Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Foreword
Railway lending has always been a challenge for the World Bank. One notable
success story is the oft-cited loan to Japanese National Railways to support construction
of the first leg of the Shinkansen (Tokyo to Osaka) as part of the 1964
Tokyo Olympics investments. However, the challenge continues because, perhaps
more than with any other transport mode, railways do not readily yield to a standardized
reform formula. Fortunately, the tools that have emerged from the
many years of experience are flexible, and can be deployed to achieve a wide
range of reform objectives. This toolkit should be a constant companion to those
who want their nation’s railway sector to become an efficient link in a transport
network that reinforces national economic growth.
In 1982, an initial comprehensive review of Bank railway lending, “The Railways
Problem,” concluded that railways could play an important role in the transport
sector of many countries. 1 However, the report also found that during the years
after World War II railways had “…become slow-moving public administrations,
now requiring extensive structural change…” In most cases change had been
slow, due in part to confusion about which functions should be managed by the
state and which by the railways, and in part to the persistent delusion that investment
alone would resolve all the problems.
In reality what was needed were changes in policies, organizational structures,
and facilities (including disinvestments that respond to changing traffic levels).
Due to the glacial pace of change, many railways remained bottlenecks to development
and a drain on government finances. 2 The report concluded that governments
should: (i) remove restrictions on competing modes, tax them appropriately
and limit subsidies to railways; (ii) shake up existing railway staff and
bring in new management and marketing skills more appropriate to commercial
operations; and (iii) ensure that investment projects aim to serve customer or
operating needs so as not to become white elephants. The report argued that the
World Bank should lend only to railways willing to embark on a thorough process
of managerial and structural transformation.
Through the 1980s, despite the declared desire to press for railways restructuring
and commercialization of services, World Bank lending continued to struggle
with recalcitrant railways and governments. World Bank projects remained focused
on investments to repair and rehabilitate facilities that had suffered more
from mismanagement than overuse. Bank loans did include more requirements
for change, and focused on restructuring; but clients tended to perform better on
investment components than on reform. The momentum of change in the Bank
sometimes seemed barely ahead of that of its railway clients.
The World Bank
1 1 “The Railways Problem,” Transportation and Water Department, World Bank, January
28, 1982, reissued November 29, 1982.
2 Ibid, summary page.
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