Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance Case Study: Moroccan Railways 3.6 New Legal Framework for Railway Activity Opening to competition In parallel with implementing ONCF restructuring, work began on a new legal framework for railway activity. The legal underpinning of the sector dated to the creation of ONCF in 1963, when railway activities were considered ‘public service’ rather than ‘commercial’. Preparing a new legal framework required discussions among ministries and the ONCF, and a lengthy parliamentary procedure. Eventually, on January 20, 2005, a new law was adopted and promulgated. The law opens railway activities to competition and allows railway enterprises to be created distinct from ONCF. The law is flexible, allows separation of infrastructure from operations and vertical integration of railway activities. According to legal provisions, railway enterprises comprise ‘rail infrastructure management enterprises’ in charge of maintenance and operation of rail infrastructure, and ‘railway services operators’ in charge of technical and commercial operations of railway services. Legally, rail infrastructure management enterprises operate under concessions signed by Government; railway services operate under licenses granted by Government. Also, a railway enterprise may merge the role of a rail infrastructure management enterprise and a railway services operator; in which case its legal basis is a concession regime. The law distinguishes between ‘commercial’ railway services and public service obligations resulting from a formal Government request. To date, no railway enterprise distinct from ONCF has been created. Creating a joint-stock company to replace ONCF will abolish ONCF as an Etablissement public industriel et commercial (EPIC) and rail infrastructure management and railway services operations on the existing network will be granted under a concession agreement to a fully State-owned joint stock company, the Société marocaine des chemins de fer (SMCF). The new joint-stock company will have autonomy to manage the railway enterprise, facilitate private-sector partnerships, and reinforce an ‘arm’s-length’ relationship between Government and railways. Under law, ONCF will become SMCF when Government signs the concession agreement, which has yet to happen. When the law to transform ONCF into SMCF was adopted, it was discovered that under existing financial regulations, ONCF would owe some DH 14,000 million in taxes (~US$ 1,600 million) to the Treasury, which is infeasible. Therefore, Parliament is reviewing a draft bill to amend the January 20, 2005 law, which would remove the financial impediment to creating SMCF; adoption of the law is expected soon. 4 Results The Moroccan railways restructuring process is a great success, despite the delay in creating the joint stock company to manage and operate the railway network. Restructuring publicly owned railways without an upfront legal and institutional shakeup is rare. By 2004, Morocco had transformed ONCF into a truly commercial, financially sound, business-oriented enterprise. Compared to 1994, traffic volume increase was noticeable, railway modal share had increased compared to freight carried by road, and staff productivity had almost doubled (Figures 1 and 2). The World Bank Page 376
Railway Reform: Toolkit for Improving Rail Sector Performance Case Study: Moroccan Railways Financial recovery was spectacular, primarily achieved by generating substantially higher net income that improved the ratio of staff costs to traffic revenue. By 2004, these achievements had laid a solid foundation of commercial, technical, and financial success for future sector improvements, as demonstrated by excellent results in 2006. The World Bank Page 377
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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