Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
In 1994, the Bank published an updated review of railway lending, “The
Evolution of the World Bank’s Railway Lending.” 3 This report concluded that
railway lending had evolved from the earlier model of investment focus to a
model that consistently tried to attack the underlying institutional weaknesses
that had caused the railways (and prior railway loans) to fail. The report pointed
out that rapidly accelerating global economic change, exemplified by the collapse
of formerly socialist railways, was increasing focus on institutional failure as
opposed to asset repair.
Supporting this analysis were two other reports aimed at defining specific actions
and tools available for restructuring – “Techniques for Railway Restructuring” 4
and “Options for Reshaping the Railway.” 5 “Techniques for Railway
Restructuring” outlined four general steps around which the restructuring effort
could be organized: (i) a Strategic Plan that relates the restructured railway
enterprise to the broader political, social, and economic context within which it will
function and addresses major public policy options; (ii) a Contract Plan that defines
specific commitments and obligations flowing from the Strategic Plan that
government and the railway enterprise formally accept as their respective
responsibilities; (iii) a railway Management Plan that establishes an organizational
structure, functional responsibilities, and performance measures for effective
internal management control, in light of the requirements imposed by the decision
to operate as a commercial enterprise; and (iv) an "Enabling Actions" Plan to list
necessary legislative, legal, and administrative changes to carry out planned
restructuring. “Options for Reshaping the Railway” addressed issues involved in
breaking up the historically monolithic railway institution, for example by creating
tenant operators that paid for access, or even for infrastructure separation—an
independent infrastructure agency and all operators pay for access.
The early 1990s saw the emergence of two additional and powerful forces
supporting railway change. The first, the European Commission’s Directive 91/440,
initiated a long process of separating railway infrastructure from operations and
requiring all operators to pay non discriminatory access charges. The Commission’s
objective was to end the “fortresses” of the national railways and open the transport
market to competition, both in and eventually for provision of rail services. Despite
many years of resisting this Directive and its follow-ons, the Commission has
slowly forced the European Union (EU) railways into a mold of separated
infrastructure with competition in freight and long-haul passenger markets and
competition for suburban and regional passenger markets. During implementation
of the change, the 10 former CEE railways have joined the EU and have been
subjected to the Directive’s requirements: in addition, a number of railways
adjacent to the EU (e.g., Russia) or influenced by EU policies (e.g., Chile) have
implemented or considered their own forms of vertical separation.
The second major force was the expanding private sector role in railway services. At
the beginning of the 1990s, the U.S. freight railways and the Canadian Pacific
The World Bank
3 Galenson, Alice and Louis S. Thompson, “The Evolution of the World Bank’s Railway
Lending,” World Bank Discussion Paper Number 269, 1994.
4 “Huff, Lee W. and Louis S. Thompson, “Techniques for Reshaping the Railway,” World
Bank report INU-56, January, 1990.
5 Moyer, Neil M and Louis S. Thompson, “Options for Reshaping the Railway,” World
Bank report WPS-926, June, 1992.
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