Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
7. Administering the Railways
money is involved, the risk of political interference exists. For this reason, the
implementation of the role of the state as an owner according to the principles
presented in the current chapter requires strong political.
Railways should act as
transport service providers
with the same
rights and obligations
in the market as any
other similar stateowned
or private entity.
7.3 Implementing New Governance Principles
7.3.1 Segregation of duties
The most important governance principle is to separate the functions of government
bodies and railway enterprises. Railways should act as transport service
providers with the same rights and obligations in the market as any other similar
state-owned or private entity. Government must play multiple roles without
meddling in daily railway management—government policy maker for the transport
sector; regulator for safety standards, infrastructure access, and sometimes
prices; owner of some railway assets (some infrastructure, perhaps rolling stock,
stations, freight and passenger facilities), and client for contracted social transport
services.
When state and railways functions are separate and clearly specified, the following
rules should be observed.
• Interaction should occur on a strictly contractual basis, or within regulation
frameworks
• The state shall exercise ownership rights without interfering in railway business
management
• Railway management maintains independence in railway business decisions,
but remains accountable to shareholders for business results
7.3.2 Setting up the legal and regulatory framework
The new legal and regulatory framework must create and protect a market environment
so state-owned and private railway operators can compete on equal terms and
avoid market distortions. The OECD Guidelines on Governance of SOEs define and
describe the main pillars and principles of a market environment. 68
• Laws should separate the state ownership function from other state functions
that could influence state-owned railway activities, particularly with regard to
market regulation.
• Governments should simplify operational practices and legal frameworks
under which state-owned railways operate. The legal framework should protect
creditor interests and allow them to press claims or initiate insolvency
proceedings.
• The state-owned railways’ public service obligations or responsibilities should be
clearly mandated in publicly disclosed laws or regulations; government should be
transparent about covering costs–preferably through contracts.
• State-owned railways should not be exempt from general laws and regulations.
Stakeholders, including competitors, should have access to efficient recourse
if their rights are violated.
68 Guidelines can be found at www.oecd.org/daf/corporateaffairs/soe/guidelines.
The World Bank Page 110