Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance 5. Creating the Industry Structure Box 5.6 Main Structural Options within the Private Infrastructure Framework (assumes mixed-use railway but with a marginal passenger role) Main railway business functions Main policy options National main-line railway network Local railway networks Freight train services Intercity passenger train services Local passenger train services Archetypal railway system National public railway department 1. Reconstitute as SOE/ SOC plus commercialization measures National public railway company (or SOE) 2. Decentralize regional/ suburban train operations to local authorities National public railway company (or SOE) National or a local public TOC operating under LGA contract 3. Concession regional and suburban passenger operations to private sector 4. Horizontal separation of public inter-city train operating company National public railway company (or SOE) National public rail-freight company (or SOE) National inter-city passenger TOC Private passenger TOC concessionaire(s) operating under service contract to central or local government authorities 5. Privatize freight railway as a vertically integrated entity(ies) 6. Concession or contract intercity passenger services to the private sector Privatized national rail-freight company (ies) (single or multiple regional concessions) Inter-city passenger TOC under government contract: private concession or private rail freight company (ies) TOC: Train Operating Company SOE: State-owned enterprise SOC: State-owned company LGA: Local Government Authority The World Bank Page 84
Railway Reform: Toolkit for Improving Rail Sector Performance 5. Creating the Industry Structure 5.5.4 Reform motives and reform choices In either infrastructure framework—public or private—not all options are relevant for all countries, and option variants can be tailored to national circumstances. Restructuring is a pragmatic search for a model that works in specific markets and in which railway management objectives are reasonably aligned with national policy objectives for railways, not an exploration of ‘ideal’ models or theoretical elegance. Clearly, market structure affects model choice. Private infrastructure framework options have been adopted by governments in countries heavily dominated by rail freight markets, where long-distance passenger rail services were marginal in the overall transport system. These governments view meeting freight transport demand as a role for the private sector in a market environment so that government need not be directly involved. If passenger demand and service dominates the national rail network, most governments have discerned a much stronger public interest or political benefit in state involvement and been unwilling to privatize the railways network, except for Japan and the UK, but subsequently reversed in the latter case. Markets also matter within each framework. Options for horizontal separation of regional or urban passenger services make sense only if there are significant subnetworks of these services. Options for multiple freight operators make sense only if overall freight markets are strong enough to sustain multiple operations. The frameworks and their variants imply a measured, progressive, rational program to rebalance the public and private sectors, redefine competition and regulation, and reset boundaries between industry sectors. Such a program will transform an archetypal and monolithic railway into a diverse, decentralized, pluralistic industry that is transport market-focused and responsive. Ideally, this type of providential program would emerge by stages in a country that has welldeveloped policy and implementation skills, sufficient transaction resources, and a meticulously designed program prior to implementation. However, in reality, many governments are rudely awakened by the alarm bells of necessity for railway restructuring only when time and money have run out. Reformed structures will boost management incentives to improve efficiency, offer more control over public expenditure, and create better value for public money than the traditional monolithic railway. Some options can also reduce public budgetary support for rail systems, but that is a separate objective and typically requires a separate policy decision. However, only radical downsizing of the network, services, and/or employees will reduce a large public subsidy quickly in a publicly-owned railway, and if the market can bear it, increasing tariffs. If these are the imperatives of the situation then the quest for a new longterm industry structure may need to take second place to more immediate surgery on the existing structure. Although crisis responses are sometimes inevitable, well-considered policies consistently applied over the long term are more successful in supporting public interests than ‘slash and burn’ solutions that may result in a demoralized workforce operating a poor service with underinvested assets. Even emergency surgery will The World Bank Page 85
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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