The World Bank has released a report titled Railway reform in South East Europe and Turkey: On the Right Track? The report documents the state of railway reform across all of South East Europe and provides specific coverage of Montenegrin railway reform. This report is a follow-up and expansion to the 2005 report, Railway Reform in the Western Balkans.
In the report, Montenegro receives praise for creating separate joint stock rail companies for infrastructure and transport services. Montenegro is in the process of privatizing its freight operator, Montecargo. The privatization is currently on hold due to failure to reach agreement with the winning bidder. When completed, this will represent the first private rail undertaking in the Western Balkans.
The summary of 2009 operational performance of Montenegro’s railways, however, shows significant room for improvement.
Montenegro possesses 249km of railway, which moved 205 million traffic units in 2009. Montenegro passenger railway traffic fell 21% from 2005 to 2009 after falling 44% from 2001 to 2004. Freight railway traffic in Montenegro fell by 21% in 2005 to 2009, after growing 72% from 2001 to 2004. Passenger railway services requires higher safety standards and is significantly more expensive to maintain than freight railway. Montenegro’s rail infrastructure currently ranks 68th in the world in terms of quality.
The main issue appears to be that few shippers are using Montenegro’s railway system, which means that is is difficult for the rail operators to recover the costs of operations and maintenance. Montenegro’s freight density is only 32% of the EU average, while the passenger density is only 22% of the EU average. Because of this, Montenegro railways rate very poorly in terms of both cost recovery and viability.
Low revenue and fixed costs will make it difficult for the government of Montenegro to privatize state-owned rail assets in the near future.
These difficulties are exacerbated by low labor productivity. Labor productivity at Montenegro railways is 20% of the EU average. While significant portions of railway labor represent fixed costs — staff you need whether the trains are running or not — some savings can be created by reducing variable costs. The report highlights room for improvement via a comparison, stating “Whereas Kosovo has 400 staff with a rail network of 333km, Montenegro has over 1,700 staff working on 249km of network—suggesting significant over-staffing.”
Cost cutting and efficiency improvements can save the Montenegrin taxpayers millions of Euros in the short-term, but in the long-term only the presence of additional freight traffic can save Montenegro’s railway system.