Who will make money from the rise in railway ticket prices?

On July 16, the GolosUA news agency hosted a press conference entitled "Who will benefit from the rise in railway ticket prices?"

The press conference was attended by: Viktor Medved -Director of the consulting company Invest-Expert;Ildar Gazizullin-Director of Economic Programs at the Institute for Public Policy;Gregory Spector-editor of the transportation newsletter Transpress.

Moderator. Yuriy Havrylechko, expert at the Public Safety Foundation.

Yuriy Havrylechko: Good afternoon, dear guests, dear colleagues! The GolosUA news agency is starting a press conference on the topic: "Who will profit from the rise in railway ticket prices?" Prices in Ukraine are rising from time to time, but does this encourage people to improve the quality of goods and services? On the contrary, prices have been rising for all twenty years of independence, while the quality of goods and services has been declining for some reason. Who will make money from the next price increase and what "improvements" we should prepare for, at least at Ukrzaliznytsia, are the issues we will discuss today. Victor, you have the first word.

Viktor Medved: Thank you. The key issue is that we should pay attention to the financial performance of Ukrzaliznytsia for the last year. Last year, we see that Ukrzaliznytsia's gross revenues increased to UAH 52 billion, and in their structure we see that revenues from freight transportation grew slightly, and revenues from passenger transportation rose slightly more.

At the same time, we can see that freight transportation generates at least some, albeit insignificant, profit, while passenger transportation shows losses in both suburban and long-distance transportation. However, the dynamics are generally in favor of reducing this gap last year compared to the year before. But at the same time, we see that Ukrzaliznytsia's net income decreased by 2.6 times, and its profit decreased to UAH 800 million as of 2012.

What is the reason for this? While we see that monopoly enterprises are essentially profitable all over the world, in Ukraine we have a situation where revenues are growing and costs are growing faster. It is worth noting that wages have increased by only ten percent, while services are rising by ten and twenty percent even today. Ten percent is planned for the first stage, and then another twenty percent. Therefore, if we were to say that the main costs in the structure are wages, they account for about 10-15 percent of the company's total costs, even with the new charges, and the price increase for tickets should have been one or two percent, no more. Maybe three percent.

It turns out that the prices for Ukrzaliznytsia's services are growing faster than the incomes of citizens. What explains this? It can only be explained by the insatiable appetites of those people who make money from Ukrzaliznytsia's transportation through various intermediary companies, by supplying goods at an inflated price. And these appetites are growing exorbitantly, and through the structure of the state-owned company, these funds are monopolistically collected and then redistributed in the interests of various companies that parasitize on the body of Ukrzaliznytsia.

According to the estimates of various international experts and FATF specialists, if the work and financing are transparent and intermediaries are cut off, we can state that Ukrzaliznytsia's profitability will be at least twenty percent annually and will amount to about UAH 10-11 billion in net profit. That is, such funds will be enough to completely renew the entire passenger fleet within ten years, and, given the profitability of freight transportation, to partially renew the freight rolling stock. These are the main positions.

Yuriy Havrylechko: Could you comment on the situation in light of the fact that wages have hardly increased, and according to official data, three hundred new railcars are planned to be purchased? According to the available public information, zero cars were purchased in the first six months. Last year, less than fifty percent of the planned railcars were purchased.

Listen, where is the money going? And the cost of passenger transportation and freight transportation is constantly rising. And yet, there are no calculations as to how much the difference in sleepers, cars, and so on will be used to buy.

Viktor Medved: I remember when Yevgeny Chervonenko became Minister of Transport, and his first position was to raise the cost of transportation. And the increase in the cost of services was about 40 percent, and in some areas by 50 and 60 percent. And this was done by a strong-willed decision due to the high confidence of citizens at that time in order to really upgrade the rolling stock of Ukrzaliznytsia in a really high-quality and fast manner over the course of several years.

