You're reading: In buying train tickets online, experts say customers may feed corruption

A shadowy company has made at least Hr 2 million from the online sale of train tickets and stands to make millions more as the scheme is rolled out on a larger scale.

Express 2 takes a commission from all online ticket sales in a scheme dating back to March 2009 that requires the traveler to pick up a ticket ordered on the state railway website from the station. Since Nov. 15, tickets for certain routes can be printed directly from the Internet, a more convenient service that promises even larger profits for the firm.

Experts said this looks like a common scheme used to pilfer profits from the state for the benefit of private, well-connected individuals.

This case, they said, is just a small example of the estimated billions of hryvnias being siphoned out of the state budget via shadowy intermediaries, which provide various services to state companies but add little value relative to the easy profits they receive.

Tickets booked over the Internet and then picked up at the railway station carry a commission charge of at least Hr 10. According to the press service of state railway conglomerate Ukrzaliznytsia, as of November they had sold 200,000 tickets via their Internet service, giving Express 2 revenues of at least Hr 2 million in commission so far.

The commission on tickets which can now be bought and printed via the Internet is at least Hr 25, which is more than, for example, the Hr 22 cost of a train ticket to Vinnytsia.

For now, the new service has been introduced on trains between Kyiv and Dnipropetrovsk only. But Ukrzaliznytsia says it might be expanded to all routes in 2011, which could bring huge profits to the intermediary Express 2.

Neither Express 2 nor Ukrzaliznytsia would reveal details about the company, or respond to detailed questions about it.

Ukrzaliznytsia said Express 2 won a tender to provide Internet tickets. However, there is no information about the tender on the company’s website.

There is no publicly accessible information about Express 2. The head of the company, Oleksandr Klimov, did not respond to a list of questions on its activities sent by fax in October. He could not be reached by telephone.

A situation where a state company receives services from firms owned by the same people who run the state company is very common in Ukraine. Of course, there is no honest tender in these cases. When we talk about some very special kind of services, like repair of train cars, there are very few companies who do that, so there is not real competition which is understandable. But it’s a completely different story when we talk about Internet services.”

– Ildar Gazizullin, an economist with Kyiv’s International Center for Policy Studies

Analysts said plenty of opportunities for kickbacks exist across Ukraine’s state companies.

“Naftogaz (the state gas company) has lots of subsidiaries and companies providing various services to Naftogaz via shadowy deals,” said Ihor Shevlyakov, an analyst with Kyiv’s International Center for Policy Studies. “For example, they have a deal with company which is monitoring the condition of gas pipes. How these deals are made, why specific companies are chosen and why they are paid double or more of the real price for services, are huge questions” that nobody is eager to answer.

Shevlyakov said such practices are widespread in regulatory state companies, for example those issuing licenses and permits for construction work. “Most of those state agencies have small firms under their wing which provide customers with some document or service, crucial for obtaining a permission of an agency itself. The firm has its own commission. The agency requires documents from that one firm only,” Shevlyakov said.

Experts say in depth research is needed to reveal how much intermediary deals cost Ukrainian budget. But politicians from various parties have accused each other of stealing anywhere from millions to billions from the budget using intermediary firms and other corrupt schemes.

A group of Western firms were earlier this year hired by the Ministry of Finance to produce a report on corruption, including deals involving intermediaries in the previous government. Made public this fall, their report and findings reportedly cost the budget more than $2 million. Critics described it as abuse of budge funds and a politically-tinged attempt to discredit opposition leader Yulia Tymoshenko, a former prime minister.

In Ukrzaliznytsia’s case, all financial transactions, including ticket purchases, are handled by a medium-sized bank called Express-Bank. Express 2 is a part of the bank itself, one official at the Transportation Ministry said on condition of anonymity.

More than a decade ago, Ukrzaliznytsia was one of the main shareholders of this bank. But its stake has since been diluted; majority ownership is now in private hands. The bank did not immediately respond to inquiries.

The Internet payment system introduced by Ukrzaliznytsia contrasts with those in developed countries where the price of a train ticket bought online is the same as if bought at the ticket office. The idea is that railways save money by hiring fewer ticket officers if a large amount of tickets are booked online.

One can find numerous companies, ready to provide the same services as Express 2 does and for a much smaller commission. Then the question arises: Why did Ukrzaliznytsia choose a company with such a high commission if not only for the reason of getting kickbacks?”

– Anatoly Sobolevsky, a lawyer with the non-governmental Organization for the Protection of Consumer Rights.

“We do not know how these systems work in developed countries,” said Nina Kostrubinska, head of customer service at Ukrzaliznytsia. “Maybe the commission is already included in the ticket price?”

The state Anti-Monopoly Committee urges customers to complain if they consider a commission too high. “If there is an indication of state monopoly misusing its power, any customer is to appeal to us and we are to hold an investigation,” said Bohdan Yakymyuk, a spokesman for the Anti-Monopoly Committee. He says no such complaints have been filed so far.

Kyiv Post staff writer Svitlana Tuchynska can be reached at [email protected]