After the audit report that detailed how the costs of Rail Baltica project have quadrupled, it seemed there would be no more shocking surprises. But there still are. It turns out that neither the politicians nor politicians of three governments (!) and even RB Rail officials had failed to notice that the documents of the project ratified by the 12th Saeima make no mention of the plans to build stations, the famous “Riga loops” or other extras that are highly expensive. BNN reached out to the head of the Saeima Parliamentary Inquiry Commission into Rail Baltica Andris Kulbergs about the surprises with this project and what should be done to ensure the project is a success.
The agreement signed by the three Baltic States in 2017 and passed by the Saeima really makes mention anything about the construction of stations. (The agreement can be viewed by anyone on likumi.lv portal). How did this situation come to be and what should be do? Should we identify those responsible for this situation, or should we just swallow this pill and act like nothing special happened here?
One of the options is to amend the shareholders’ agreement ratified by the Saeima in 2017 between Latvia, Lithuania and Estonia on the establishment of the Rail Baltica railway connection, because it cannot be that one has been decided in the Saeima, but something completely different was then approved by the Cabinet of Ministers. This points to the legal side of affairs. We said as much to the prosecution office. We also identified the fact that the content submitted to the Cabinet of Ministers in 2016 did not include the financial side. What was written there stated there would not be any impact on the budget. But something like that is impossible in practice. When changing technical specifications, some impact on investments is fixed, while operational things, all sorts of extras and wants, such as the construction of a basement for luggage for the railway connection to the airport, expansion and growth of the central railway station, construction of regional railway stations, are without any assessment regarding the impact they will have on the overall investment and also on the operational activities afterwards. The board simply agreed on this, submitted and then accepted on the principle of consensus – 51% of the managers of the project voted “in favour”. That’s it. Then the proposal is passed and pushed forward. This is how this snowball has been growing for years: everyone was coming in with their own political zeal, their wants, so to speak, clicked on the options in the car configurator without evaluating what all this would will mean in monthly payments. This has been the case for years, and only recently, at the end of this year or last year, the first procedure was introduced. This was explained to us yesterday (at the meeting of the Parliamentary Inquiry Commission on the 8th of August).
So basically it comes to Rail Baltica’s implementation was a clear example of principle of political irresponsibility. There have been so many log carriers that there are no specific names and surnames that carried the unverified plans to the Cabinet of Ministers?
This is a case of collective irresponsibility. There is no single person who is individually responsible. The fact that this project has no supervisor has led to the outcome we see today.
The growth of the project’s costs was truly enormous. With this in mind, there is one question on the minds of most people – what do we do now? In Estonia, for example, there is an opinion that the project should be stopped because it is no longer economically viable and the losses will outweigh the benefits…
We’re past that railway station. There is a document signed by three countries, where we have our duties and responsibilities in the implementation of the project, as well as obligations before the European Union. In theory, one solution could be that the representatives of all three Baltic States fly to Brussels and tell the European Commission that we have finally come to our senses and will build the main track, what Europe finances.
Because the shovel for the construction of the main track is still has not struck in any ground patch. We got carried away with “Riga loops”, but have not done anything to complete what we’ve been paid to do.
It has been publicly announced that the construction of Riga Central Station and airport station alone could cost almost a billion euros, while the total cost estimate of 17 regional stations, according to the National Audit Office, is 102 million euros. Very big numbers for Latvia’s scale. Are there any ideas where we could find this money?
EU co-financing has yet to enter any of those stations. They simply do not qualify for it. The same applies to Riga Central Station or any other commercial place or building. Europe is financing a railway line and its electrification, alarm systems and all the necessary parameters.
Does this mean that we have been spending European money intended for Rail Baltica on things this money is not meant for?
Yes. Europe also financed the design work, which includes all of the things that are outside what the European Union is financing. For example, you cannot design only a track without also designing commercial or other types of objects. That makes sense. Europe said yes, we will co-finance the design for you. But this does not mean that they undertook to build and finance what they will build. They made a commitment to design, but we thought we would include all these extras inside the project. Only no one has talked about how these extras would be financed.
The government and the Ministry of Transport have been misleading the public that we have 85% European Union co-financing for this whole project this whole time. No, 85% co-financing is for the construction of the main road! Approximately 1.5 billion euros are available from the Connecting Europe Facility or CEF fund for the implementation of Rail Baltica activities. This is the money that Europe is ready to give at the moment, what is available and what has yet to be used. If we subtract from the total cost for Latvia – 1.5 billion from 9.5 billion euros. So it is no longer 85% co-financed by the European Union, but below 20%. And then the big question remains – who has thought about how to finance the other 80%? It is foolish to think this is Europe’s project. No, this is our project! If we finally perceive it as our project financed by us, and that Europe merely injects money here and there, only then will we be able to return to actual construction work and understand what is it that we need and what we can realistically afford. Just because we need a lot doesn’t mean we can afford it. It would be beautiful if we had regional stations, it would be great if we go through the Riga loop, but the question is whether we can afford it. No one has asked or evaluated such a question, which was confirmed to us yesterday (08.08). All these portions of funding from Europe have never been viewed in their entirety, never been judged what this portion means for the whole project. We have never found a person who has looked at it.