But we all remember that there was a sharp increase in the cost of transportation, but no improvement in service delivery. We can only note an increase in the quality of services, if you can call it that, with Hyundai trains, which is questionable, and which was done again through corruption, as is always the case with us, at an inflated cost. Again, a key issue, an important issue when investing in construction, in every resolution of the Cabinet of Ministers and when adopting laws, there is a column that speaks to the effectiveness of the state budget's profit generation through the taxation mechanism.

In other words, they buy components from state-owned enterprises, and then this money is returned through VAT and other taxes with a multiplier of up to fifty percent when invested in machine building and so on. But we can see that in the course of preparations for Euro 2012 and the investment of all these Hyundai cars, the money was actually withdrawn from the country, and the efficiency for the budget is practically zero. So, again, the question is, where are they going to buy these new railcars? And the fact that they are not buying them now is better than if they were buying them like Hyundai, for sure.

But the key problem with Ukrzaliznytsia in general is that this organization is extremely opaque. That is, everything is veiled and hidden behind seven seals. Therefore, I think the way to solve all these problems is to introduce an electronic accounting system, a transparent system, a public system that can be provided by electronic means of communication or the Internet, so that everyone, especially since it is a state-owned enterprise, can see financial flows, purchases, and so on. Because all the profits are being washed away because of this.

Gregory Spector: Would you allow a small addition?

Yuriy Havrylechko: Yes, of course. And you're next.

Gregory Spector: No, it's just an addition to the way modern information technology works. When we put our hopes on technical capabilities, on what is most... Here we are, all passengers, you see, the railway workers are not here, they hold their press conferences behind closed doors separately, so to speak, behind the entrance hall, they hold their press conferences, passengers hold their press conferences. So, you, as passengers, are faced with practically three people on the railway, right? The ticket taker, the train manager and the conductor.

So, just imagine (a small note): since 2011, Order No. 185-c, signed by the then CEO of Ukrzaliznytsia, has been in effect, which is called "lokhotron" or "Ukrainian roulette" among conductors. Everything seems to be fair, and train crews are being formed, which, by the way, has a direct bearing on money and the quality of service. Just imagine the situation exactly a year ago, remember the disaster in Krymsk, where our only train from the Caucasus goes, the cars are thirty-five years old, there is no air conditioning, electricity is on the move, toilets work on the move, and so on and so forth. Because of this misfortune, they stop all the trains for a day, for a few hours, depending on how lucky they are.

And the train manager is traveling, thank God, a train manager who has been working on the railroad for thirty years, but he sees his conductors for the first time in his life. In team sports, there is such a thing as teamwork, in aviation, flight time, and in the navy, sailing. So, when the ministry made this roulette, you don't know what train you will be riding on or what cars you will be servicing. And a railroad car is, in general, a technically complex vehicle. And you don't know who you will be traveling with in a critical situation.

This is how modern technology works. So, conductors and train managers confidentially tell us that in order to get one of the two or three prestigious trains, in order for this "roulette" to produce the desired result, you need only five thousand dollars, and two thousand dollars from the conductor. That's all the modern technology performed by Ukrzaliznytsia. So, I don't think that modern technologies will make a positive difference in the quality of service.

Yuriy Havrylechko: So, we will continue with the topic of economic feasibility, and after that, we may return to modern technologies. Ildar, you have the floor.

Ildar Gazizullin: Good afternoon, dear colleagues, dear media! So, in fact, if you look at rail transport, it remains one of the least reformed among other infrastructure sectors. That is, if we compare the state of reforms at Ukrzaliznytsia with the state of reforms in the gas sector or the electricity sector, then in fact, reforms are lagging behind the most.

First of all, the biggest problem, in my opinion, is the lack of necessary institutions, the full functioning of the National Commission for Transport Regulation, and we know that it was created several years ago but has not started working. Even this decision to raise tariffs today and in October was made, if I'm not mistaken, by an order of the Ministry. That is, the role of the commission, which is supposed to be independent and should take into account all these issues, the real costs of the railroad, and real investment programs, is still not working.

