Transport minister examines ČD Cargo

The new transport minister's vow to introduce more competition in railway transport is a familiar promise from those assuming the post in the Czech Republic. Vít Bárta has been uncommonly swift, however, in condemning "immoral" contracts and waste in the ministry not two weeks after assuming office, rhetoric underscored by his intention of filing a criminal complaint to investigate contracts at ČD Cargo, a subsidiary of state-owned Czech Railways.

Bárta also intends to upend the management board at ČD Cargo following a KPMG audit that purports to show the company will run into the red this year, due to contracts signed under current management that were under cost and ran at a loss for the rail company.

"There is the threat of loss, and the former management of ČD Cargo is responsible for this loss. They are the ones who actually agreed to contracts that were under the cost of necessary expenses. That means not just without profits, but at a loss," Bárta said at a press conference July 26. "I consider personnel changes in ČD Cargo as necessary. Not in a matter of hours, but weeks."

The Transport Ministry is under pressure to cut its budget, as are all government ministries, which will have to cut an additional cumulative 10 billion Kč ($509.9 million) this year.

"Right from the beginning, we are telling the public the sad truth that we will have to save money even at the cost of delays in some construction projects," Bárta said.

Bárta did not specify which contracts in particular were agreed to at a loss, though he said he was providing information to the police. The complaint will specifically name former ČD Cargo CEO Josef Bazala, who told the daily Hospodářské noviny (HD) that the contracts were agreed to because the crisis forced the company to go below cost. But HN noted that the discounts were being enjoyed primarily by one company, Spedica, a Czech transport and logistics company. Those contracts dealt mostly with farm commodities, which were not hurt by the crisis.

Cleaning out top management at the company won't be enough to guarantee a clean company, said RegioJet's Jiří Schmidt. RegioJet is a subsidiary of Student Agency, a company that recently filed a complaint with the European Commission alleging regional governments broke the law by signing contracts with Czech Railways without proper public tenders.

"We were surprised by the very fast reaction of Bárta to the situation at ČD Cargo; it's a really fast approach," Schmidt told The Prague Post. "But personally, I have to say the position of CEO at ČD Cargo is not the crucial position. What's much more important is the approach of the entire ministry. So from our point of view, [CEO Petr] Žaluda is not the biggest problem. It's the entire management there that battles against competitors."

Aside from mismanaged contracts and possible corruption, Schmidt and Radim Jančura, owner of Student Agency, are waiting to see whether promises to liberalize the market will truly pan out, or whether the new minister is simply providing popular lip service.

"The last three ministers also said they wanted to open the market, but none of them actually began the process. We'll see in the next few weeks and months whether he's really serious about this," Schmidt added.

Student Agency and Regiojet are currently awaiting an official response from the EC on the complaint they filed about the regional contracts, and expect one in the fall.

"It would be a big opportunity for transport companies - not just us but big ones like Veolia and Areva - to really join the market. It would also be good news for the ministry, which is paying much more to [Czech Railways] than is necessary," Jančura said.

Bárta has also been quick to distance himself from individuals who could be perceived as corrupt, including entrepreneur Ivo Rittig, who has been called one of the ODS's "godfathers."

"The real threat comes from lobbyists, from gray zones, and I will be very, very careful to watch these people. I need to tell you, one name I will be particularly careful about is Ivo Rittig," he said.

As part of his move to clean up and cut costs, Bárta said he will pay particular attention to contracts dealing with legal and advisory services, some of which cost alarming amounts, added Deputy Transport Minister Radek Šmerda.

"In the Czech Republic, I don't know of any international company that can afford to spend 250 million Kč on law services each year," he said.

One company that has stuck out in particular is Austrian company Kapsch, which was contracted to build the toll system. Under hidden appendices in its contracts, the company has been contracted for nearly 30 billion Kč worth of services, and expects to get even more.

"A number of immoral contracts were closed, such as the one with Kapsch," Bárta said.

The department that oversees the contract, the Highways Directorate, takes up nearly 50 percent of the Transport Ministry's budget each year, Bárta said, and will be the subject of an investigation as well.

Claire Compton can be reached at
ccompton@praguepost.com