Good Practices - Albania
Study on the Economic/Financial Appraisal for the rehabilitation of the whole Albanian railway network

The location is covering the Project area including Tirana (PTT) – Durres / Durres Port; Durres to Rrogozhine; Rrogozhine – Fier- Vlore; Rrogozhine – Elbasan; Elbasan – Pogradec; Vore – Shkoder and Shkoder – Hani I Hotit border; Fier – Ballsh, Budull – Fushe Kruje, factories Librazhd, Prrenjias, etc. (a synthesis of freight lines)

The stakeholders are the Promoter Ministry of Infrastructure and Energy, the Beneficiary Albanian Railways of the IM HSH; the partnerships with the state PPP in Fier –Vora and Fier Ballsh and partners with railway connection to national railway infrastructure to/from Port of Durres, fuel port of Vlora, and with industrial logistic centres of the freight lines Budull- F. Kruja and Librazhd and Prrenjas operating with the mines of that zone in east and south east of Albania.

Time of Implementation is approved in the Law 63/2015 of 11.06.2015 and completed during 06/2015-11/2016.

An overview of the CBA Project is following:

Rehabilitation of each rail section is assessed separately, in terms of its contribution to the benefits of upgrading the whole railway network of the country. The rehabilitation of the whole network (DO ALL scenario) is also assessed, in comparison to the continuation in the future of the operation of the network in its present form (DO NOTHING scenario).

The rehabilitation of each section is evaluated as a separate scenario. By definition, the assessment of the various scenarios is based on incremental magnitudes. Incremental magnitudes (traffic, costs, revenues, users’ and external impacts) are calculated as the difference of the magnitudes of each scenario under evaluation from a common base-case scenario.

The base-case scenario for the purposes of the present study has been determined to be the DO ALL scenario (i.e. the scenario which foresees the rehabilitation of all 8 rail sections), relative to which incremental magnitudes of important parameters (traffic and resulting costs and benefits) are calculated for each of the 8 scenarios and in this way the rehabilitation of each individual rail section is evaluated.

Each of these scenarios is formulated under the theoretical assumption that all other rail sections will be rehabilitated, with the exception of the particular rail section, to which the scenario under assessment each time refers.

Map of revitalisation projects in the railway core and comprehensive TEN-T connections
Source: SEETO - TEN-T Indicative Extension to Neighbouring Countries Comprehensive/Core network to Western Balkans Region – Definition for Railways and Ports [by Commission Delegated Regulation (EU) 2016/758 of 4 February 2016 amending Regulation (EU) No 1315/2013 of the European Parliament and of the Council as regards adapting Annex III thereto]
3. Challenges and barriers in implementing /introducing selected good practice and respective ways used in order to overcome or limit risks

One variable is discerned as critical: The savings in users’ / external costs. These savings are mainly dependent on the forecasts of traffic that will be diverted from the road to the railroad. These forecasts have been determined through the use of a comprehensive traffic model, based on corresponding forecasts of macro parameters such as population, GDP, international arrivals etc. Of reliable organizations (INSTAT, EUROSTAT, IMF, WTO etc.), unit values derived from E.U. research programs and extensive surveys of the consultants in Albania and surrounding countries.

Furthermore, the basic forecasts of the traffic model are compatible to corresponding forecasts of recently conducted similar studies for Albania. There is therefore no credible basis for assessing the likelihood of parameters leading to the estimates of Section 3.10.3 (including macro parameters, the forecasts of the traffic model and unit values that determine savings in users’ and external costs) diverging from the basic forecasts of the present, either in an upwards or in a downwards direction, where there is no credible data available, on which to base quantified risk analysis – especially taking into account the present low level of train transport service in Albania, which is associated with continuous decline of train traffic in recent years.

4. Funding mechanism, cooperation schemes developed and institutional reforms made

EBRD Technical Cooperation Funds in document code:796-01-10-tsr-fapi-adfr-03/4_0 and issue & date: 20-10-2015 (0) for Republic of Albania/Ministry MTI in financial/economic appraisal of the whole Albanian railway network (EBRD technical cooperation funds)

Component B - Financial and Economic Appraisal of the whole railway network ( Task B3 – Financial and Economic Analysis) & ( Task B4 – Prioritisation of Investments on Railway Lines)

The project is approved at level of Decision of Council of Ministers of Albania DoCM no. 811, date 16.11.2016 On Approval of Transport Sector Strategy and Action Plan 2016-2020 and published in the Official Journal 230-2016.