This is a direct violation of the President's economic reform program, which stipulates that a fully independent National Commission should have been in place by the end of last year. Unfortunately, other provisions of this program regarding rail transport are not being implemented either.

If we talk about the gas sector and the electricity sector, there are obviously problems there as well, including problems with prices and tariffs, with cross-subsidization, but there is some progress in principle, and at least more information about financing is available.

"Ukrzaliznytsia, unfortunately, remains very closed, and one of the symptoms of this financial closure and lack of reforms is that it is very difficult to attract funds from international financial institutions to this sector. Because, indeed, creditors would like to see reforms and more transparency.

Another point is the tariffs for the population, which again should be set by a commission that is independent of the interests of the industry. But it is obvious that tariffs for passenger transportation need to be raised, because they are really unprofitable, despite the fact that there is corruption and abuse, and procurement is really done at inflated prices. What is the problem? Indeed, it is now increasingly difficult for Ukrzaliznytsia to cover these losses on passenger transportation with freight transportation, because it is no secret that most freight transportation is already carried out by private operators, and there are actually problems with Ukrzaliznytsia receiving the so-called infrastructure component in tariffs. That is, so that it can actually make money on it.

That's why the excess profits on freight transportation that we had in the past are no longer excess profits, they are just profits, and that's why the need to revise passenger transportation tariffs is so acute now. So, what to do? Yes, I think that in principle, the railroad reform program, despite some shortcomings, is adequate, but it needs to be implemented. And it is obvious that it is very difficult for this specialized ministry to reform itself and delegate control powers to the national commission, but without this, questions will continue to arise about the reasonableness of tariffs and the reasonableness of railroad expenses.

And in fact, the investment needs are very large, and in this I somewhat disagree with my colleague that we need about ten billion dollars to upgrade rolling stock and so on. It seems to me that much more is needed, if we take into account the infrastructure needs. However, I agree that the amount is very large and cannot be raised in one year, perhaps even in ten. Therefore, the tariff policy and how this money is spent is a very important issue, but without it, the quality of services will really deteriorate in the future.

Yuriy Havrylechko: Then I have a question. How can we even talk about any losses in passenger transportation when it is absolutely profitable? I think that they are about a hundred and fifty percent profitable. This is my statement and your statement that they are unprofitable are absolutely equivalent, because there are no transparent cost calculations that can be verified. So you can say anything, and the probability of any statement being one hundred percent true will be the same, because there are no calculations and it is impossible to verify.

Ildar Gazizullin: I agree that indeed the financial statements of Ukrzaliznytsia should have been audited, and there is indeed a problem as you mentioned. At the same time, again, if you look at most countries that have developed passenger transport, rail transport, as a rule, all these types of services are unprofitable, that is, they are subsidized from the state budget. So again, we can assume that in Ukraine, these services are also unprofitable.

Another point is unprofitability. That is, if the railroad does not invest any money in rolling stock renewal or infrastructure, then it is indeed formally profitable, i.e., when it covers only operating costs and not capital costs. But such profitability is really artificial, meaning that no one needs it.

Yuriy Havrylechko: That is, unfortunately, we are now talking and living in the field of probabilities and analogies, not calculations, so it is impossible to say clearly what and how. That's why, perhaps, investors don't go into this industry because they can't estimate what they will get. Grigory, would you like to add something to this?

Gregory Spector: You know, I would, for example... I address you exactly like this: dear passengers, because everyone here is a passenger. And talk about cheap tickets and so on and so forth, you know, in any sober view, is dog's nonsense. For one simple reason. Let's start with who is the customer for railroad passenger transportation? First of all, let's say it's the least socially protected segments of the population. Our multiplying millionaires are able to buy an airplane, charter a plane, rent a saloon car from a CEO, and so on. They do not care about these tariffs, in general.

