Ukraine may transfer some parts of the management of its national railway system to Germany’s Deutsche Bahn railway company for 10 years, Prime Minister Oleksiy Honcharuk said in Davos, Switzerland, on Jan. 23.
The announcement comes one day after the signing of a memorandum of understanding on a possible strategic partnership in the development of Ukrzaliznytsia, or Ukrainian Railways, between the Ministry of Infrastructure of Ukraine and Deutsche Bahn.
Deutsche Bahn is a private joint-stock company while Ukrzaliznytsia is Ukraine’s state-owned rail monopoly.
Speaking about the memorandum on Twitter, Honcharuk wrote that German specialists are to reform the management of Ukrzaliznytsia, while Ukraine will retain full control over the enterprise.
“I hope that German operational efficiency and zero tolerance for corruption will become the basis for changing the situation in the company,” he said.
Ukrzaliznytsia is regularly criticized for its obsolete and non-transparent organization, allowing corruption to flourish. Its equipment and rail lines are outdated and its workforce of 280,000 employees is bloated and inefficient.
The railway transport management is increasingly seen to not meet the growing needs of Ukrainian society, as well as European standards. The dilapidated railway system of Ukraine is in dire need of modernization, experts say, and the government has often said that its modernization is a priority.
The government unveiled an ambitious project on Sept. 29, 2019. According to that plan, Ukrzaliznytsya will be divided into three companies, one infrastructure operator, a freight and passenger carrier.
According to Honcharuk, the railway can be left in state ownership, but the rest has to be privatized.
The roadmap also includes repairing 5,000 kilometers of railways, upgrading 200 units of rolling stock, 800 passenger cars, as well as 10 intercity electric trains.
In order to do so, the Cabinet of Ministers signed a previous memorandum with the European Bank for Reconstruction and Development on Oct. 29, 2019, during an investment forum in Mariupol.
The memorandum of cooperation provides for the placement of Ukrzaliznytsya shares on the international exchange market.
While helping to raise capital for the company’s development, the procedure also promotes best corporate practices in the railway’s management.
The issue of UZ shares to trade on international stock exchanges does not mean full privatization of the company though.
Investors will be able to acquire some of the shares of Ukrzaliznytsya, while the state will be able to retain control over the company’s activities.
In 2019, Ukrzaliznytsia transported almost 1 million passengers to the EU, and sold 25 million of tickets in total.
Ukrzaliznytsia is a state-owned monopoly of rail transport that controls the vast majority of railroad transportation in the country.
The huge enterprise manages over 23,000 kilometers of tracks, making it the 13th largest in the world, with a fleet of 25,000 cars.