cargo.

Russian Ports Post Results
In 2004 Russian ports handled 355.4 mn tons of cargo, 22.2% up year-on-year.
According to the port regulatory body Rosmorport port of the North-Western basin performed best, they handled 143.3 mn tons, which is 42% up comparing with 2003. Southern ports' handling amounted to 142 mn tons, 11.8% improvement year-on-year. The result of the Far-Eastern ports was 70.3 mn tons, 11.9% increase.

Stevedoring companies of the Saint-Petersburg port took the first place among the Nort-Western complexes handling 96 mn tons, 60.1% up. They are followed by Murmansk port terminals (20.7 mn tons), which faced volume decrease of 4.2% comparing with 2003. Considerably fell down volumes of Vitino and Kandalaksha ports (by 52.1% and 72.5% respectively). Vitino stopped operations in December due to re-routing of LUKOIL's oil to Primorsk, where the oil corporation built new terminal. As "RZD-Partner" was told in BaltTransService, who delivered oil to Vitino by railway, there have been no orders for transportation to the port since November. Market participants believe that cargo owners are not satisfied with Vitino's infrastracture. However, the port plans recommence handling by summer.
Kaliningrad ports increased throughput by 8.5% to 13.8 mn tons.
Handling of Vyborg and Vysotsk sharply grew by 25.9% to 1.4 mn tons and 116.3% to 5.2 mn tons respectively.
Throughput of Arkhangelsk was up by 73% to 5.5 mn tons.
Among the Southern ports best dynamics was showed by the Olya port, where throughput was up by 94.8% to 135.4 thousand tons. Stevedores of the Astrakhan port handled 5.6 mn tons, 47% up year-on-year.
The Novorossiysk port increased handling volumes by 7.3% to 97.5 mn tons. Throughput of Novorossysk Commercial Sea Port increased by 10.3% to 70 mn tons, that of KTK-R was up by 50.5% to 22.5 mn tons, of Novoroslesexport - by 14.8% to 1.6 mn tons.
Stevedoring companies of the Vostochny port rose handling by 32.1% to 20.8 mn tons. Nakhodka Commercial Sea Port handled 7.9 mn tons, 27.9% up year-on-year. Vanino decreased volumes by 7.4% to 9.5 mn tons.
Vladivostok terminals increased throughput by 7.9% to 14.9 mn tons.
[~DETAIL_TEXT] => OAO RZD plans to spend RUR109 million on installing barrier equipment at railway crossings and 49 million on automatic signal equipment in 2005. In line with the programme to increase rail traffic safety in 2005 RZD is to equip 132 crossings with barrier systems and another 117 crossings with gates.

However, in accordance with instructions from the Transport Ministry, OAO RZD will equip rail crossings with barrier systems as a more efficient way of barring auto transport from the crossing when a train is approaching, instead of simply installing gates. The cost of equipping the crossings with barrier systems and installing additional gates is practically the same: RUR900 thousand to 1 million 200 thousand for each crossing (depending on the location and technical peculiarities).
Railways are to perform the follows: to equip crossings with automatic signals; to install industrial rubber surfaces, radio communications and signals with light-emitting diodes; to improve power supplies, electric lighting and other facilities. This will take place annually in accordance with the programme of rail traffic safety enhancement.
At present 12 thousand 384 crossings are in use on the railway network, of which 2 thousand 477 crossings are operated by signalmen. In the past year there were a total of 288 accidents on rail crossings (compared with 330 in 2003). As a safety measure rail crossing maintenance with the participation of representatives from the State Transport Safety Control was checked up. In addition responsibility of crossing signalmen was increased. Crossing signalmen are officially registered as voluntary public order vigilantes. In 2004 they carried out 20 thousand 152 surprise inspections on crossings together with rail maintenance management and transport safety workers.
In 2004 77 rail crossings were set for re- equipment. To achieve this goal the railways were allocated RUR52 million 620 thousand. And extra sum of USD34 million 830 thousand was allocated by OAO RZD to install barrier systems at 49 crossings. In addition 105 crossings were equipped with barrier systems using the railways' own resources. Totally, on the Russian railway network barrier systems were implemented at 231 crossings in 2004.

Key Objective to be Reached
To provide safety of rail traffic is the key objective for all heads of rail administrations of CIS states.

OAO RZD President Gennady Fadeyev noted that safety of rail traffic is the key objective for all heads of rail administrations. Within framework of the objective Council members decided to develop strict requirements with regard to technical condition of rolling stock when preparing it for handing over on international junction points.
To improve the safety level of rail traffic the rail administrations in 2005 are to develop a concept of failure proof operation up to 2010. The concept calls for timely drafting and modification of normative and technical documents with regard to maintenance of hardware, introduction of an automated traffic safety control system, modern technical means of control and logistics with a view to eliminating human factor.

Things Go Better with E-Invoice
OAO "Russian Railways" has worked out electronic invoice for freight trains crossing overland border check points.

According to the company's president Gennady Fadeyev, current situation of customs inspection procedures decrease competitiveness of some of freight transportation compared to trucking. It works in such a way due to paper work takes a lot of time, sometimes several days. The project introduced can help avoid it
Speaking of passenger trains G.Fadeyev claimed customs inspection will be implemented while train getting to the border check point.

Far-Eastern Transport Group in China
In the beginning of 2005 the leading carrier of Russia Far-Eastern Transport Group established its first official headquarter in China.

The opening ceremony took place on January 21 in the Embassy of the Russian Federation in China People's Republic.
The priority tasks of the headquarter are development of transit flow via Russia from the countries of South-Eastern Asia to the Middle Asia and European countries, also export-import transportation volume increase between Russia and China with help of the TrabsSiberian route capacities.
Today the company is a leader in container handling transported from China to Russia and European countries. The share of handled cargo by the company reaches 20% from the total volume. Thus in 2004 the transportation volume of the company amounted to 18 mn.t.
The company plans to expand its presence in China. During 2005 it is planned to open headquarters in Peking, Shanghai and Harbin

From Transport Committee to Commission on Cooperation
In Warsaw the 7th meeting of the Russian-Polish Committee on transport took place. The Russian participants' delegation was headed by the RF Minister of Transport Alexander Misharin.

Within the framework of the session some issues on different modes of transport were considered. Among above-mentioned are the following ones: container transportation from the Far East to the Western Europe opportunity implementing LHS and logistic center in Slavkov (Poland); transportation perfecting via the pan-European transport corridor №2; ferry bridge line for freight and passenger transportation between the ports of Gdansk and Baltyisk; etc.
Speaking at the session A.Misharin stated that the last four years are characterized by intensifying of economic cooperation between Russia and Poland. Trade turnover between the two countries has increased by 60% and amounted to $9 bn. since 2004. That demands more productive cooperation of the countries in the transport sector.
Concerning the opportunity of joint company establishment on controlling the logistic center in Slavkov, the Minister said this project would be of competitive character to sea containerized shipping in the direction South-Eastern Asia- Europe. Now the working group on the project development has been made.

New Terminal to be Built in Ventspils
Ventspils Sea Commercial Port JSC in cooperation with Dutch company Inditec Finanse B.V. plans to construct a modern coal terminal in the port of Ventspils. It is going to be the first specialized coal terminal in the Baltic countries.

The project envisages construction of the modern ecologically safe terminal which won't allow pollute environment with slack.
Private and public investment is going to be attracted for the project as well as funds provided by the Ventspils Free Port. Expected terminal capacity is about 5 mn.t. of coal per year.

New Logistic Centers to be Opened in Estonia
In the nearest future two new companies will start operating on the Estonian logistics market, they are Belgium company Scanfor and the Russian one - Eurosib.

The Belgium company plans to open its headquarter in Tallinn. Earlier the Belgiums cooperated with the Estonian company which is one of the five largest logistic companies on the market. According to Tomas Hirve, "Scanfor" representative in Estonia, their business can be considered as a attractive one as they plan to enter the Russian market soon.
Eurosib plans to provide Estonian transport companies with special opportunities and logistic solutions. The company providing Russia and the CIS with logistic solutions in 2003 transported 17.03 mn.t. of cargo.

Russian Ports Post Results
In 2004 Russian ports handled 355.4 mn tons of cargo, 22.2% up year-on-year.
According to the port regulatory body Rosmorport port of the North-Western basin performed best, they handled 143.3 mn tons, which is 42% up comparing with 2003. Southern ports' handling amounted to 142 mn tons, 11.8% improvement year-on-year. The result of the Far-Eastern ports was 70.3 mn tons, 11.9% increase.

Stevedoring companies of the Saint-Petersburg port took the first place among the Nort-Western complexes handling 96 mn tons, 60.1% up. They are followed by Murmansk port terminals (20.7 mn tons), which faced volume decrease of 4.2% comparing with 2003. Considerably fell down volumes of Vitino and Kandalaksha ports (by 52.1% and 72.5% respectively). Vitino stopped operations in December due to re-routing of LUKOIL's oil to Primorsk, where the oil corporation built new terminal. As "RZD-Partner" was told in BaltTransService, who delivered oil to Vitino by railway, there have been no orders for transportation to the port since November. Market participants believe that cargo owners are not satisfied with Vitino's infrastracture. However, the port plans recommence handling by summer.
Kaliningrad ports increased throughput by 8.5% to 13.8 mn tons.
Handling of Vyborg and Vysotsk sharply grew by 25.9% to 1.4 mn tons and 116.3% to 5.2 mn tons respectively.
Throughput of Arkhangelsk was up by 73% to 5.5 mn tons.
Among the Southern ports best dynamics was showed by the Olya port, where throughput was up by 94.8% to 135.4 thousand tons. Stevedores of the Astrakhan port handled 5.6 mn tons, 47% up year-on-year.
The Novorossiysk port increased handling volumes by 7.3% to 97.5 mn tons. Throughput of Novorossysk Commercial Sea Port increased by 10.3% to 70 mn tons, that of KTK-R was up by 50.5% to 22.5 mn tons, of Novoroslesexport - by 14.8% to 1.6 mn tons.
Stevedoring companies of the Vostochny port rose handling by 32.1% to 20.8 mn tons. Nakhodka Commercial Sea Port handled 7.9 mn tons, 27.9% up year-on-year. Vanino decreased volumes by 7.4% to 9.5 mn tons.
Vladivostok terminals increased throughput by 7.9% to 14.9 mn tons.
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РЖД-Партнер

Competitiveness Development and Problems of Tariff Regulation Harmonization

Andrey Sharonov Deputy Minister of Economic Development and Trade of the RF
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    [DETAIL_TEXT] => Railway transport efficiency increase, reduction of expenditures on transportation and transport consistent for raw materials cost, quality improvement and upgrading transport services market are the basic goals of the structural reform, and their achievement is possible with help of competitiveness development and tariff policy harmonization in the transport sector.

OAO RZD WON'T BE SELF-SUFFICIENT HOLDING
Competitiveness development within the railway transport and creation of favorable surrounding for private investments are the key indicators of the reform being a success in general. Its programme envisages competitive sector development within railway transportation including companies-freight operators establishment that would possess their own rolling stock. At the present moment we can speak about 2450 rolling stock owners functioning in Russia. The number of companies that operate their own rolling stock of over 1000 rail cars has exceeded 50 ones and this figure is constantly growing. In 2003 about 90% of the total volume cars produced was purchased by private companies. Many big oil and metallurgical companies provided for great investment resources in their investment programmes to form up and enlarge their own car parks. It shows a sign of transport strategy re-consideration by these companies, i.e. they believe production transportation to be an opportunity of reducing expenditures as well as getting additional profit while rolling stock leasing.
In respect to railway transport sector the state performs both as a regulator and a share-holder. While this despite the state's being greatly interested in getting profit from OAO RZD the role of regulator is much more important and priority one for the state. Now the process of separation of self-run structural subdivisions into independent companies is being actively carried on. These subdivisions implement specialized cargo transportation, provide with technical base repair services, manufacture spare parts, and fulfill activities not concerning transportation immediately. Thus it covers those sectors where competitiveness can develop rapidly.
It should be noticed that the Programme of railway transport structural reform approved in May 2003 was greatly amended by the end of 2004. In particular the decision on obligatory determination of terms and ways of further separated assets sale was made. It means that while making decision about affiliates establishment the term of their shares auction should also be defined. Thus OAO RZD is not going to be turned into self-sufficient holding but start to get rid of assets in competitive types of activities loosing its monopolistic position on the market.
Also the Board of Directors OAO RZD control over deals with shares and property of affiliates created has been significantly strengthened that should provide for transparency of operation and direction their assets in the period covering the procedure of affiliate's establishment till its sale.
As a result by the third stage of the reform OAO RZD should have infrastructure and a carrier which can be separated only after reaching necessary conditions concerning expediency of total organization separation.
European experience of railway transport development proves that organization separation of infrastructure and a cargo carrier is inevitable thing to follow. Due to this very step the reform's claim on equal access of carriers to infrastructure can be implemented.
It should be said there is a certain tendency of RZD excessive guardianship of its affiliates. While business-planning they focus on guarantee volume of orders from the corporation as a rule, and don't take into consideration other customers' demands and other sorts of activities. Moreover while orders placement neither corporation nor its affiliates suppose that other market participants can perform as competitors and aspire to orders getting. Characteristic peculiarity of the most separated affiliates structures is that their initial target envisages OAO RZD demands satisfaction while planned profitability of other customers servicing is at 2-5 times higher. In general competitive surrounding should be created in all the sectors of the railway transport services market: transportation, repair, additional services etc.

Passenger Transportation Perspectives
To create competitive market for passenger transportation is much more problematic task. Number of companies willing to operate in this sector is less than in freight transportation one. It can be explained by its lesser profitability. Here effective tariff policy combining both social aspect (i.e. providing with socially important volumes of transportation under privileged tariffs) and giving additional services on high comfort and respective level of servicing standard should be worked out.
Though till non-profitable types of passenger transportation subsidizing exist (i.e. that one that works at the expense of RZD cargo transportation) there is no hope of competitiveness appearing in this sector in reality. OAO RZD as a monopolist doesn't have any incentives to decrease expenditures and private companies which losses from passenger services providing are not going to be compensated by the budgets will risk to find themselves in initially non-competitive conditions. The only exception that can be named for this sector is passenger transportation of highly comfort on the routes connecting Moscow and large regional centers.
At the second stage of the reform it is supposed to establish "Federal Passenger Company" JSC (which shares are going to be under the federal property terms) that is to provide for long-distance passenger transportation and some companies working for suburban passenger transportation routes. Passenger suburban companies will be established with participation of the Federation subjects interested in such projects and after that controlling functions and financing will be handled to authorities of the regional level.
Thus in the near future the federal and regional budgets will face the problem of passenger transportation subsidizing. According to OAO RZD, sums of the subsidies needed will amount to RUR 25bn. (USD 0.9 bn) for long-distance routes and RUR 30bn. (USD 1 bn.) for suburban communication.
These data should be examined thoroughly and such examination can be implemented only after final OAO RZD transition to separate account procedures of the company's profits and expenditures according to separation of infrastructure, car, locomotive and railway station tariffs consistents for passenger transportation.
This work should be completed till the first quarter of 2005 in order to calculate cost-price of the services on passenger transportation and define the volumes of subsidies to be made for 2006 federal and regional budgets.
Making decision on direct subsiding of passenger transportation losses transition will allow to save significant finance resources from maintenance RZD expenditures that can be directed to investment targets of the company or to tariffs reduction for freight transportation

Tariffs Deregulation is on the Agenda
Problem of railway transportation market demonopolization has acquired great importance now. This process is supposed to be implemented by transition from natural monopolies subjects functioning regulation within railway transportation towards natural monopolies subjects functioning within providing with services on railway transport infrastructure consumption.
That is it is necessary to take up to tariffs liberalization within competitive segments of transportation market. In first turn it concerns oil, container, perishable, general and other goods. It is must be reached via final division of the railway tariff into car, locomotive and infrastructure consistents (as well as railway station one for passenger transportation).
This task should become priority one now. One more problem at the current stage of the reformation is efficient combination of the state tariff regulation, competitiveness development and structural changes within railway transport sector. First of all it concerns issues on harmonization the very institutional system of tariffs regulation. Here one thing should be mentioned i.e. transfer the authorities to the unified regulation body- the RF Federal Tariff Service (FTS) and formation of the collegial body - the FTS Board where representatives of the federal bodies of executive power joined the event took place in 2004 while the administrative reform unfolding. The target of its establishment was objectivity of decision made and transparency of regulator functioning raise.

Russian Ports Will Remain Competitive
As it is known at the present moment in Russia twofold difference on railway tariffs on export-import transportation via border check-points overland on one hand (Tariff Regulation N10-01, Issue 3) and Russian ports is kept and on the other hand it works for domestic transportation (Clause 2). The Ministry of Economic Development and Trade is a supporter of domestic and foreign rates unification. Our position approved by the FTS was to differentiate tariffs inexation according to issues of the Tariff Regulation N10-01 keeping the average rate of tariff indexation worth 8,5%. In 2005 tariff indexation worth 12.5% was implemented for freight transportation within domestic communication and via the ports of Russia, and rates for export-import transportation via border check-points overland still remain at the level of 2004 (but coal)
Differentiated tariff indexation was stipulated by the following factors:
1. The average level of export-import railway tariffs for freight transportation via border check-points now exceeds the level of analogous tariffs while transportation via the Russian ports by 1,95 times and is higher the transit tariffs rate. Further rates increase for transportation via border check-points will actually have prohibitive character and influence the international trade negatively.
2. Average profitability of transportation via the Russian sea ports in 2004 is forecasted to amount to 2,09roubles/10tkm which is 25% lower average network cost-price fixed for 2004 by OAO RZD Board at the level of 2,80 roubles (0.1 USD)/10t/km. Average profitability of domestic transportation will amount to 2,65 roubles (0.09 USD)/10t/km (95% from average network cost-price of transportation) While indexation according to the Ministry of Economic Development and Trade the level of profitability when transportation via the Russia ports will reach 78% from the cost-price and for domestic transportation it will get to the level of average network cost-price. Thus, differentiated tariff indexation of freight transportation is a way of step-by-step liquidation of freight transportation crossed subsiding.
3. Differentiated indexation will allow to reduce disbalance growth in transport infrastructure development where due to twofold difference of tariffs railway carrying capacities towards border check-points are out of demand, but infrastructure towards sea ports functions with exceeding capacities limits. Moreover because of limited capacities of railway and ports themselves issues of adjustment cargo receiving procedures by the latter ones start to be of speculative character.
Due to the offered approach to tariffs indexation in 2005 proportion of transportation tariffs via border check-points and via sea ports will change from 1,95 to 1,73. While this existing difference for tariffs will anyway allow the ports of Russia to have higher level of tariffs for their services compared to the ports of neighbour countries. In our opinion differentiated indexation will make it possible to provide the general growth of average profitability at the level of planned for 2005 maximum levels of tariffs increase for freight transportation by 8,5% and doesn't entail decrease in the Russian export competitiveness

On Medium-Term Planning
In general practice of tariffs increase for railway freight and passenger transportation once a year introduced in 2003-2004 influenced the rates of inflation decrease and economic growth positively. Subjects of economic activities got an opportunity to consider the factor of railway transport consistent while their annual business planning beforehand.
But some cargo owners and transport companies point out that today it is hard to foresee their activities and investment programmes in first turn for the periods over one year that decreases investment attractiveness of their businesses and hampers private railway transportation business development. Considering the governmental decisions OAO RZD has to work out and submit for approvement by the RF Government the company's Investment Programme and Financial Plan for the period of 2006-2008. It will allow to make long-term forecasts about transport consistent share in prices for raw goods, restrict negative provide for sufficient level of profitability of the sector itself and make necessary capital investment.
While this it would be well-grounded if the level of tariff indexation for freight and passenger transportation is approved for the three-year period not just for one year as it is done now with restriction of maximum level of indexation by the rate of forecsted inflation.
It will improve investment climate both for OAO RZD itself (as most of its investment projects are planned for over a year) and for other market subjects of railway transportation that could forcast their activities for longer periods in the future.
[~DETAIL_TEXT] => Railway transport efficiency increase, reduction of expenditures on transportation and transport consistent for raw materials cost, quality improvement and upgrading transport services market are the basic goals of the structural reform, and their achievement is possible with help of competitiveness development and tariff policy harmonization in the transport sector.

