Public Disclosure Authorized FREIGHT TRANSPORT FOR DEVELOPMENT TOOLKIT: RailPublic Disclosure Authorized Freight Public Disclosure Authorized Public Disclosure Authorized Paul Amos i The Transport Research Support program is a joint World Bank/ DFID initiative focusing on emerging issues in the transport sector. Its goal is to generate knowledge in high priority areas of the transport sector and to disseminate to practitioners and decision-makers in developing countries. Rail Freight in Development Eight ways to manage it better and five ways governments can help ©2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750- 8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e- mail: [email protected]. CONTENTS ACKNOWLEDGEMENTS .............................................................................................................................. I EXECUTIVE SUMMARY .............................................................................................................................. II NOMENCLATURE .................................................................................................................................... IV 1 RAIL FREIGHT AND DEVELOPMENT: THE KEY ISSUES ........................................................................... 2 1.1 RAIL FREIGHT IN DEVELOPMENT ....................................................................................................................... 2 1.2 KEY MANAGEMENT ISSUES ............................................................................................................................. 3 1.3 KEY POLICY ISSUES ........................................................................................................................................ 4 2 RAIL FREIGHT: THE GLOBAL LANDSCAPE ............................................................................................. 6 2.1 TRACKS FROM THE PAST ................................................................................................................................. 6 2.2 WHERE IS TODAY’S RAIL FREIGHT? ................................................................................................................... 8 2.3 WHAT KIND OF FREIGHT IS IT? ........................................................................................................................ 9 2.4 WHO PROVIDES RAIL FREIGHT TRANSPORT? ...................................................................................................... 11 2.5 WHOSE INFRASTRUCTURE DO THE RAIL FREIGHT PROVIDERS USE? ......................................................................... 12 2.6 HOW DOES RAIL FREIGHT VOLUME COMPARE WITH THE OTHER MODES? ................................................................ 12 3 MANAGING RAIL FREIGHT COMPANIES: EIGHT WAYS OF DOING IT BETTER ...................................... 14 3.1 TARGET THE MARKETS, TAILOR THE PRODUCTS ................................................................................................. 14 3.2 BE THE LOW COST CARRIER .......................................................................................................................... 15 3.3 MEASURE COSTS AND MONITOR MARGINS...................................................................................................... 17 3.4 PRICE TO MARKET ....................................................................................................................................... 18 3.5 TREAT INFRASTRUCTURE AS BUSINESS ASSETS, NOT AS BALLAST ............................................................................ 19 3.6 HAUL MORE FREIGHT WITH LESS METAL ........................................................................................................ 21 3.7 DOWNSIZE AND UPSKILL ............................................................................................................................... 22 3.8 LINK TRAINS INTO SUPPLY CHAINS .................................................................................................................. 24 4 CREATING THE POLICY SETTINGS: FIVE WAYS GOVERNMENTS CAN HELP ......................................... 27 4.1 MAKE RAIL FREIGHT A BUSINESS .................................................................................................................... 27 4.2 LET THE PRIVATE SECTOR PLAY. ...................................................................................................................... 29 4.3 ENCOURAGE COMPETITION ........................................................................................................................... 32 4.4 DON’T LET BORDERS BE BARRIERS ................................................................................................................... 33 4.5 LEVEL THE PLAYING AND THE PAYING FIELD ....................................................................................................... 35 5 CASE-STUDIES.................................................................................................................................... 38 5.1 INTRODUCTION ........................................................................................................................................... 38 5.2 CHINA’S COMPREHENSIVE RAILWAY DEVELOPMENT PROGRAM............................................................................ 38 5.3 INDIAN RAILWAYS TURNAROUND PROGRAM .................................................................................................... 41 5.4 SUB-SAHARAN AFRICA’S RAIL CONCESSIONING PROGRAM .................................................................................. 43 ANNEXES ................................................................................................................................................ 47 ANNEX A: SOME EVIDENCE ON THE EXTERNAL IMPACTS OF RAIL AND ROAD FREIGHT .......................................................... 47 ANNEX B: STRUCTURE OF RAILWAY COSTS ................................................................................................................. 50 LIST OF ABBREVIATIONS ......................................................................................................................... 55 REFERENCES ........................................................................................................................................... 56 List of Tables Table 3-1 Freight customer mode choice criteria ................................................................................................ 14 Table 3-2: Some potential impacts of railway infrastructure on competitive advantage .................................. 21 Table 3-3 Impact of technology and management measures on employment levels......................................... 23 Table 4-1 Main conclusions of independent assessments commissioned by World Bank into railway privatization ................................................................................................................................................ 30 Table 4-2: Opportunities for private participation in rail freight provision ......................................................... 31 Table 5-1: Examples of management approaches applied in China .................................................................... 39 Table 5-2: Concessions of African Railways 1993-2005 ....................................................................................... 45 Table 6-1: Main factors affecting track maintenance and renewals ................................................................... 50 List of Figures Figure 2-1 Intermodal and multimodal. ................................................................................................................ 6 Figure 2-2: Distribution of world railway network and freight traffic by region ................................................... 8 Figure 2-3: Average route utilization (million tonnes/rail route-km) ..................................................................