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The World Bank
Rescuing Railways:Recent Achievements and Experience
What Are The Trends?
Louis S. ThompsonRailways Adviser
Islamabad, PakistanFebruary 14, 2000
The World Bank
The Bank and Pakistan Railways (PR)10 Loans, $262 million to Pakistan Railways2 Transport Sector loans ($384 m) with rail componentsPR is important: employment (105,000+ people); financial deficits; environmental advantages; natural rail marketPR, with good people, is near collapse because of conflicting policies and need for change
freight traffic has been fallingpassenger traffic has been stagnantlow employee and asset productivityhigh passenger share with very low fares
PR is dying -- action is badly neededSuccessful change unlikely in the public sector, but private sector can succeed
The World Bank
Freight Traffic Has Been Shrinking(000,000 Ton-km)
02000400060008000
10000120001400016000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
Indonesia Republic of Korea Thailand Vietnam Bangladesh Pakistan Malaysia
The World Bank
Passenger Traffic has Stagnated(000,000 P-Km)
0
5000
10000
15000
20000
25000
30000
35000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
Indonesia Republic of Korea Thailand Vietnam Pakistan Malaysia Bangladesh
The World Bank
Employee Productivity is Relatively Low(000 Pkm+000 Tkm/Employee)
0 200 400 600 800 1000 1200 1400
Bangladesh
Indonesia
Korea
Malaysia
Thailand
Vietnam
Philippines
China
India
Pakistan
Sri Lanka
Austria
France
Greece
Sweden
The World Bank
Average Annual Output per Freight Wagon is Also Low(000 Tkm per Wagon)
0 500 1000 1500 2000 2500 3000
Bangladesh
Indonesia
Korea
Malaysia
Thailand
Vietnam
Philippines
China
India
Pakistan
Sri Lanka
Austria
France
Greece
Sweden
The World Bank
Passenger Traffic as Percent of Total Traffic Is Very High
(P-km/(P-km+T-Km))%
0 20 40 60 80 100Bangladesh
Indonesia
Korea
Malaysia
Thailand
Vietnam
Philippines
China
India
Pakistan
Sri Lanka
Austria
France
Greece
Sweden
The World Bank
The Ratio of Average Passenger Fareto Average Freight Tariff Is Very Low:Interacts With High Passenger Share
0 1 2 3 4 5
Bangladesh
Indonesia
Korea
Malaysia
Thailand
Vietnam
Philippines
China
India
Pakistan
Sri Lanka
Austria
France
Greece
Sweden
The World Bank
PR is Approaching Irrelevance:Rail versus Truck Freight Market Share (% ton-km)
In China, Poland, US, EU, India and Pakistan
0
20
40
60
80
100
70 75 80 85 90 95
China US EU Poland India Pakistan
Note: other modes excluded. This considers only the rail share of rail plus truck traffic.
The World Bank
Why Have Public Sector Railways Foundered:Is Pakistan Unusual?
Public sector railways are in trouble everywhereTransitions prevail: EU, US, Latin America, Africa, Middle East, India and ChinaReasons are the same universally:
shortage and unreliability of public fundingmixing of commercial and social roles without compensationpolitical interferencesurging competition
The World Bank
Why Private Sector?
Mobilize private investment, replace public fundsBetter use of national resourcesIncreased efficiencyBetter market development Enhanced social equityBetter meet defense and security needsEffective environmental protectionSurvive private competition
The World Bank
World Bank Group Experience With Rail Concessioning or Privatization
Freight concessions: Argentina (6), Chile (2), Brazil (7), Bolivia (2), Uruguay, Guatemala, Mexico (6+), Peru (3), Cote d’Ivoire/Burkina Faso, Cameroon, Malawi, Mozambique (2), Senegal/Mali, Ghana, Jordan, 5 others underwayPartial Privatizations: Poland and Romania underwaySuburban passengers: Buenos Aires (7); Rio de Janeiro; Mexico City underwayMetros: Buenos Aires, Rio de Janeiro, Bangkok, Sao Paulo underwayUK: 12 suburban and 13 inter city passenger franchises, 2 freight operators and 1 infrastructure company Others: New Zealand, Canada, US, Australia
The World Bank
Argentine Rail Freight(000,000 Ton-Km)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1974 1979 1984 1989 1994
UrquizaBelgranoBroad Gauge
Concessioning
The World Bank
Suburban Rail Passengers in Buenos Aires(millions of passengers)
0
100
200
300
400
500
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98
concessioning
The World Bank
Buenos Aires Metro: 1970 to 1998(000 Passengers)
0
50000
100000
150000
200000
250000
300000
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98
Concessioning
The World Bank
Labor Productivity in Argentina(000,000 TU/Employee)
0
0.5
1
1.5
2
2.5
1973 1978 1983 1988 1993 1998
UrquizaBelgranoBroad GaugeSuburban RailwaysPR
PR
The World Bank
Rail Freight Traffic Growth inCote d’Ivoire/Burkina Faso
(000,000 T-Km)
0
100
200
300
400
500
600
700
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
No data is available for 1988 and 1989
Concessioning
The concessionaire took over in October 1995 and a full year has been extrapolated from the first nine months.