OAO RZD WON'T BE SELF-SUFFICIENT HOLDING
Competitiveness development within the railway transport and creation of favorable surrounding for private investments are the key indicators of the reform being a success in general. Its programme envisages competitive sector development within railway transportation including companies-freight operators establishment that would possess their own rolling stock. At the present moment we can speak about 2450 rolling stock owners functioning in Russia. The number of companies that operate their own rolling stock of over 1000 rail cars has exceeded 50 ones and this figure is constantly growing. In 2003 about 90% of the total volume cars produced was purchased by private companies. Many big oil and metallurgical companies provided for great investment resources in their investment programmes to form up and enlarge their own car parks. It shows a sign of transport strategy re-consideration by these companies, i.e. they believe production transportation to be an opportunity of reducing expenditures as well as getting additional profit while rolling stock leasing.
In respect to railway transport sector the state performs both as a regulator and a share-holder. While this despite the state's being greatly interested in getting profit from OAO RZD the role of regulator is much more important and priority one for the state. Now the process of separation of self-run structural subdivisions into independent companies is being actively carried on. These subdivisions implement specialized cargo transportation, provide with technical base repair services, manufacture spare parts, and fulfill activities not concerning transportation immediately. Thus it covers those sectors where competitiveness can develop rapidly.
It should be noticed that the Programme of railway transport structural reform approved in May 2003 was greatly amended by the end of 2004. In particular the decision on obligatory determination of terms and ways of further separated assets sale was made. It means that while making decision about affiliates establishment the term of their shares auction should also be defined. Thus OAO RZD is not going to be turned into self-sufficient holding but start to get rid of assets in competitive types of activities loosing its monopolistic position on the market.
Also the Board of Directors OAO RZD control over deals with shares and property of affiliates created has been significantly strengthened that should provide for transparency of operation and direction their assets in the period covering the procedure of affiliate's establishment till its sale.
As a result by the third stage of the reform OAO RZD should have infrastructure and a carrier which can be separated only after reaching necessary conditions concerning expediency of total organization separation.
European experience of railway transport development proves that organization separation of infrastructure and a cargo carrier is inevitable thing to follow. Due to this very step the reform's claim on equal access of carriers to infrastructure can be implemented.
It should be said there is a certain tendency of RZD excessive guardianship of its affiliates. While business-planning they focus on guarantee volume of orders from the corporation as a rule, and don't take into consideration other customers' demands and other sorts of activities. Moreover while orders placement neither corporation nor its affiliates suppose that other market participants can perform as competitors and aspire to orders getting. Characteristic peculiarity of the most separated affiliates structures is that their initial target envisages OAO RZD demands satisfaction while planned profitability of other customers servicing is at 2-5 times higher. In general competitive surrounding should be created in all the sectors of the railway transport services market: transportation, repair, additional services etc.

Passenger Transportation Perspectives
To create competitive market for passenger transportation is much more problematic task. Number of companies willing to operate in this sector is less than in freight transportation one. It can be explained by its lesser profitability. Here effective tariff policy combining both social aspect (i.e. providing with socially important volumes of transportation under privileged tariffs) and giving additional services on high comfort and respective level of servicing standard should be worked out.
Though till non-profitable types of passenger transportation subsidizing exist (i.e. that one that works at the expense of RZD cargo transportation) there is no hope of competitiveness appearing in this sector in reality. OAO RZD as a monopolist doesn't have any incentives to decrease expenditures and private companies which losses from passenger services providing are not going to be compensated by the budgets will risk to find themselves in initially non-competitive conditions. The only exception that can be named for this sector is passenger transportation of highly comfort on the routes connecting Moscow and large regional centers.
At the second stage of the reform it is supposed to establish "Federal Passenger Company" JSC (which shares are going to be under the federal property terms) that is to provide for long-distance passenger transportation and some companies working for suburban passenger transportation routes. Passenger suburban companies will be established with participation of the Federation subjects interested in such projects and after that controlling functions and financing will be handled to authorities of the regional level.
Thus in the near future the federal and regional budgets will face the problem of passenger transportation subsidizing. According to OAO RZD, sums of the subsidies needed will amount to RUR 25bn. (USD 0.9 bn) for long-distance routes and RUR 30bn. (USD 1 bn.) for suburban communication.
These data should be examined thoroughly and such examination can be implemented only after final OAO RZD transition to separate account procedures of the company's profits and expenditures according to separation of infrastructure, car, locomotive and railway station tariffs consistents for passenger transportation.
This work should be completed till the first quarter of 2005 in order to calculate cost-price of the services on passenger transportation and define the volumes of subsidies to be made for 2006 federal and regional budgets.
Making decision on direct subsiding of passenger transportation losses transition will allow to save significant finance resources from maintenance RZD expenditures that can be directed to investment targets of the company or to tariffs reduction for freight transportation

Tariffs Deregulation is on the Agenda
Problem of railway transportation market demonopolization has acquired great importance now. This process is supposed to be implemented by transition from natural monopolies subjects functioning regulation within railway transportation towards natural monopolies subjects functioning within providing with services on railway transport infrastructure consumption.
That is it is necessary to take up to tariffs liberalization within competitive segments of transportation market. In first turn it concerns oil, container, perishable, general and other goods. It is must be reached via final division of the railway tariff into car, locomotive and infrastructure consistents (as well as railway station one for passenger transportation).
This task should become priority one now. One more problem at the current stage of the reformation is efficient combination of the state tariff regulation, competitiveness development and structural changes within railway transport sector. First of all it concerns issues on harmonization the very institutional system of tariffs regulation. Here one thing should be mentioned i.e. transfer the authorities to the unified regulation body- the RF Federal Tariff Service (FTS) and formation of the collegial body - the FTS Board where representatives of the federal bodies of executive power joined the event took place in 2004 while the administrative reform unfolding. The target of its establishment was objectivity of decision made and transparency of regulator functioning raise.

Russian Ports Will Remain Competitive
As it is known at the present moment in Russia twofold difference on railway tariffs on export-import transportation via border check-points overland on one hand (Tariff Regulation N10-01, Issue 3) and Russian ports is kept and on the other hand it works for domestic transportation (Clause 2). The Ministry of Economic Development and Trade is a supporter of domestic and foreign rates unification. Our position approved by the FTS was to differentiate tariffs inexation according to issues of the Tariff Regulation N10-01 keeping the average rate of tariff indexation worth 8,5%. In 2005 tariff indexation worth 12.5% was implemented for freight transportation within domestic communication and via the ports of Russia, and rates for export-import transportation via border check-points overland still remain at the level of 2004 (but coal)
Differentiated tariff indexation was stipulated by the following factors:
1. The average level of export-import railway tariffs for freight transportation via border check-points now exceeds the level of analogous tariffs while transportation via the Russian ports by 1,95 times and is higher the transit tariffs rate. Further rates increase for transportation via border check-points will actually have prohibitive character and influence the international trade negatively.
2. Average profitability of transportation via the Russian sea ports in 2004 is forecasted to amount to 2,09roubles/10tkm which is 25% lower average network cost-price fixed for 2004 by OAO RZD Board at the level of 2,80 roubles (0.1 USD)/10t/km. Average profitability of domestic transportation will amount to 2,65 roubles (0.09 USD)/10t/km (95% from average network cost-price of transportation) While indexation according to the Ministry of Economic Development and Trade the level of profitability when transportation via the Russia ports will reach 78% from the cost-price and for domestic transportation it will get to the level of average network cost-price. Thus, differentiated tariff indexation of freight transportation is a way of step-by-step liquidation of freight transportation crossed subsiding.
3. Differentiated indexation will allow to reduce disbalance growth in transport infrastructure development where due to twofold difference of tariffs railway carrying capacities towards border check-points are out of demand, but infrastructure towards sea ports functions with exceeding capacities limits. Moreover because of limited capacities of railway and ports themselves issues of adjustment cargo receiving procedures by the latter ones start to be of speculative character.
Due to the offered approach to tariffs indexation in 2005 proportion of transportation tariffs via border check-points and via sea ports will change from 1,95 to 1,73. While this existing difference for tariffs will anyway allow the ports of Russia to have higher level of tariffs for their services compared to the ports of neighbour countries. In our opinion differentiated indexation will make it possible to provide the general growth of average profitability at the level of planned for 2005 maximum levels of tariffs increase for freight transportation by 8,5% and doesn't entail decrease in the Russian export competitiveness

On Medium-Term Planning
In general practice of tariffs increase for railway freight and passenger transportation once a year introduced in 2003-2004 influenced the rates of inflation decrease and economic growth positively. Subjects of economic activities got an opportunity to consider the factor of railway transport consistent while their annual business planning beforehand.
But some cargo owners and transport companies point out that today it is hard to foresee their activities and investment programmes in first turn for the periods over one year that decreases investment attractiveness of their businesses and hampers private railway transportation business development. Considering the governmental decisions OAO RZD has to work out and submit for approvement by the RF Government the company's Investment Programme and Financial Plan for the period of 2006-2008. It will allow to make long-term forecasts about transport consistent share in prices for raw goods, restrict negative provide for sufficient level of profitability of the sector itself and make necessary capital investment.
While this it would be well-grounded if the level of tariff indexation for freight and passenger transportation is approved for the three-year period not just for one year as it is done now with restriction of maximum level of indexation by the rate of forecsted inflation.
It will improve investment climate both for OAO RZD itself (as most of its investment projects are planned for over a year) and for other market subjects of railway transportation that could forcast their activities for longer periods in the future.
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Andrey Sharonov Deputy Minister of Economic Development and Trade of the RF
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Andrey Sharonov Deputy Minister of Economic Development and Trade of the RF
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    [DETAIL_TEXT] => Railway transport efficiency increase, reduction of expenditures on transportation and transport consistent for raw materials cost, quality improvement and upgrading transport services market are the basic goals of the structural reform, and their achievement is possible with help of competitiveness development and tariff policy harmonization in the transport sector.

OAO RZD WON'T BE SELF-SUFFICIENT HOLDING
Competitiveness development within the railway transport and creation of favorable surrounding for private investments are the key indicators of the reform being a success in general. Its programme envisages competitive sector development within railway transportation including companies-freight operators establishment that would possess their own rolling stock. At the present moment we can speak about 2450 rolling stock owners functioning in Russia. The number of companies that operate their own rolling stock of over 1000 rail cars has exceeded 50 ones and this figure is constantly growing. In 2003 about 90% of the total volume cars produced was purchased by private companies. Many big oil and metallurgical companies provided for great investment resources in their investment programmes to form up and enlarge their own car parks. It shows a sign of transport strategy re-consideration by these companies, i.e. they believe production transportation to be an opportunity of reducing expenditures as well as getting additional profit while rolling stock leasing.
In respect to railway transport sector the state performs both as a regulator and a share-holder. While this despite the state's being greatly interested in getting profit from OAO RZD the role of regulator is much more important and priority one for the state. Now the process of separation of self-run structural subdivisions into independent companies is being actively carried on. These subdivisions implement specialized cargo transportation, provide with technical base repair services, manufacture spare parts, and fulfill activities not concerning transportation immediately. Thus it covers those sectors where competitiveness can develop rapidly.
It should be noticed that the Programme of railway transport structural reform approved in May 2003 was greatly amended by the end of 2004. In particular the decision on obligatory determination of terms and ways of further separated assets sale was made. It means that while making decision about affiliates establishment the term of their shares auction should also be defined. Thus OAO RZD is not going to be turned into self-sufficient holding but start to get rid of assets in competitive types of activities loosing its monopolistic position on the market.
Also the Board of Directors OAO RZD control over deals with shares and property of affiliates created has been significantly strengthened that should provide for transparency of operation and direction their assets in the period covering the procedure of affiliate's establishment till its sale.
As a result by the third stage of the reform OAO RZD should have infrastructure and a carrier which can be separated only after reaching necessary conditions concerning expediency of total organization separation.
European experience of railway transport development proves that organization separation of infrastructure and a cargo carrier is inevitable thing to follow. Due to this very step the reform's claim on equal access of carriers to infrastructure can be implemented.
It should be said there is a certain tendency of RZD excessive guardianship of its affiliates. While business-planning they focus on guarantee volume of orders from the corporation as a rule, and don't take into consideration other customers' demands and other sorts of activities. Moreover while orders placement neither corporation nor its affiliates suppose that other market participants can perform as competitors and aspire to orders getting. Characteristic peculiarity of the most separated affiliates structures is that their initial target envisages OAO RZD demands satisfaction while planned profitability of other customers servicing is at 2-5 times higher. In general competitive surrounding should be created in all the sectors of the railway transport services market: transportation, repair, additional services etc.

Passenger Transportation Perspectives
To create competitive market for passenger transportation is much more problematic task. Number of companies willing to operate in this sector is less than in freight transportation one. It can be explained by its lesser profitability. Here effective tariff policy combining both social aspect (i.e. providing with socially important volumes of transportation under privileged tariffs) and giving additional services on high comfort and respective level of servicing standard should be worked out.
Though till non-profitable types of passenger transportation subsidizing exist (i.e. that one that works at the expense of RZD cargo transportation) there is no hope of competitiveness appearing in this sector in reality. OAO RZD as a monopolist doesn't have any incentives to decrease expenditures and private companies which losses from passenger services providing are not going to be compensated by the budgets will risk to find themselves in initially non-competitive conditions. The only exception that can be named for this sector is passenger transportation of highly comfort on the routes connecting Moscow and large regional centers.
At the second stage of the reform it is supposed to establish "Federal Passenger Company" JSC (which shares are going to be under the federal property terms) that is to provide for long-distance passenger transportation and some companies working for suburban passenger transportation routes. Passenger suburban companies will be established with participation of the Federation subjects interested in such projects and after that controlling functions and financing will be handled to authorities of the regional level.
Thus in the near future the federal and regional budgets will face the problem of passenger transportation subsidizing. According to OAO RZD, sums of the subsidies needed will amount to RUR 25bn. (USD 0.9 bn) for long-distance routes and RUR 30bn. (USD 1 bn.) for suburban communication.
These data should be examined thoroughly and such examination can be implemented only after final OAO RZD transition to separate account procedures of the company's profits and expenditures according to separation of infrastructure, car, locomotive and railway station tariffs consistents for passenger transportation.
This work should be completed till the first quarter of 2005 in order to calculate cost-price of the services on passenger transportation and define the volumes of subsidies to be made for 2006 federal and regional budgets.
Making decision on direct subsiding of passenger transportation losses transition will allow to save significant finance resources from maintenance RZD expenditures that can be directed to investment targets of the company or to tariffs reduction for freight transportation

Tariffs Deregulation is on the Agenda
Problem of railway transportation market demonopolization has acquired great importance now. This process is supposed to be implemented by transition from natural monopolies subjects functioning regulation within railway transportation towards natural monopolies subjects functioning within providing with services on railway transport infrastructure consumption.
That is it is necessary to take up to tariffs liberalization within competitive segments of transportation market. In first turn it concerns oil, container, perishable, general and other goods. It is must be reached via final division of the railway tariff into car, locomotive and infrastructure consistents (as well as railway station one for passenger transportation).
This task should become priority one now. One more problem at the current stage of the reformation is efficient combination of the state tariff regulation, competitiveness development and structural changes within railway transport sector. First of all it concerns issues on harmonization the very institutional system of tariffs regulation. Here one thing should be mentioned i.e. transfer the authorities to the unified regulation body- the RF Federal Tariff Service (FTS) and formation of the collegial body - the FTS Board where representatives of the federal bodies of executive power joined the event took place in 2004 while the administrative reform unfolding. The target of its establishment was objectivity of decision made and transparency of regulator functioning raise.

Russian Ports Will Remain Competitive
As it is known at the present moment in Russia twofold difference on railway tariffs on export-import transportation via border check-points overland on one hand (Tariff Regulation N10-01, Issue 3) and Russian ports is kept and on the other hand it works for domestic transportation (Clause 2). The Ministry of Economic Development and Trade is a supporter of domestic and foreign rates unification. Our position approved by the FTS was to differentiate tariffs inexation according to issues of the Tariff Regulation N10-01 keeping the average rate of tariff indexation worth 8,5%. In 2005 tariff indexation worth 12.5% was implemented for freight transportation within domestic communication and via the ports of Russia, and rates for export-import transportation via border check-points overland still remain at the level of 2004 (but coal)
Differentiated tariff indexation was stipulated by the following factors:
1. The average level of export-import railway tariffs for freight transportation via border check-points now exceeds the level of analogous tariffs while transportation via the Russian ports by 1,95 times and is higher the transit tariffs rate. Further rates increase for transportation via border check-points will actually have prohibitive character and influence the international trade negatively.
2. Average profitability of transportation via the Russian sea ports in 2004 is forecasted to amount to 2,09roubles/10tkm which is 25% lower average network cost-price fixed for 2004 by OAO RZD Board at the level of 2,80 roubles (0.1 USD)/10t/km. Average profitability of domestic transportation will amount to 2,65 roubles (0.09 USD)/10t/km (95% from average network cost-price of transportation) While indexation according to the Ministry of Economic Development and Trade the level of profitability when transportation via the Russia ports will reach 78% from the cost-price and for domestic transportation it will get to the level of average network cost-price. Thus, differentiated tariff indexation of freight transportation is a way of step-by-step liquidation of freight transportation crossed subsiding.
3. Differentiated indexation will allow to reduce disbalance growth in transport infrastructure development where due to twofold difference of tariffs railway carrying capacities towards border check-points are out of demand, but infrastructure towards sea ports functions with exceeding capacities limits. Moreover because of limited capacities of railway and ports themselves issues of adjustment cargo receiving procedures by the latter ones start to be of speculative character.
Due to the offered approach to tariffs indexation in 2005 proportion of transportation tariffs via border check-points and via sea ports will change from 1,95 to 1,73. While this existing difference for tariffs will anyway allow the ports of Russia to have higher level of tariffs for their services compared to the ports of neighbour countries. In our opinion differentiated indexation will make it possible to provide the general growth of average profitability at the level of planned for 2005 maximum levels of tariffs increase for freight transportation by 8,5% and doesn't entail decrease in the Russian export competitiveness

On Medium-Term Planning
In general practice of tariffs increase for railway freight and passenger transportation once a year introduced in 2003-2004 influenced the rates of inflation decrease and economic growth positively. Subjects of economic activities got an opportunity to consider the factor of railway transport consistent while their annual business planning beforehand.
But some cargo owners and transport companies point out that today it is hard to foresee their activities and investment programmes in first turn for the periods over one year that decreases investment attractiveness of their businesses and hampers private railway transportation business development. Considering the governmental decisions OAO RZD has to work out and submit for approvement by the RF Government the company's Investment Programme and Financial Plan for the period of 2006-2008. It will allow to make long-term forecasts about transport consistent share in prices for raw goods, restrict negative provide for sufficient level of profitability of the sector itself and make necessary capital investment.
While this it would be well-grounded if the level of tariff indexation for freight and passenger transportation is approved for the three-year period not just for one year as it is done now with restriction of maximum level of indexation by the rate of forecsted inflation.
It will improve investment climate both for OAO RZD itself (as most of its investment projects are planned for over a year) and for other market subjects of railway transportation that could forcast their activities for longer periods in the future.
[~DETAIL_TEXT] => Railway transport efficiency increase, reduction of expenditures on transportation and transport consistent for raw materials cost, quality improvement and upgrading transport services market are the basic goals of the structural reform, and their achievement is possible with help of competitiveness development and tariff policy harmonization in the transport sector.