And any increase in tariffs... You know, it was very interesting to see this blathering about how we have the cheapest tickets. Just yesterday, I received a letter from a girl, the daughter of my friends, who lives and studies in Germany on an exchange, she is a student and works part-time there. And there is not a day off that she does not travel by high-speed normal trains to another European capital somewhere, and she is a student. It's quite normal. I'm probably the oldest person here, and I remember very well when I was a student and I could afford to go to Moscow on weekends, go to some other city, and so on and so forth.

And it makes no sense to talk about unprofitable passenger transportation, because it is a social order of the state, otherwise why the hell do we need this state at all? First of all. Second, let's look at the numbers, you say there are no numbers. When Ukrzaliznytsia was formed, the volume of transportation was about ten times higher, an order of magnitude. For some reason, Ukrzaliznytsia managed to get by with an administrative and management staff ten times smaller. If you count the number of Lexuses and Audis, there are, first of all, huge internal reserves that can be used very easily.

Second, there is cross-financing of transportation everywhere in the world. Our information and analytical center, in cooperation with Ukrzaliznytsia specialists, prepared such serious information about the catastrophic situation, in particular, with passenger transportation, in the fall of 2004. The fact that eight years ago, the wear and tear of our locomotives and passenger cars was approaching critical levels. The then management of Ukrzaliznytsia made unimaginable efforts to master the repair process and extend their service life in order to carry out these transportation operations. But if we want our people not to travel anywhere without a subscription, i.e., they would be unable to leave without a travel ban, please, we can continue to raise tariffs.

For example, today we have absolutely no demand for river transportation because there is no river transportation. Air transport has ceased to be a general purpose transport. If we want to destroy the country... It would be fine if, say, people from Donetsk went to Lviv, people from Lviv went to Crimea, you know, people would know their country better, be better friends, and so on and so forth. This is an absolute social order.

So, these talks that "it's like this all over the world" are based on what? Let's say you have an income, a salary, whatever, of any person. They have a certain amount left over for theater, movies, transportation, food, and so on, after utility bills, healthcare, and so on. So, if on the same day that we were being "blatant" about having the lowest tariffs, there was an official statement from our statistical office that we were in last place in terms of income, and if you subtract all the ministers, deputies and others from that income, it would turn out that we are somewhere between Ghana and Botswana. That's great.

Next is the strategy. Just two or three weeks ago, if you are interested in transportation issues, the International Railway Business Forum was held in Sochi, Strategic Partnership 1520, as it was called (1520 is our gauge). And there, the president of Russian Railways expressed an absolutely revolutionary idea that passenger transportation should be the main area of development for the next fifty years at least. Because as people become more affluent, they start traveling more for excursions, vacations, visits, anywhere. Passenger service is growing. This is what is called the "mainline development direction".

If we have destroyed the most popular trains, if someone, I don't see anyone here that I know from the parliamentary pool, but if you take the time to look at the transcripts of the Verkhovna Rada plenary sessions, at least the Friday ones, you will find several dozen requests to restore such and such a train, to restore such and such an electric train, to restore such and such a stop. This means that there is a demand for transportation. If people are holding up MPs and majoritarian MPs and so on, then there is a demand for transportation.

That's why we have to cancel the trains that are in demand and introduce Hyundai trains instead, which are not suitable for any high-speed traffic. Tell me, please, you've been to Crimea, you must have had a vacation. If you take, say, a person with small children, with things, and ask him to walk to Simferopol with small children, and then another three hours to the sea, and so on, will he ever go to Crimea again? Never in his life. Instead, they destroy those normal trains.

