Reform Movements in the Railway Sector

Reform Movements in the Railway Sector
Although the railways were mentioned with planned economies and public management until twenty years ago, the first emergence was realized by private sector in USA and UK. For the US and Canada, which are North American countries, this situation has remained unchanged, but after the Second World War European countries and the rest of the world continued to operate in the state monopoly of railways.
With the development of the highway and airlines, the railway sector, which has left its bright period behind, has become unable to meet the service expectations of today's consumers such as speed, comfort, door-to-door transportation due to worsening service quality, failed management and insufficient investments. As a result, the decrease in the demand for the railway and the burden on the state budget of the losses of the railway undertakings cause the question of the necessity of the railway system under the presence of modes of transportation such as the rapidly developing road and airway; began to be seen. The fact that it is safer and more environmentally friendly than other transportation systems has increased the attractiveness of the sector, and technological advances have supported the development of faster vehicles and the development of appropriate infrastructure. In this way, the reform processes in the railway sector, which have been placed on the agenda of transport policies, have started under these conditions.
It is possible to say that railway reforms have two pillars such as creating competitive environment within the sector and gaining competitive power against other transportation systems. In the formation of the intra-sectoral competition environment, the question of what kind of infrastructure-transportation activities will be carried out. Infrastructure-transportation activities in railways can be structured horizontally or vertically; it is possible to establish competition under both structuring models. In countries such as the USA and Canada, which form an example of horizontal structuring, there is a competitive environment between multiple railway undertakings that carry out infrastructure-transport activities in a vertically integrated structure. In this kind of structure, which has seen an intensive capital investment in the railroads and developed in some countries where its industry and trade volume are developed and suitable for its geographical structure, the railway networks are so developed that more than one line (parallel lines) in the country has been allowed to connect different routes. The parallel lines in which the horizontal structuring develops during the natural course of the process, puts downward pressure on the railway transportation fees as the competition provides a direct competitive environment; on the other hand, the interaction in infrastructure-superstructure services, due to vertical integrated service provision, ensures correct, timely and on-site investment decisions. However, the biggest disadvantage of this model is that it does not allow for sufficient benefits from density economies. In addition, the construction of the infrastructure in line with parallel line competition may not create rational choices physically and economically in every country.
Even if the parallel lines are not formed, the competition environment can be provided indirectly by horizontal means. In this system, the existing railway network is transformed into a divided structure and each network is connected to the main ports or industrial cities with high traffic volumes. Therefore, although it is not between the same routes, at one of the destinations or destinations, the user is given the opportunity to make more choices by offering more than one network access. Developed in the Latin American region after railway reforms, this system has been successful in some countries. However, not every user can achieve the same advantage, especially when some users in the inner regions are confronted with a single railway operation and the need for access to more than one railway network for the transportation between some points due to the divided structure of the railroad constitutes the problematic sides of the model.
The draft law studies in Turkey's European Union reform process, which takes samples As can be seen from the traced vertical structural model for the provision of intra-industry competition and infrastructure-transport activities ensured the separation of at least some accounting; In addition to the already existing railway transportation companies, independent railway enterprises have been allowed to enter the market in return for infrastructure usage fee payments. In this system, infrastructure activities are carried out by the public as a monopoly outside the UK; however, competition is becoming more favorable in the downstream market of transport activities. The fact that independent railway enterprises do not have to bear the infrastructure costs that require high investment makes the market entry attractive. On the other hand, the fact that railway enterprises provide uninterrupted service on a single railway network positively affects service quality. The most criticized aspect of this model is the fact that decomposition increases transaction costs in the sector where the infrastructure-business dependency is high and causes coordination problems among the parties in many aspects such as investment efficiency and security. In the context of competition law, it is also among the other risks of the model that the firm can use its dominant position in the upper market in the disruptive direction in the lower market in every situation where there is no vertical structure. Therefore, access to infrastructure is generally regulated in countries with vertical structuring, but this situation contradicts with the aim of reducing the weight of the targeted state in the sector by reforms.
In countries that implement the railway reform, debates are revolving in the framework outlined above, and there is no widely accepted model of the most appropriate structuring. The success of the reforms is shaped by the influence of the country experience in the liberalization of network industries, the physical and economic situation of the railway sector in the country, the competition with other transport systems, the demand structure in passenger-freight transport services. There is no seamless structuring model and the applicability of any chosen method may change depending on the transformation of the railway sector over time. However, despite all the risks, it is possible to see examples of countries that have been successful under each structuring model. Recognizing that competition is better than the public monopoly under regulation, as it is generally accepted in the literature, and as far as possible, Newberry * is directed towards competition wherever possible, but inevitable resorting to regulation will not disappoint us on railway reforms.

Source : http://www.rekabet.gov.tr