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Working Paper Document Implementation of EU legislation on rail liberalisation in Belgium, France, Germany and The Netherlands Working Paper Document by Xavier Deville and Fabienne Verduyn March 2012 No 221 National Bank of Belgium Limited liability company RLP Brussels – Company’s number : 0203.201.340 Registered office : boulevard de Berlaimont 14 – BE -1000 Brussels www.nbb.be Editor Jan Smets Member of the Board of directors of the National Bank of Belgium © Illustrations : National Bank of Belgium Layout : NBB Microeconomic Analysis Cover : NBB AG – Prepress & Image Published in March 2012 ABSTRACT This study provides a detailed and easy-to read overview of the railway liberalisation in Belgium and the three neighbouring countries. The European Union's liberalisation Directives are often complex and are implemented in very specific ways in the different Member States. The analysis goes into some detail about the Commission's underlying motives and economic theories for letting network industries, which had previously been regarded as natural monopolies, convert into competitive enterprises with the separation of infrastructure from operations. The study takes a look at the impact of the European rail liberalisation Directives in Belgium and its neighbouring countries - France, Germany and the Netherlands. There are considerable variations in the way in which the Directives are applied. It is reflected in the way in which the separation of the infrastructure and the transport services within the railway companies was carried out, and in the degree of opening of the market in freight and passenger transport. The analysis shows that the dominance of the former monopolists in the different Member States means that private rail operators face major obstacles. The financial analysis of the railway companies reveals wide variations in economic performance. The combination of better balance sheet figures and a bigger domestic market means that some major players in Europe are financially better off, giving them superiority over the smaller railway companies. This raises the question whether these circumstances will ultimately lead to distortion of competition. JEL classification: D23, D40, H20, L14 and L92. Keywords: rail, liberalisation, subsidies, debt NBB WORKING PAPER No. 221 - MARCH 2012 Corresponding authors: NBB, Microeconomic Information department, e-mail: [email protected] and [email protected] Research results and conclusions expressed are those of the authors and do not necessarily reflect the views of the National Bank of Belgium or any other institution to which the authors are affiliated. All remaining errors are ours. The authors would like to thank their colleagues from the Microeconomic Information department. Special thanks go to Messrs Luc Dufresne, secretary general at the NBB, Philippe Quintin, head of department at the NBB, and George van Gastel, head of service at the NBB for their support and their comments on this paper. NBB WORKING PAPER No. 221 - MARCH 2012 CONTENTS INTRODUCTION .......................................................................................................................................... 1 1. REASONS FOR AND OBJECTIVES OF RAILWAY REFORM .......................................................................... 2 1. 1. REASONS BEHIND THE REFORM OF THE RAILWAYS .......................................................................................... 2 1.1.1. The decline of rail transport........................................................................................................ 2 1.1.2. The reasons for this decline ........................................................................................................ 4 1.2. THE OBJECTIVES OF THE REFORM OF THE RAILWAYS ........................................................................................ 5 2. THE EUROPEAN LEGISLATIVE FRAMEWORK FOR RAIL LIBERALISATION .................................................. 8 2.1. THE FIRST DIRECTIVES ............................................................................................................................. 8 2.2. THE FIRST RAILWAY PACKAGE .................................................................................................................... 8 2.3. THE SECOND RAILWAY PACKAGE ................................................................................................................ 9 2.4. THE THIRD RAILWAY PACKAGE ..................................................................................................................10 2.5. LATER DEVELOPMENTS ...........................................................................................................................11 2.6. SUMMARY OF THE LEGISLATIVE FRAMEWORK IN FORCE ...................................................................................13 3. THEORETICAL FRAMEWORK ..................................................................................................................14 3.1. DEFINITION OF A NETWORK INDUSTRY ...................................................................................................14 3.2. CHARACTERISTICS OF A NETWORK INDUSTRY ...........................................................................................14 3.3. NETWORK INDUSTRIES AND NATURAL MONOPOLIES ..................................................................................15 3.4. REFORM OF NETWORK INDUSTRIES .......................................................................................................19 3.5. VERTICAL STRUCTURE .......................................................................................................................20 3.6. ADVANTAGES AND DISADVANTAGES OF VERTICAL INTEGRATION IN THE RAIL INDUSTRY .......................................23 3.6.1. Advantages of vertical integration .......................................................................................23 3.6.2. Disadvantages of vertical integration...................................................................................24 3.7. CONCLUSION .......................................................................................................................................26 4. THE REFORM OF THE RAILWAYS IN BELGIUM ........................................................................................27 4.1. REORGANISATION AND DEVELOPMENT OF THE INCUMBENT RAILWAY COMPANY....................................................27 4.1.1. Background ...............................................................................................................................27 4.1.2. Developments on the Belgian rail market ..................................................................................31 4.2. FINANCIAL ANALYSIS ..............................................................................................................................37 4.2.1. Revenues and subsidies .............................................................................................................38 4.2.2. Operating costs .........................................................................................................................46 4.2.3. Debt..........................................................................................................................................48 4.2.4. Analysis of the ratios .................................................................................................................52 4.3. CONCLUSION .......................................................................................................................................56 5. THE REFORM OF THE RAILWAYS IN FRANCE ..........................................................................................58 5.1. REORGANISATION AND DEVELOPMENT OF THE INCUMBENT RAILWAY COMPANY....................................................58 5.1.1. Background ...............................................................................................................................58 5.1.2. Development on the French rail market .....................................................................................61 5.2. FINANCIAL ANALYSIS ..............................................................................................................................66 5.2.1. Revenues and subsidies .............................................................................................................66 5.2.2. Operating costs .........................................................................................................................70 5.2.3. Debt..........................................................................................................................................71 5.3. CONCLUSION .......................................................................................................................................73 6. THE REFORM OF THE RAILWAYS IN GERMANY ......................................................................................74 6.1. REORGANISATION AND DEVELOPMENT OF THE INCUMBENT RAILWAY COMPANY....................................................74 6.1.1. Background ...............................................................................................................................74 6.1.2. Developments on the German rail market .................................................................................80 NBB WORKING PAPER No. 221 - MARCH 2012 6.1.3. Employment trends in the German railways...............................................................................91
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