Options for Industry Structure



Reform motives and reform choices
In either infrastructure framework—public or private—not all options are relevant for all countries, and option variants can be tailored to national circumstances. Restructuring is a pragmatic search for a model that works in specific markets and in which railway management objectives are reasonably aligned with national policy objectives for railways, not an exploration of ‘ideal’ models or theoretical elegance.

Clearly, market structure affects model choice. Private infrastructure framework options have been adopted by governments in countries heavily dominated by rail freight markets, where long-distance passenger rail services were marginal in the overall transport system. These governments view meeting freight transport demand as a role for the private sector in a market environment so that government need not be directly involved. If passenger demand and servicedominatesthe national rail network, most governments have discerned a much stronger public interest or political benefit in state involvement and been unwilling to privatize the railways network, except for Japanand the UK, but subsequently reversed in the latter case.

Markets also matter within each framework. Options for horizontal separation of regional or urban passenger services make sense only if there are significant sub-networks of these services. Options for multiple freight operators make sense only if overall freight markets are strong enough to sustain multiple operations.

The frameworks and their variants imply a measured, progressive, rational program to rebalance the public and private sectors, redefine competition and regulation, and reset boundaries between industry sectors. Such a program will transform an archetypal and monolithic railway into a diverse, decentralized, pluralistic industry that is transport market-focused and responsive. Ideally, this type of providential program would emergeby stages in a country that has well-developed policy and implementation skills, sufficient transaction resources, and a meticulously designed program prior to implementation. However, in reality, many governments are rudely awakenedby the alarm bells of necessity for railway restructuring only when time and money have run out.

Reformed structures will boost management incentives to improve efficiency, offer more control over public expenditure, and create better value for public money than the traditional monolithic railway. Some options canalso reduce public budgetary support for rail systems, but that is a separate objective and typically requires a separate policy decision. However, only radical downsizing of the network, services, and/or employees will reduce a large public subsidy quickly in a publicly-owned railway, and if the market can bear it, increasing tariffs. If these are the imperatives of the situation then the quest for a new long-term industry structure may need to take second place to more immediate surgery on the existing structure.

Although crisis responses are sometimes inevitable, well-considered policies consistently applied over the long term are more successful in supporting public interests than ‘slash and burn’ solutions that may result in a demoralized workforce operating a poor service with underinvested assets. Even emergency surgery will make more sense in the context of a longer-term structural strategy to create a competitive railway that is affordable to users and taxpayers.

contains descriptions of many railway industry structures and individual rail entities that illustrate structures described in this toolkit. Individual case studies illustrate variants of core railway structures. Collectively, the case studies illustrate the diverse solutions to organizing a national railway industry. Additional case studies can be found under .

    
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