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BISHKEK (TCA) — The Kyrgyz Government proposed to corporatize the Kyrgyz Temir Jolu State Enterprise (Kyrgyz Railways). The issue was discussed on February 5 at a meeting of the Parliamentary Committee on Transport, Communications, Architecture and Construction.

“At the initial stage, we propose to create a joint venture with a potential investor in freight forwarding. We believe that this will allow us to attract additional financial resources for the development of the railway industry. It is also planned to introduce a mechanism of state and private participation in financing the railway transport modernization,” said Kyrgyz Temir Jolu General Director Kanatbek Abdykerimov, who was appointed to head the company three months ago. Former CEO Almazbek Nogoibaev was dismissed after being accused of corruption by MPs.

Some deputies are skeptical about the idea of the enterprise’s transformation into a joint stock company. The Kyrgyz Temir Jolu had already been renamed into the national company, but it has not brought any results. In is necessary to develop the railway network and connect the north and south of the country by the railways, the MPs said.

Timber, metal building materials from Russia and other cargoes that pass along the Bishkek—Osh highway have put this motor road in poor condition, MPs said. It is necessary to transport such cargoes through railways only, the MPs believe. They asked the Transport Ministry to make every effort to remedy the situation.

The Kyrgyz Temir Jolu is now negotiating with banks on buying of new passenger and freight cars this year. The shortage of freight cars hinders the development of the country’s coal industry and creates difficulties for entrepreneurs, the MPs added.

The purchase of freight cars in the near future would allow increasing the exports of goods from the southern regions of the country.

Following the discussion, the parliamentary committee members suggested the Government to reduce by 50% the company’s net profit payment to the national budget and to allocate the released funds for modernization of the track infrastructure.

Background

The Kyrgyz Temir Jolu was established in 2005 as a successor to the Kyrgyz Railways, which, in turn, inherited the functions of the Frunze branch of the Alma-Ata Railways in 1992.

The length of Kyrgyzstan’s railways was 470 kilometers in 2006, and it is 426 kilometers now. The track network is fragmented, and the rolling stock including coaches, locomotives and freight wagons, is outdated. Rail transport accounts for only 3% of the cargo turnover in the country.

4,812 people are now working in the state-owned enterprise.

Rolling stock

Over the 27 years of independence, Kyrgyzstan has bought only six locomotives. The rest have been exploited for 40 years, despite the expired usage period, Kyrgyz Temir Jolu General Director Abdykerimov said.

More than 52.5% of freight cars and 51.6% of coaches are inoperative. From 2020, 94 coaches will be sent for scrap.

To restore the freight car fleet and fully meet the needs of business entities until 2022, it is necessary to purchase 200 freight cars annually for more than 571 million soms.

Last year, 15 coaches and four freight cars were repaired. The overhaul of wagons is being done in Uzbekistan, while the Kyrgyz Temir Jolu can carry out routine maintenance only.

With the money borrowed from the Russian-Kyrgyz Development Fund, the enterprise bought 150 freight wagons that were sent to stations in the south of the country.

The Kyrgyz Temir Jolu also plans to buy two shunting diesel locomotives.

Growth of freight and passenger traffic

In 2018, the Kyrgyz Temir Jolu transported 7.4 million tons of cargo, 4% more compared to 2017, Abdykerimov said.

The growth in cargo transportation was largely due to the country's accession to the Eurasian Economic Union. From 2016 to 2018, the volume of goods transported by the railway increased by 23.4%.

The increase was achieved due to the growth in exports of goods including coal (60%), oil products (tenfold increase), construction materials (fourfold), and cement (threefold).

The company’s southern branch doubled the transportation in 2018 because Uzbekistan provided a 30% discount on the transportation of goods from Kyrgyzstan.

The passenger traffic has increased by 10 thousand people over the past year. About 300 thousand passengers travel by railways of Kyrgyzstan annually. In 2018, there were 324.4 thousand, 10.4% more than in 2017.

291.6 thousand passengers used the local train routes and 33.1 thousand were interstate passengers.

On the company’s sale to Russia

“We are not negotiating the sale of the enterprise,” Abdykerimov said answering journalists' questions about selling the company to Russia.

At a press conference in Bishkek on February 7, Security Council Secretary Damir Sagynbayev did not comment on rumors that Kyrgyz Temir Jolu and other strategic facilities would be transferred to Russia.

To assess the proposal for the company’s reorganization, it is necessary to conduct a comprehensive economic analysis of the relevant decisions, he added. Regarding the sale of Kyrgyzgaz (Kyrgyz Gas) to the Russian side, it is a good example. Local citizens saw that household gas comes to their houses without fail and at a low price, he said.

Rumors on the sale of the state-owned Kyrgyz Temir Jolu to Russia began to circulate after the recent meeting of the Kyrgyz Temir Jolu General Director with the head of the Russian Railways Oleg Belozerov in Moscow.

They discussed the development of a preliminary feasibility study of projects for Kyrgyzstan’s railway network development, the issue of purchase of Russian coaches and reducing the fare for passengers in the Russian-Kyrgyz train connections, and on the transfer to the ownership of Kyrgyz Railways of the locomotives of the Russian Railways which are now leased by the Kyrgyz Temir Jolu. There was no issue of selling the company on the agenda, the company spokesman Erkin Kaimov told Azattyk Radio.

Railways development concept

Kyrgyz Temir Jolu General Director Kanatbek Abdykerimov presented a draft Concept of Kyrgyzstan’s railway transport development for 2019-2025 to Prime Minister Mukhammedkaly Abylgaziyev.

Within the Concept, it is planned to build a new model of enterprise management including corporatization and public-private partnership mechanisms, Abdykerimov said.

Attraction of highly qualified personnel is among the important tasks of the Concept.

“It is unacceptable that such a strategic facility as the Kyrgyz Temir Jolu national company be in such a state as it is now. It is necessary to take decisive measures to radically change the situation in the railway transport and to make the company profitable, modernized and developing,” stressed PM Abylgaziyev.

He ordered to accelerate the implementation of measures for the development of railway transport related to the Kyrgyz Temir Jolu corporatization.

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