Corridor management on selected SEETO flagship corridor by using the models of TEN-T Corridor. That meant Albanian railway network is already included into the Flagship axles initiative Study and REBIS study update according to SEETO Multiannual PLAN.

Cooperation schemes developed through support rail opening market for the SEETO region. The institutional reform made is at implementation of new railway code in Albania already approved by Government of Albania by Decision of Council of Ministers of Albania Nr. 566 date 03.08.2016 and by Law no. 142, date 22.12.2016 and published in the Official Journal 265-2016 as of 12.01.2017 after its approval in parliamentary adoption procedure. The railway code entered into force on 12.01.2018.

5. Factors of success
  • Connection to harbour/port: the railway connection to a harbour/port is very important, especially regarding freight transport, as the opportunity of combined transport services between sea and rail is given. Freight transportation by rail not only promotes the evolution of the ports connected, but also provides high railway revenues and contributes to the economic growth of the country.

    Scenario S1 was given the highest grade as it directly connects to the major port of Albania, port of Durres, and has a positive impact both on passenger and freight transport. The connection of the port with the capital, Tirana, promotes passenger transport between the two main poles of the country and, besides facilitating the railway freight transportation, it also supports the development of the touristic aspect of the harbour. Scenario S2 was given the second highest grade, as it also refers to a direct connection of Durres port. Scenarios S3 and S7 were given equal high score, as they both connect to port either directly or indirectly. More specifically, section Rrogozhine – Vlore directly connects to the port of Vlore. Although the scenario refers to a direct connection with a port, like Scenario S1, the score given is lower based on the importance of the port and its role to the Albania port network. Scenario S7, on the other hand, is given the same grade thus not directly linked to a port. However, the section Shkoder – Hani i Hotit promotes the connection with the port of Bar, a major port of Montenegro, located very close to the border with Albania. Scenario S4, S5 and S8 were given lower grades as they do not connect to a port and/or are far from any.

  • International connection: Albania holds an important geo-strategic position within the Balkans, providing access to the Adriatic Sea for the neighbouring countries of Kosovo and FYR Macedonia, access to the central Europe for Greece and FYR Macedonia and access to the Mediterranean through Greece to Montenegro. The connection of the sections with the neighbouring countries was considered important in evaluation, as it plays a major role regarding exchange of people and goods. Sections the Shkoder – Hani i Hotit that links the Montenegro border crossing with Albania, was given the highest grade.
  • Part of corridor VIII: Trans-European Corridor VIII is a key corridor for the major transport network in the Balkans. This transportation route not only facilitates the exchange of goods, people and energy supplies between the European Union, the Balkan states and the Central Asian states, but it is also significant due to its important role in strengthening the links between the Balkan countries and improving the stability in the region. Any activity related to the development and promotion of Trans-European Transport Corridor VIII as an important element of the European transport network.
  • Suburban transport service: This sub-criterion refers to the capability of each section in carrying passengers within urban areas, related with higher frequency services than conventional railway and involving commuting and/or common every day passenger movements. The highest score got the railway line between Durres and Tirana, being the section connecting the two major attraction poles of the country and holding a special position within the railway system, has the characteristics of being upgraded to suburban railway service section transferring large number of passengers on a daily basis.
  • Railway network is planned at connection to international airport: Grading for these Sub-criteria were based on the Connectivity of each section to the airport or its proximity to a section connecting to the airport. The connection to an international airport is important regarding the role of a railway section in the transport sector, as it involves connection with an important pole of transport movements, especially passenger transport movements, indicating an integrated service for visitors and high revenues for the railway.
    Albania has one international airport at Tirana and, thus, and, thus, with higher proximity to links connecting to the international airport and Durres – Tirana were awarded
  • Environmental Air/noise/vibrations pollution: Grading for these sub-criteria was based on the proximity of each section to urban and inhabited areas or located near areas whose flora and fauna could be affected by air pollution, high noise disturbance and vibrations. Scenarios S8 involving the railway branches to major plants and factories was awarded the highest grade, as they connect to industrial areas which are usually not connected with areas of high environmental value.
    Durres – Tirana, evaluated was found to be the most significantly affected section by environmental pollution, as higher frequency services are programmed for this section, producing high levels of noise and air pollution as well as vibrations.
  • Transverse(al) connectivity: The sub-criteria refer to the capability of each railway
    Section in connecting areas between the two sides of the railway line. This sub-criterion is closely related to the number of tunnels and bridges involved in each evaluated section, as these technical projects are assumed to be providing easy access between both sides of the railway line both to people and to the fauna in each area.
  • Nature protection Scenic zone travelling: Grading for these sub-criteria was based on the alignment of each railway section through areas of natural beauty. Section Elbasan – Pogradec of Scenario S5 was assumed to have the best landscape view as it cresses a mountainous terrain and is also aligned in close proximity to the Ohrid lake, giving to railway passengers the opportunity to enjoy beautiful natural scenery.
6. Recommendations, transferability

RECOMMENDATIONS incl. the MCA ranking is to be considered more appropriate for basing decisions on investment priorities, because many other important (non-economic) criteria are considered in the prioritization.