Does this huge gap between existing and missing funds for the implementation of the project not indicate that such a rather unpleasant thing as bankruptcy is possible in the future?
If the course currently taken with the implementation of all the commitments undertaken continues, then I really doubt Latvia’s ability to finance it directly. Even if we find a solution, it means that we will have to tighten your belts somewhere else in order to be able to afford this. If the realisation of the project continues as currently set out, I predict huge problems in budgeting and how this can be financed.
However, the current Minister of Transport has been working in the joint venture of the Baltic States “Rail Baltica” for the implementation of the project – “RB Rail” – since 2014, in a sufficiently responsible position…
Yes, at first he led Baiba Rubesa, Chairman of the Board of RB Rail, as a member of the RB Rail Board, then he left there. Baiba Rubesa hired him as the Head of the Strategic Development Department, and Kaspars Briškens directly responsible for the way in which Rail Baltic would be developing strategically. At one time, he was also an advisor to the Ministry of Transport on these issues, so from the side of the Ministry of Transport he led this and was in this project all the time. I have not found confirmation anywhere, and we also asked Baiba Rubesa in the commission whether there were alarming reports, whether there was any written testimony [about the exaggeration], but no, there are none. I’m waiting for a chance to ask Briškens the same question. He is also one of the authors of the air rail hub idea, which we will be looking at next. The idea is that on your way to the airport you drop off your luggage before boarding the train, then it is automatically put on the plane and arrives at your destination, wherever it may be. In addition, it is planned to build an entire basement floor in Riga Central Station for sorting luggage, where there will be a connection to the railway with the airport. Sounds good, but I have received a document stating that 2% of Rail Baltic passengers would choose such a service, and this 2% could be in 2056! This idea is Briškens’ own idea, he has carried it through, even the study has been commissioned. This is one example of how a project is overgrown with extras. Of course, this would be convenient, and there are indeed such solutions in Europe, but there is also a significant number of passengers who travel by train to the airport. In the case of Latvia, this is one of the services we can do without. It costs an entire floor at the central railway station, it costs the establishment of a logistics system with the airport and the fact that we necessarily need a Rail Baltic train connection with the airport. But has anyone asked why Rail Baltic should be connected to the airport? Why can’t this connection be the same as in Estonia, where they have a tram line? Why can’t we have this connection as an existing ViVi train that extends its line from Imanta to the airport?
Or keep using the existing 22nd bus route, which courses between the airport and Riga centre?
I do not know a capital of any country where there is such a close proximity to the airport from the city centre as in Latvia. It’s rare to find one. I cannot understand why it is necessary to drive such a giant formation as Rail Baltica through the entire centre of Riga to the airport. Why? What for?
A 2011 study by the British consultancy company Aecom, on which the ratification of all legal documents by the Saeima was based, estimated that in the most optimal version of this project, which would cost 1.27 billion euros in Latvia, the railway would run along Riga and to Riga Central Station. That’s it. Next, the solution could be at the municipal level – whether it’s a bus to the airport, the existing national railroad or whatever. It’s an imaginary thing that someone has told us – there should be a Rail Baltic train at the airport!
At one time, we were very proud that a project of the century like Rail Baltic was being developed in Latvia together with the other two Baltic countries. Nowadays, it is becoming more and more common to say that this is the failure of the century. What do you think has led this well-intentioned project so far off-course?
The biggest plague that I have identified when listening to the parliamentary inquiry commission meetings is that all those involved in the implementation of the project worked in the Ministry of Transport, while being on the boards of capital companies, members of the board of directors with the right to represent the company. They were all parallel bosses of each other and vice versa. It feels like there was a rotation calendar. People without qualifications, without appropriate skills, without experience in project management, are leading the largest investment project in the history of the country! And they are each other’s bosses and write the rules for themselves… This is a tragedy. And this is the case in all ministries, everywhere these officials also work at the same time on the boards of state-owned companies.
But what greater conflict of interest could there, if not one involving an official who is responsible for the railway infrastructure from the Ministry of Transport as a policy maker and also acts on the board or board of the company at the same time!
Unfortunately, this practice has come into being as a matter of course. Any ideas on how to get rid of it?
It is simply irresponsibility and negligence. Such an official cannot control himself on his own and misses many important things. Besides, officials like that simply have too many responsibilities to run something like that at all. At the meetings of the parliamentary inquiry commission held so far, I have seen that they simply do not understand that this is wrong, they do not understand that mistakes have been made, and it seems normal to them.
People don’t understand why you’re singling them out?
That’s right. Coming from private economic structures, it’s a shock to me. I just can’t figure it out.
In the Inquiry Commission, we unanimously decided that we, as a commission, should direct the draft law on the prohibition of the possibility of combining such positions. If a person wishes to do so, please leave the civil service, undergo an appropriate open, public selection procedure, in which the most qualified candidate with appropriate experience wins, and become a full member of the council or board!