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Minister Says Focus Shifting from Motorways to Railways (interview)

Ljubljana, 12 October (STA) - After years of major investments in the motorway network, Slovenia will begin providing budget funds for railways as part of a major shift in strategy, Transport Ministry Patrick Vlacic told the STA. Vlacic said preparatory works for a second track on the key link between the port of Koper and the hub of Divaca should begin this year.

When Slovenia launched the motorway construction project in the early 1990s it provided budget funds. But when it launched the railway development programme it did not earmark funds, Vlacic said in an interview with the STA. Only 30% of the railway development plan has therefore been implemented so far.

In order to speed up construction of railway infrastructure, the government adopted a bill earmarking funds in the budget for the construction of railway infrastructure by tapping into the vehicle tax. Parliament passed this legislation in March. "We have provided for a key condition: a steady stream of funds that will allow the construction of infrastructure."

Currently, the government has earmarked EUR 108m annually under the instrument, but Vlacic points out that EU funds and a number of other national sources must be added to that. "We can expect a lengthy process of investing into railways infrastructure, which is currently in a very poor state. This process will last 10, 15 years."

A key project in this respect is the construction of a second track between Koper and Divaca in the southwest. Vlacic expects that construction works on the track will begin before the year is out.

"We were hoping to secure a construction permit in September, but September has gone and we still have not received a permit. This is why I have requested a report from the body overseeing the project. With a bit of luck the preparatory works - moving of electric lines, building of access roads and the like - will begin this year."

Labeling this the most important infrastructure project for Slovenia at the moment, Vlacic said the government has set out to reform the sector in order to provide it with the capacity to carry out large projects. He said the Directorate for Railway Investments, which currently handles infrastructure projects, was currently lacking the staff to handle such a large number of projects.

One of the changes in the package of laws that the government has drawn up in order to reform the sector is therefore a public corporation handling investments. The company will be in charge of infrastructure projects but will not own the infrastructure, which will be owned by state. Vlacic explained that this is to avoid budget funds for infrastructure being treated as state aid.

Moreover, the minister rejected that the government was rushing with reforms of the railways system. "It is high time for reforms. We began drafting legislation six months ago and nobody can claim that we are rushing."

He said that the government will likely debate the package this week. One of the major changes envisaged will be the structure of the national railways operator Slovenske zeleznice, which will be transformed into a holding company with three core companies: passenger transport, cargo and infrastructure.

Asked about the idea of establishing a logistics holding around Slovenske zeleznice, which has been promoted by him and Prime Minister Borut Pahor, Vlacic said the proposal was still alive despite opposition from some of the companies involved. But he said this issue cannot be tied to the restructuring of the railways operator.

"Currently we are preparing answers to the questions raised at the conference dedicated to the logistics holding held in mid-September. We have divided the issues into three categories: economic, legal and 'emotional'. Answering these questions will be crucial to pushing ahead with the holding."

Yet he stressed that the overhaul of Slovenske zeleznice was a separate issue to the formation of a logistics holding. "The holding is about the future of the logistics sector in Slovenia...but is not about rescuing Slovenske zeleznice. Restructuring at Slovenske zeleznice is already being carried out by the operator's management... On top of that is the legislative package that will transform the operator into a modern company."

Moreover, Vlacic touched on the government's plans to resort to public-private partnerships in building new motorways in the country. "All motorways since 1994 should have been built through concessions and the money instead chanelled into modernising railways infrastructure."

"Instead we now have a heavily-indebted motorway company, DARS, and poor railways infrastructure. But the government no longer intends to provide funds for the building of motorways."

He said that DARS's current debt amounted to EUR 4bn. "The management of DARS has been asked to prepare a proposal for reprogramming its loans. We need to find a solution in new loan arrangements, since we cannot provide for sufficient funding to pay off the loans by 2020."

However, the minister downplayed talk that Slovenia significantly overpaid its motorway network following reports that construction companies had formed a cartel agreement in bidding for projects. "When somebody says that motorways were overpaid by EUR 2bn, I expect them to provide evidence."

"Certainly, there were instances when projects were overpaid, I'm not turning a blind eye to this. But stating a number just like that is irresponsible," the minister said, adding that DARS was currently drawing up a report on motorway construction costs.

He said the high price of motorways was also a result of high quality of construction. "Slovenia has relatively good motorways and a study has shown that building costs are comparable to other countries in this respect."

"Indeed, the quality in some areas might even be too good. I'm not talking about the tarmac, but also about all other aspects of construction, including protecting water sources, archaeological sites and so on. For example to build two kilometres of motorway in [the village near Ljubljana] Skofljica, the state wold have to pay EUR 15m just to secure archaeological finds. This is unacceptable to me."

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