  • Regional Development: Grading for this sub-criteria was based on the role of each Railway section in the connection of regional areas and small urban conurbations. Thus, industrial links scenario, S8, was given a very low score as it is not related to connectivity of regional areas. The same applied to scenario S7 evaluating the border section to Montenegro that does not cross any important town or village.

    Moreover, Scenario S1 regarding section Durres – Tirana which crosses mainly urban areas and connects high-populated cities was given a rather low grade, the same with Scenario S2 that connects Rrogozhine and Durres, being very close to high urbanized areas. Scenario S3, connecting the regional areas of Lushnje, Fier and Vlore and, thus, providing access of northern Albania to the central part of the country and the capital was ranked first, followed by Scenario S5 in which the Elbasan – Pogradec section contributes in the connectivity of east Albania with the central area and section Vore - Shkoder of Scenario S6 that improves the connectivity of northern Albania.

  • Connection of logistic and industrial production poles: the railway connection to a production pole, such as a plant or factory, is very important regarding freight transport, as it provides the opportunity of combined transport services between sea and rail. Big cement and petrochemical factories are situated in the Albanian territory, thus, freight transportation by rail enforces the growth of imports providing high railway revenues and contributing to the economic growth of the country. Scenario S8 was given the highest grade as it directly connects to the major plants of Albania in Fier and Fushe Kruje. Scenario S2 was given the second highest grade, as it refers to the section linking southern and eastern Albania with the central part of the country. The third higher score was given to Scenario S1 and the rest received lower grades.
  • Connection of urban settlements: Grading for these sub-criteria was based on the alignment of each railway section through main urban areas of the country. The highest score was awarded to Scenario S1, related to a railway section connecting two major urban centres, and the lowest grade was given to Scenario S8, related to a section aligned through industrial areas only.

    Scenarios S3 and S5 refer to railway sections connecting main urban conurbations in the south and east part of the country respectively and were, thus, given the same grade – the second highest one, followed by S6, also connecting major town of northern Albania. The rest of the scenarios were given lower grades, as the sections they relate to run through smaller towns and villages.

  • Project Maturity: This sub-criteria refers to the progress made on the studies related to The implementation of rehabilitation works in each section. This criterion has taken under consideration whether each project is included in the Operational Programme of Albania and/or if it is given any priority within the Transport sector projects. Scenario S1 holds an important position within the projects programmed from the Albanian Ministry of Transport, and the final study is in progress, so it was given the highest score. A high score is also given to Scenario S8 including the freight-only railway sections, which are considered to be rehabilitated as part of a Concession Agreement. The rest of the scenarios were given relatively low scores as the related studies are still at an initial level and/or have not yet started.
  • Project Constructability: This sub-criterion refers to the grade of difficulty in the construction of each railway section. High difficulty levels are mainly connected with the geology of the areas of the railway lines and the technical structures included in each section. Scenarios involving railway sections aligned in flat terrains got higher grade compared to scenarios with railway sections running in hilly or mountainous terrains or sections that cross rivers and streams.

    Moreover, the type and quality of the ground on which the railway is seated is also important as loose and unstable ground can also cause problems and reduce the constructability of a scenario.

    Based on these issues, Scenario S7, related to a railway section running along a flat area was given the highest grade, followed by scenarios S1, S3, S6 and S8 that tied in the second place.

    Scenario S5 was considered to be related with the lowest constructability because of the difficult topography of the area between Elbasan and Pogradec, while scenarios S2 and S4 got a slightly higher but still low grade.

  • Project feasibility Cost/km: For the purposes of this sub-criteria, a parameter related to unit costs (MLN EUR per kilometre) of rehabilitated railway network has been considered. Although project costs are relatively close, Scenario S5 is the most expensive one at about 1,32MEURO/km, followed by S1, S2 S3, S4 and S5 with project costs of 1,1MEURO/km, 1MEURO/km, 0,99MEURO/km and 0,97MEURO/km respectively...)