OAO RZD WON'T BE SELF-SUFFICIENT HOLDING
Competitiveness development within the railway transport and creation of favorable surrounding for private investments are the key indicators of the reform being a success in general. Its programme envisages competitive sector development within railway transportation including companies-freight operators establishment that would possess their own rolling stock. At the present moment we can speak about 2450 rolling stock owners functioning in Russia. The number of companies that operate their own rolling stock of over 1000 rail cars has exceeded 50 ones and this figure is constantly growing. In 2003 about 90% of the total volume cars produced was purchased by private companies. Many big oil and metallurgical companies provided for great investment resources in their investment programmes to form up and enlarge their own car parks. It shows a sign of transport strategy re-consideration by these companies, i.e. they believe production transportation to be an opportunity of reducing expenditures as well as getting additional profit while rolling stock leasing.
In respect to railway transport sector the state performs both as a regulator and a share-holder. While this despite the state's being greatly interested in getting profit from OAO RZD the role of regulator is much more important and priority one for the state. Now the process of separation of self-run structural subdivisions into independent companies is being actively carried on. These subdivisions implement specialized cargo transportation, provide with technical base repair services, manufacture spare parts, and fulfill activities not concerning transportation immediately. Thus it covers those sectors where competitiveness can develop rapidly.
It should be noticed that the Programme of railway transport structural reform approved in May 2003 was greatly amended by the end of 2004. In particular the decision on obligatory determination of terms and ways of further separated assets sale was made. It means that while making decision about affiliates establishment the term of their shares auction should also be defined. Thus OAO RZD is not going to be turned into self-sufficient holding but start to get rid of assets in competitive types of activities loosing its monopolistic position on the market.
Also the Board of Directors OAO RZD control over deals with shares and property of affiliates created has been significantly strengthened that should provide for transparency of operation and direction their assets in the period covering the procedure of affiliate's establishment till its sale.
As a result by the third stage of the reform OAO RZD should have infrastructure and a carrier which can be separated only after reaching necessary conditions concerning expediency of total organization separation.
European experience of railway transport development proves that organization separation of infrastructure and a cargo carrier is inevitable thing to follow. Due to this very step the reform's claim on equal access of carriers to infrastructure can be implemented.
It should be said there is a certain tendency of RZD excessive guardianship of its affiliates. While business-planning they focus on guarantee volume of orders from the corporation as a rule, and don't take into consideration other customers' demands and other sorts of activities. Moreover while orders placement neither corporation nor its affiliates suppose that other market participants can perform as competitors and aspire to orders getting. Characteristic peculiarity of the most separated affiliates structures is that their initial target envisages OAO RZD demands satisfaction while planned profitability of other customers servicing is at 2-5 times higher. In general competitive surrounding should be created in all the sectors of the railway transport services market: transportation, repair, additional services etc.

Passenger Transportation Perspectives
To create competitive market for passenger transportation is much more problematic task. Number of companies willing to operate in this sector is less than in freight transportation one. It can be explained by its lesser profitability. Here effective tariff policy combining both social aspect (i.e. providing with socially important volumes of transportation under privileged tariffs) and giving additional services on high comfort and respective level of servicing standard should be worked out.
Though till non-profitable types of passenger transportation subsidizing exist (i.e. that one that works at the expense of RZD cargo transportation) there is no hope of competitiveness appearing in this sector in reality. OAO RZD as a monopolist doesn't have any incentives to decrease expenditures and private companies which losses from passenger services providing are not going to be compensated by the budgets will risk to find themselves in initially non-competitive conditions. The only exception that can be named for this sector is passenger transportation of highly comfort on the routes connecting Moscow and large regional centers.
At the second stage of the reform it is supposed to establish "Federal Passenger Company" JSC (which shares are going to be under the federal property terms) that is to provide for long-distance passenger transportation and some companies working for suburban passenger transportation routes. Passenger suburban companies will be established with participation of the Federation subjects interested in such projects and after that controlling functions and financing will be handled to authorities of the regional level.
Thus in the near future the federal and regional budgets will face the problem of passenger transportation subsidizing. According to OAO RZD, sums of the subsidies needed will amount to RUR 25bn. (USD 0.9 bn) for long-distance routes and RUR 30bn. (USD 1 bn.) for suburban communication.
These data should be examined thoroughly and such examination can be implemented only after final OAO RZD transition to separate account procedures of the company's profits and expenditures according to separation of infrastructure, car, locomotive and railway station tariffs consistents for passenger transportation.
This work should be completed till the first quarter of 2005 in order to calculate cost-price of the services on passenger transportation and define the volumes of subsidies to be made for 2006 federal and regional budgets.
Making decision on direct subsiding of passenger transportation losses transition will allow to save significant finance resources from maintenance RZD expenditures that can be directed to investment targets of the company or to tariffs reduction for freight transportation

Tariffs Deregulation is on the Agenda
Problem of railway transportation market demonopolization has acquired great importance now. This process is supposed to be implemented by transition from natural monopolies subjects functioning regulation within railway transportation towards natural monopolies subjects functioning within providing with services on railway transport infrastructure consumption.
That is it is necessary to take up to tariffs liberalization within competitive segments of transportation market. In first turn it concerns oil, container, perishable, general and other goods. It is must be reached via final division of the railway tariff into car, locomotive and infrastructure consistents (as well as railway station one for passenger transportation).
This task should become priority one now. One more problem at the current stage of the reformation is efficient combination of the state tariff regulation, competitiveness development and structural changes within railway transport sector. First of all it concerns issues on harmonization the very institutional system of tariffs regulation. Here one thing should be mentioned i.e. transfer the authorities to the unified regulation body- the RF Federal Tariff Service (FTS) and formation of the collegial body - the FTS Board where representatives of the federal bodies of executive power joined the event took place in 2004 while the administrative reform unfolding. The target of its establishment was objectivity of decision made and transparency of regulator functioning raise.

Russian Ports Will Remain Competitive
As it is known at the present moment in Russia twofold difference on railway tariffs on export-import transportation via border check-points overland on one hand (Tariff Regulation N10-01, Issue 3) and Russian ports is kept and on the other hand it works for domestic transportation (Clause 2). The Ministry of Economic Development and Trade is a supporter of domestic and foreign rates unification. Our position approved by the FTS was to differentiate tariffs inexation according to issues of the Tariff Regulation N10-01 keeping the average rate of tariff indexation worth 8,5%. In 2005 tariff indexation worth 12.5% was implemented for freight transportation within domestic communication and via the ports of Russia, and rates for export-import transportation via border check-points overland still remain at the level of 2004 (but coal)
Differentiated tariff indexation was stipulated by the following factors:
1. The average level of export-import railway tariffs for freight transportation via border check-points now exceeds the level of analogous tariffs while transportation via the Russian ports by 1,95 times and is higher the transit tariffs rate. Further rates increase for transportation via border check-points will actually have prohibitive character and influence the international trade negatively.
2. Average profitability of transportation via the Russian sea ports in 2004 is forecasted to amount to 2,09roubles/10tkm which is 25% lower average network cost-price fixed for 2004 by OAO RZD Board at the level of 2,80 roubles (0.1 USD)/10t/km. Average profitability of domestic transportation will amount to 2,65 roubles (0.09 USD)/10t/km (95% from average network cost-price of transportation) While indexation according to the Ministry of Economic Development and Trade the level of profitability when transportation via the Russia ports will reach 78% from the cost-price and for domestic transportation it will get to the level of average network cost-price. Thus, differentiated tariff indexation of freight transportation is a way of step-by-step liquidation of freight transportation crossed subsiding.
3. Differentiated indexation will allow to reduce disbalance growth in transport infrastructure development where due to twofold difference of tariffs railway carrying capacities towards border check-points are out of demand, but infrastructure towards sea ports functions with exceeding capacities limits. Moreover because of limited capacities of railway and ports themselves issues of adjustment cargo receiving procedures by the latter ones start to be of speculative character.
Due to the offered approach to tariffs indexation in 2005 proportion of transportation tariffs via border check-points and via sea ports will change from 1,95 to 1,73. While this existing difference for tariffs will anyway allow the ports of Russia to have higher level of tariffs for their services compared to the ports of neighbour countries. In our opinion differentiated indexation will make it possible to provide the general growth of average profitability at the level of planned for 2005 maximum levels of tariffs increase for freight transportation by 8,5% and doesn't entail decrease in the Russian export competitiveness

On Medium-Term Planning
In general practice of tariffs increase for railway freight and passenger transportation once a year introduced in 2003-2004 influenced the rates of inflation decrease and economic growth positively. Subjects of economic activities got an opportunity to consider the factor of railway transport consistent while their annual business planning beforehand.
But some cargo owners and transport companies point out that today it is hard to foresee their activities and investment programmes in first turn for the periods over one year that decreases investment attractiveness of their businesses and hampers private railway transportation business development. Considering the governmental decisions OAO RZD has to work out and submit for approvement by the RF Government the company's Investment Programme and Financial Plan for the period of 2006-2008. It will allow to make long-term forecasts about transport consistent share in prices for raw goods, restrict negative provide for sufficient level of profitability of the sector itself and make necessary capital investment.
While this it would be well-grounded if the level of tariff indexation for freight and passenger transportation is approved for the three-year period not just for one year as it is done now with restriction of maximum level of indexation by the rate of forecsted inflation.
It will improve investment climate both for OAO RZD itself (as most of its investment projects are planned for over a year) and for other market subjects of railway transportation that could forcast their activities for longer periods in the future.
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Andrey Sharonov Deputy Minister of Economic Development and Trade of the RF
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Andrey Sharonov Deputy Minister of Economic Development and Trade of the RF
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РЖД-Партнер

Cooperation Goes First

Gennady Fadeyev
OAO RZD President
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    [DETAIL_TEXT] => The state-run company OAO Russian Railways (RZD) was formed while the process of railway transport reform unfolding and started operating on October,1 in 2003. According to the Strategic Programme of the company its mission envisages market demand on transportation satisfaction, operation efficiency increase as well as services improvement and deep integration into Euro-Asian transport system.

Stability, availability, safety...
While its mission implementation OAO RZD follows the world's trends of economy globalization, providing with finance procedures transparency, basing on the principles of social responsibility of business to the society. As a guarantee of the company's target determination the railway transport structural reform being implemented by the RF Government under the regional authorities support can be considered.
According to the results obtained for the period of year and a half company's functioning the corporation showed its stability and throughput increase that amounted to 8% in 2004. While this ОАО RZD provided its customers with tariff decrease in reality. Thus transport consistent for export goods got down by 20% in average. Due to this tendency export potential of Russia grew, Russian goods competitiveness on the world's market has also increased. In particular, coal export got up by 15%, included railway transportation that shows growth of 35%.
It is worth saying that during the first year of the company's functioning transportation quality significantly improved and among the most important improvements achieved for the above-mentioned period is transportation quality getting higher and speed of cargo delivery growth by 6%. Cargo share delivered right in time pointed shows stable result of over 90%, and for some cargoes such as coke, ore and vegetables this figure is 95%, thus it goes hand in hand with the world's standards.
Labour productivity growth for this period amounted to 7% that made it possible to raise railway men wages.
Also one more thing should be noted for the passed four years we have been witnessing one of the most important tendencies working well in the company's development course which is safety of train movement increase. The number of train crashes per unit of work decreased by two times and accidents - by 2.5 times. The proper level for cargo storage is also provided by the company. According to the plan of the financial-economic data of the company OAO RZD was functioning profitably having earned about USD300 million in 2004.
Well-built strategy of the company and its follow-up step-by-step implementation, working out long-term perspectives for economic development as well as providing with modern management while company's controlling allowed the corporation be recognized by the international rating agency Standard & Poor's that has given it BB+ sovereign credit rating.
While its functioning the company follows the principle of keeping the balance of interests of the state, transport services customers and the company itself. In general we can state that after the first stage of the reform when the functions of state regulation and economic control were separated stable railway transport functioning, its safety and availability were increased.

To Be Responsible to the State
Today we've reached the second stage of the reform's unfolding which covers the period of 2003-2005. It is focused at separation off OAO RZD enterprises involved into competitive activities. In 2005 it is planned to establish about forty affiliates from the sixty ones supposed to be established by 2010 on the base of more than a hundred of the company's subsidiaries and structural departments with basic assets volume worth USD1 billion. It is important to underline that while the process of re-organization we don't aim at destroying of that having been created before but at creation of a principally new system of relations between the corporation and its affiliates that in their turn are going to perform as legally independent enterprises of the sector.
Steps on affiliates' establishment are being taken in accordance with the plan and special regulations approved by the OAO RZD Board. By now the Board of the company has already considered and approved the concepts of affiliates establishment on the base of the 11 basic sector complexes. And in 2004 five of them were approved for the following types of activity: track machinery manufacturing and maintenance, electro technical production manufacturing; scientific-technical complex; freight cars major repairs and spare parts production; capital construction and development work. Affiliates operating in these spheres are going to be launched this year.
The Board of directors has approved a joint project of OAO RZD implemented altogether with Far-Eastern Shipping Company JSC on establishment Russkaya Troyka JSC which major area is multimodal containerized transportation. Now the work on other joint-projects getting ready included cooperation with foreign partners, for example Deutche Bahn, has been launched.
It is worth clarifying that creating new independent enterprises now we are forming up a commercial base for OAO RZD railway transport infrastructure maintenance and development. In general it doesn't contradict the concept of competitive transportation market development, moreover in two years we are brining our affiliates to the financial market.
Also such important direction of the second stage reform as completing corporative structure control optimization of OAO RZD should be mentioned. The goal has been determined and spade-work on reduction of the controlling staff has already been done.
The way of the railway transport reform unfolding was considered at the meeting of the RF Government in September, 2004. Generally it was noted the changes are going well and with accordance to the Programme and thus can be characterized positively. Along with that the Government made a decision on necessity of speeding up normative-and-legislative bills issuing planned to be approved long before and the projects of which were delayed to be considered due to the administration reform of the federal bodies of executive power of Russia implementation in 2004.
We are pleased to note that the positive way of our reform development is proved by the international experts' evaluation. In particular, the analytical report made by the ECMT says: "We can't help admitting great progress of railway transport reform in Russia. All the steps needed to escape economic crisis in this sector have been taken. It is an extraordinary important thing as this branch of economy is a key one for Russia and performs as a major tax-payer. The legislation worked out and approved at the first stage makes serious contribution into stability of reforms unfolding process". In this report we've found helpful recommendations that will allow to follow our way paying attention to risks probable and escape unfortunate consequences. We are very much in debt to the experts for the work done.
It should be said that if the reform of the Russian railways is based on the experience acquired thanks to having taken place or being implemented re-organization of the largest railway systems of the world then it becomes a phenomena of greatest attention and comprehensive study for those countries where it is on the agenda at the moment. In particular in this respect we cooperate with such countries as Argentina, Iran, India, CIS countries etc.
And some words of our company's perspectives within the framework of reformation process. In the course of its development ОАО Russian railways is based on the mission logically following from the state's tasks solving which is to provide the transport system of Russia with "core" - functions at the same time being responsible for complete satisfaction of the state's economy demand on transportation. In this respect the aspect of keeping the integrity of infrastructure and transport consistents in the company's structure up to the moment of conditions appearing for their total separation as it is pointed in the Programme of the Reform is of highly importance. The Ministry of Economic and Trade Development of the RF and other deregulating bodies share our opinion and provide us with their great support in this. We can state that we are going to follow this way without any fails preventing the risks of stability and safety fall for railway transport functioning. The time has proved the evolution approach to the reform being right and such attitude should be developed further to enhance Russia's economy stability.

Competitiveness to Give New Start
The most important reform direction is creation of conditions for competitiveness development within the freight transportation sector. In this respect the Russian transport market is characterized by intensiveness of activities of rolling stock owners including operator companies, the tendency that has been developed for the passed years. At the current moment the share of private rail cars takes 31% from the general park, and they provide 35% of all the transportation by the way more profitable than that implemented by the ОАО RZD rolling stock.
Under conditions of fast-growing inter-sector competitiveness our major goal, in particular, envisages providing transport market participants with non-discriminatory access to infrastructure and its efficiency development. We should confess that despite positive development dynamics achieved within private railway transport business there are great number of problems to solve. Mainly they are connected with independent transport companies relations with OAO RZD. Thus, legislative base regulating private carriers and operators activities hasn't been worked out, mechanisms of equal access to the infrastructure are not functioning well, great deal of misunderstanding can be found on the problem of using private locomotive haulage (most part of which is under RZD control now); problems concerning private rolling stock repair are to be considered as once again this is under the corporation regulation.
Today all the issues above-mentioned are being worked out and projects of normative documents are getting to be issued. In particular, in the near future we are planning to liquidate those problems which are in the company's competent authorities. They are as follows: non-discriminatory access of private rail cars for operating; fair decision on rail cars congestions waiting for locomotives at the stations; repair issues. In particular from this year beginning the plan of depot car repair contains the volumes claimed by the companies-owners under equal with RZD park terms. While this demand for spare parts is included in application under terms of their being supplied via Roszheldorsnab (Russian railways supplier JSC). Because of this there is no need to sort out price problem as all the cars are to be repaired according to unified calculation models and prices with fair volume of profitability for the private rolling stock. All these steps are surely will be accompanied with promotion of the projects on repair affiliates establishment altogether with private investors on the base of RZD depots.
We will support all the measures implemented by the Ministry of the RF and other regulatory bodies on competitiveness development within railway transport sector. At the same time we should understand clearly that competitiveness in other words is not a "nursery" for artificial new companies growing, that have nothing but ambitions for functioning on this market, and moreover that don't show any signs of their being ready to be responsible for transport to the country's economy. We see competitive relations as strict mechanism of production functioning tuned to the market demands on quality increase and services and goods cost decrease.
Our company performing as a carrier takes active part in competition as any other transport company does. We've got great experience, professional staff and good-working technologies and production traditions. We keep the level of our competitiveness rate high and it would be strange to ask us for artificial compromise provided for the joining the market private companies at the expense of our transport services efficiency.
We'd like to address to all the candidates with a claim of joining the "common track" and acquiring their own reputation of significant transport market players by means of showing their initiative, discipline and innovations introduction. We are happy to welcome strong and professional companies appearing that could make great contribution into the transport sector development. It is not needed by OAO RZD only, it is summoned by the country's economy itself.

