Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
5. Creating the Industry Structure
(iv) the concept that ‘common user’ transport infrastructure is inherently public
patrimony that should be run for the public good rather than private profit.
A government policy position opposed to railway network private ownership or
management through concession limits available structural choices, but does not
rule out separability options, greater competition, and private participation in
train operations.
Box 5.2 summarizes the merits of a private company as corporate form.
Box 5.2
Benefits of a Private Company
Why might a private company be preferred?
• Private shareholders provide the greatest incentives for business-like decision making.
• Railway service meets private (i.e. market or commercial) as opposed to social needs.
• Rail transport is no longer seen as a core government business.
• Other forms of SOE or SOC have been unsuccessful.
What are the most favorable circumstances?
• The company is capable of profitable operation and government is willing to accept market forces to establish
the balance of price and services offered, whatever that may be.
• Government accepts the verdict of market forces but remains willing to exert influence through explicit
compensation for meeting public service obligations, and through other transparent mechanisms such as
contributions to capital upgrading.
• Government specifies the services to be delivered and is willing to contract a private company, using a concession
or franchise, to deliver services at market or regulated prices.
What are the least favorable circumstances?
• Political expectations and private company interests are seriously misaligned.
• Government lacks sufficient administrative capacity to regulate or provide contractual support to achieve
public interest goals.
5.3 The Second Building Block: Market Competition
The second building block of railway industry structure is the degree of competition
among suppliers of railway services. Historically, freedom to compete in
supplying rail services has been weak or absent from national rail industry structures
in most countries, unlike other transport sub-sectors. Road haulage, longdistance
coaches, coastal shipping, inland waterway barging, airline passenger
and freight—all modes of transport that compete with national railways display
higher levels of competition among service suppliers.
No systematic empirical worldwide review of the benefits of competition within
the railway sector has been carried out. However, Canadian, American, and
Mexican rail freight sectors have substantial parallel competition between railways,
reinforced by negotiated and mandatory track access arrangements. These
operating conditions are widely accepted among policymakers as factors that
contribute to making these railways amongst the most technically efficient and
innovative in the world. European countries such as Germany and the UK opened
their rail freight markets to competition earliest and furthest and experienced the
highest growth in rail freight. In Australia, competition among rail freight providers
yielded service and tariff benefits for bulk and intermodal freight shippers.
Most countries that have competitively tendered contracts to operate urban or
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