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RAILWAY RESTRUCTURING EXPERIENCES

RAILWAY RESTRUCTURING EXPERIENCES. Ankara, Turkey October, 2001. A Perspective. The World Bank and Turkish Railways (TCDD): two loans, over $240 million last loan more than 13 years ago TCDD’s problems: market and financial pressures Coming challenge: EU requirements

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RAILWAY RESTRUCTURING EXPERIENCES

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  1. RAILWAY RESTRUCTURING EXPERIENCES Ankara, Turkey October, 2001

  2. A Perspective • The World Bank and Turkish Railways (TCDD): • two loans, over $240 million • last loan more than 13 years ago • TCDD’s problems: market and financial pressures • Coming challenge: EU requirements • What other countries are doing • A few comparisons • Ideas for Turkey

  3. Km of Line(1999, 2000 for TCDD)

  4. Passenger-kms (000,000)(1999, 2000 for TCDD)

  5. Passenger TrafficIndex: 1980=100

  6. Freight Tonne-Km (000,000) (1999, 2000 TCDD)

  7. Freight TrafficIndex: 1980=100

  8. Traffic Mix:Passenger-Km as % of P-km + T-Km(1999, 2000 TCDD)

  9. Ratio of Average Passenger Fares to Average Freight Tariffs(1999)

  10. Employee Productivity:(P-Km+T-Km)/Employee (000)(1999, 2000 TCDD)

  11. Traffic Density:(P-Km+T-Km)/Km (000)(1999, 2000 TCDD)

  12. What Others Are Doing • The railway as enterprise, government as policy maker/regulator • Choices in structure: Turkey will look at the EU models • Moving the public/private boundary -- concessioning and privatization are major elements in restructuring programs in some countries • All railways are changing: mixes emerging

  13. Directions of Railway Change Private Involvement Structural Change Mixtures are possible!

  14. EU ORDER 91-440(Updated as Order 2001/12,13,14)

  15. DB AG Holding Company DB Cargo DB Regio AG (Local Passengers) DB Reise & Touristik AG (Intercity Passenger) DB Netz (Infrastructure) DB Stations and Service AG The Deutsche Bahn Structure

  16. Rail Management Services Company Infrastructure Company,public enterprise Rail Asset Company Old SNCFR Spin off Gradually dissolve Passenger Company Freight Company Split commuter from ICP, transfer commuter, eventually concession ICP First to be sold Real Estate Subsidiary Sell or develop Romania: The New Railway SystemWith Focus on Transition Minister of Transport Ensures uniform data

  17. Railway Concessioning • Began in Argentina in 1991 • Now 13 countries with concessions -- freight (32), inter city passenger (2), suburban passenger (8) and Metros (4) • A concession is NOT a sale of assets: it is, instead, a transfer of control for a period (+/- 30 yrs) • Concessions can be either payment to government for use of assets or payment by government for subsidy and capital program • Experience to date has been highly positive • As of now, the only privatization and concessioning in Europe is the UK and Estonia. Not required by EU rules

  18. TCDD’s Problems • Confusion of government and enterprise roles • Organization for production, not market • no Lines of Business, no costing information • Lack of commercial, financial goals • Imposed social roles (low passenger fares) • Non-core distractions (ports)

  19. TCDD’s Program: Initial Actions • TCDD as enterprise separated from government -- enterprise under commercial rules (profit motive, business Board with outside involvement and private sector personnel rules) • Operating functions (Infrastructure, Freight, Passenger) adopt LOB organization on an accounting basis • Separate and localize suburban operations -- accounting first, then institutional • Spin off social, non-rail activities • Separate Ports operations

  20. Structural Options • Structure -- infrastructure and line of business separation • Why separation of infrastructure? • clarity of costs and benefits of various services • facilitate mixed solutions • EU rules • Why NOT separate • complex and costly -- transaction costs • potential conflicts and confusion • Critical issues • access charges -- structure and levels? • scheduling and dispatching -- who and where? • Lines of business • Ports separated • freight, local passenger,intercity passenger

  21. Options for Private Sector Role • Private sector, per se, is neither panacea nor ideological objective • Don’t privatize monopolies -- restructure them first, along with railway services, and provide for regulation • Consider specialized companies (like CONCOR in India) for private sector involvement • Consider privatization or concessioning of passenger or freight

  22. What Has the World Bank Done? • Restructuring analyses, analytical tools and TA • Support for required new accounting systems • Asset rehabilitation to support new structures • Labor transitions and retraining (Argentina, Brazil, Poland – potentially Russia) • Environmental cleanup • Changes in structure (suburban devolution, creation of management and accounting systems) • Support for required new accounting systems • Risk guarantees • Transaction management • Investment in private operators

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