Tariffs Deregulation: The Issue to be Solved at Last
Railway transport tariff system is an issue of great importance for OAO RZD functioning as well as for private transport companies and macroeconomics of the country in general. At the moment tariffs for freight transportation is regulated by Tariff Regulation №10-01 (approved in August 2003) and the Federal Tariff Service of the RF, which is authorized to amend this document and define the temporary increased/decreased rates for this or that types of cargo on this or that direction.
It should be confessed that this tariff system doesn't correspond with present-day demands and needs to be amended. Both the Federal bill "On natural monopolies" and the Programme of the reform say while competitive relations being formed in the certain market sectors the step needed is to transfer to free, contractual price formation i.e. tariffs deregulation. In these sectors ОАО RZD should have an opportunity to react flexibly while market conditions change and regulate its own rates accordingly. I'm speaking about tariffs decreasing not increasing mainly.
Surely, division the tariff into consistents (car consistent separation, particularly) some time ago was a crucial step for private railway business development. Though we believe the time has come to go forward and de-regulate car consistent in those transportation sectors where ОАО RZD doesn't perform as a monopolist. At the present-day stage the largest sector here is oil and oil products transportation where the share of railway transportation amounts to only 30%, RZD performs less than a half transportation and for certain directions all the transportation is implemented by private cars. The same situation is actual for chemicals, fertilizers, ore and some more cargoes. In the European part of the country only 10-15% of containerized transportation is performed by railway transport. As a competitive market the market of transportation of metal, paper, grain, trucks, machinery for short and medium distances can be considered. Great decrease in transported volumes usually appear for the directions parallel to water routes during the navigation period. In general due to our tariff system being inflexible we suffered USD 250 million that were not directed to the infrastructure development.
Thus in order to form up the efficient tariff policy adjusted to market economy conditions in our opinion it is necessary to separate off the natural monopoly competitive sectors of the transport services and de-regulate tariffs while preserving general principles of antimonopoly control. And today we are waiting for this issue being sorted out by the regulatory bodies of the country to attention of which all the projects and offers have already been directed.

To Investors' Attention
One of the key targets of railway transport reformation is its investment's attractiveness increase. It is going to be provided at the expense of economic efficiency of all the types of the company's activities and its client base expanding in Russia and on the world's market. The company plans to develop its investment projects by means of long-term loans on the capital market under its investment programmes implementation. The basic instrument of this type of resources attraction is going to be bonded debt and long-term credits. In December 2004 we first issued our ruble bonds and demand exceeded supply in this respect. This project can be considered as a pilot one within the framework of our further entering the funds market and operation our floater.
As one more direction of cooperation with our investors can be called funds attraction towards railway infrastructure development. We are speaking of infrastructure objects development and adjoining main lines access railways to provide transportation towards largest port terminals and largest industrial enterprises. We can name some of such examples. In particular, Lukoil Oil Company invested USD10million into railway access lines construction towards the port of Vysotsk on the Baltic Sea. The programme of infrastructure development altogether with coal enterprises and subjects of the Federation worth USD150million is implemented in Kuzbass. As a result both sides can be thought as taking advantage.
The most important task of further reform development is private investment attraction into infrastructure applying to mechanisms of state-and-private partnership. The major difficulty here lies in finding adequate ways of private investor funds protection under conditions of legislative prohibition of market turnover of the whole OAO RZD infrastructure. Though this question tends to be solved soon. We believe as a pilot project construction and development of railway objects on the Yamal peninsula where largest gas and oil deposits are concentrated can be regarded. The most significant investment projects we are going to implement in the near future are the following ones: oil transportation from Siberia to China, Moscow-Saint-Petersburg-Helsinki high-speed line reconstruction and launch, participation in the project of containerized cargo transportation from the countries of Asia-Pacific region to Slavkov (Poland) via the Trans-Siberian route, international transport corridor North-South development etc.
Also we should mention our plans within transport mechanical engineering sector. The year of 2004 was a year to give the most powerful impulse to development of the Russian locomotive engineering due to the personal attention of the RF President Vladimir Putin. Now we are functioning in accordance with the Programme of new locomotive designing and production. Last year the first Russian freight diesel locomotive 2ТЭ70 was produced at the Kolomensky engineering plant. Simultaneously with that at the Novocherkassk electric locomotive plant new powerful electric locomotive "Yermak" was manufactured. In 2005 production of modern highly-efficient passenger electric locomotives and freight diesel locomotives will be started in assembly-line way.
We are deeply sure in necessity of the native transport mechanical engineering sector development. Due to out readiness to invest and pretensions to the production quality all the major metallurgical complexes of Russia were subjected to overall modernization in respect of rails, wheel pairs, car castings production. This created the fundamental base to Russian railways reaching the level of the European technical equipment modern state that is a basic condition of Euro-Asian transport system integration.
We are pleased to mention that we've started some of joint machinery engineering production projects according to foreign technology principles and element base. Thus in the end of the last year an agreement between ОАО RZD and Siemens AG (Germany) was signed that envisages manufacture of high-speed trains InterSityExpress (ISE) at the Moscow locomotive repair plant.

Towards the World Business Community
As it has already been said the company's mission provided for its deep integration into Euro-Asian transport system. We can't help admitting that Russia due to its geopolitics peculiarities is a potential natural "bridge" that would link the countries of Western and Eastern Europe and South Asia. Such a situation without any doubts should be advantageous for following not only the company's interests but the whole world's business community in general. The strategic programme of ОАО RZD is provided for overall transit potential development of the RF along the international transport corridor West-East or the Transsib (Europe - Russia - Japan with branches towards China and Korea) and North-South (Northern Europe - Russia - Caucasus - Persian Gulf - Iran - India, Afghanistan etc.), also along Paneuropean Crete Corridors N4 and N9.
Today within the framework of these projects solutions working out and their implementation on new linking lines construction for these directions is being carried on including technical support on communication development in Iran, Azerbaijan and Korea. Also work on strengthening railway access lines towards border check-points (especially with China and Finland), and ports is planned to be held.
In general the major directions for Russia's cooperation with the EU within railway transport sector the following ones can be considered:
- transport policy harmonization considering transportation volumes growth;
- steps on transport legislation unification and its standards getting closer taken;
- customs formalities simplification;
- IT-technologies implementation for data-exchange to create unified information space;
- joint scientific-research projects on transport objects modernization;
- criteria for maintenance compatibility of rolling stock working out;
- container transportation volume increase;
- joint companies-carriers establishment.

On the Way of Practical Cooperation
From great number of tasks to be solved and that could bring our company to qualitatively new state I would like to emphasize efficient cooperation with our clients and partners. We have to reach the high world level of transport services to make our clients believe ОАО RZD can guarantee efficient transportation and infrastructure services providing. Our partners-suppliers should get the chance to appreciate their relations with large, reliable and perspective customer of material resources and technical equipment and our investors and credit organizations enjoy the opportunity to invest their funds into the largest corporation possessing respectable credit rating.
All in all stable OAO RZD functioning under powerful state support let me offer our company's participation in large-scale logistic solutions necessary for global trade-economic relations development. And my major deed in this respect is going to be invitation of business-world representatives to close cooperation with our company within transportation organization, technical base development, perspective railway equipment production and financial and investment cooperation fields.
[~DETAIL_TEXT] => The state-run company OAO Russian Railways (RZD) was formed while the process of railway transport reform unfolding and started operating on October,1 in 2003. According to the Strategic Programme of the company its mission envisages market demand on transportation satisfaction, operation efficiency increase as well as services improvement and deep integration into Euro-Asian transport system.

Stability, availability, safety...
While its mission implementation OAO RZD follows the world's trends of economy globalization, providing with finance procedures transparency, basing on the principles of social responsibility of business to the society. As a guarantee of the company's target determination the railway transport structural reform being implemented by the RF Government under the regional authorities support can be considered.
According to the results obtained for the period of year and a half company's functioning the corporation showed its stability and throughput increase that amounted to 8% in 2004. While this ОАО RZD provided its customers with tariff decrease in reality. Thus transport consistent for export goods got down by 20% in average. Due to this tendency export potential of Russia grew, Russian goods competitiveness on the world's market has also increased. In particular, coal export got up by 15%, included railway transportation that shows growth of 35%.
It is worth saying that during the first year of the company's functioning transportation quality significantly improved and among the most important improvements achieved for the above-mentioned period is transportation quality getting higher and speed of cargo delivery growth by 6%. Cargo share delivered right in time pointed shows stable result of over 90%, and for some cargoes such as coke, ore and vegetables this figure is 95%, thus it goes hand in hand with the world's standards.
Labour productivity growth for this period amounted to 7% that made it possible to raise railway men wages.
Also one more thing should be noted for the passed four years we have been witnessing one of the most important tendencies working well in the company's development course which is safety of train movement increase. The number of train crashes per unit of work decreased by two times and accidents - by 2.5 times. The proper level for cargo storage is also provided by the company. According to the plan of the financial-economic data of the company OAO RZD was functioning profitably having earned about USD300 million in 2004.
Well-built strategy of the company and its follow-up step-by-step implementation, working out long-term perspectives for economic development as well as providing with modern management while company's controlling allowed the corporation be recognized by the international rating agency Standard & Poor's that has given it BB+ sovereign credit rating.
While its functioning the company follows the principle of keeping the balance of interests of the state, transport services customers and the company itself. In general we can state that after the first stage of the reform when the functions of state regulation and economic control were separated stable railway transport functioning, its safety and availability were increased.

To Be Responsible to the State
Today we've reached the second stage of the reform's unfolding which covers the period of 2003-2005. It is focused at separation off OAO RZD enterprises involved into competitive activities. In 2005 it is planned to establish about forty affiliates from the sixty ones supposed to be established by 2010 on the base of more than a hundred of the company's subsidiaries and structural departments with basic assets volume worth USD1 billion. It is important to underline that while the process of re-organization we don't aim at destroying of that having been created before but at creation of a principally new system of relations between the corporation and its affiliates that in their turn are going to perform as legally independent enterprises of the sector.
Steps on affiliates' establishment are being taken in accordance with the plan and special regulations approved by the OAO RZD Board. By now the Board of the company has already considered and approved the concepts of affiliates establishment on the base of the 11 basic sector complexes. And in 2004 five of them were approved for the following types of activity: track machinery manufacturing and maintenance, electro technical production manufacturing; scientific-technical complex; freight cars major repairs and spare parts production; capital construction and development work. Affiliates operating in these spheres are going to be launched this year.
The Board of directors has approved a joint project of OAO RZD implemented altogether with Far-Eastern Shipping Company JSC on establishment Russkaya Troyka JSC which major area is multimodal containerized transportation. Now the work on other joint-projects getting ready included cooperation with foreign partners, for example Deutche Bahn, has been launched.
It is worth clarifying that creating new independent enterprises now we are forming up a commercial base for OAO RZD railway transport infrastructure maintenance and development. In general it doesn't contradict the concept of competitive transportation market development, moreover in two years we are brining our affiliates to the financial market.
Also such important direction of the second stage reform as completing corporative structure control optimization of OAO RZD should be mentioned. The goal has been determined and spade-work on reduction of the controlling staff has already been done.
The way of the railway transport reform unfolding was considered at the meeting of the RF Government in September, 2004. Generally it was noted the changes are going well and with accordance to the Programme and thus can be characterized positively. Along with that the Government made a decision on necessity of speeding up normative-and-legislative bills issuing planned to be approved long before and the projects of which were delayed to be considered due to the administration reform of the federal bodies of executive power of Russia implementation in 2004.
We are pleased to note that the positive way of our reform development is proved by the international experts' evaluation. In particular, the analytical report made by the ECMT says: "We can't help admitting great progress of railway transport reform in Russia. All the steps needed to escape economic crisis in this sector have been taken. It is an extraordinary important thing as this branch of economy is a key one for Russia and performs as a major tax-payer. The legislation worked out and approved at the first stage makes serious contribution into stability of reforms unfolding process". In this report we've found helpful recommendations that will allow to follow our way paying attention to risks probable and escape unfortunate consequences. We are very much in debt to the experts for the work done.
It should be said that if the reform of the Russian railways is based on the experience acquired thanks to having taken place or being implemented re-organization of the largest railway systems of the world then it becomes a phenomena of greatest attention and comprehensive study for those countries where it is on the agenda at the moment. In particular in this respect we cooperate with such countries as Argentina, Iran, India, CIS countries etc.
And some words of our company's perspectives within the framework of reformation process. In the course of its development ОАО Russian railways is based on the mission logically following from the state's tasks solving which is to provide the transport system of Russia with "core" - functions at the same time being responsible for complete satisfaction of the state's economy demand on transportation. In this respect the aspect of keeping the integrity of infrastructure and transport consistents in the company's structure up to the moment of conditions appearing for their total separation as it is pointed in the Programme of the Reform is of highly importance. The Ministry of Economic and Trade Development of the RF and other deregulating bodies share our opinion and provide us with their great support in this. We can state that we are going to follow this way without any fails preventing the risks of stability and safety fall for railway transport functioning. The time has proved the evolution approach to the reform being right and such attitude should be developed further to enhance Russia's economy stability.

Competitiveness to Give New Start
The most important reform direction is creation of conditions for competitiveness development within the freight transportation sector. In this respect the Russian transport market is characterized by intensiveness of activities of rolling stock owners including operator companies, the tendency that has been developed for the passed years. At the current moment the share of private rail cars takes 31% from the general park, and they provide 35% of all the transportation by the way more profitable than that implemented by the ОАО RZD rolling stock.
Under conditions of fast-growing inter-sector competitiveness our major goal, in particular, envisages providing transport market participants with non-discriminatory access to infrastructure and its efficiency development. We should confess that despite positive development dynamics achieved within private railway transport business there are great number of problems to solve. Mainly they are connected with independent transport companies relations with OAO RZD. Thus, legislative base regulating private carriers and operators activities hasn't been worked out, mechanisms of equal access to the infrastructure are not functioning well, great deal of misunderstanding can be found on the problem of using private locomotive haulage (most part of which is under RZD control now); problems concerning private rolling stock repair are to be considered as once again this is under the corporation regulation.
Today all the issues above-mentioned are being worked out and projects of normative documents are getting to be issued. In particular, in the near future we are planning to liquidate those problems which are in the company's competent authorities. They are as follows: non-discriminatory access of private rail cars for operating; fair decision on rail cars congestions waiting for locomotives at the stations; repair issues. In particular from this year beginning the plan of depot car repair contains the volumes claimed by the companies-owners under equal with RZD park terms. While this demand for spare parts is included in application under terms of their being supplied via Roszheldorsnab (Russian railways supplier JSC). Because of this there is no need to sort out price problem as all the cars are to be repaired according to unified calculation models and prices with fair volume of profitability for the private rolling stock. All these steps are surely will be accompanied with promotion of the projects on repair affiliates establishment altogether with private investors on the base of RZD depots.
We will support all the measures implemented by the Ministry of the RF and other regulatory bodies on competitiveness development within railway transport sector. At the same time we should understand clearly that competitiveness in other words is not a "nursery" for artificial new companies growing, that have nothing but ambitions for functioning on this market, and moreover that don't show any signs of their being ready to be responsible for transport to the country's economy. We see competitive relations as strict mechanism of production functioning tuned to the market demands on quality increase and services and goods cost decrease.
Our company performing as a carrier takes active part in competition as any other transport company does. We've got great experience, professional staff and good-working technologies and production traditions. We keep the level of our competitiveness rate high and it would be strange to ask us for artificial compromise provided for the joining the market private companies at the expense of our transport services efficiency.
We'd like to address to all the candidates with a claim of joining the "common track" and acquiring their own reputation of significant transport market players by means of showing their initiative, discipline and innovations introduction. We are happy to welcome strong and professional companies appearing that could make great contribution into the transport sector development. It is not needed by OAO RZD only, it is summoned by the country's economy itself.

Tariffs Deregulation: The Issue to be Solved at Last
Railway transport tariff system is an issue of great importance for OAO RZD functioning as well as for private transport companies and macroeconomics of the country in general. At the moment tariffs for freight transportation is regulated by Tariff Regulation №10-01 (approved in August 2003) and the Federal Tariff Service of the RF, which is authorized to amend this document and define the temporary increased/decreased rates for this or that types of cargo on this or that direction.
It should be confessed that this tariff system doesn't correspond with present-day demands and needs to be amended. Both the Federal bill "On natural monopolies" and the Programme of the reform say while competitive relations being formed in the certain market sectors the step needed is to transfer to free, contractual price formation i.e. tariffs deregulation. In these sectors ОАО RZD should have an opportunity to react flexibly while market conditions change and regulate its own rates accordingly. I'm speaking about tariffs decreasing not increasing mainly.
Surely, division the tariff into consistents (car consistent separation, particularly) some time ago was a crucial step for private railway business development. Though we believe the time has come to go forward and de-regulate car consistent in those transportation sectors where ОАО RZD doesn't perform as a monopolist. At the present-day stage the largest sector here is oil and oil products transportation where the share of railway transportation amounts to only 30%, RZD performs less than a half transportation and for certain directions all the transportation is implemented by private cars. The same situation is actual for chemicals, fertilizers, ore and some more cargoes. In the European part of the country only 10-15% of containerized transportation is performed by railway transport. As a competitive market the market of transportation of metal, paper, grain, trucks, machinery for short and medium distances can be considered. Great decrease in transported volumes usually appear for the directions parallel to water routes during the navigation period. In general due to our tariff system being inflexible we suffered USD 250 million that were not directed to the infrastructure development.
Thus in order to form up the efficient tariff policy adjusted to market economy conditions in our opinion it is necessary to separate off the natural monopoly competitive sectors of the transport services and de-regulate tariffs while preserving general principles of antimonopoly control. And today we are waiting for this issue being sorted out by the regulatory bodies of the country to attention of which all the projects and offers have already been directed.

To Investors' Attention
One of the key targets of railway transport reformation is its investment's attractiveness increase. It is going to be provided at the expense of economic efficiency of all the types of the company's activities and its client base expanding in Russia and on the world's market. The company plans to develop its investment projects by means of long-term loans on the capital market under its investment programmes implementation. The basic instrument of this type of resources attraction is going to be bonded debt and long-term credits. In December 2004 we first issued our ruble bonds and demand exceeded supply in this respect. This project can be considered as a pilot one within the framework of our further entering the funds market and operation our floater.
As one more direction of cooperation with our investors can be called funds attraction towards railway infrastructure development. We are speaking of infrastructure objects development and adjoining main lines access railways to provide transportation towards largest port terminals and largest industrial enterprises. We can name some of such examples. In particular, Lukoil Oil Company invested USD10million into railway access lines construction towards the port of Vysotsk on the Baltic Sea. The programme of infrastructure development altogether with coal enterprises and subjects of the Federation worth USD150million is implemented in Kuzbass. As a result both sides can be thought as taking advantage.
The most important task of further reform development is private investment attraction into infrastructure applying to mechanisms of state-and-private partnership. The major difficulty here lies in finding adequate ways of private investor funds protection under conditions of legislative prohibition of market turnover of the whole OAO RZD infrastructure. Though this question tends to be solved soon. We believe as a pilot project construction and development of railway objects on the Yamal peninsula where largest gas and oil deposits are concentrated can be regarded. The most significant investment projects we are going to implement in the near future are the following ones: oil transportation from Siberia to China, Moscow-Saint-Petersburg-Helsinki high-speed line reconstruction and launch, participation in the project of containerized cargo transportation from the countries of Asia-Pacific region to Slavkov (Poland) via the Trans-Siberian route, international transport corridor North-South development etc.
Also we should mention our plans within transport mechanical engineering sector. The year of 2004 was a year to give the most powerful impulse to development of the Russian locomotive engineering due to the personal attention of the RF President Vladimir Putin. Now we are functioning in accordance with the Programme of new locomotive designing and production. Last year the first Russian freight diesel locomotive 2ТЭ70 was produced at the Kolomensky engineering plant. Simultaneously with that at the Novocherkassk electric locomotive plant new powerful electric locomotive "Yermak" was manufactured. In 2005 production of modern highly-efficient passenger electric locomotives and freight diesel locomotives will be started in assembly-line way.
We are deeply sure in necessity of the native transport mechanical engineering sector development. Due to out readiness to invest and pretensions to the production quality all the major metallurgical complexes of Russia were subjected to overall modernization in respect of rails, wheel pairs, car castings production. This created the fundamental base to Russian railways reaching the level of the European technical equipment modern state that is a basic condition of Euro-Asian transport system integration.
We are pleased to mention that we've started some of joint machinery engineering production projects according to foreign technology principles and element base. Thus in the end of the last year an agreement between ОАО RZD and Siemens AG (Germany) was signed that envisages manufacture of high-speed trains InterSityExpress (ISE) at the Moscow locomotive repair plant.

