Rubesa slams Baltic governments, sees no chance of success without reforms

Baiba Rubesa at her press conference on 27 September 2018.
Baiba Rubesa at her press conference on 27 September 2018. Source: Screen still

Baiba Rubesa, who stepped down as CEO of RB Rail on Thursday, said in a press release that she found it impossible to continue at the helm of the Baltic states' joint venture to build the Rail Baltica railway. The company's current model is "blatantly contrary to the principles of good corporate governance," Rubesa said, blasting the three Baltic governments for having done their part to delay an agreement on the project's funding.

Rubesa described the project as run at the moment to be "neither manageable nor sustainable," and that in its current set-up RB Rail will not manage "to deliver a new economics and security corridor with infrastructure that has a commitment of 85% financing from the European taxpayer."

National interests in the way of financing, implementation agreements

Even after discussions with stakeholders that had been going on for more than a year, there was no sign of an agreement on a sustainable financing model for the joint venture, Rubesa added.

She also pointed out that the same could be said about the project on the whole. The inability of the shareholders (ie. the Estonian, Latvian and Lithuanian companies set up for the project) to agree on a clear approach how to run the venture, then, has been the main source of project delays, which is threatening the EU side of Rail Baltica's funding, Rubesa said.

The request of Latvian Prime Minister Māris Kučinskis was what kept Rubesa from resigning already this summer, she said. "I have chosen to resign now to share with the citizens of Estonia, Latvia and Lithuania my profound concern that the Rail Baltica global project is at serious risk of not being properly implemented," Rubesa explained her decision to step down now.

"The conflicts of interests encapsulated in the very roots of the project are the main reason behind the actions and inactions of all involved parties. It is not compatible with my faith and belief in fair and responsible project implementation," Rubesa said.

With her resignation, she is hoping to "create a legacy" for her successor as well as the initiative in the population of the three Baltic states to press for changes, she added.

Rubesa: European Commission should get involved

Rubesa continued her press conference with a list of recommendations she says she has sent to the European Commission, select members of the European Parliament, and the heads of government of the Baltic states as well as a handful of other interested countries.

Among them are four specific suggestions how to improve the implementation of future EU cross-border projects.

The first is to give the EU a tangible role in cross-border projects. Financial support for Rail Baltica with CEF grants is at the extremely high level of 85%, but her experience was "that the recommendations and expectations of the European Union as the main investor in the project are barely considered by the national beneficiaries. This is why going forward, the European Commission should be directly involved in the implementation and execution of cross border projects," Rubesa said.

Estonia "dead set against implementation" of joint venture

In connection with this first recommendation, she said that civil servants at the Estonian Ministry of Economic Affairs and Communications have been "dead set against the implementation" of a joint venture, repeatedly stating that the joint venture isn't needed at all, and that "If the Commission wants it, let them pay for it."

Current CEO of Rail Baltic Estonia OÜ, Riia Sillave, said according to Rubesa that all the project will do is build tracks, and that they should get started on doing just that as soon as possible—with complete disregard for the project's broader vision and its impact on the three Baltic economies, Rubesa pointed out.

Supervisory board lacks professionalism, mired in conflicts of interest

Rubesa's second recommendation is to change over to a professional and conflict-free supervisory board. The current double role of the countries on the board, namely as shareholders as well as partners in the national implementation of the project, "creates an unwanted loop of supervision as well as inherent conflicts of interest," Rubesa said.

This delays the decision-making process. "It creates a paradox where the national shareholders, who are at the same time implementing bodies, are responsible for the supervision of the joint venture that is in turn tasked with the supervision of these implementing bodies," Rubesa stressed.

"Saddest example of mismanagement in the history of public sector governance"

"To me, this is probably the saddest example of mismanagement in the history of public sector governance," she added.

Rubesa's example for problems in this area is Lithuanian railway company LG. The only private company in Rail Baltica's set-up, it would naturally treat the project as part of its own business plans. This means that a private company is involved in a scheme that was originally intended to be built entirely without the involvement of existing railway companies, Rubesa said.

But the conflicts of interest don't stop there. They continue where the Latvian members of RB Rail's supervisory board are also executives of Latvijas dzelzceļš (LDz), the national railway company.

No chance of success without a sustainable financing model—and there is none

The third recommendation is to get to an agreement on a multi-year sustainable financing model for RB Rail and for the global project. Despite agreements between the three Baltic governments and despite a global project being in place, since 2016 the national shareholders of RB Rail have not managed to agree on such a model, which leaves the project, to be completed by 2026, without a clear timeline and funding model, Rubesa said.

Adding to that, the annual budget of RB Rail for 2019 is still not approved.

Rubesa: Obsession with national interests sends message that Baltic states don't care about the project

The insistence of Estonia, Latvia and Lithuania on national interest is dangerous for the whole Rail Baltica project, as it conveys the message to European partners (the biggest net payers into the cohesion and CEF funds among them) that the Baltic states couldn't care less about this infrastructure project of the century, Rubesa said.

The three governments are "playing poker" with a project in which they stand to gain six euros to every euro they invest themselves, and that they will benefit from for decades to come, she added.

While all of the relevant ministries in the Baltic states have been stonewalling RB Rail concerning its funding, Latvia apparently doesn't even have the ability to make a statement on how it sees the project's funding in the future.

Political leadership desperately needed

Rubesa's fourth recommendation, then, is for the prime ministers to step up and take charge. "There is a need for political leadership. At a minimum, the project needs new engagement on the part of the infrastructure ministries of all three countries," Rubesa said.

But in fact, the circle actually needs to be extended to include the government areas of the economy, national defence and foreign affairs as well.

"The responsibility to ensure success for the project lies in fact with each prime minister," Rubesa said. Rail Baltica is not only a transport or economic project, but a political one as well, and beyond that of significance for the security of the three countries as well, she stressed.

Rubesa: Transport and infrastructure ministers all against joint venture

Rubesa also criticised the Baltic states' transport and infrastructure ministers. "My most ironic realisation at last year's Rail Baltica global forum was that the three key individuals that decide on the project's implementation details and financing were all publicly opposed to the global project before gaining positions of power," Rubesa said.

Summing up her four recommendations, she concluded that the most important challenge facing the European Commission is to depoliticise the implementation of cross-border projects, while at the same time making sure that there is political leadership at the national level at the same time.

In the year of the Baltic states' centennials, Rail Baltica is the single most important project and the best opportunity for the Baltic states to ensure economic growth and success in the future as well, and Rubesa expressed her disappointment at the apparent lack of commitment of Estonia, Latvia and Lithuania to the project.

Editor: Dario Cavegn

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