The World Bank
Rail Labor Productivity inCote d’Ivoire/Burkina Faso
(000 TU/Employee)
0
50
100
150
200
250
300
350
400
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98
No data available for 1988 and 1989
Concessioning
The concessionaire took over in October 1995 and a full year has been extrapolated from the first nine months.
PR
The World Bank
Rail Labor productivity in Brazil andBolivia and After Concessioning
(000 TU/Employee)
0
1000
2000
3000
4000
5000
6000
7000
RFFSA: FCA RFFSA: MRS RFFSA: FSA RFFSA: TerezaCristina
RFFSA: Novoeste RFFSA:Nordeste Bolivia: Andina Bolivia: Oriental
BeforeAfter
The World Bank
Rail Freight Tariffs in BrazilBefore and After Concessioning
(R$/000 T-Km)
0
5
10
15
20
25
30
35
40
FCA MRS FSA Novoeste Nordeste
1996 (govt)1998 (concessioned)
The World Bank
Approaches AvailableTraditional public management
Public controlOutsourcing of some servicesManagement contracts
Public/private partnershipsFranchising/concession (“Concessions”)Functional separations, mixed operation
PrivatizationDivestitures to private operatorsPrivate supply and operation
Mixtures
The World Bank
LessonsDetermined action is vitalMake sure you have the moneyKeep risk in the right placeLet private sector “fix” the railwaySocial issues (labor, resettlement, environment) are importantIdentify and pay for social services (students, season tickets): avoid cross subsidiesDon’t forget regulation/oversight, but good contracts can also yield good oversight
The World Bank
World Bank RolesFinance constructionRepair/rehabilitate to assist transactionEnvironmental cleanupHuman transitions:
Redundancy/retirementRetrainingRelocation/resettlement
Partial guarantees (risk or credit term)Technical assistance
Packaging and preparing studiesMarketingAdvice (economic, financial/legal)
Transaction management and results delivery (CFS)Investment in operators (IFC)
The World Bank
Questions for Pakistan
Separation and disposal of non-rail assets?Program for labor?Infrastructure integral with one operator (freight or passenger), or separate from both?Access fees, structure and level?Infrastructure and rolling stock rehabilitation program?Sale of assets or concessioning of freight company?Tariff policy and support for passenger company?Transaction management?
The World Bank
The World Bank
Concessioning in Railways
Government defines and grants rights to a companyConcession agreement details objectives and allocates risksGovernment retains or can receive ownership of infrastructure and equipment at end of term Concessionaire provides services and perhaps facilities, and carries appropriate commercial and financial riskConcession has a defined term (5 to 50 years): privatization has unlimited term
The World Bank
Dimensions of Concessions
Package size/division of responsibilityTermWho owns or finances whatService Specification (quantity, quality, price)Tariff AuthorityPaymentsAward criteriaRenegotiation conditions
The World Bank
Critical Concessioning Issues
Duration vs. investmentSpeed vs. transitional damageSurplus employees (retirement & redundancy)Who bears what risk (revenues)Regulation
SafetyEconomic -- contract versus CommissionAnti-monopoly
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Awarding Options
Negotiations, auction, sealed bidPrequalificationFlexibility vs comparability“Weighting formula” vs. best priceGovernment decides award criteria: minimum tariff, maximum payment to Government, minimum operating support with fixed tariff, minimum capital contribution, and NPV-based combinations.
The World Bank
Privatization of Railways:Back to the Future
Integral Privatization (some multiple use)New Zealand, Canada, Japan, US, TAZRAIL
Infrastructure Separation (with sale or franchising of operations)
UK, Romania, Chile, EU railways, Estonia, Poland (?), Australia (many models)
Mixtures are possible (and often best)
The World Bank
Critical Privatization Issues
How infrastructure is separated:Who owns and controls (especially dispatching)Neutral access and acceptable charges
Concession (exclusive or non-exc.), sell going concern(s), sell assets?Term (if any) of operating franchises (number and type of offerings), and availability of rolling stock
The World Bank
EU ORDER 91-440
Freight Intercity Passenger Regional Passengers Suburban Passengers
Infrastructure Ownership
Infrastructure Improvement Kept at national level, Can be devolved
Infrastructure maintenance may be privatized
Control of Operations
(Dispatching and Scheduling)
Train Movement
Equipment Can be Can be Can be devolved
Marketing Privatized Privatized
Financial Accountability PSO Support Permitted
The World Bank
Deutsche Bahn ApproachFreight Intercity Passenger Regional Passengers Suburban Passengers
Infrastructure Ownership
Infrastructure Improvement DB Infrastructure Mostly DB Infrastructure, but some
Infrastructure maintenance involvement by states and local government
Control of Operations
(Dispatching and Scheduling)
Train Movement Mostly Operated by DB Passenger under
Equipment DB Freight DB Passenger contract with locals, but some are operated
Marketing "to be privatized" "to be privatized" by locals
Financial Accountability State and Local PSO
The World Bank
British Rail Privatization
Freight Intercity Passenger Regional Passengers Suburban Passengers
Infrastructure Ownership
Infrastructure Improvement
Infrastructure maintenance All Owned and Operated by RAILTRACK
Control of Operations
(Dispatching and Scheduling)
Train Movement 25 Franchises
Equipment EW&S Rail 3 Rolling Stock Leasing Companies ("ROSCOS" : Private)
Marketing Private 25 Franchises (Private)
Financial Accountability Subsidies by local/national governments
All Owned and Operated by RAIL TRACK
The World Bank
Ton-Km on Concessioned Freight Railways(000,000)
02000400060008000
1000012000140001600018000
CH/BO:A-LP
BO:AndinaCd'I/BFasoCH:FERRONOR
CamerounBO:Oriental
BR:Nordeste
JORDANAR:RocaAR:FEPSAME:Chiapas-Mayab
BR:Novoeste
AR:BAPAR:NCANEW
ZEALAND (1996) 5.
