Alfa English > News
James Lemmon – I’m not bitter – The cost of passenger traffic (3)
2009-10-29 13:00
by James Lemmon
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Alfa.lt
Andriaus Ufarto (BFL) nuotr.
There has been a lot said about getting to and from Lithuania and almost all of it is true. The bottom line is that getting in, out and around this small country is very hard, not least for foreigners, who bring money with them.
We have seen the situation devolve slowly from where it was in 2007 — the peak of the boom years where everything was going up.Since then of course the worldwide economic crisis has crushed the Lithuanian economy like an egg under foot and the transport industry has collapsed.
Though the economic crisis was partly directly responsible for the failure of certain airlines, the poor transport situation is more widespread across other types of transport for passengers, the train and bus networks.
You couldn't really blame the crisis itself — all it has done is scratch away the surface to reveal what was underneath, something like a lotto-card.
The buses in Lithuania are way too expensive for the service they offer and are hardly competitive with driving your own car if you use them often enough. The train is cheaper, but it is hideously slow and only runs a few times a day to the most popular locations. International routes on trains are nothing short of a disaster.
Senior people in the passenger transport industry have told me that these things are they way they are because the government doesn't step in and subsidise it. Without subsidy, the industry isn't sustainable, they say.
A Deutsche Bahn executive said that the domestic train market in Lithuania would never be profitable and that they only way that Lithuanians could ever expect something as good as the Germans or Belgians have would be to pay for it out of taxpayer's money. At the moment that is of course unfeasible.
The same goes for air transport. The Minister of Transport and Communications recently wrote a letter to the Lithuanian parliament pleading with them to give him 15 million litas, a small amount in the scope of the economy, to subsidize airlines who choose to come here with loss-making routes. So far it hasn't happened and probably won't in the near future.
Free market economy fundamentalists will argue that the government shouldn't subsidise the industry and let the market take care of itself, but it just isn't working. Corruption, the low wages of Lithuanians, and many other issues that won't be solved soon are in the way.
So the crisis has pushed the government to the limit in terms of budget and isn't putting money into stimulating the transport industry, but in doing so they are missing out on a lot of money. The cash cow can't enter the country.
An aviation expert told me too that if you get a plane with 25 foreigners on it every day, the money they spend in the country will generate one million litas in value added taxes alone. Now that doesn't take into account other taxes that the government would collect along the way like income tax and others.
This money would also produce jobs in the tourism industry that would have a spill over effect to other industries.
In short, the money that the government would spend on stimulating the aviation and rail economies would be a drop in the ocean to the amount they would earn from taxes. In the mean time jobs would be created and people abroad would soon start trumpeting the name of Lithuania. Who knows, investment might actually follow if people can get to the country.
So what is the cost of passenger traffic? If what the industry experts say is true, then investming is a no-brainer. Even the free market people would be happy: you have to spend money to make money. Its just a question now how long it will take the government to go ahead and do this.-
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