Govt, Unions in Rough Talks to Avoid Strike in Hugely Indebted Bulgarian Railways

(L-R) Finance Minister Djankov, Transport Minister Moskovski and PM Borisov; all three of them have been involved in major talks with syndicates over the fate of the BDZ railways. Photo by BGNES

Bulgaria's Cabinet and syndicates have agreed to hold new talks on the fate of the Bulgarian State Railways company, BDZ, after they failed to resolve their disputes on Friday.

The entire week saw haggling between the government in the face of the Transport Ministry and the BDZ management and the trade unions over the plans for the restructuring of the vastly troubled state-owned railway company, including two meetings with Prime Minister Boyko Borisov.

The two parties eventually agreement to hold a new high-level negotiations meeting next Thursday, with the syndicates still being ready to play the card of a mass railway strike, as they threatened in September.

"The discussions will continue but our positions have certainly become closer," Transport Minister Ivaylo Moskovski told the reporters on Friday.

"During this week, we had extremely intensive dialogue on all levels. Some of the commitments and problems were clarified during these talks," said in turn Plamen Dimitrov, President of the Confederation of Independent Bulgarian Syndicates (KNSB).

He revealed that the government provided the syndicates with exact data about the massive debts of the BDZ company, which total BGN 771 M. Of those, BGN 531 M are debts to financial institutions.

The union leader said it is still unclear if the Transport Ministry will resort to shutting down entire railway lines but that it promised it "will not leave any places without transportation,"

The syndicates and the government have failed to agree on the major issue – the signing of a new collective labor contract for the BDZ employees. KNSB and the other major union, the Podkrepa Labor Confederation, have greater demands than what is offered by the Transport Ministry.

Transport Minister Moskovski claimed that the railway company meets its social commitments and has not delayed payments of salaries or benefits.

Another major issue of dispute on the agenda is the proposed privatization of BDZ Freight Services, which is traditionally more profitable than the passenger services of the state company.

Moskovski vowed to keep up the dialogue and consultations with the syndicates as the privatization procedure for BDZ Freight Services is going on.

"It is a fact that BDZ has no other source of gaining such a substantial funding source than the privatization of BDZ Freight Services. Nobody has expressed interest as of yet. We will be seeking an investor that will guarantee the development of this sector," the minister stated.

The syndicates tend to disagree by stressing they are not convinced that the sale of the freight services department is the only way to raise the badly needed cash for the Bulgarian State Railways.

Raising several hundred million BGN is necessary if BDZ wants to receive a massive, BGN 460 M loan from the World Bank for restructuring and repayment of old debts.

Bulgaria's railway syndicates announced in September they planned a strike in early October 2011 over a number of issues, including the news that a badly needed World Bank loan for state railway company BDZ has fallen through.

The major grievances of the railway unionists and laborers include the failed negotiations with the government for the signing of a new collective labor contract, the refusal of the World Bank to grant a massive loan for BDZ, and what is said to be measures on part of the government to implement massive layoffs from the railways in the near future.

Unionists say the entire railway system in Bulgaria is "in panic" as some 2000 people are to be laid off from BDZ Passenger Services and BDZ Freight Services.

The railway unions' strike announcement came a day after BDZ CEO Yordan Nedev announced that the World Bank has refused for the time being to a grant a life-and-death restructuring loan for the Bulgarian State Railways BDZ.

Nedev explained that the ailing Bulgarian railways need to demonstrate much better management in order to hope they can get the long-discussed loan.

Bulgaria's state-owned passenger railway operator BDZ has been traditionally in a horrendous financial condition in the past 20 years.

Since December 2010, when a preliminary loan agreement in the form of a memorandum with the World Bank was signed, the Bulgarian government had been hoping to get a loan of BGN 460 M for BDZ, together with a loan of BGN 160 M for the National Company "Railway Infrastructure", from the World Bank for badly needed reforms.

However, the reform attempts have been countered by the trade unions as they threatened to lead to massive layoffs of the state-employed railway workers (estimated by the unions at as many as 7 000 people).

Thus, in March 2011, the Bulgarian government was forced by an imminent railway strike to back out of some of its reform plans. The following months saw the replacement of the Transport Minister and the BDZ CEO.

The Bulgarian government had planned to grant BDZ a loan of BGN 140 M, counting on receiving back the money from the expected World Bank loan. The rest of the WB credit was to be utilized for covering the railways' mounting debts as the company is said to be nearing bankruptcy even though it has reduced its losses over the past two years.

According to Nedev, the end of 2011 the state company can make about BGN 10-13 M by ridding itself of outdated assets such as railway cars, spare parts, etc.

As part of the company's restructuring efforts, 600 BDZ employees will be transferred into a cleaning firm that will receive a three-year contract for BGN 14 M. Another 250 employees will be transferred to work at security firms guarding BDZ properties.

BDZ has already sent 200 of its employees to work in a joint venture together with Tip-Top Courier, a shipping company.

Nedev has confirmed the intention of the Bulgarian Transport Ministry to go for the privatization of BDZ Freight Services, first announced in August 2011.

"The process for the privatization of BDZ Freight Services has not been organized yet," Nedev said, adding the only thing clear at present was that BDZ Freight Services' assets are valued at about BGN 320 M.

The freight services of the Bulgarian state railways have traditionally been its more profitable unit, and past governments have used freight revenues to cover mounting deficits in the passenger services.

Earlier in September, Bulgarian Transport Minister Ivaylo Moskovski said the privatization could take about 6-12 months.

Unlike BDZ, however, Bulgaria's National Company "Railway Infrastructure" is expected to get its BGN 140 M loan from the World Bank because it is not going to cover old debts with the money but will invest them in new railway network equipment.

Bulgaria's railway unions have been fiercely opposed to all moves of the present government, slamming BDZ CEO himself, after Nedev was appointed in the spring without prior experience in the railway sector. The syndicates have threated new protests over the possibility of massive layoffs, and have been vehemently against the loan deal with the World Bank which seems to have fallen through at least for the time being.

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