Towards the World Business Community
As it has already been said the company's mission provided for its deep integration into Euro-Asian transport system. We can't help admitting that Russia due to its geopolitics peculiarities is a potential natural "bridge" that would link the countries of Western and Eastern Europe and South Asia. Such a situation without any doubts should be advantageous for following not only the company's interests but the whole world's business community in general. The strategic programme of ОАО RZD is provided for overall transit potential development of the RF along the international transport corridor West-East or the Transsib (Europe - Russia - Japan with branches towards China and Korea) and North-South (Northern Europe - Russia - Caucasus - Persian Gulf - Iran - India, Afghanistan etc.), also along Paneuropean Crete Corridors N4 and N9.
Today within the framework of these projects solutions working out and their implementation on new linking lines construction for these directions is being carried on including technical support on communication development in Iran, Azerbaijan and Korea. Also work on strengthening railway access lines towards border check-points (especially with China and Finland), and ports is planned to be held.
In general the major directions for Russia's cooperation with the EU within railway transport sector the following ones can be considered:
- transport policy harmonization considering transportation volumes growth;
- steps on transport legislation unification and its standards getting closer taken;
- customs formalities simplification;
- IT-technologies implementation for data-exchange to create unified information space;
- joint scientific-research projects on transport objects modernization;
- criteria for maintenance compatibility of rolling stock working out;
- container transportation volume increase;
- joint companies-carriers establishment.

On the Way of Practical Cooperation
From great number of tasks to be solved and that could bring our company to qualitatively new state I would like to emphasize efficient cooperation with our clients and partners. We have to reach the high world level of transport services to make our clients believe ОАО RZD can guarantee efficient transportation and infrastructure services providing. Our partners-suppliers should get the chance to appreciate their relations with large, reliable and perspective customer of material resources and technical equipment and our investors and credit organizations enjoy the opportunity to invest their funds into the largest corporation possessing respectable credit rating.
All in all stable OAO RZD functioning under powerful state support let me offer our company's participation in large-scale logistic solutions necessary for global trade-economic relations development. And my major deed in this respect is going to be invitation of business-world representatives to close cooperation with our company within transportation organization, technical base development, perspective railway equipment production and financial and investment cooperation fields.
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Gennady Fadeyev
OAO RZD President
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Gennady Fadeyev
OAO RZD President
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    [DETAIL_TEXT] => The state-run company OAO Russian Railways (RZD) was formed while the process of railway transport reform unfolding and started operating on October,1 in 2003. According to the Strategic Programme of the company its mission envisages market demand on transportation satisfaction, operation efficiency increase as well as services improvement and deep integration into Euro-Asian transport system.

Stability, availability, safety...
While its mission implementation OAO RZD follows the world's trends of economy globalization, providing with finance procedures transparency, basing on the principles of social responsibility of business to the society. As a guarantee of the company's target determination the railway transport structural reform being implemented by the RF Government under the regional authorities support can be considered.
According to the results obtained for the period of year and a half company's functioning the corporation showed its stability and throughput increase that amounted to 8% in 2004. While this ОАО RZD provided its customers with tariff decrease in reality. Thus transport consistent for export goods got down by 20% in average. Due to this tendency export potential of Russia grew, Russian goods competitiveness on the world's market has also increased. In particular, coal export got up by 15%, included railway transportation that shows growth of 35%.
It is worth saying that during the first year of the company's functioning transportation quality significantly improved and among the most important improvements achieved for the above-mentioned period is transportation quality getting higher and speed of cargo delivery growth by 6%. Cargo share delivered right in time pointed shows stable result of over 90%, and for some cargoes such as coke, ore and vegetables this figure is 95%, thus it goes hand in hand with the world's standards.
Labour productivity growth for this period amounted to 7% that made it possible to raise railway men wages.
Also one more thing should be noted for the passed four years we have been witnessing one of the most important tendencies working well in the company's development course which is safety of train movement increase. The number of train crashes per unit of work decreased by two times and accidents - by 2.5 times. The proper level for cargo storage is also provided by the company. According to the plan of the financial-economic data of the company OAO RZD was functioning profitably having earned about USD300 million in 2004.
Well-built strategy of the company and its follow-up step-by-step implementation, working out long-term perspectives for economic development as well as providing with modern management while company's controlling allowed the corporation be recognized by the international rating agency Standard & Poor's that has given it BB+ sovereign credit rating.
While its functioning the company follows the principle of keeping the balance of interests of the state, transport services customers and the company itself. In general we can state that after the first stage of the reform when the functions of state regulation and economic control were separated stable railway transport functioning, its safety and availability were increased.

To Be Responsible to the State
Today we've reached the second stage of the reform's unfolding which covers the period of 2003-2005. It is focused at separation off OAO RZD enterprises involved into competitive activities. In 2005 it is planned to establish about forty affiliates from the sixty ones supposed to be established by 2010 on the base of more than a hundred of the company's subsidiaries and structural departments with basic assets volume worth USD1 billion. It is important to underline that while the process of re-organization we don't aim at destroying of that having been created before but at creation of a principally new system of relations between the corporation and its affiliates that in their turn are going to perform as legally independent enterprises of the sector.
Steps on affiliates' establishment are being taken in accordance with the plan and special regulations approved by the OAO RZD Board. By now the Board of the company has already considered and approved the concepts of affiliates establishment on the base of the 11 basic sector complexes. And in 2004 five of them were approved for the following types of activity: track machinery manufacturing and maintenance, electro technical production manufacturing; scientific-technical complex; freight cars major repairs and spare parts production; capital construction and development work. Affiliates operating in these spheres are going to be launched this year.
The Board of directors has approved a joint project of OAO RZD implemented altogether with Far-Eastern Shipping Company JSC on establishment Russkaya Troyka JSC which major area is multimodal containerized transportation. Now the work on other joint-projects getting ready included cooperation with foreign partners, for example Deutche Bahn, has been launched.
It is worth clarifying that creating new independent enterprises now we are forming up a commercial base for OAO RZD railway transport infrastructure maintenance and development. In general it doesn't contradict the concept of competitive transportation market development, moreover in two years we are brining our affiliates to the financial market.
Also such important direction of the second stage reform as completing corporative structure control optimization of OAO RZD should be mentioned. The goal has been determined and spade-work on reduction of the controlling staff has already been done.
The way of the railway transport reform unfolding was considered at the meeting of the RF Government in September, 2004. Generally it was noted the changes are going well and with accordance to the Programme and thus can be characterized positively. Along with that the Government made a decision on necessity of speeding up normative-and-legislative bills issuing planned to be approved long before and the projects of which were delayed to be considered due to the administration reform of the federal bodies of executive power of Russia implementation in 2004.
We are pleased to note that the positive way of our reform development is proved by the international experts' evaluation. In particular, the analytical report made by the ECMT says: "We can't help admitting great progress of railway transport reform in Russia. All the steps needed to escape economic crisis in this sector have been taken. It is an extraordinary important thing as this branch of economy is a key one for Russia and performs as a major tax-payer. The legislation worked out and approved at the first stage makes serious contribution into stability of reforms unfolding process". In this report we've found helpful recommendations that will allow to follow our way paying attention to risks probable and escape unfortunate consequences. We are very much in debt to the experts for the work done.
It should be said that if the reform of the Russian railways is based on the experience acquired thanks to having taken place or being implemented re-organization of the largest railway systems of the world then it becomes a phenomena of greatest attention and comprehensive study for those countries where it is on the agenda at the moment. In particular in this respect we cooperate with such countries as Argentina, Iran, India, CIS countries etc.
And some words of our company's perspectives within the framework of reformation process. In the course of its development ОАО Russian railways is based on the mission logically following from the state's tasks solving which is to provide the transport system of Russia with "core" - functions at the same time being responsible for complete satisfaction of the state's economy demand on transportation. In this respect the aspect of keeping the integrity of infrastructure and transport consistents in the company's structure up to the moment of conditions appearing for their total separation as it is pointed in the Programme of the Reform is of highly importance. The Ministry of Economic and Trade Development of the RF and other deregulating bodies share our opinion and provide us with their great support in this. We can state that we are going to follow this way without any fails preventing the risks of stability and safety fall for railway transport functioning. The time has proved the evolution approach to the reform being right and such attitude should be developed further to enhance Russia's economy stability.

Competitiveness to Give New Start
The most important reform direction is creation of conditions for competitiveness development within the freight transportation sector. In this respect the Russian transport market is characterized by intensiveness of activities of rolling stock owners including operator companies, the tendency that has been developed for the passed years. At the current moment the share of private rail cars takes 31% from the general park, and they provide 35% of all the transportation by the way more profitable than that implemented by the ОАО RZD rolling stock.
Under conditions of fast-growing inter-sector competitiveness our major goal, in particular, envisages providing transport market participants with non-discriminatory access to infrastructure and its efficiency development. We should confess that despite positive development dynamics achieved within private railway transport business there are great number of problems to solve. Mainly they are connected with independent transport companies relations with OAO RZD. Thus, legislative base regulating private carriers and operators activities hasn't been worked out, mechanisms of equal access to the infrastructure are not functioning well, great deal of misunderstanding can be found on the problem of using private locomotive haulage (most part of which is under RZD control now); problems concerning private rolling stock repair are to be considered as once again this is under the corporation regulation.
Today all the issues above-mentioned are being worked out and projects of normative documents are getting to be issued. In particular, in the near future we are planning to liquidate those problems which are in the company's competent authorities. They are as follows: non-discriminatory access of private rail cars for operating; fair decision on rail cars congestions waiting for locomotives at the stations; repair issues. In particular from this year beginning the plan of depot car repair contains the volumes claimed by the companies-owners under equal with RZD park terms. While this demand for spare parts is included in application under terms of their being supplied via Roszheldorsnab (Russian railways supplier JSC). Because of this there is no need to sort out price problem as all the cars are to be repaired according to unified calculation models and prices with fair volume of profitability for the private rolling stock. All these steps are surely will be accompanied with promotion of the projects on repair affiliates establishment altogether with private investors on the base of RZD depots.
We will support all the measures implemented by the Ministry of the RF and other regulatory bodies on competitiveness development within railway transport sector. At the same time we should understand clearly that competitiveness in other words is not a "nursery" for artificial new companies growing, that have nothing but ambitions for functioning on this market, and moreover that don't show any signs of their being ready to be responsible for transport to the country's economy. We see competitive relations as strict mechanism of production functioning tuned to the market demands on quality increase and services and goods cost decrease.
Our company performing as a carrier takes active part in competition as any other transport company does. We've got great experience, professional staff and good-working technologies and production traditions. We keep the level of our competitiveness rate high and it would be strange to ask us for artificial compromise provided for the joining the market private companies at the expense of our transport services efficiency.
We'd like to address to all the candidates with a claim of joining the "common track" and acquiring their own reputation of significant transport market players by means of showing their initiative, discipline and innovations introduction. We are happy to welcome strong and professional companies appearing that could make great contribution into the transport sector development. It is not needed by OAO RZD only, it is summoned by the country's economy itself.

Tariffs Deregulation: The Issue to be Solved at Last
Railway transport tariff system is an issue of great importance for OAO RZD functioning as well as for private transport companies and macroeconomics of the country in general. At the moment tariffs for freight transportation is regulated by Tariff Regulation №10-01 (approved in August 2003) and the Federal Tariff Service of the RF, which is authorized to amend this document and define the temporary increased/decreased rates for this or that types of cargo on this or that direction.
It should be confessed that this tariff system doesn't correspond with present-day demands and needs to be amended. Both the Federal bill "On natural monopolies" and the Programme of the reform say while competitive relations being formed in the certain market sectors the step needed is to transfer to free, contractual price formation i.e. tariffs deregulation. In these sectors ОАО RZD should have an opportunity to react flexibly while market conditions change and regulate its own rates accordingly. I'm speaking about tariffs decreasing not increasing mainly.
Surely, division the tariff into consistents (car consistent separation, particularly) some time ago was a crucial step for private railway business development. Though we believe the time has come to go forward and de-regulate car consistent in those transportation sectors where ОАО RZD doesn't perform as a monopolist. At the present-day stage the largest sector here is oil and oil products transportation where the share of railway transportation amounts to only 30%, RZD performs less than a half transportation and for certain directions all the transportation is implemented by private cars. The same situation is actual for chemicals, fertilizers, ore and some more cargoes. In the European part of the country only 10-15% of containerized transportation is performed by railway transport. As a competitive market the market of transportation of metal, paper, grain, trucks, machinery for short and medium distances can be considered. Great decrease in transported volumes usually appear for the directions parallel to water routes during the navigation period. In general due to our tariff system being inflexible we suffered USD 250 million that were not directed to the infrastructure development.
Thus in order to form up the efficient tariff policy adjusted to market economy conditions in our opinion it is necessary to separate off the natural monopoly competitive sectors of the transport services and de-regulate tariffs while preserving general principles of antimonopoly control. And today we are waiting for this issue being sorted out by the regulatory bodies of the country to attention of which all the projects and offers have already been directed.

To Investors' Attention
One of the key targets of railway transport reformation is its investment's attractiveness increase. It is going to be provided at the expense of economic efficiency of all the types of the company's activities and its client base expanding in Russia and on the world's market. The company plans to develop its investment projects by means of long-term loans on the capital market under its investment programmes implementation. The basic instrument of this type of resources attraction is going to be bonded debt and long-term credits. In December 2004 we first issued our ruble bonds and demand exceeded supply in this respect. This project can be considered as a pilot one within the framework of our further entering the funds market and operation our floater.
As one more direction of cooperation with our investors can be called funds attraction towards railway infrastructure development. We are speaking of infrastructure objects development and adjoining main lines access railways to provide transportation towards largest port terminals and largest industrial enterprises. We can name some of such examples. In particular, Lukoil Oil Company invested USD10million into railway access lines construction towards the port of Vysotsk on the Baltic Sea. The programme of infrastructure development altogether with coal enterprises and subjects of the Federation worth USD150million is implemented in Kuzbass. As a result both sides can be thought as taking advantage.
The most important task of further reform development is private investment attraction into infrastructure applying to mechanisms of state-and-private partnership. The major difficulty here lies in finding adequate ways of private investor funds protection under conditions of legislative prohibition of market turnover of the whole OAO RZD infrastructure. Though this question tends to be solved soon. We believe as a pilot project construction and development of railway objects on the Yamal peninsula where largest gas and oil deposits are concentrated can be regarded. The most significant investment projects we are going to implement in the near future are the following ones: oil transportation from Siberia to China, Moscow-Saint-Petersburg-Helsinki high-speed line reconstruction and launch, participation in the project of containerized cargo transportation from the countries of Asia-Pacific region to Slavkov (Poland) via the Trans-Siberian route, international transport corridor North-South development etc.
Also we should mention our plans within transport mechanical engineering sector. The year of 2004 was a year to give the most powerful impulse to development of the Russian locomotive engineering due to the personal attention of the RF President Vladimir Putin. Now we are functioning in accordance with the Programme of new locomotive designing and production. Last year the first Russian freight diesel locomotive 2ТЭ70 was produced at the Kolomensky engineering plant. Simultaneously with that at the Novocherkassk electric locomotive plant new powerful electric locomotive "Yermak" was manufactured. In 2005 production of modern highly-efficient passenger electric locomotives and freight diesel locomotives will be started in assembly-line way.
We are deeply sure in necessity of the native transport mechanical engineering sector development. Due to out readiness to invest and pretensions to the production quality all the major metallurgical complexes of Russia were subjected to overall modernization in respect of rails, wheel pairs, car castings production. This created the fundamental base to Russian railways reaching the level of the European technical equipment modern state that is a basic condition of Euro-Asian transport system integration.
We are pleased to mention that we've started some of joint machinery engineering production projects according to foreign technology principles and element base. Thus in the end of the last year an agreement between ОАО RZD and Siemens AG (Germany) was signed that envisages manufacture of high-speed trains InterSityExpress (ISE) at the Moscow locomotive repair plant.

Towards the World Business Community
As it has already been said the company's mission provided for its deep integration into Euro-Asian transport system. We can't help admitting that Russia due to its geopolitics peculiarities is a potential natural "bridge" that would link the countries of Western and Eastern Europe and South Asia. Such a situation without any doubts should be advantageous for following not only the company's interests but the whole world's business community in general. The strategic programme of ОАО RZD is provided for overall transit potential development of the RF along the international transport corridor West-East or the Transsib (Europe - Russia - Japan with branches towards China and Korea) and North-South (Northern Europe - Russia - Caucasus - Persian Gulf - Iran - India, Afghanistan etc.), also along Paneuropean Crete Corridors N4 and N9.
Today within the framework of these projects solutions working out and their implementation on new linking lines construction for these directions is being carried on including technical support on communication development in Iran, Azerbaijan and Korea. Also work on strengthening railway access lines towards border check-points (especially with China and Finland), and ports is planned to be held.
In general the major directions for Russia's cooperation with the EU within railway transport sector the following ones can be considered:
- transport policy harmonization considering transportation volumes growth;
- steps on transport legislation unification and its standards getting closer taken;
- customs formalities simplification;
- IT-technologies implementation for data-exchange to create unified information space;
- joint scientific-research projects on transport objects modernization;
- criteria for maintenance compatibility of rolling stock working out;
- container transportation volume increase;
- joint companies-carriers establishment.

On the Way of Practical Cooperation
From great number of tasks to be solved and that could bring our company to qualitatively new state I would like to emphasize efficient cooperation with our clients and partners. We have to reach the high world level of transport services to make our clients believe ОАО RZD can guarantee efficient transportation and infrastructure services providing. Our partners-suppliers should get the chance to appreciate their relations with large, reliable and perspective customer of material resources and technical equipment and our investors and credit organizations enjoy the opportunity to invest their funds into the largest corporation possessing respectable credit rating.
All in all stable OAO RZD functioning under powerful state support let me offer our company's participation in large-scale logistic solutions necessary for global trade-economic relations development. And my major deed in this respect is going to be invitation of business-world representatives to close cooperation with our company within transportation organization, technical base development, perspective railway equipment production and financial and investment cooperation fields.
[~DETAIL_TEXT] => The state-run company OAO Russian Railways (RZD) was formed while the process of railway transport reform unfolding and started operating on October,1 in 2003. According to the Strategic Programme of the company its mission envisages market demand on transportation satisfaction, operation efficiency increase as well as services improvement and deep integration into Euro-Asian transport system.

