Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
5. Creating the Industry Structure
3. Long-term investment in public railway infrastructure. Sometimes
governments offer exclusive concessions as incentives for railway services
providers to make long-term investments in infrastructure. African railway
concessions, in particular, are based on this justification.
Exclusivity is not incompatible with contestability. In the three circumstances
described above, governments can adopt a transparent and competitive bidding
process for granting exclusive rights, and for any associated public funding.
5.3.3 Alternative paths to competition
The main policy alternatives are summarized in Figure 5.2 below. The assumption
is that if governments favor greater competition in segments of core railway
services, they will accept private sector delivery, therefore, competition in the
market or for the market would include at least one private participant.
In some countries, two railways owned by the same government (or owned by a
state and a local government) compete for traffic, but competition is nearly always
at the margin of operations as a by-product of other policies, rarely the central
policy intent. There are good reasons for this.
First, national governments may fear that two commonly-owned competitors will
lapse into a comfortable duopoly with stable market shares, thereby neutering
competition. However, the opposite scenario is equally undesirable—each stateowned
competitor might attempt to pursue an aggressive price-cutting strategy at
the expense of the public purse (whether in the guise of lower shareholder value
or higher budgetary support). 55
55 This is to be distinguished from the situation such as in the EU where state-owned
railways of different countries compete for traffic on some routes.
The World Bank Page 75