RAILWAY RESTRUCTURING EXPERIENCES

Ankara, Turkey October, 2001

The World Bank

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 The World Bank

Km of Line

(1999, 2000 for TCDD)

40000 35000 30000 25000 20000 15000 10000 5000 0 8671 9978 3662 11364 2813 22891 1909 2299 37477 31423 2324 4290 5345

Tu rk ey S w ed en S lo va kia R om an ia P or tu ga l P ola nd Ire la nd G re ec e G er m an y Fr an ce D en m ar k B ulg ar ia A us tria The World Bank

Passenger-kms (000,000)

(1999, 2000 for TCDD)

80000 70000 60000 50000 40000 30000 20000 10000 0 6146 7434 2968 12304 4329 26187 1421 1583 72543 66495 5113 3819 7899

Tu rk ey S w ed en S lo va kia R om an ia P or tu ga l P ola nd Ire la nd G re ec e G er m an y Fr an ce D en m ar k B ulg ar ia A us tria The World Bank

Passenger Traffic Index: 1980=100

160 140 120 100 80 60 40 1980 1985 1990 1995 2000 France Romania Turkey Poland The World Bank

Freight Tonne-Km (000,000)

(1999, 2000 TCDD)

80000 70000 60000 50000 40000 30000 20000 10000 0 55460 71494 53438 8237 14400 9862 15927 2179 466 326 1938 5297 14733

Tu rk ey S w ed en S lo va kia R om an ia P or tu ga l P ola nd Ire la nd G re ec e G er m an y Fr an ce D en m ar k B ulg ar ia A us tria The World Bank

Freight Traffic Index: 1980=100

200 180 160 140 120 100 80 60 40 20 1980 1985 1990 1995 2000 France Romania Turkey Poland The World Bank

Traffic Mix: Passenger-Km as % of P-km + T-Km

(1999, 2000 TCDD)

90 80 70 60 50 40 30 20 10 0 42.7

34 23.1

43.6

66.5

32.1

75.3

82.9

50.4

55.4

72.5

41.9

34.9

Tu rk ey Sw ed en Sl ov ak ia R om an ia Po rtu ga l Po lan d Ire lan d G re ec e G erm an y Fra nc e D en m ark Bu lga ria Au stri a

The World Bank

Ratio of Average Passenger Fares to Average Freight Tariffs

(1999)

4.5

4 3.5

3 2.5

2 1.5

1 0.5

0 4.13

3.17

2.77

1.36

1 0.33

0.36

0.86

0.61

0.4

1 0.35

1.04

Tu rk ey Sw ed en Sl ov ak ia R om an ia Po rtu ga l Po lan d Ire lan d G re ec e G erm an y Fra nc e D en m ark Bu lga ria Au stri a

The World Bank

Employee Productivity:

(P-Km+T-Km)/Employee (000) (1999, 2000 TCDD)

1220 1200 1000 800 600 400 337 200 0 262 268 521 400 170 182 739 688 672 196 437

Tu rk ey Sw ed en Slo va kia R om an ia Po rtu ga l Po la nd Ire lan d G re ec e G er m an y Fra nc e D en m ar k B ulg ari a A us tria The World Bank

Traffic Density:

(P-Km+T-Km)/Km (000) (1999, 2000 TCDD)

4500 4000 3500 3000 2500 2000 1500 1000 500 0 1659 2188 3504 2484 2314 3567 988 830 3843 3817 3034 2125 4234

Tu rk ey S w ed en S lo va kia R om an ia P or tu ga l P ola nd Ire la nd G re ec e G er m an y Fr an ce D en m ar k B ulg ar ia A us tria The World Bank

What Others Are Doing

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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 The World Bank

Directions of Railway Change

Private Involvement Integral Dominant Integral, Separated Minority Operators Public Ownership Partnerships: Concessions or Franchises Awarded

China, Russia and India Argentina (13), Brazil (9), Mexico (5), Peru (3), Guatemala, Bolivia (ministries), MAV, (2), Panama, Cote SRT, MZ, others, d'Ivoire/Burkina Faso, Cameroon, (SOE's),

TCDD

Congo (Brazzaville), Malawi, Madagascar, Jordan

Private Ownership

New Zealand, Ferronor (Chile), CVRD (Brazil), A&B (Chile) Amtrak, VIA, Japan Freight Mexico City suburban, CONCOR (India) US Class I, CN and CP, East/West/Central Japan Railways

Separation

E.U. and Chile passenger Swedish suburban, FEPASA (Chile), LHS line (Poland) U.K. franchises and EWS, Polish and Romanian freight

Range of the EU model Mixtures are possible!

The World Bank

EU ORDER 91-440

(Updated as Order 2001/12,13,14)

Infrastructure Ownership Infrastructure Improvement Infrastructure maintenance Control of Operations (Dispatching and Scheduling) Train Movement Equipment Marketing Financial Accountability Freight Intercity Passenger Regional Passengers Suburban Passengers Kept at national level, may be privatized Can be Privatized Can be Privatized

Can be devolved

Can be devolved PSO Support Permitted

The World Bank

The Deutsche Bahn Structure

DB AG Holding Company DB Cargo DB Reise & Touristik AG (Intercity Passenger) DB Regio AG (Local Passengers) DB Netz (Infrastructure) DB Stations and Service AG The World Bank

Romania: The New Railway System With Focus on Transition

Minister of Transport Rail Management Services Company Ensures uniform data Infrastructure Company, enterprise Passenger Company public Rail Asset Company Spin off Freight Company Split commuter from ICP, transfer commuter, eventually concession ICP Real Estate Subsidiary First to be sold Sell or develop Old SNCFR Gradually dissolve The World Bank

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

The World Bank

TCDD’s Problems

   

Confusion of government and enterprise roles Organization for production, not market



no Lines of Business, no costing information

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Lack of commercial, financial goals Imposed social roles (low passenger fares) Non-core distractions (ports) The World Bank

TCDD’s Program: Initial Actions

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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 The World Bank

    

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 The World Bank

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 The World Bank

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 The World Bank