Stability, availability, safety...
While its mission implementation OAO RZD follows the world's trends of economy globalization, providing with finance procedures transparency, basing on the principles of social responsibility of business to the society. As a guarantee of the company's target determination the railway transport structural reform being implemented by the RF Government under the regional authorities support can be considered.
According to the results obtained for the period of year and a half company's functioning the corporation showed its stability and throughput increase that amounted to 8% in 2004. While this ОАО RZD provided its customers with tariff decrease in reality. Thus transport consistent for export goods got down by 20% in average. Due to this tendency export potential of Russia grew, Russian goods competitiveness on the world's market has also increased. In particular, coal export got up by 15%, included railway transportation that shows growth of 35%.
It is worth saying that during the first year of the company's functioning transportation quality significantly improved and among the most important improvements achieved for the above-mentioned period is transportation quality getting higher and speed of cargo delivery growth by 6%. Cargo share delivered right in time pointed shows stable result of over 90%, and for some cargoes such as coke, ore and vegetables this figure is 95%, thus it goes hand in hand with the world's standards.
Labour productivity growth for this period amounted to 7% that made it possible to raise railway men wages.
Also one more thing should be noted for the passed four years we have been witnessing one of the most important tendencies working well in the company's development course which is safety of train movement increase. The number of train crashes per unit of work decreased by two times and accidents - by 2.5 times. The proper level for cargo storage is also provided by the company. According to the plan of the financial-economic data of the company OAO RZD was functioning profitably having earned about USD300 million in 2004.
Well-built strategy of the company and its follow-up step-by-step implementation, working out long-term perspectives for economic development as well as providing with modern management while company's controlling allowed the corporation be recognized by the international rating agency Standard & Poor's that has given it BB+ sovereign credit rating.
While its functioning the company follows the principle of keeping the balance of interests of the state, transport services customers and the company itself. In general we can state that after the first stage of the reform when the functions of state regulation and economic control were separated stable railway transport functioning, its safety and availability were increased.

To Be Responsible to the State
Today we've reached the second stage of the reform's unfolding which covers the period of 2003-2005. It is focused at separation off OAO RZD enterprises involved into competitive activities. In 2005 it is planned to establish about forty affiliates from the sixty ones supposed to be established by 2010 on the base of more than a hundred of the company's subsidiaries and structural departments with basic assets volume worth USD1 billion. It is important to underline that while the process of re-organization we don't aim at destroying of that having been created before but at creation of a principally new system of relations between the corporation and its affiliates that in their turn are going to perform as legally independent enterprises of the sector.
Steps on affiliates' establishment are being taken in accordance with the plan and special regulations approved by the OAO RZD Board. By now the Board of the company has already considered and approved the concepts of affiliates establishment on the base of the 11 basic sector complexes. And in 2004 five of them were approved for the following types of activity: track machinery manufacturing and maintenance, electro technical production manufacturing; scientific-technical complex; freight cars major repairs and spare parts production; capital construction and development work. Affiliates operating in these spheres are going to be launched this year.
The Board of directors has approved a joint project of OAO RZD implemented altogether with Far-Eastern Shipping Company JSC on establishment Russkaya Troyka JSC which major area is multimodal containerized transportation. Now the work on other joint-projects getting ready included cooperation with foreign partners, for example Deutche Bahn, has been launched.
It is worth clarifying that creating new independent enterprises now we are forming up a commercial base for OAO RZD railway transport infrastructure maintenance and development. In general it doesn't contradict the concept of competitive transportation market development, moreover in two years we are brining our affiliates to the financial market.
Also such important direction of the second stage reform as completing corporative structure control optimization of OAO RZD should be mentioned. The goal has been determined and spade-work on reduction of the controlling staff has already been done.
The way of the railway transport reform unfolding was considered at the meeting of the RF Government in September, 2004. Generally it was noted the changes are going well and with accordance to the Programme and thus can be characterized positively. Along with that the Government made a decision on necessity of speeding up normative-and-legislative bills issuing planned to be approved long before and the projects of which were delayed to be considered due to the administration reform of the federal bodies of executive power of Russia implementation in 2004.
We are pleased to note that the positive way of our reform development is proved by the international experts' evaluation. In particular, the analytical report made by the ECMT says: "We can't help admitting great progress of railway transport reform in Russia. All the steps needed to escape economic crisis in this sector have been taken. It is an extraordinary important thing as this branch of economy is a key one for Russia and performs as a major tax-payer. The legislation worked out and approved at the first stage makes serious contribution into stability of reforms unfolding process". In this report we've found helpful recommendations that will allow to follow our way paying attention to risks probable and escape unfortunate consequences. We are very much in debt to the experts for the work done.
It should be said that if the reform of the Russian railways is based on the experience acquired thanks to having taken place or being implemented re-organization of the largest railway systems of the world then it becomes a phenomena of greatest attention and comprehensive study for those countries where it is on the agenda at the moment. In particular in this respect we cooperate with such countries as Argentina, Iran, India, CIS countries etc.
And some words of our company's perspectives within the framework of reformation process. In the course of its development ОАО Russian railways is based on the mission logically following from the state's tasks solving which is to provide the transport system of Russia with "core" - functions at the same time being responsible for complete satisfaction of the state's economy demand on transportation. In this respect the aspect of keeping the integrity of infrastructure and transport consistents in the company's structure up to the moment of conditions appearing for their total separation as it is pointed in the Programme of the Reform is of highly importance. The Ministry of Economic and Trade Development of the RF and other deregulating bodies share our opinion and provide us with their great support in this. We can state that we are going to follow this way without any fails preventing the risks of stability and safety fall for railway transport functioning. The time has proved the evolution approach to the reform being right and such attitude should be developed further to enhance Russia's economy stability.

Competitiveness to Give New Start
The most important reform direction is creation of conditions for competitiveness development within the freight transportation sector. In this respect the Russian transport market is characterized by intensiveness of activities of rolling stock owners including operator companies, the tendency that has been developed for the passed years. At the current moment the share of private rail cars takes 31% from the general park, and they provide 35% of all the transportation by the way more profitable than that implemented by the ОАО RZD rolling stock.
Under conditions of fast-growing inter-sector competitiveness our major goal, in particular, envisages providing transport market participants with non-discriminatory access to infrastructure and its efficiency development. We should confess that despite positive development dynamics achieved within private railway transport business there are great number of problems to solve. Mainly they are connected with independent transport companies relations with OAO RZD. Thus, legislative base regulating private carriers and operators activities hasn't been worked out, mechanisms of equal access to the infrastructure are not functioning well, great deal of misunderstanding can be found on the problem of using private locomotive haulage (most part of which is under RZD control now); problems concerning private rolling stock repair are to be considered as once again this is under the corporation regulation.
Today all the issues above-mentioned are being worked out and projects of normative documents are getting to be issued. In particular, in the near future we are planning to liquidate those problems which are in the company's competent authorities. They are as follows: non-discriminatory access of private rail cars for operating; fair decision on rail cars congestions waiting for locomotives at the stations; repair issues. In particular from this year beginning the plan of depot car repair contains the volumes claimed by the companies-owners under equal with RZD park terms. While this demand for spare parts is included in application under terms of their being supplied via Roszheldorsnab (Russian railways supplier JSC). Because of this there is no need to sort out price problem as all the cars are to be repaired according to unified calculation models and prices with fair volume of profitability for the private rolling stock. All these steps are surely will be accompanied with promotion of the projects on repair affiliates establishment altogether with private investors on the base of RZD depots.
We will support all the measures implemented by the Ministry of the RF and other regulatory bodies on competitiveness development within railway transport sector. At the same time we should understand clearly that competitiveness in other words is not a "nursery" for artificial new companies growing, that have nothing but ambitions for functioning on this market, and moreover that don't show any signs of their being ready to be responsible for transport to the country's economy. We see competitive relations as strict mechanism of production functioning tuned to the market demands on quality increase and services and goods cost decrease.
Our company performing as a carrier takes active part in competition as any other transport company does. We've got great experience, professional staff and good-working technologies and production traditions. We keep the level of our competitiveness rate high and it would be strange to ask us for artificial compromise provided for the joining the market private companies at the expense of our transport services efficiency.
We'd like to address to all the candidates with a claim of joining the "common track" and acquiring their own reputation of significant transport market players by means of showing their initiative, discipline and innovations introduction. We are happy to welcome strong and professional companies appearing that could make great contribution into the transport sector development. It is not needed by OAO RZD only, it is summoned by the country's economy itself.

Tariffs Deregulation: The Issue to be Solved at Last
Railway transport tariff system is an issue of great importance for OAO RZD functioning as well as for private transport companies and macroeconomics of the country in general. At the moment tariffs for freight transportation is regulated by Tariff Regulation №10-01 (approved in August 2003) and the Federal Tariff Service of the RF, which is authorized to amend this document and define the temporary increased/decreased rates for this or that types of cargo on this or that direction.
It should be confessed that this tariff system doesn't correspond with present-day demands and needs to be amended. Both the Federal bill "On natural monopolies" and the Programme of the reform say while competitive relations being formed in the certain market sectors the step needed is to transfer to free, contractual price formation i.e. tariffs deregulation. In these sectors ОАО RZD should have an opportunity to react flexibly while market conditions change and regulate its own rates accordingly. I'm speaking about tariffs decreasing not increasing mainly.
Surely, division the tariff into consistents (car consistent separation, particularly) some time ago was a crucial step for private railway business development. Though we believe the time has come to go forward and de-regulate car consistent in those transportation sectors where ОАО RZD doesn't perform as a monopolist. At the present-day stage the largest sector here is oil and oil products transportation where the share of railway transportation amounts to only 30%, RZD performs less than a half transportation and for certain directions all the transportation is implemented by private cars. The same situation is actual for chemicals, fertilizers, ore and some more cargoes. In the European part of the country only 10-15% of containerized transportation is performed by railway transport. As a competitive market the market of transportation of metal, paper, grain, trucks, machinery for short and medium distances can be considered. Great decrease in transported volumes usually appear for the directions parallel to water routes during the navigation period. In general due to our tariff system being inflexible we suffered USD 250 million that were not directed to the infrastructure development.
Thus in order to form up the efficient tariff policy adjusted to market economy conditions in our opinion it is necessary to separate off the natural monopoly competitive sectors of the transport services and de-regulate tariffs while preserving general principles of antimonopoly control. And today we are waiting for this issue being sorted out by the regulatory bodies of the country to attention of which all the projects and offers have already been directed.

To Investors' Attention
One of the key targets of railway transport reformation is its investment's attractiveness increase. It is going to be provided at the expense of economic efficiency of all the types of the company's activities and its client base expanding in Russia and on the world's market. The company plans to develop its investment projects by means of long-term loans on the capital market under its investment programmes implementation. The basic instrument of this type of resources attraction is going to be bonded debt and long-term credits. In December 2004 we first issued our ruble bonds and demand exceeded supply in this respect. This project can be considered as a pilot one within the framework of our further entering the funds market and operation our floater.
As one more direction of cooperation with our investors can be called funds attraction towards railway infrastructure development. We are speaking of infrastructure objects development and adjoining main lines access railways to provide transportation towards largest port terminals and largest industrial enterprises. We can name some of such examples. In particular, Lukoil Oil Company invested USD10million into railway access lines construction towards the port of Vysotsk on the Baltic Sea. The programme of infrastructure development altogether with coal enterprises and subjects of the Federation worth USD150million is implemented in Kuzbass. As a result both sides can be thought as taking advantage.
The most important task of further reform development is private investment attraction into infrastructure applying to mechanisms of state-and-private partnership. The major difficulty here lies in finding adequate ways of private investor funds protection under conditions of legislative prohibition of market turnover of the whole OAO RZD infrastructure. Though this question tends to be solved soon. We believe as a pilot project construction and development of railway objects on the Yamal peninsula where largest gas and oil deposits are concentrated can be regarded. The most significant investment projects we are going to implement in the near future are the following ones: oil transportation from Siberia to China, Moscow-Saint-Petersburg-Helsinki high-speed line reconstruction and launch, participation in the project of containerized cargo transportation from the countries of Asia-Pacific region to Slavkov (Poland) via the Trans-Siberian route, international transport corridor North-South development etc.
Also we should mention our plans within transport mechanical engineering sector. The year of 2004 was a year to give the most powerful impulse to development of the Russian locomotive engineering due to the personal attention of the RF President Vladimir Putin. Now we are functioning in accordance with the Programme of new locomotive designing and production. Last year the first Russian freight diesel locomotive 2ТЭ70 was produced at the Kolomensky engineering plant. Simultaneously with that at the Novocherkassk electric locomotive plant new powerful electric locomotive "Yermak" was manufactured. In 2005 production of modern highly-efficient passenger electric locomotives and freight diesel locomotives will be started in assembly-line way.
We are deeply sure in necessity of the native transport mechanical engineering sector development. Due to out readiness to invest and pretensions to the production quality all the major metallurgical complexes of Russia were subjected to overall modernization in respect of rails, wheel pairs, car castings production. This created the fundamental base to Russian railways reaching the level of the European technical equipment modern state that is a basic condition of Euro-Asian transport system integration.
We are pleased to mention that we've started some of joint machinery engineering production projects according to foreign technology principles and element base. Thus in the end of the last year an agreement between ОАО RZD and Siemens AG (Germany) was signed that envisages manufacture of high-speed trains InterSityExpress (ISE) at the Moscow locomotive repair plant.

Towards the World Business Community
As it has already been said the company's mission provided for its deep integration into Euro-Asian transport system. We can't help admitting that Russia due to its geopolitics peculiarities is a potential natural "bridge" that would link the countries of Western and Eastern Europe and South Asia. Such a situation without any doubts should be advantageous for following not only the company's interests but the whole world's business community in general. The strategic programme of ОАО RZD is provided for overall transit potential development of the RF along the international transport corridor West-East or the Transsib (Europe - Russia - Japan with branches towards China and Korea) and North-South (Northern Europe - Russia - Caucasus - Persian Gulf - Iran - India, Afghanistan etc.), also along Paneuropean Crete Corridors N4 and N9.
Today within the framework of these projects solutions working out and their implementation on new linking lines construction for these directions is being carried on including technical support on communication development in Iran, Azerbaijan and Korea. Also work on strengthening railway access lines towards border check-points (especially with China and Finland), and ports is planned to be held.
In general the major directions for Russia's cooperation with the EU within railway transport sector the following ones can be considered:
- transport policy harmonization considering transportation volumes growth;
- steps on transport legislation unification and its standards getting closer taken;
- customs formalities simplification;
- IT-technologies implementation for data-exchange to create unified information space;
- joint scientific-research projects on transport objects modernization;
- criteria for maintenance compatibility of rolling stock working out;
- container transportation volume increase;
- joint companies-carriers establishment.

On the Way of Practical Cooperation
From great number of tasks to be solved and that could bring our company to qualitatively new state I would like to emphasize efficient cooperation with our clients and partners. We have to reach the high world level of transport services to make our clients believe ОАО RZD can guarantee efficient transportation and infrastructure services providing. Our partners-suppliers should get the chance to appreciate their relations with large, reliable and perspective customer of material resources and technical equipment and our investors and credit organizations enjoy the opportunity to invest their funds into the largest corporation possessing respectable credit rating.
All in all stable OAO RZD functioning under powerful state support let me offer our company's participation in large-scale logistic solutions necessary for global trade-economic relations development. And my major deed in this respect is going to be invitation of business-world representatives to close cooperation with our company within transportation organization, technical base development, perspective railway equipment production and financial and investment cooperation fields.
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Gennady Fadeyev
OAO RZD President
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Gennady Fadeyev
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РЖД-Партнер

First Stage: Development, Results, Perspectives

Railway transport reform in Russia is an integral part of general social-economic changes being implemented in the Russian Federation starting from 1990 and determined for a transfer from the Soviet to market economy conditions.
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Goals, Principles, Stages
All the steps are taken in accordance with the Programme of Structural Reform for railway transport approved by the RF Government's decree № 384 (May, 18, 2001). This documents claims the following major goals of the reform:
- railway transport stability and availability increase;
- single harmonized transport system of the state;
- national economy aggregate expenditures on cargo railway transportation reduction;
- growing demand on railway services satisfaction
Among basic reform principles declared the following ones should be mentioned: evolution way of changes implemented; state regulation and economic activity functions separation; providing financial transparency; investment attractiveness; unified railways infrastructure preservation; transfer from natural-monopoly to competitive conditions for the sector.
In general the reform is aimed at effective railway transport model establishment that would be based on free competitiveness within transportation sphere and flexible state infrastructure regulation. While this it is taken into account that railway transport plays a key macroeconomic role for Russia (sometimes it is even called "state-forming" one) and thus needs greatest circumspection for any structural changes implementation.
All the process of restructuring is divided into three stages:
First - (2001 - 2002) - separation of state regulation and economic activity functions that were performed by the Ministry of Railways of the RF
Second- (2003 - 2005) - sector de-monopolization
Third- (2006 - 2010) - railway transportation competitive market creation and developing

Functions of state regulations and economic activity separation
At the first stage of restructuring that covered 2001 - 2003 impressive preliminary work was done. The greatest importance was new legislative base or set of the Federal bills approving: "On railway transport in the Russian Federation", "RF railway transport regulations", "On peculiarities of railway transport property control" and "On amendment the bill "On natural monopolies".
The projects of the above-mentioned decrees were worked out by the Ministry of Railways and it took them long to be approved by the different sorts of ministries and departments, independent transport and industrial associations and afterwards by the Parliament It should be said that the first drafts were amended while first readings by 70-80%. That means that the legislative base was formed in a quite democratic way. New bills were approved at the end of 2004 and took effective on May, 2003.
The very idea of the Russian railways privatization even in the form of the state-run company establishment resulted in ambiguous reactions rise in the State Duma and public in general. While voting new bills got 65 % votes. Rigid "against"-reaction was expressed by the Communists fraction.
During that period but new bills some more documents were approved (new version of "Tariff Regulation № 10-01 "Tariffs for cargo transportation and infrastructure services " (that introduced car consistent for tariffs) and new Regulations for cargo transportation directed to functioning under new conditions.
One more very important direction for the Ministry of Railways re-formation should be considered work on the sector property complex inventory making and a new economic subject's stock establishment. This detailed work implementation took two years to be completed. All in all 2300 juridical people, about 15 thousand departments with their own balance accounts were found. As a result a special classifier, new information base of all the sector's assets and unified summary financial register were formed. In general the system took data on over one billion objects of tangible assets.
On September 18, 2003 by the RF Government Bill № 585 ОАО Russian Railways was established, and starting from October,1 new company started operating. Gennady Fadeyev, Minister of Railways was appointed to perform president's functions. Funds of 987 enterprises worth over USD 50 billion made up stock of the unified economic subject. According to the legislation the company 100% of shares belong to the state and can be sold only under condition of special Federal decree issuing. Moreover ОАО RZD doesn't have a right to sell, get to lease, free use or pawn main line infrastructure and all the objects of defense determination. Other infrastructure objects and subsidiaries' shares can be sold with the Government agreement.
Now ОАО RZD is an vertically-integrated company possessing infrastructure, rolling stock to for freight and passenger transportation, system of trains operating control and their safety providing. The corporation has 150 subsidiaries that join separate transportation structures, plant on rolling stock manufacturing and repairing, construction departments, scientific-industrial complex etc. ОАО RZD possesses 17 territory subsidiaries - railways. Moreover one million employees work for the corporation.

