Georgia on the road to reform.(Analysis)(Railway & Transport Reform seminar)

DAVID ONOPRISHVILI has a new challenge. Appointed as Chairman & Managing Director of Georgian Railway at the beginning of June, he is tasked with turning the network around and restructuring it for privatisation.

As the country's former Finance Minister, and a member of the economic reform policy committee, Onoprishvili has seen huge changes sweeping across Georgia's economy. But so far, he says, these have largely passed the railways by. 'The railway is still run in the same way that we inherited from the Soviet Union', he explained during a Railway & Transport Reform seminar hosted in London by LVA (UK) Ltd on June 28. 'Up to this year, there had been no effort to reform the railways--which has caused a lot of harm, as the rest of the economy is changing rapidly.'

'GR's financial situation is weak--the management was corrupt, and there has been no proper auditing process.' Onoprishvili says the turnaround will be a step-by-step process. 'Our first priority is to clarify the present situation', he explains, noting that a new financial management system and auditing process is being put in place.

At the same time, he has commissioned 'a proper evaluation of the assets' which he believes are seriously undervalued. This has a spin-off in that not enough money is being set aside to cover depreciation and renewals. 'The wagon fleet and the locomotives are very depreciated, and we need to invest heavily in their replacement. At the same time, the railway owns a lot of land and property, and non-core assets like hospitals and even tourist resorts and hotels. We must work out what we actually need, and get rid of the rest.'

In parallel with the financial changes, Onoprishvili has started drawing up a strategic development plan, which is to be completed by the end of this year. Once this is ready, GR will be legally restructured as a state-owned joint-stock company. The ultimate intention is to move towards privatisation, although he does not expect to see the restructuring process get underway for around 18 months.

Ancilliary businesses such as the hospitals and resorts will be converted to separate companies and sold off, raising money for investment in core activities. The strategic plan will look at ways to bring in private-sector finance to the railway, but Onoprishvili believes an early candidate will be the purchase or leasing of rolling stock. Separation of train operations from infrastructure management is also on the cards, although the preferred structure is unlikely to emerge for another year.

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