NCPA - National Center for Policy Analysis

Rail Privatization Spreading

April 8, 1999

Rail privatization in some form is underway in 60 nations, says Joseph Vranich, author of "Derailed," a book critical of Amtrak, the American rail passenger service. Although there is no single rail privatization model, Vranich urges countries to ignore the bureaucratic model of Amtrak.

Competition is even coming to China, where the government is moving the monolithic, state-owned Chinese Railways toward competition and privatization.

  • When China freed air fares in November 1997, the railroads had to make massive cuts in fares because of the competition.
  • A privately-owned company, the Fujkui Group, will run cargo trains over rails owned by the Chinese Railways, offering faster service and much lower freight prices.
  • Chinese Railways has established autonomous operating units, such as the Guangzhou-Shezhen Railway Corporation, which is listed on the New York Stock Exchange, and the Sanshui-Maoming Railway; both tailor freight and passenger rates to market conditions and generate enough revenue to lure private financing.
  • China plans to build, renovate and electrify its railway lines with $30 billion in private investment in government-guaranteed corporate bonds, rather than cash subsidies.

China Railways has carried more than one billion passengers annually for years, but is gradually losing market share. The 11.4 billion auto travelers in China last year will increase by another 5 percent this year, and the 56 million who traveled by air last year could rise another 10 percent.

Similarly, rail is losing market share in Europe: in 1975, rail and air had equal portions of Western Europe's intercity passenger market, but today rail is half that of air. Trains now serve only about 7 percent of the passenger market, but the increasing traffic on high-speed and commuter trains has masked declines on long-distance trains.

Source: Joseph Vranich, "Transportation Competition: Railroads and Reform in China," Vital Speeches, February 15, 1999.


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