First Results
The second stage of the reform started with its being late. Formed in line with ОАО RZD renewed Ministry of Railways was demolished in March, 2003 while general administrative reform of the federal bodies of executive power that was followed by its railway transport regulation functions transfer to the RF Ministry of Transport. Though, making decisions on organization and functional issues of the new Ministry of Transport and submitted to it Federal Inspection Transport Service and Federal Railway Transport Agency took long and lasted till autumn.
On September 9 the way of the reform's unfolding was considered by the Government. In general the first stage results were thought to be as positive ones and going hand in hand with the Programme. At the same time the decision to speed up working out of some normative documents was made to prevent slowing down transfer to further changes needed to be done. Particularly at the Government's session was underlined that one of the most showing result of the reform is private operator companies possessing rolling stock growth. By now the companies of this sort have got 30% of general sector car park which transports 35% of all the cargo. According to the Carriers and Operators Association, for the period of 2001 - 2004 investment into rolling stock purchasing reached the level of over USD 2 billion. Operators have created competitive conditions on the market of rolling stock supply and become potential institution for competing relations within transportation services sector. Still there is one carrier on the Russian railway transport market which ОАО RZD.

Competitive models
While the process of unified economic subject (OAO RZD) separation off the Ministry of Railway was carried on, issue on following this or that competitive model for the Russian railways was more of theoretical than practical sort. But now this problem has been put on the agenda and become a reason for heated discussions rise.
As it is known there are two basic variants of competitive models for railway transport in the world. The first one is characteristic for North America and demands well developed railway network, highly efficient system of antitrust legislation and private undertaking traditions working well.
Another modification is used in the countries of Latin America (Brazil, Mexico, Argentina etc)
Europe chose its direction for railway restructuring and after the EU directive of 1991 issuing allowed carrier companies to use infrastructure of other countries. The next EU directive of 2001 made railway transport market separate infrastructure and transportation business completely. In this direction the reforms in Finland, the UK, Sweden, Germany and the Netherlands were carried out.
Russia took its own way which was considered as a worthwhile one by ECMT experts who made a report "Regulatory Reform of Railways in Russia" The Programme of the structural reform as it has already been mentioned defines as one of the key tasks "preserving the unified state network industrial railway infrastructure and centralized traffic control". Along with this it is pointed out that the third stage will cover the issue of "evaluation of opportunity for several competing vertically-integrated railway companies establishment" as well as "steps on competitiveness increase on the market of freight transportation for those sectors of the network that have parallel ways"
That is at least for the near future the infrastructure will remain unified. But in this case a question on organization-legislative separation with transporting business will arise. The Programme shows: "While structural reform unfolding conditions can be created under which complete organization infrastructure separation off transportation business will take place". Such decision can be made considering the international experience and following some of conditions which are as follows: inner restructuring of OAO RZD completing according to the types of activities; technical standards and rules of technology coordination probation; non-discriminatory access to the infrastructure mechanisms implantation etc.
The Programme clearly shows that infrastructure, locomotive park and some part of freight cars integration under state-run company's control is worthwhile, at least, during first years of the system's restructuring. While this the proportion of cars belonging to OAO RZD and private carriers is defined as 50 to 50 for the first period. Gennady Fadeyev, president of the company strongly believes this situation will remain as a real one for long.
Thus, Russian model specific character is defined by the fact that unified infrastructure owner performs also as a carrier that transports not only state and non-profitable cargo but tends to run its business in a profitable way in general. Competitiveness will become true reality for all the existing carriers: ОАО RZD, separated off it affiliates and independent private carriers.
It is obvious that under such circumstances mechanism of non-discriminatory access to the infrastructure providing and giving other equal opportunities for transportation business acquires special meaning. All these conditions are being worked out now. Two normative documents on non-descriminatory access have already been approved but for the present moment they don't work within transportation process as there are no independent carriers in reality. Their appearing is forecasted for 2006 when issues on according licenses, using own locomotive haulage, duties distribution etc have been solved.

Competitive activities separation off OAO RZD
Such issue as affiliates separation off OAO RZD is worth of particular attention. This problem discussions resulted in heated debates at the Government's session that led to making decision to amend Governmental Bill № 384 which is a basic document for the reform unfolding
At the second stage from OAO RZD authorities position it would be worthwhile to carry out affiliates separation in a way to form typical holding structure afterwards. At first 100% affiliates' shares will be controlled by ОАО RZD, later some part of them will be sold. It could help increase company's capitalization, give additional resources for infrastructure financing, save general ability of the most important railway transport activities to be under control.
The RF Ministry of Economic Development and Trade didn't come out in favor of this plan. Minister German Gref characterized such changes as total absence of any sort of demonopolization of ОАО RZD, he called to-be-established holding "monster" and "hypermonopoly" that will prevent any competition development. Moreover he clarified that choosing such a variant the state won't be able to control OAO RZD assets sale.
In particular, G.Gref demanded to carry out re-organization in such a way that companies being separated on the base of OAO RZD property could become state-run and independent on the corporation. And the next step should be directed to their privatization according to the working legislation standards. As a result in the Government's Bill № 811 effective on December 20, 2004 and with issuing of which Bill № 384 was amended such position was reflected in a form of compromise. The Federal passenger company should be established as an independent on OAO RZD one (2007 was named as the term of launching) and other companies will be separated as OAO RZD affiliates but under condition of defining the terms and ways of their shares sale.
At the present moment OAO RZD Board of Directors has approved the Regulation of affiliates establishment and Schedule of arrangements on competitive organizations separation off the company. Also the Concept of OAO RZD corporate construction has been approved. In 2005 five concepts of affiliates separation have been defined according to the following types of activities: freight cars major repair and spare parts production; track machinery production; electrotechnical equipment production; scientific-technological complex; capital construction and projecting activities. The Board of Directors hasn't approved yet the concepts of affiliates on container transportation (Transcontainer) establishment as well as that one on perishable goods transportation (Refservice). Their projects are to be re-considered after amending.
At the same time ОАО RZD altogether with other carriers started establishing joint-companies, for example, Russkaya Troyka JSC for intermodal transportation which a joint-project of RZD and FESCO (Far-Eastern Shipping Company) Agreement on joint-companies for freight and passenger transportation establishment was concluded with Deutsche Bahn.

Resume
Thus, the way of the Russian railways reform unfolding shows the transfer towards market relations in the sector is going on gradually and in accordance with the Programme approved by the RF Government. Railway transport functioning can be characterized as a stable and dynamically developing sector. The first and most precious consequences of changes going well have become private investment flow into rolling stock and conditions creation for OAO RZD effective financial resources attraction for the company's basis assets renewal.
Today the issue of inter-sector competitiveness organization within transportation sphere is on the agenda. It should bring its fruitful results for cargo owners servicing improvement and transport expenditures control in their production cost.
At the present moment among necessary conditions for further competitiveness development the following one can be named: tariffs de-regulation for competitive segments of the transport market i.e. that problem the decision of which is expected to be made by the Federal Tariff Service
It is obvious that the RF Ministry of Transport responsible for railways restructuring is ready to carry on with changes started.

Andrey Guryev [~DETAIL_TEXT] =>
Goals, Principles, Stages
All the steps are taken in accordance with the Programme of Structural Reform for railway transport approved by the RF Government's decree № 384 (May, 18, 2001). This documents claims the following major goals of the reform:
- railway transport stability and availability increase;
- single harmonized transport system of the state;
- national economy aggregate expenditures on cargo railway transportation reduction;
- growing demand on railway services satisfaction
Among basic reform principles declared the following ones should be mentioned: evolution way of changes implemented; state regulation and economic activity functions separation; providing financial transparency; investment attractiveness; unified railways infrastructure preservation; transfer from natural-monopoly to competitive conditions for the sector.
In general the reform is aimed at effective railway transport model establishment that would be based on free competitiveness within transportation sphere and flexible state infrastructure regulation. While this it is taken into account that railway transport plays a key macroeconomic role for Russia (sometimes it is even called "state-forming" one) and thus needs greatest circumspection for any structural changes implementation.
All the process of restructuring is divided into three stages:
First - (2001 - 2002) - separation of state regulation and economic activity functions that were performed by the Ministry of Railways of the RF
Second- (2003 - 2005) - sector de-monopolization
Third- (2006 - 2010) - railway transportation competitive market creation and developing

Functions of state regulations and economic activity separation
At the first stage of restructuring that covered 2001 - 2003 impressive preliminary work was done. The greatest importance was new legislative base or set of the Federal bills approving: "On railway transport in the Russian Federation", "RF railway transport regulations", "On peculiarities of railway transport property control" and "On amendment the bill "On natural monopolies".
The projects of the above-mentioned decrees were worked out by the Ministry of Railways and it took them long to be approved by the different sorts of ministries and departments, independent transport and industrial associations and afterwards by the Parliament It should be said that the first drafts were amended while first readings by 70-80%. That means that the legislative base was formed in a quite democratic way. New bills were approved at the end of 2004 and took effective on May, 2003.
The very idea of the Russian railways privatization even in the form of the state-run company establishment resulted in ambiguous reactions rise in the State Duma and public in general. While voting new bills got 65 % votes. Rigid "against"-reaction was expressed by the Communists fraction.
During that period but new bills some more documents were approved (new version of "Tariff Regulation № 10-01 "Tariffs for cargo transportation and infrastructure services " (that introduced car consistent for tariffs) and new Regulations for cargo transportation directed to functioning under new conditions.
One more very important direction for the Ministry of Railways re-formation should be considered work on the sector property complex inventory making and a new economic subject's stock establishment. This detailed work implementation took two years to be completed. All in all 2300 juridical people, about 15 thousand departments with their own balance accounts were found. As a result a special classifier, new information base of all the sector's assets and unified summary financial register were formed. In general the system took data on over one billion objects of tangible assets.
On September 18, 2003 by the RF Government Bill № 585 ОАО Russian Railways was established, and starting from October,1 new company started operating. Gennady Fadeyev, Minister of Railways was appointed to perform president's functions. Funds of 987 enterprises worth over USD 50 billion made up stock of the unified economic subject. According to the legislation the company 100% of shares belong to the state and can be sold only under condition of special Federal decree issuing. Moreover ОАО RZD doesn't have a right to sell, get to lease, free use or pawn main line infrastructure and all the objects of defense determination. Other infrastructure objects and subsidiaries' shares can be sold with the Government agreement.
Now ОАО RZD is an vertically-integrated company possessing infrastructure, rolling stock to for freight and passenger transportation, system of trains operating control and their safety providing. The corporation has 150 subsidiaries that join separate transportation structures, plant on rolling stock manufacturing and repairing, construction departments, scientific-industrial complex etc. ОАО RZD possesses 17 territory subsidiaries - railways. Moreover one million employees work for the corporation.

First Results
The second stage of the reform started with its being late. Formed in line with ОАО RZD renewed Ministry of Railways was demolished in March, 2003 while general administrative reform of the federal bodies of executive power that was followed by its railway transport regulation functions transfer to the RF Ministry of Transport. Though, making decisions on organization and functional issues of the new Ministry of Transport and submitted to it Federal Inspection Transport Service and Federal Railway Transport Agency took long and lasted till autumn.
On September 9 the way of the reform's unfolding was considered by the Government. In general the first stage results were thought to be as positive ones and going hand in hand with the Programme. At the same time the decision to speed up working out of some normative documents was made to prevent slowing down transfer to further changes needed to be done. Particularly at the Government's session was underlined that one of the most showing result of the reform is private operator companies possessing rolling stock growth. By now the companies of this sort have got 30% of general sector car park which transports 35% of all the cargo. According to the Carriers and Operators Association, for the period of 2001 - 2004 investment into rolling stock purchasing reached the level of over USD 2 billion. Operators have created competitive conditions on the market of rolling stock supply and become potential institution for competing relations within transportation services sector. Still there is one carrier on the Russian railway transport market which ОАО RZD.

Competitive models
While the process of unified economic subject (OAO RZD) separation off the Ministry of Railway was carried on, issue on following this or that competitive model for the Russian railways was more of theoretical than practical sort. But now this problem has been put on the agenda and become a reason for heated discussions rise.
As it is known there are two basic variants of competitive models for railway transport in the world. The first one is characteristic for North America and demands well developed railway network, highly efficient system of antitrust legislation and private undertaking traditions working well.
Another modification is used in the countries of Latin America (Brazil, Mexico, Argentina etc)
Europe chose its direction for railway restructuring and after the EU directive of 1991 issuing allowed carrier companies to use infrastructure of other countries. The next EU directive of 2001 made railway transport market separate infrastructure and transportation business completely. In this direction the reforms in Finland, the UK, Sweden, Germany and the Netherlands were carried out.
Russia took its own way which was considered as a worthwhile one by ECMT experts who made a report "Regulatory Reform of Railways in Russia" The Programme of the structural reform as it has already been mentioned defines as one of the key tasks "preserving the unified state network industrial railway infrastructure and centralized traffic control". Along with this it is pointed out that the third stage will cover the issue of "evaluation of opportunity for several competing vertically-integrated railway companies establishment" as well as "steps on competitiveness increase on the market of freight transportation for those sectors of the network that have parallel ways"
That is at least for the near future the infrastructure will remain unified. But in this case a question on organization-legislative separation with transporting business will arise. The Programme shows: "While structural reform unfolding conditions can be created under which complete organization infrastructure separation off transportation business will take place". Such decision can be made considering the international experience and following some of conditions which are as follows: inner restructuring of OAO RZD completing according to the types of activities; technical standards and rules of technology coordination probation; non-discriminatory access to the infrastructure mechanisms implantation etc.
The Programme clearly shows that infrastructure, locomotive park and some part of freight cars integration under state-run company's control is worthwhile, at least, during first years of the system's restructuring. While this the proportion of cars belonging to OAO RZD and private carriers is defined as 50 to 50 for the first period. Gennady Fadeyev, president of the company strongly believes this situation will remain as a real one for long.
Thus, Russian model specific character is defined by the fact that unified infrastructure owner performs also as a carrier that transports not only state and non-profitable cargo but tends to run its business in a profitable way in general. Competitiveness will become true reality for all the existing carriers: ОАО RZD, separated off it affiliates and independent private carriers.
It is obvious that under such circumstances mechanism of non-discriminatory access to the infrastructure providing and giving other equal opportunities for transportation business acquires special meaning. All these conditions are being worked out now. Two normative documents on non-descriminatory access have already been approved but for the present moment they don't work within transportation process as there are no independent carriers in reality. Their appearing is forecasted for 2006 when issues on according licenses, using own locomotive haulage, duties distribution etc have been solved.

Competitive activities separation off OAO RZD
Such issue as affiliates separation off OAO RZD is worth of particular attention. This problem discussions resulted in heated debates at the Government's session that led to making decision to amend Governmental Bill № 384 which is a basic document for the reform unfolding
At the second stage from OAO RZD authorities position it would be worthwhile to carry out affiliates separation in a way to form typical holding structure afterwards. At first 100% affiliates' shares will be controlled by ОАО RZD, later some part of them will be sold. It could help increase company's capitalization, give additional resources for infrastructure financing, save general ability of the most important railway transport activities to be under control.
The RF Ministry of Economic Development and Trade didn't come out in favor of this plan. Minister German Gref characterized such changes as total absence of any sort of demonopolization of ОАО RZD, he called to-be-established holding "monster" and "hypermonopoly" that will prevent any competition development. Moreover he clarified that choosing such a variant the state won't be able to control OAO RZD assets sale.
In particular, G.Gref demanded to carry out re-organization in such a way that companies being separated on the base of OAO RZD property could become state-run and independent on the corporation. And the next step should be directed to their privatization according to the working legislation standards. As a result in the Government's Bill № 811 effective on December 20, 2004 and with issuing of which Bill № 384 was amended such position was reflected in a form of compromise. The Federal passenger company should be established as an independent on OAO RZD one (2007 was named as the term of launching) and other companies will be separated as OAO RZD affiliates but under condition of defining the terms and ways of their shares sale.
At the present moment OAO RZD Board of Directors has approved the Regulation of affiliates establishment and Schedule of arrangements on competitive organizations separation off the company. Also the Concept of OAO RZD corporate construction has been approved. In 2005 five concepts of affiliates separation have been defined according to the following types of activities: freight cars major repair and spare parts production; track machinery production; electrotechnical equipment production; scientific-technological complex; capital construction and projecting activities. The Board of Directors hasn't approved yet the concepts of affiliates on container transportation (Transcontainer) establishment as well as that one on perishable goods transportation (Refservice). Their projects are to be re-considered after amending.
At the same time ОАО RZD altogether with other carriers started establishing joint-companies, for example, Russkaya Troyka JSC for intermodal transportation which a joint-project of RZD and FESCO (Far-Eastern Shipping Company) Agreement on joint-companies for freight and passenger transportation establishment was concluded with Deutsche Bahn.

Resume
Thus, the way of the Russian railways reform unfolding shows the transfer towards market relations in the sector is going on gradually and in accordance with the Programme approved by the RF Government. Railway transport functioning can be characterized as a stable and dynamically developing sector. The first and most precious consequences of changes going well have become private investment flow into rolling stock and conditions creation for OAO RZD effective financial resources attraction for the company's basis assets renewal.
Today the issue of inter-sector competitiveness organization within transportation sphere is on the agenda. It should bring its fruitful results for cargo owners servicing improvement and transport expenditures control in their production cost.
At the present moment among necessary conditions for further competitiveness development the following one can be named: tariffs de-regulation for competitive segments of the transport market i.e. that problem the decision of which is expected to be made by the Federal Tariff Service
It is obvious that the RF Ministry of Transport responsible for railways restructuring is ready to carry on with changes started.

Andrey Guryev [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => Railway transport reform in Russia is an integral part of general social-economic changes being implemented in the Russian Federation starting from 1990 and determined for a transfer from the Soviet to market economy conditions.
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Goals, Principles, Stages
All the steps are taken in accordance with the Programme of Structural Reform for railway transport approved by the RF Government's decree № 384 (May, 18, 2001). This documents claims the following major goals of the reform:
- railway transport stability and availability increase;
- single harmonized transport system of the state;
- national economy aggregate expenditures on cargo railway transportation reduction;
- growing demand on railway services satisfaction
Among basic reform principles declared the following ones should be mentioned: evolution way of changes implemented; state regulation and economic activity functions separation; providing financial transparency; investment attractiveness; unified railways infrastructure preservation; transfer from natural-monopoly to competitive conditions for the sector.
In general the reform is aimed at effective railway transport model establishment that would be based on free competitiveness within transportation sphere and flexible state infrastructure regulation. While this it is taken into account that railway transport plays a key macroeconomic role for Russia (sometimes it is even called "state-forming" one) and thus needs greatest circumspection for any structural changes implementation.
All the process of restructuring is divided into three stages:
First - (2001 - 2002) - separation of state regulation and economic activity functions that were performed by the Ministry of Railways of the RF
Second- (2003 - 2005) - sector de-monopolization
Third- (2006 - 2010) - railway transportation competitive market creation and developing

Functions of state regulations and economic activity separation
At the first stage of restructuring that covered 2001 - 2003 impressive preliminary work was done. The greatest importance was new legislative base or set of the Federal bills approving: "On railway transport in the Russian Federation", "RF railway transport regulations", "On peculiarities of railway transport property control" and "On amendment the bill "On natural monopolies".
The projects of the above-mentioned decrees were worked out by the Ministry of Railways and it took them long to be approved by the different sorts of ministries and departments, independent transport and industrial associations and afterwards by the Parliament It should be said that the first drafts were amended while first readings by 70-80%. That means that the legislative base was formed in a quite democratic way. New bills were approved at the end of 2004 and took effective on May, 2003.
The very idea of the Russian railways privatization even in the form of the state-run company establishment resulted in ambiguous reactions rise in the State Duma and public in general. While voting new bills got 65 % votes. Rigid "against"-reaction was expressed by the Communists fraction.
During that period but new bills some more documents were approved (new version of "Tariff Regulation № 10-01 "Tariffs for cargo transportation and infrastructure services " (that introduced car consistent for tariffs) and new Regulations for cargo transportation directed to functioning under new conditions.
One more very important direction for the Ministry of Railways re-formation should be considered work on the sector property complex inventory making and a new economic subject's stock establishment. This detailed work implementation took two years to be completed. All in all 2300 juridical people, about 15 thousand departments with their own balance accounts were found. As a result a special classifier, new information base of all the sector's assets and unified summary financial register were formed. In general the system took data on over one billion objects of tangible assets.
On September 18, 2003 by the RF Government Bill № 585 ОАО Russian Railways was established, and starting from October,1 new company started operating. Gennady Fadeyev, Minister of Railways was appointed to perform president's functions. Funds of 987 enterprises worth over USD 50 billion made up stock of the unified economic subject. According to the legislation the company 100% of shares belong to the state and can be sold only under condition of special Federal decree issuing. Moreover ОАО RZD doesn't have a right to sell, get to lease, free use or pawn main line infrastructure and all the objects of defense determination. Other infrastructure objects and subsidiaries' shares can be sold with the Government agreement.
Now ОАО RZD is an vertically-integrated company possessing infrastructure, rolling stock to for freight and passenger transportation, system of trains operating control and their safety providing. The corporation has 150 subsidiaries that join separate transportation structures, plant on rolling stock manufacturing and repairing, construction departments, scientific-industrial complex etc. ОАО RZD possesses 17 territory subsidiaries - railways. Moreover one million employees work for the corporation.