Talk to any head of a government ministry or factory that sends a lot of people on business trips. What happens? When you travel on a normal night train, put on a white shirt in the morning, do all your business there, and return home normally in the evening. You lose one working day. And when you go on a "hoonadevnik" trip, you have to spend two extra days in a hotel, again at the expense of the organization. And you don't lose one working day, you lose two extra working days. You know, it's ridiculous! A high-speed train, go to any carriage, look, cars built in the GDR 35-38 years ago, they have a maximum speed of 140-160 kilometers per hour written on them. Who are they kidding?

Tell me, please, who is responsible for the destruction of the railroad transport? Nobody. And when they talk about the lack of money and so on, again, here sits my esteemed colleague Konovalov, who remembers all these stories perfectly well, when eighteen thousand of the most scarce freight cars disappeared. They just disappeared. I mean, they didn't physically disappear, they were used for free, i.e., for free, by some companies close to the government. It was just that these people were getting about five to twenty-five million hryvnias a day. So is rail transportation unprofitable at all or not?

And from that moment on, as I say, there was absolutely official data that all these transportation services were in a catastrophic situation. Great, we have a great... we had a Luhansk Diesel Locomotive Plant? Where is it, who owns the Luhansk Locomotive Plant now? Ukraine does not have it. You know, there were all these car repair plants. Where are they now? And so on and so forth. This is probably due to the fact that, unfortunately, over the past twenty-two years, our government has not understood the role of transport in general and the role of rail transport in particular.

When the Verkhovna Rada was discussing the issue of reforming railway transport, you know, I probably got more gray hairs from the moment when three hundred amendments were adopted in, I think, twenty-five minutes. At the same time, only two "outstanding" railroaders spoke: Karmazin, who you know is a great guy, but has nothing to do with transportation, and Kaplienko. That was all. The rest of the show was a wholesale affair.

What kind of reform it is and what kind of quality it is, if it has been slowed down for two and a half years. Why? Because if it had been implemented, it would have destroyed the railroad. So, do you understand what is going on? When you start providing any service, you always remember who the consumer of this service is and what it is for. Do we want to destroy the country? Let's destroy passenger transportation. Do we want protests?

When this "Hyundai" epic began, there were protests in several regions, when people simply blocked the main railroad tracks. And everybody knows that these Hyundai's, excuse me... You know, at the same time, it's great to imagine that I have named some events for which you, as professionals, can easily find some figures. On that day, just as we were being bombarded by all sorts of members and multimembers that we should immediately raise tariffs, there were two reports that in China, the former Minister of Transportation was sentenced to death with a two-year reprieve. If he behaves, he will get a life sentence.

Do you remember how much he stole? Ten million. If you ask anyone here, you know, they'll laugh at this poor Chinese guy, he stole ten million in seven years of work! That's why in China, a train travels two and a half thousand kilometers at a speed of 360 kilometers per hour, and it is made in China. In Romania, which is not generally known for, let's say, crystal transparency and the like, the former head of the railroad department was given five years in prison on the same day. In Romania! Please tell us who is responsible for what is happening in the transportation sector?

And now look at the other thing. We ask: who will benefit from this? Have you ever wondered what the profitability of minibuses is? Why are they fighting so hard for minibuses? If people are pushed out by such actions, then this winter of 2013, when all transport was actually blocked due to snow, only the city train was running in Kyiv with interruptions, and now it will not run because the city does not pay for it, trains. It's not like you get snowed in and freeze on a bus; any sane leader of the country would have thought that this transport needs to be saved, because it was the first winter like this, but not the last. But nothing was done.

You know the roads we have. How many people die because of this? Go to the Emergencies Ministry's website and you will find statistics on how many people died in car accidents: one year of our roads is equal to two ten-year wars in Afghanistan. What if people don't travel by train at these prices? That's right, they will be picked up by taxis. So, today the traffic police literally published information about the number and condition of our minibuses and so on. And now answer this question: when was the last time there was a fatal accident involving railroad passengers? You can't answer that because there have been no accidents on the railways in the last five years. So, who benefits from this? The state? No. Because all the minibus operators who brazenly raise prices are actually registered as individual entrepreneurs, on a single tax. Do people benefit? No, it's not. Well, I don't know then... Oh, funeral homes and cemetery workers.

