1. RAILWAY RESTRUCTURING EXPERIENCES
Louis S. Thompson
Railways Adviser
The World Bank
Ankara, Turkey
May, 2000

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 entering a market economy
The coming challenge: EU organization
What other countries are doing
Ideas for Turkey
But first, a few comparisons

3. Km of Line (1998)

4. Passenger-kms (000,000) (1998)

5. Passenger Traffic Index: 1980=100

6. Freight Tonne-Km (000,000) (1998)

7. Freight Traffic Index: 1980=100

8. Traffic Mix: Passenger-Km as % of P-km + T-Km (1998)

9. Ratio of Average Passenger Fares to Average Freight Tariffs

10. Employee Productivity: (P-Km+T-Km)/Employee (000) (1998)

11. Wagon Productivity T-Km/Wagon (000) (1998)

12. Traffic Density: (P-Km+T-Km)/Km (000) (1998)

13. 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
All are changing: mixes emerging

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

15. EC ORDER

16. 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

17. Romania: The New Railway System With Focus on Transition
Minister of Transport
Holding Company
Rail Management
Services Company
Infrastructure
Company, public
enterprise
Rail Asset
Company
Old SNCFR
Ensures uniform data
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

18. 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

19. TCDD’s Problems Confusion of government and enterprise roles
Organization for production, not market
no LOB’s, no costing information
Imposed social roles (low passenger fares)
Non-core distractions (ports)

20. 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 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

21. Structural Options
Structure -- infrastructure and line of business separation
Why separation of infrastructure?
clarity of costs and benefits of various services
facilitate mixed solutions
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

22. 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

23. What Has the World Bank Done?
Restructuring analyses, analytical tools and TA
Asset rehabilitation to support new structure
Labor transitions and retraining
Resettlement
Environmental cleanup
Changes in structure (suburban devolution, creation of management and accounting systems)
Risk guarantees
Transaction management
Investment in private operators