First Results
The second stage of the reform started with its being late. Formed in line with ОАО RZD renewed Ministry of Railways was demolished in March, 2003 while general administrative reform of the federal bodies of executive power that was followed by its railway transport regulation functions transfer to the RF Ministry of Transport. Though, making decisions on organization and functional issues of the new Ministry of Transport and submitted to it Federal Inspection Transport Service and Federal Railway Transport Agency took long and lasted till autumn.
On September 9 the way of the reform's unfolding was considered by the Government. In general the first stage results were thought to be as positive ones and going hand in hand with the Programme. At the same time the decision to speed up working out of some normative documents was made to prevent slowing down transfer to further changes needed to be done. Particularly at the Government's session was underlined that one of the most showing result of the reform is private operator companies possessing rolling stock growth. By now the companies of this sort have got 30% of general sector car park which transports 35% of all the cargo. According to the Carriers and Operators Association, for the period of 2001 - 2004 investment into rolling stock purchasing reached the level of over USD 2 billion. Operators have created competitive conditions on the market of rolling stock supply and become potential institution for competing relations within transportation services sector. Still there is one carrier on the Russian railway transport market which ОАО RZD.

Competitive models
While the process of unified economic subject (OAO RZD) separation off the Ministry of Railway was carried on, issue on following this or that competitive model for the Russian railways was more of theoretical than practical sort. But now this problem has been put on the agenda and become a reason for heated discussions rise.
As it is known there are two basic variants of competitive models for railway transport in the world. The first one is characteristic for North America and demands well developed railway network, highly efficient system of antitrust legislation and private undertaking traditions working well.
Another modification is used in the countries of Latin America (Brazil, Mexico, Argentina etc)
Europe chose its direction for railway restructuring and after the EU directive of 1991 issuing allowed carrier companies to use infrastructure of other countries. The next EU directive of 2001 made railway transport market separate infrastructure and transportation business completely. In this direction the reforms in Finland, the UK, Sweden, Germany and the Netherlands were carried out.
Russia took its own way which was considered as a worthwhile one by ECMT experts who made a report "Regulatory Reform of Railways in Russia" The Programme of the structural reform as it has already been mentioned defines as one of the key tasks "preserving the unified state network industrial railway infrastructure and centralized traffic control". Along with this it is pointed out that the third stage will cover the issue of "evaluation of opportunity for several competing vertically-integrated railway companies establishment" as well as "steps on competitiveness increase on the market of freight transportation for those sectors of the network that have parallel ways"
That is at least for the near future the infrastructure will remain unified. But in this case a question on organization-legislative separation with transporting business will arise. The Programme shows: "While structural reform unfolding conditions can be created under which complete organization infrastructure separation off transportation business will take place". Such decision can be made considering the international experience and following some of conditions which are as follows: inner restructuring of OAO RZD completing according to the types of activities; technical standards and rules of technology coordination probation; non-discriminatory access to the infrastructure mechanisms implantation etc.
The Programme clearly shows that infrastructure, locomotive park and some part of freight cars integration under state-run company's control is worthwhile, at least, during first years of the system's restructuring. While this the proportion of cars belonging to OAO RZD and private carriers is defined as 50 to 50 for the first period. Gennady Fadeyev, president of the company strongly believes this situation will remain as a real one for long.
Thus, Russian model specific character is defined by the fact that unified infrastructure owner performs also as a carrier that transports not only state and non-profitable cargo but tends to run its business in a profitable way in general. Competitiveness will become true reality for all the existing carriers: ОАО RZD, separated off it affiliates and independent private carriers.
It is obvious that under such circumstances mechanism of non-discriminatory access to the infrastructure providing and giving other equal opportunities for transportation business acquires special meaning. All these conditions are being worked out now. Two normative documents on non-descriminatory access have already been approved but for the present moment they don't work within transportation process as there are no independent carriers in reality. Their appearing is forecasted for 2006 when issues on according licenses, using own locomotive haulage, duties distribution etc have been solved.

Competitive activities separation off OAO RZD
Such issue as affiliates separation off OAO RZD is worth of particular attention. This problem discussions resulted in heated debates at the Government's session that led to making decision to amend Governmental Bill № 384 which is a basic document for the reform unfolding
At the second stage from OAO RZD authorities position it would be worthwhile to carry out affiliates separation in a way to form typical holding structure afterwards. At first 100% affiliates' shares will be controlled by ОАО RZD, later some part of them will be sold. It could help increase company's capitalization, give additional resources for infrastructure financing, save general ability of the most important railway transport activities to be under control.
The RF Ministry of Economic Development and Trade didn't come out in favor of this plan. Minister German Gref characterized such changes as total absence of any sort of demonopolization of ОАО RZD, he called to-be-established holding "monster" and "hypermonopoly" that will prevent any competition development. Moreover he clarified that choosing such a variant the state won't be able to control OAO RZD assets sale.
In particular, G.Gref demanded to carry out re-organization in such a way that companies being separated on the base of OAO RZD property could become state-run and independent on the corporation. And the next step should be directed to their privatization according to the working legislation standards. As a result in the Government's Bill № 811 effective on December 20, 2004 and with issuing of which Bill № 384 was amended such position was reflected in a form of compromise. The Federal passenger company should be established as an independent on OAO RZD one (2007 was named as the term of launching) and other companies will be separated as OAO RZD affiliates but under condition of defining the terms and ways of their shares sale.
At the present moment OAO RZD Board of Directors has approved the Regulation of affiliates establishment and Schedule of arrangements on competitive organizations separation off the company. Also the Concept of OAO RZD corporate construction has been approved. In 2005 five concepts of affiliates separation have been defined according to the following types of activities: freight cars major repair and spare parts production; track machinery production; electrotechnical equipment production; scientific-technological complex; capital construction and projecting activities. The Board of Directors hasn't approved yet the concepts of affiliates on container transportation (Transcontainer) establishment as well as that one on perishable goods transportation (Refservice). Their projects are to be re-considered after amending.
At the same time ОАО RZD altogether with other carriers started establishing joint-companies, for example, Russkaya Troyka JSC for intermodal transportation which a joint-project of RZD and FESCO (Far-Eastern Shipping Company) Agreement on joint-companies for freight and passenger transportation establishment was concluded with Deutsche Bahn.

Resume
Thus, the way of the Russian railways reform unfolding shows the transfer towards market relations in the sector is going on gradually and in accordance with the Programme approved by the RF Government. Railway transport functioning can be characterized as a stable and dynamically developing sector. The first and most precious consequences of changes going well have become private investment flow into rolling stock and conditions creation for OAO RZD effective financial resources attraction for the company's basis assets renewal.
Today the issue of inter-sector competitiveness organization within transportation sphere is on the agenda. It should bring its fruitful results for cargo owners servicing improvement and transport expenditures control in their production cost.
At the present moment among necessary conditions for further competitiveness development the following one can be named: tariffs de-regulation for competitive segments of the transport market i.e. that problem the decision of which is expected to be made by the Federal Tariff Service
It is obvious that the RF Ministry of Transport responsible for railways restructuring is ready to carry on with changes started.

Andrey Guryev [~DETAIL_TEXT] =>
Goals, Principles, Stages
All the steps are taken in accordance with the Programme of Structural Reform for railway transport approved by the RF Government's decree № 384 (May, 18, 2001). This documents claims the following major goals of the reform:
- railway transport stability and availability increase;
- single harmonized transport system of the state;
- national economy aggregate expenditures on cargo railway transportation reduction;
- growing demand on railway services satisfaction
Among basic reform principles declared the following ones should be mentioned: evolution way of changes implemented; state regulation and economic activity functions separation; providing financial transparency; investment attractiveness; unified railways infrastructure preservation; transfer from natural-monopoly to competitive conditions for the sector.
In general the reform is aimed at effective railway transport model establishment that would be based on free competitiveness within transportation sphere and flexible state infrastructure regulation. While this it is taken into account that railway transport plays a key macroeconomic role for Russia (sometimes it is even called "state-forming" one) and thus needs greatest circumspection for any structural changes implementation.
All the process of restructuring is divided into three stages:
First - (2001 - 2002) - separation of state regulation and economic activity functions that were performed by the Ministry of Railways of the RF
Second- (2003 - 2005) - sector de-monopolization
Third- (2006 - 2010) - railway transportation competitive market creation and developing

Functions of state regulations and economic activity separation
At the first stage of restructuring that covered 2001 - 2003 impressive preliminary work was done. The greatest importance was new legislative base or set of the Federal bills approving: "On railway transport in the Russian Federation", "RF railway transport regulations", "On peculiarities of railway transport property control" and "On amendment the bill "On natural monopolies".
The projects of the above-mentioned decrees were worked out by the Ministry of Railways and it took them long to be approved by the different sorts of ministries and departments, independent transport and industrial associations and afterwards by the Parliament It should be said that the first drafts were amended while first readings by 70-80%. That means that the legislative base was formed in a quite democratic way. New bills were approved at the end of 2004 and took effective on May, 2003.
The very idea of the Russian railways privatization even in the form of the state-run company establishment resulted in ambiguous reactions rise in the State Duma and public in general. While voting new bills got 65 % votes. Rigid "against"-reaction was expressed by the Communists fraction.
During that period but new bills some more documents were approved (new version of "Tariff Regulation № 10-01 "Tariffs for cargo transportation and infrastructure services " (that introduced car consistent for tariffs) and new Regulations for cargo transportation directed to functioning under new conditions.
One more very important direction for the Ministry of Railways re-formation should be considered work on the sector property complex inventory making and a new economic subject's stock establishment. This detailed work implementation took two years to be completed. All in all 2300 juridical people, about 15 thousand departments with their own balance accounts were found. As a result a special classifier, new information base of all the sector's assets and unified summary financial register were formed. In general the system took data on over one billion objects of tangible assets.
On September 18, 2003 by the RF Government Bill № 585 ОАО Russian Railways was established, and starting from October,1 new company started operating. Gennady Fadeyev, Minister of Railways was appointed to perform president's functions. Funds of 987 enterprises worth over USD 50 billion made up stock of the unified economic subject. According to the legislation the company 100% of shares belong to the state and can be sold only under condition of special Federal decree issuing. Moreover ОАО RZD doesn't have a right to sell, get to lease, free use or pawn main line infrastructure and all the objects of defense determination. Other infrastructure objects and subsidiaries' shares can be sold with the Government agreement.
Now ОАО RZD is an vertically-integrated company possessing infrastructure, rolling stock to for freight and passenger transportation, system of trains operating control and their safety providing. The corporation has 150 subsidiaries that join separate transportation structures, plant on rolling stock manufacturing and repairing, construction departments, scientific-industrial complex etc. ОАО RZD possesses 17 territory subsidiaries - railways. Moreover one million employees work for the corporation.

First Results
The second stage of the reform started with its being late. Formed in line with ОАО RZD renewed Ministry of Railways was demolished in March, 2003 while general administrative reform of the federal bodies of executive power that was followed by its railway transport regulation functions transfer to the RF Ministry of Transport. Though, making decisions on organization and functional issues of the new Ministry of Transport and submitted to it Federal Inspection Transport Service and Federal Railway Transport Agency took long and lasted till autumn.
On September 9 the way of the reform's unfolding was considered by the Government. In general the first stage results were thought to be as positive ones and going hand in hand with the Programme. At the same time the decision to speed up working out of some normative documents was made to prevent slowing down transfer to further changes needed to be done. Particularly at the Government's session was underlined that one of the most showing result of the reform is private operator companies possessing rolling stock growth. By now the companies of this sort have got 30% of general sector car park which transports 35% of all the cargo. According to the Carriers and Operators Association, for the period of 2001 - 2004 investment into rolling stock purchasing reached the level of over USD 2 billion. Operators have created competitive conditions on the market of rolling stock supply and become potential institution for competing relations within transportation services sector. Still there is one carrier on the Russian railway transport market which ОАО RZD.

Competitive models
While the process of unified economic subject (OAO RZD) separation off the Ministry of Railway was carried on, issue on following this or that competitive model for the Russian railways was more of theoretical than practical sort. But now this problem has been put on the agenda and become a reason for heated discussions rise.
As it is known there are two basic variants of competitive models for railway transport in the world. The first one is characteristic for North America and demands well developed railway network, highly efficient system of antitrust legislation and private undertaking traditions working well.
Another modification is used in the countries of Latin America (Brazil, Mexico, Argentina etc)
Europe chose its direction for railway restructuring and after the EU directive of 1991 issuing allowed carrier companies to use infrastructure of other countries. The next EU directive of 2001 made railway transport market separate infrastructure and transportation business completely. In this direction the reforms in Finland, the UK, Sweden, Germany and the Netherlands were carried out.
Russia took its own way which was considered as a worthwhile one by ECMT experts who made a report "Regulatory Reform of Railways in Russia" The Programme of the structural reform as it has already been mentioned defines as one of the key tasks "preserving the unified state network industrial railway infrastructure and centralized traffic control". Along with this it is pointed out that the third stage will cover the issue of "evaluation of opportunity for several competing vertically-integrated railway companies establishment" as well as "steps on competitiveness increase on the market of freight transportation for those sectors of the network that have parallel ways"
That is at least for the near future the infrastructure will remain unified. But in this case a question on organization-legislative separation with transporting business will arise. The Programme shows: "While structural reform unfolding conditions can be created under which complete organization infrastructure separation off transportation business will take place". Such decision can be made considering the international experience and following some of conditions which are as follows: inner restructuring of OAO RZD completing according to the types of activities; technical standards and rules of technology coordination probation; non-discriminatory access to the infrastructure mechanisms implantation etc.
The Programme clearly shows that infrastructure, locomotive park and some part of freight cars integration under state-run company's control is worthwhile, at least, during first years of the system's restructuring. While this the proportion of cars belonging to OAO RZD and private carriers is defined as 50 to 50 for the first period. Gennady Fadeyev, president of the company strongly believes this situation will remain as a real one for long.
Thus, Russian model specific character is defined by the fact that unified infrastructure owner performs also as a carrier that transports not only state and non-profitable cargo but tends to run its business in a profitable way in general. Competitiveness will become true reality for all the existing carriers: ОАО RZD, separated off it affiliates and independent private carriers.
It is obvious that under such circumstances mechanism of non-discriminatory access to the infrastructure providing and giving other equal opportunities for transportation business acquires special meaning. All these conditions are being worked out now. Two normative documents on non-descriminatory access have already been approved but for the present moment they don't work within transportation process as there are no independent carriers in reality. Their appearing is forecasted for 2006 when issues on according licenses, using own locomotive haulage, duties distribution etc have been solved.

Competitive activities separation off OAO RZD
Such issue as affiliates separation off OAO RZD is worth of particular attention. This problem discussions resulted in heated debates at the Government's session that led to making decision to amend Governmental Bill № 384 which is a basic document for the reform unfolding
At the second stage from OAO RZD authorities position it would be worthwhile to carry out affiliates separation in a way to form typical holding structure afterwards. At first 100% affiliates' shares will be controlled by ОАО RZD, later some part of them will be sold. It could help increase company's capitalization, give additional resources for infrastructure financing, save general ability of the most important railway transport activities to be under control.
The RF Ministry of Economic Development and Trade didn't come out in favor of this plan. Minister German Gref characterized such changes as total absence of any sort of demonopolization of ОАО RZD, he called to-be-established holding "monster" and "hypermonopoly" that will prevent any competition development. Moreover he clarified that choosing such a variant the state won't be able to control OAO RZD assets sale.
In particular, G.Gref demanded to carry out re-organization in such a way that companies being separated on the base of OAO RZD property could become state-run and independent on the corporation. And the next step should be directed to their privatization according to the working legislation standards. As a result in the Government's Bill № 811 effective on December 20, 2004 and with issuing of which Bill № 384 was amended such position was reflected in a form of compromise. The Federal passenger company should be established as an independent on OAO RZD one (2007 was named as the term of launching) and other companies will be separated as OAO RZD affiliates but under condition of defining the terms and ways of their shares sale.
At the present moment OAO RZD Board of Directors has approved the Regulation of affiliates establishment and Schedule of arrangements on competitive organizations separation off the company. Also the Concept of OAO RZD corporate construction has been approved. In 2005 five concepts of affiliates separation have been defined according to the following types of activities: freight cars major repair and spare parts production; track machinery production; electrotechnical equipment production; scientific-technological complex; capital construction and projecting activities. The Board of Directors hasn't approved yet the concepts of affiliates on container transportation (Transcontainer) establishment as well as that one on perishable goods transportation (Refservice). Their projects are to be re-considered after amending.
At the same time ОАО RZD altogether with other carriers started establishing joint-companies, for example, Russkaya Troyka JSC for intermodal transportation which a joint-project of RZD and FESCO (Far-Eastern Shipping Company) Agreement on joint-companies for freight and passenger transportation establishment was concluded with Deutsche Bahn.

Resume
Thus, the way of the Russian railways reform unfolding shows the transfer towards market relations in the sector is going on gradually and in accordance with the Programme approved by the RF Government. Railway transport functioning can be characterized as a stable and dynamically developing sector. The first and most precious consequences of changes going well have become private investment flow into rolling stock and conditions creation for OAO RZD effective financial resources attraction for the company's basis assets renewal.
Today the issue of inter-sector competitiveness organization within transportation sphere is on the agenda. It should bring its fruitful results for cargo owners servicing improvement and transport expenditures control in their production cost.
At the present moment among necessary conditions for further competitiveness development the following one can be named: tariffs de-regulation for competitive segments of the transport market i.e. that problem the decision of which is expected to be made by the Federal Tariff Service
It is obvious that the RF Ministry of Transport responsible for railways restructuring is ready to carry on with changes started.

Andrey Guryev [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => Railway transport reform in Russia is an integral part of general social-economic changes being implemented in the Russian Federation starting from 1990 and determined for a transfer from the Soviet to market economy conditions.
[~PREVIEW_TEXT] => Railway transport reform in Russia is an integral part of general social-economic changes being implemented in the Russian Federation starting from 1990 and determined for a transfer from the Soviet to market economy conditions.
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