Yuriy Havrylechko: Optimistic...

Gregory Spector: Sure.

Yuriy Havrylechko: Ildar, you have received a comment.

Ildar Gazizullin: In principle, the only such remark is about the level of income and tariffs. In other words, Ukraine has one of the lowest levels of salaries and incomes in the region, and only Moldova has lower salaries.

Yuriy Havrylechko: Not anymore.

Ildar Gazizullin: Not anymore, right? Theirs was lower than ours. So our country is a country with very low income, and we are used to counting on some services that are typical for countries with developed economies. Therefore, we need to take a really rational approach to this. If we really have such a poor population, then perhaps they should not count on the level and coverage of services that was, say, in Soviet times. That is, an intermediate solution, until the population becomes richer, is obviously subsidizing these services from the state budget.

But we know that the population expects not only a high level and quality of railway transport services, but we all want hot water, district heating, gas, electricity, but obviously the situation with tariffs is also very, very unsatisfactory. So this is really a problem of a poor country that inherited the infrastructure of a rich country, and this is a problem that cannot be solved very easily. Thank you.

Yuriy Havrylechko: To be honest, I still don't understand. A low-cost flight from Kyiv to Warsaw costs 40-60 euros, from Kharkiv to Ankara - 70-100 dollars. And a Hyundai ride from Kyiv to Kharkiv costs the same seventy to a hundred dollars. How can this be explained? Moreover, again, according to our calculations, the cost of traveling by Hyundai is no more than one hundred hryvnias, and this is with a thirty percent profit. And everything else is one hundred percent profit. That's it.

So, if we have a loss-making Ukrzaliznytsia, I want to say that anyone here would be happy to accept Ukrzaliznytsia as a gift and it would become profitable the next day, just like the rest of the world. Because if you look at prices in the West, we have already reached European prices for almost everything, but for some reason we have not reached European wages. Accordingly, absolutely all costs in Ukraine are ten times lower than in the West. Therefore, it is very difficult to compare prices and quality of services. And if we consider that the number of transportation has actually decreased significantly, then only by increasing the number of transportation and reducing the price can we make more profit and, accordingly, have money to upgrade the rolling stock.

Dear colleagues, please take your questions.

Dmytro Khilyuk, "News24": I have a question for all the experts who would like to answer. How likely is the scenario that in a few years the freight fleet, along with freight locomotives, will go to private hands, and the state will own only the railroad and passenger transportation? Actually, this will be subsidized from the budget, similar to the example of the modern Naftogaz. Thank you.

Viktor Medved: Let me answer that. There are very high chances of such a scenario, especially since the current law that protects Ukrzaliznytsia from privatization does not apply to rolling stock, and we see that for many years, as my colleague said, freight cars have been used in the interests of private individuals, and in principle, most of the profits end up in private hands, and today we know all about it. That is why the actions that are being taken today, I think, are all falling apart on purpose.

In order to buy Ukrtelecom, for example, we had to show that it was unprofitable. And in order to make it unprofitable, we had to raise the cost of services so that people would stop using them. The same principle applies to Ukrzaliznytsia: by continually raising the price of passenger transportation services, we see that Ukrzaliznytsia's revenues will fall, and it will have negative dynamics, and then we can buy it, relatively speaking, for a dollar as a loss-making enterprise and take on investment commitments to restore it.

Then good managers will come in, just like they came to Ukrtelecom today, and accordingly, tariffs are being raised every month. And if you look at it objectively, Ukrtelecom is already a profitable company, not as unprofitable as the state-owned one, although nothing has changed, neither the quality of services nor anything else, except that they have laid off people, and are now selling off Ukrtelecom's property, real estate, and so on, which is expensive, and so on.

