The high-speed train project Rail Baltic should be co-financed by the private sector through selling shares, a move which would upgrade the debate over its necessity and business value, says former Hansapank CEO Indrek Neivelt.
The rail project, which would connect major Baltic cities with Western Europe, is estimated to cost over 3.5 billion euros, with the Estonian government paying 500 million euros.
So far debate has focused more on the location of the track than profitability. Neivelt said in his blog the project should seek cargo guarantees from potential clients, adding that a private company would not be able to receive such huge loans or investment without preliminary contracts with clients.
“The private sector has funds waiting for investments. All local investment bankers say people have too much money on their accounts and there are few companies on the stock exchange,” he said.
Listing Rail Baltic shares would take debate to the next level and it would become far more clear if the project is necessary or not, Neivelt said, asking if the public sector officials behind the project would invest their own personal funds, and if pension funds, which also suffer from a lack of domestic investment projects, would also be interested.
He said the private sector would signal if the project is heading to the right direction.
“Otherwise at some point we will read in the media that the state took out hundreds of millions of euros in loans to finance the railway,” Neivelt said.
Editor: J.M. Laats