In 1995, Poland passed the first law to reform the railway system. The law mandated PKP separate accounting for freight, passenger, and infrastructure services in order to provide transparency in business lines operations within PKP. In 1997, the law was fully implemented when the Polish government passed the Railway Transport Law, which aligned Poland with the EU acquis communautaire, established infrastructure, freight operations, passenger services, and traction as separate directorates under PKP. The 1997 law also initiated private sector involvement in the railway supply industry, and opened the railway network to third-party Polish operators. Thus this stage of the reform process accomplished three major goals:
  • Prepared PKP for joint stock company formation by creating separate lines of business;
  • Initiated private sector participation in the railway supply industry; and
  • Opened the network to third-party Polish operators.
These organizational changes set the stage for further reforms but were insufficient for the railway sector to withstand the second economic crisis in 1999. The crisis forced Government to take more aggressive actions to restructure PKP. In 2000, Government passed the Railway Restructuring and Privatization Law as part of the EU Directive 91/440/EEC. The law established PKP SA as a fully state-owned joint stock holding company in January 2001. In October 2001, 24 subsidiaries were established, including PLK, which manages railway infrastructure; PKP Cargo, which operates freight services; PKP InterCity Passenger Services, which operates long distance and international passenger transport; PKP Energetyka, which operates energy and traction services; and PKP Informatyka, which is in charge of telecommunications. Urzad Transportu Kolejowego (UTK) was established to regulate the railway market.

The railway industry reform process, under the 2003 Law on Railway Transport, initiated private sector involvement and encouraged competition. The law replaced railway concessions for operating on the network with more liberal licenses, thus encouraging private sector participation and competition in railway industry. During 2003-05, the regulatory body issued 57 licenses to independent operators. In 2006, under EU regulations, the Polish railway network opened to international operators. During 2008-10, reform efforts focused on reducing unneeded facilities, and seeking financial resources for railway network investment. For example, PKP Cargo reduced 42 divisions to 16 during 2008-09, and in 2010 it aims to issue convertible bonds worth US$ 111 million.

Comment on the Reforms

Insufficient political support and management which was incapable of running subsidiary companies within the joint stock company structure were the biggest obstacles to railway reform. As politicians and trade unions dragged their feet, private sector involvement in PKP Cargo was deferred, and for other subsidiaries, substantially delayed. The lack of capable management meant that PKP financial stability failed to improve immediately after the joint stock company was established.

During 1990-09, PKP reduced its labor force by 60 percent. The railways mitigated negative social impacts with early retirement and severance packages. The packages were negotiated among PKP, trade unions, and Government, and financed by PKP from loans, own funds, and bonds. Negotiations resolved many conflicts, such as passenger transport regionalization, which was resolved through a tripartite agreement among trade unions, national government and local governments.

Reforms were adjusted as they progressed. The 2000 law, which established the joint stock company holding structure, was amended in 2001, 2002, 2003, and 2004. The 2003 law on railway transport was amended in 2004. These amendments responded to the realities of politics, economics, and acquis communautaire requirements.

Copyright ©  The World Bank. All Rights Reserved. Legal