The situation is the same with Ukrzaliznytsia, which is clearly being prepared for so-called shadow privatization. And the important point is that when the rolling stock is fully privately owned, you are welcome to it, but no one will need the road, because the road means land tax, maintenance, and so on. And all these costs will be borne by the state, while private operators who will use the rolling stock will receive the profit.

Yuriy Havrylechko: By the way, in the entire history of privatization in Ukraine, not a single truly unprofitable enterprise has ever been privatized. Food for thought...

Ildar Gazizullin: This is indeed a risky scenario. Of course, it can be implemented in a better way, for example, if we talk about separating freight and passenger transportation. Again, the infrastructure component, when the infrastructure remains in the ownership of the state, and the state will take money from private carriers for the use of the track, i.e. infrastructure. This is actually possible. Then there will be profits and money to restore the passenger rolling stock.

Yes, indeed, privatization in Ukraine is not transparent, although the freight transportation sector is de facto commercial, and most of the transportation is carried out by a private operator. So, let's just say that some privatization has actually taken place here. So, again, I agree that there should be cost control by the regulator, which will set tariffs, and this is simply a necessity.

Gregory Spector: With your permission. I am a little bit more optimistic. I agree with our host of the press conference that Ukraine in general and Ukrainian transportation are, let's say, beyond the realm of common sense. All over the world, river freight transportation is naturally considered the cheapest, especially for bulk cargo and construction cargo. The Dnipro is standing, Ukrrechflot is out of business.

What about what will happen? Do you understand what is going on? Why the idiocy of raising prices will be felt by Ukrzaliznytsia very soon. The fact is that after our economy naturally "improves", freight transportation drops as a result of this improvement - there is nothing to transport. So, after 1995, you know, there was some kind of craziness when they were drawing how many international transport corridors would go through Ukraine, there was a capitalist competition, so transit is profitable, yes, there would be opportunities, but with normal management of the industry, normal. But transit is falling.

And passenger transportation is the only source of living money that is needed on a daily basis. And then again, when we talk about the quality of transportation, just do a little journalistic investigation, there were a lot of complaints about the laundry on trains. By the way, this is a huge, huge layer of work, let's say, the layer of work that also involves a huge amount of money. And just ask who took all these laundry operations away from the railroads, whose companies they are. This is a very interesting question.

And as for whether or not this privatization will be shadowy. You see, we developed our reform program at Ukrzaliznytsia earlier than our neighbors in Russia. Well, for a number of, most likely, subjective reasons, we were twelve years behind with this reform. So, again, in Russia, where such a division into operator and other services has taken place, they are already starting to backfire. Why? Because operators have a surplus of rolling stock, and the capacity of tracks, the capacity of marshalling yards, loading yards, and so on is not infinite. Instead of using the common fleet more rationally, so to speak, so that there is no empty run, they have these private cars running back and forth empty, clogging marshalling yards and blocking sidings.

Therefore, if our constantly changing leaders are smart enough to look at the results of reforming this industry in post-Soviet countries, at reforms in Europe, I think that such a division will not happen. Because if they do, it will simply ruin our railroad transportation. Because, remember, Ukrrechflot was reformed in the same way with the help of great European experts who absolutely do not need competitors in the form of Ukrainian carriers, based on the same principle, as in the children's story about the tops and the bottoms? They took away something that immediately brings in real money, they took away this coastal shipping fleet that goes abroad.

The Kyiv River Port, which is about three kilometers away, handled more cargo in 1990 than all Ukrainian ports today. It's still standing, and they don't know what to do with it. That's why I'm more optimistic that our leaders will eventually get their brains working.

Yuriy Havrylechko: Thank you. Questions, please.

Zoryana Stepanenko, Era TV company: I have a question for Mr. Ildar. I would like you to tell us in more detail what the reform of Ukrzaliznytsia is all about. And the second question is to you, first of all, and to the experts, who will be able to