EGYPTPAKISTANBR:FEPASABR:FCABR:FSAME:Northeast
ME:Northwest
The World Bank
Line Km on Concessioned Freight Railways(000,000)
0100020003000400050006000700080009000
JORDANCH/BO:A-LPCamerounCH:FERRONOR
Cd'I/BFasoBO:Oriental
ME:ChiapasBR:NovoesteBO:AndinaME:Northeast
New ZealandBR:NordesteAR:NCAAR:RocaBR:FEPASAEGYPTAR:FEPSAAR:BAPME:Northwest
BR:FSABR:FCAPAKISTAN
The World Bank
Employees on Concessioned Freight Railways
0
20000
40000
60000
80000
100000
120000
CH/BO:A-LP CH:FERRONOR
ME:ChiapasBO:AndinaBR:NordesteBR:NovoesteBO:OrientalAR:RocaAR:FEPSAAR:BAPAR:NCAJORDANCd'I/BFasoBR:FSABR:FCACamerounNew ZealandME:Northeast
BR:FEPASAME:Northwest
EGYPTPAKISTAN
The World Bank
Total Traffic Density(000 Traffic Units/Km)
0
2000
4000
6000
8000
10000
12000
14000
CH/BO:A-LP
BR:Nordeste
AR:RocaAR:FEPSABO:AndinaAR:BAPCH:FERRONOR
AR:NCACd'I/BFasoBO:Oriental
ME:ChiapasNew Zealand
BR:Novoeste
BR:FCACamerounBR:FSABR:FEPASAJORDANPAKISTANME:Northwest
ME:Northeast
ConrailBR:MRSEGYPT
The World Bank
Employee Productivity on Concessioned Freight Railways(000 TU/Employee)
0
500
1000
1500
2000
2500
3000
3500
4000
PAKISTANCamerounCd'I/BFasoCH/BO:A-LPBR:FEPASAJORDANEGYPTME:Northwest
BO:Oriental
New ZealandBO:AndinaBR:NordesteAR:RocaAR:FEPSAME:Northeast
AR:NCAAR:BAPCH:FERRONOR
BR:NovoesteBR:FCABR:FSAME:Chiapas
The World Bank
Staff in Intercity Passenger Railways
0
20000
40000
60000
80000
100000
120000
UK: Island UK: CardiffUK:AngliaUK:Cross Country
UK: Midland Main
UK: S Wales & W
UK: CentralUK:RRNEUK: NW
TrainsUK: GNERUK: Grt W
estUK: ScotrailUK: W
CoastUS: AmtrakEgypt
Pakistan
The World Bank
Line-Km on Concessioned Passenger Railways
05000
1000015000200002500030000350004000045000
UK: Island UK: CardiffUK: Mid land Main
UK:AngliaUK: Grt W
estUK: GNERUK:RRNEUK: NW
TrainsUK: CentralUK: S W
ales & WUK: W
CoastUK:Cross Country
UK: ScotrailEgyptPakistanUS: Amtrak
The World Bank
Passenger-Km on Concessioned Passenger Railways(000,000)
0
10000
20000
30000
40000
50000
60000
70000
UK: Island UK: CardiffUK:AngliaUK: S W
ales & WUK: NW
TrainsUK: Mid land Main
UK: CentralUK:RRNEUK: ScotrailUK:Cross Country
UK: Grt West
UK: W Coast
UK: GNERUS: AmtrakPakistanEgypt
The World Bank
Passenger-Km/Staff on Concessioned Passenger Railways
(000,000)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
UK: Island US: AmtrakPakistanUK: NW
TrainsUK: CardiffUK: S W
ales & WUK: CentralUK: ScotrailUK:RRNEEgyptUK: Grt W
estUK: W
CoastUK:AngliaUK: Midland Main
UK: GNERUK:Cross Country
The World Bank
Passenger-Km/Km on Concessioned Passenger Railways(000,000)
0
0.5
1
1.5
2
2.5
US: Amtrak UK: S W
ales & WUK: NW
TrainsUK: IslandUK: CentralEgyptUK: ScotrailUK: CardiffUK:RRNEUK:Cross Country
UK:AngliaUK: W
CoastPakistanUK: Grt W
estUK: Midland Main
UK: GNER