Home » Sectors » Transportation » Railways

Railways
Railways are an efficient transport mode and use a unique technology that has very low friction —based on steel wheels and steel rails and generally more fuel efficient than road transport. Railways are ideal to transport high volumes of bulk commodities or passengers. Governments worldwide try to reform state railway departments and agencies in an effort to reduce costs, improve services, and realize more effective investments.

Involving the private sector in the refom process is a dual-purpose strategy that seeks not only investors but also private sector operators, whose experience and skills can sharpen the commercial focus of railway enterprises. The private sector has much to offer railway reform efforts—capital is more abundant in the private sector and investors recognize that railways can offer opportunities for good returns.

PPIAF has provided extensive technical assistance in support of the railways sector in three regions of the world: Africa, Eastern Europe, and Asia.  In Africa, assistance has been provided for Botswana, Malawi, Sudan, Swaziland, Tanzania, Uganda, and Zambia. In Eastern Europe, assistance has been provided to Armenia, Croatia, Georgia, and Serbia. In Asia, assistance has been provided to China, India, and Thailand.
 
PPIAF assistance covers upstream and downstream support in the following areas: 
 
  • Upstream review of the regulatory and institutional frameworks applicable to the railways sector to propose recommendations for an appropriate framework conducive to private sector investment through a concession of the existing railways
  •  Support for the restructuring of the sector, including the preparation of a strategic implementation plan
  • Assistance to analyze options for private sector participation
 
In some countries PPIAF has been providing specific transaction support, including the following:
 
  • Assistance to the government of Botswana for the preparation of a pre-feasibility study for three rail links connecting Botswana with a port in the Namibian coast: the Trans-Kalahari Railway, Mmamabula-Ellisras and Mosetse-Kazungula. 
  • Assistance to the government of Armenia to restructure the country’s railways to increase private sector participation in the rail sector and to structure the concession of Armenian Railway. Around 2005, the company was not productive, was expensive to operate, provided an expensive service to its customers and increasingly was less competitive as it needed lots of capital to improve its operations and provide a better service. The outcome of this process was the successful award by the Armenian government of the concession to modernize and operate Armenian Railway. On February 13, 2008, the 30-year concession agreement was signed between Russian Railway Company and the government of Armenia. South Caucasian Railways was incorporated by the winning bidder to run the railway and operate the concession. For more information on this activity and PPIAF's assistance to Aremenia in general check the country write-up.
     

PPIAF has also provided post-transaction support for the review of concession agreements, with the objective of understanding the railway’s current performance and the condition of infrastructure as well as the traffic potential and investment requirements given anticipated developments in the region.

Additionally, PPIAF has supported the development of various knowledge products, including the preparation and dissemination of the Railway Reform Toolkit.
 
In 2001 PPIAF support was requested to prepare a report entitled “Private Investment in Railways: Experience from South and South America, Africa and New Zealand” which describes the results of an analysis of concessions and privatizations in the railways sector in several countries. The objective of this report was to allow a better assessment of the results and to improve donor support for future rail concession and privatizations projects.
 
In 2006 PPIAF, the Asian Development Bank, and the World Bank sponsored another  study entitled “Best Practices for Private Sector Investment in Railways”, a comprehensive document covering main aspects of railway concessions to the private sector and numerous case studies of the experience with privatizations, concessions, and private sector investment in various countries around the world.