Crony capitalism



Overhead catenary worth millions is stolen, trains and road traffic is delayed for hours, but no one will be prosecuted.
Photo © Adrian Wozniak.

(The photo comes from a post on Adrian Wozniak’s blog blozek. Click to see it in its original context.)

About a year ago, during refurbishment works on the railway line through the centre of Warsaw, I heard a station announcer apologise that the train service at Warszawa Centralna would be badly disrupted because some signalling cable had gone missing. What possible use is brand new brand multi core signalling cable? Railway signalling, of course! But how can material stolen from PKP be ‘recycled’ and sold back to PKP for reuse elsewhere? Read on.

According to an article in the current issue of the Polish weekly “NIE” the loss  to PKP due to theft and corruption by company insiders runs into billions of zloty each year. In an interview with journalist Dorota Zielinska, Tadeusz Juszczyk who worked for PKP as a starszy kontroller – a senior internal auditor  lifts the lid on some of the details. In the 1990s, he and three of his colleagues uncovered a major scandal involving writing down the book value of assets being transferred to the PKP’s new daughter companies, selling them at their real value and pocketing the difference. They estimated that losses to PKP were in the order of 800 million zloty. PKP local bosses ‘rewarded’ Juszczyk by hauling him off before a medical commission and trying to prove that he was unfit to work. Unfortunately the commission pronounced him 100% fit, so he and his family were punished by depriving them of access to PKP’s own health service.

When PKP withdraws services from a railway line the track should be left down until the local authorities have had a chance to consider taking the line over. However, in practice on many closed lines, unofficial scrap contractors get to work as soon as the last train has passed, often with the full knowledge of local rail bosses. A 100 km long railway line between Pyskowice and Dabrowa Gornicz worth billions of zloty just vanished. But that’s not the end of the scandal, old railway sleepers are turned over, given a quick lick of creosote and sold as new to construction companies working on track refurbishment contracts. Such ‘restored’ sleepers quickly decay so the track gangs are carefull to insert a brand new sleeper every three sleepers or so to keep the track to gauge until its time to repair it yet again.

A 22 km section of track between Lubiebiec and Trzepizury was modernized with the help of EU funding. The undergrowth was professionally cut back, new drains were dug, the ballast was replaced and new sleepers were laid. Some prisoners out on working party from the nearby jail nearby accosted Juszczyk, “We’ve been locked up, but here the thieves can do their work in the open.” The controller asked them to elaborate. “Can’t you see they are using old rails?” He checked for himself. The thieves were right. When he reported the matter to his boss he was told that everything was all right. Trains had to run over the old worn out rails at nor more than 20 km/h a year later the track was relaid with new rail.

Travelling around his patch Juszczyk lost track the number of times he came across advertising hoardings and kiosks at stations for which there was no registered agreement. “How come you were not challenged by the local managers?” he would ask. “Nobody noticed that we were here?” he would be inevitably told. Contracts to cut undergrowth, or in the winter clear snow, would be signed, money would change hands and the work would never be done. Or in some cases the work would be done, but by railwaymen working for PKP, while the private company run by rail bosses took the profit.

The situation as described by Juszczyk is a major scandal which should lead to the appointment of an independent audit commission under the direct supervision of the Ministry of Finance. Tragically, for a country making its painful way from communism to capitalism, similar przekręty (fiddles) take place in other state owned companies. So what are the chances that Poland’s Finance Minister, Jacek Rostocki, will act? I remember arguing with Rostocki in the early 1990s when he was advising Leszek Balcerowicz (the perpetrator of Poland’s economic ‘shock therapy’) that Poland needed a reformed judiciary and more transparent laws for the new system to work effectively. “Some people think that capitalism in Poland will work in the same way it does in England,” he said with a smile. “What Poland will get is capitalism as it operates in South America”. So don’t hold your breath that anything will change real soon.


One Response to “Crony capitalism”

  1. White Horse Pilgrim Says:

    I’ve just been reading how four railway cable thieves including an insider were jailed in Britain. It’s a tempttion everywhere, but in some countries action is taken.

    I am sad to hear that things are so bad in Poland. When I worked in Romania, that kind of thing was the norm. I even saw freight trains stopped to sell material from them, with bent railway workers as the middlemen. I would have hoped that Poland is better, not just materially but morally too. Perhaps the only solution for PKP is a ruthless privatisation, with foreign management that won’t tolerate its profits being cut by thieving?

    Otherwise I can see the EU losing interest in funding projects where scrap is bought at new prices. There are plenty of people in need in the West. Poland may be a special case because it was abandoned to the USSR and needs support and encouragement to become the modern country that it deserves to be. But the EU should stop throwing money at the Balkans right now.

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