3rd Interactive Session: Janusz Lacny

Ladies and Gentlemen, Dear Friends,

Let me share with you my experience, observations, thoughts and remarks on the results of last year's EU enlargement perceived from two points of view, namely: from the theoretical one - as a professor of the University of Economy, Bydgoszcz, as well as from the practical one - as of an owner of a transport and freight-forwarding company JMJ-Trans, both in Poland.

Generally speaking, the EU enlargement on 1 May 2004 resulted in facilitating trade and transport at least among 25 EU Member States. Internal borders between these countries together with long queues of heavy goods vehicles due to heavy customs controls vanished, leaving only quick passport controls. From the theoretical point of view, the beneficial impact of lifting borders can be listed as follows: shorter transport time, reduced costs of transport operations, increased productivity of transport companies, more revenues for entrepreneurs, etc. Such a result could have been predicted long before last year's enlargement. And it was indeed predicted, unfortunately by entrepreneurs inexperienced in road transport.

But theory does not necessarily go in line with practice. Reduced costs of transport have already been compensated by new infrastructure charges introduced recently, and increased revenues for entrepreneurs vanished with the decrease of freight rates due to severe competition on the transport market generated by an excessive and unjustified optimism of some hauliers, mainly newcomers in the business.

In my company for example, the EU enlargement resulted in an increase of productivity measured in terms of vehicles' mileage per month, by more then 10% - mainly because of the lifting of internal borders. At the same time, my revenues were absorbed by the increase of transport costs (fuel prices, external costs of infrastructure charges, appreciation of the Polish currency, etc.) and the drop of freight rates (severe price competition between transport companies). My company lost some long term partners at the break of the year when new actors entered the process of negotiations with new terms of transport and offered economically unjustified prices. Of course, one can say that it is my fault as I was not able to adjust my company to these new conditions, to reduce costs, increase efficiency and intensify productivity. My answer to those entrepreneurs who do not apply economic calculations is very simple. I say: it is not difficult to win the price competition, but the winner must always be very careful not to achieve the Pyrrhic victory which, I am afraid, is going to be the case for many such companies this year.

Since the most important advantages of road transport over other modes of transport are: "door-to-door", "just-in-time" and "single-mode" delivery of goods, removal of border crossing procedures, much improved competitiveness of road transport and quality of services offered on the Community market. This, in turn, together with bilateral authorisation limits being lifted, resulted in the creation of a new type of transport services, I would call it "the road tramping", where vehicles move from one place to another, then another, and another one, loaded and unloaded according to the clients' needs.

My company started offering such services to my best clients last year. However, I must admit, offering such services is very challenging as it requires a high level of vehicles reliability (anything can happen on the road, even to new trucks), the responsibility of company's freight-forwarders who must strictly obey principles of scheduling, as well as professionalism of drivers who must be fully devoted to and identify themselves with their company.

We all remember very well how much more time-consuming the transport of goods by road between EU 15 Member States and the rest of the world was a year ago. The waiting time at borders was not only slowing down trade between these regions, and not only did it make road transport less effective but, although indirectly, it also had some influence on transport safety.

Since waiting time at borders could never have been considered as a break or rest time in the sense of the UN AETR Convention or the EU Regulation 3820/85, in order to catch up with the time wasted some drivers broke these rules, thus decreasing the safety on roads. Statistics of the Polish Road Transport Inspection show that more than 40% of all drivers' infringements were made against driving and rest time rules. Although current statistics show an improvement, these are still not satisfactory.

Speaking of Road Inspection, I must underline that stricter controls and enforcement of EU rules on driving and rest times in Poland, and perhaps in other new Member States too, combined with the opening last year of a wide EU market for good drivers, resulted in higher labour costs. Increased wages in Poland are closing the gap with the EU average. My own experience shows that in the past years, the average labour costs (drivers) in decent transport companies operating on the international market, was more than doubled in Poland.

The EU enlargement not only shifted the EU external borders eastwards and southwards, and eliminated internal borders among 10 new member states; it also created longer queues and longer waiting times between EU 25 and other non-EU countries as well as more control, more bureaucracy, higher costs of transport operations, lower productivity of transport companies and lower revenues for transport entrepreneurs. Vehicles, while crossing the continent from West to East before 1 May, were scattered among many different border crossings between Germany and Poland, Poland and Lithuania, Poland and Belarus or Ukraine, Lithuania and Belarus or Latvia and Russia. Since the exchange of goods between West and East, and in particular between EU and CIS countries, did not change after 1 May 2004, the traffic of heavy goods vehicles between these territories remains unchanged. What can be observed now is significant concentration of vehicles at specific border crossings such as, for instance, between Poland and Belarus at Koroszczyn/Brest or between Latvia and Russia at Terehova/Buratchki.

Since my vehicles operate on both EU and non-EU markets, I am aware of everyday problems faced by my drivers at EU external borders. Just to give an example of heavy bureaucracy, I can mention leasing contracts being translated into different languages and certified by sworn translators, requested at some border crossings. I understand how difficult it is to harmonise all border crossing procedures in order to avoid control duplication, unjustified bureaucracy, dishonesty and bribery that only apparently help to solve local problems. I know them all because they exist everywhere, in my native country as well.

The EU enlargement widely opened the market to transport companies from the 10 new EU Member States. This situation created an uncontrolled increase in the number of heavy goods vehicles authorised to perform international transport thus resulting in very strong competition among fleet operators causing severe fights over clients as well as an unreasonable and totally unjustified drop of freight rates. In spite of the recent introduction of new elements in external costs, which significantly increased the cost of EU internal transport, the freight rates dropped much below those of the early nineties, although fuel prices and labour costs have more than doubled since that time, not mentioning many other transport cost factors.

According to my estimate, the number of heavy goods vehicles authorised to perform international transport should be reduced by 20-30% in some EU Member States, Poland included. But a simple decrease through market rules may not necessarily lead to the expected result. Some similarities to air transport can easily be identified here. Big airline companies, with their long-lasting experience and tradition, are being replaced step by step by cheap ones. The newcomers are cheaper than the others not because they are able to find employees or purchase aeroplanes and fuel at a lower price. They reduce the costs of company infrastructure and the quality of service offered to their clients. As long as they can find new clients who accept such changes, they will further develop their market share. The same may happen to road transport operators. Very professional companies, well organised and offering high quality services, may loose their position to the benefit of weak and non-professional companies, simply because they are cheaper.

Of course, some cost reduction of transport services will soon become the sine qua non condition for entrepreneurs who want to stay and compete on the global market. For small transport companies owning some 10-20 heavy goods vehicles, outsourcing seems like the best solution for all technical aspects. A company infrastructure such as a transport base equipped with a workshop, a tire service station, etc. may soon be replaced by professional and flexible companies that specialise in offering relatively cheap services to fleet operators.

And last but not least, let me say some words about an issue, which although not being directly related to last year's EU enlargement, has a very strong impact on the current state of road transport companies. Let me come back to the introduction of the infrastructure charge system in Germany at the beginning of this year. Time-related charges of the former vignette system have been replaced by distance-related charges. In order to introduce such an apparently obvious change, a very sophisticated system of infrastructure charges had to be designed, manufactured, introduced and tested. The new charges are commonly considered by transport operators as being extortionately high. According to my estimates, an average monthly charge for a single heavy goods vehicle operating on the EU market (50% activity on the German market) is around EUR 800. It cumulates a sum equivalent to the price of a new truck in a period of 6 years. What makes the infrastructure user charges so high? A complex system like the one introduced in Germany is expensive as such. So it is also the price of the system that significantly increases the costs covered by road transport.

Thank you for your attention

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