Bulgaria’s railways resembled someone who had suffered several heart attacks over three to four years, but managed to survive despite all the harm to its health.
This was how a Bulgarian expert once described the state of the two state-owned companies, Bulgarian State Railways (BDZ) and the National Railway Infrastructure Company (NRIC).

It was in October that Alexander Tsvetkov, Minister of Transport, Communications and IT, said that the two companies, formed seven years ago after the carve-up of the BDZ monopoly, were effectively bankrupt.

A succession of governments failed to implement deep reforms in the sector, that should have included shutting down loss-making activities and cutting staff, by simply avoiding the issue of the companies’ ineffective management and ever-growing debts.

The 1.6 billion leva that has been poured into the two companies in state subsidies over the past seven years has been used solely to keep the system ticking over.    

This has resulted in taxpayers continuing to shell out for the 33 000 employees, and for trains that in some cases run with only two or three passengers on board.
At the same time, the average speed of trains is less than 50 km/h, train carriages are outmoded, and worse, there have been tragic incidents. Using railway transport in Bulgaria has become a real challenge for customers.

Reforms at any cost
A World Bank April 2009 report said that "delaying the next stage of the reforms in the sector would mean: wasting future economic opportunities; worsening of the companies’ assets, loss of market share and investments".

According to the World Bank, the sector needed radical changes, including a major shake-up of management culture at BDZ and the NRIC.      
"If nothing changes in Bulgaria’s railways, they would continue being a burden for the state and will cost it a minimum of 500 million leva a year," Yordan Mirchev, former chairperson of Parliament’s transport committee, said.

According to Georgi Angelov, senior economist at the Open Society Institute Sofia, BDZ should stop asking for money from the Budget and start developing their cargo transport services, which were continually losing market share. A further five years without reforms would mean that this market share would be lost completely, Angelov said.    

The fight for cargo
In recent years, road carriers slowly but surely started increasing their share of cargo services at the expense of the state railways.
This was a logical development because railway cargo services are 30 to 40 per cent more expensive than road carriers charge, and are slower.

The state company takes two to three days to get a cargo from Rousse on the Danube to Sofia; a private road carrier manages in a day.
The big advantage of the railways is that they can transport several large items of cargo in one shipment. However, this advantage has started to shrink, given newly-emerged competition in the form of small private railway companies.

"We have fewer staff and we work with modern technology and offer flexible rates and schemes to clients," according to BDZ former director-general Vladimir Dounchev, currently executive director of the private Bulgarian Railway Company.

At the same time, BDZ continues to charge a complex price rate. As a holding structure, BDZ brings together several companies. Under the system by which prices are decided, BDZ’s Transport Cargo company pays rent for the locomotives and carriages it uses to another BDZ company, and also pays a fee to BDZ which, in return, pays a fee to NRIC for the use of the railway infrastructure.

According to experts, all these costs could be reduced by 10 per cent by improving the quality of cargo transport services. This, however, means that 2653 people would have to be sacked, and it was less than two months ago when trade unions announced they were ready to go on strike after Tsvetkov said that he planned the dismissal of 2000 people in the sector including BDZ administration. The winners in the "strike situation" are private operators who already started negotiating transport deals for next year. These companies say that several of BDZ’s current large clients were thinking of switching sides and dropping BDZ in 2010.  

Besides offering flexible rates and prices, state railways should also work for signing smaller clients too, experts said.
"The first step towards creating a market orientated company is to have a marketing department set up in it, which would actually deal with the market," Deputy Transport Minister Kamen Kichev said. He said that BDZ’s first priority was to recover financially.