From the economic point of view, liberalization means the mitigation of legal constraints on public services which are enforced by the State (Brose, 2015). In this case of liberalization, the public assets such as premises, services, lands and organizations usually transferred or sold to private or voluntary sector. As to the former regulations of the railway system in Europe, the State Railways of the Member States used to govern the railway infrastructure and train services under an
extensive monopoly. Therefore, through the liberalization and deregulation, railway market has opened to private companies, in such a way that allows competition. On the other hand, if the railway infrastructure has opened to competition, superfluous infrastructure would be built due to the competition between companies, which would also lead to irrelevant investments. That is why it is feasible and realistic to promote competition just in transport operations.
The term “yardstick competition” refers to the competition between a state company and a private one (Brose, 2015). In yardstick competition, since the agents (i.e.
railway companies within the scope of this study) are granted low incentives in order to encourage productivity, there is a poor or no competition. In this regard, the agents are subsidized by the public authority based on their performance in comparison with the other agents that are engaged in the same field (see Figure 2.5) (Nash & Rivera-Trujillo, 2004). After the yardstick competition is achieved, franchising can be implemented according to the operation type of the railway (passenger or freight).
The European Union member states generally use the franchising system for passenger transport. The UK has become the most significant implementer of this system from the mid-1990s.
Figure 2.5. Degree of Competition-Degree of Separation (Nash & Rivera-Trujillo , 2004).
Railway franchising means that the passenger or freight transport operations are assigned to the private companies, following a competitive public tendering, by the state, via granting the licenses for operation under a contract. To put it another way, State as a franchisor provides privilege of passenger or freight transport to Private companies as franchisees. Similar developments to those in the railway sector can be observed in the field of civil aviation in terms of franchising. For instance, a well-rooted owner of airports and the competition among several airlines. Following the successful implementation of liberalization and deregulation processes, privatization and marketization processes can be realized.
“Privatization”, which is closely associated with liberalization but a separated term, means that the possession of a public entity is transferred from state to private sector.
In case of railway market liberalization, private companies are granted access to the railway network which is under the monopoly of state before. On the other hand, marketization refers to the process of restructuring, allowing for imposition of market forces upon the public services, in which the planning, provision and financing have conventionally been performed by state.
Considering the literature review and experiences from the selected countries, it is seen that the European railway undertakings have experienced lack of efficiency in management and poor perspective on trade and financial losses for the most of 20th century. As a consequence of this situation, the EU Member States have made reforms on their national railway sector based on the railway packages of the European Commission. Some of the objectives those reforms tried to achieve are summarized as follows (Brose, 2015):
• Decreasing the requirement for the state subsidies and elimination of corporate debts (Nash, 2008),
• Allowing third parties access to the rail infrastructure and hence improving the efficiency or railway system (Wetzel, 2008),
• Separating the infrastructure management from the train services and hence improving the competitiveness,
• Establishing independent railway supervisory and regulatory authorities for allocation of capacity and access to fundamental facilities.
Railway undertakings around the world utilize three basic model for their company structure: Government-owned monopolies (e.g. Russia and India), private-vertical integrated companies (e.g. USA and Japan), and separated infrastructure manager and railway operator companies (e.g. European Countries) (Nash, 2016; Tomes, 2017). When the liberalization studies in European countries are examined in depth, it can be better understood how this structuring has or could have consequences. For the revitalization of railways, the EU Member States have begun to reorganize their rail structures in accordance with EU legislation, following the EC Directives, which separate accounting systems of railway infrastructure and operations and include four railway packages, between the period of 2001-2016. However, there have been significant differences between countries in practice. These differences can be seen in Table 2.1.
In general, countries have adopted one of two organizational structures: horizontal separation, which separates the rail freight transport and rail passenger transport from each other by several vertically integrated networks, and vertical separation, which separates railway infrastructure management from railway transport services and allows multiple private railway operators to access the network (Pittman et al., 2007;
Pittman, 2011).
When the vertical and horizontal structures of European railway systems are reviewed in depth, the following changes can be observed: Vertical separation of the railways have started with EC Directive 91/440, which separates railway infrastructure and train services in terms of management and account keeping. After the adoption of EC Directive 91/440, most of the EU countries have implemented the Directive in two steps: firstly, establishing separate managements for both rail infrastructure and rail operations and secondly, a complete vertical separation of former state monopoly. Sweden was the first country that fully implemented the separation of rail infrastructure and rail operations back in 1988; when former state
monopoly (Swedish State Railways) split into two independent entity as Banverket, which maintained the rail infrastructure, and Statens Järnvägar, which operated passenger and freight trains. As of 2005; Italy, Ireland, Austria and Belgium are still utilizing the vertically integrated structure for their national railway systems (Cantos, Pastor, Serrano, 2010).
Table 2.1 Separation Model for EU Member States (Aslan, 2012)
Regulation
Type Category Member States
Case A Fully independent
However, reforms towards the horizontal separation of railways are rarer. Except for the case of Great Britain, where a comprehensive railway restructuring process took place, various changes have been emerged as a result of horizontal separation of railways. For instance, the Netherlands have horizontally divided its national railway system and introduced tender system for its passenger services in different regions as well as provided third party access for the freight sector. Similarly, Sweden has utilized tender system for passenger services in 1989 and has opened its freight sector
to new operators in 1996. Accordingly, Denmark has permitted private operators to access its freight network in 2001, whereas Norway has divided its railway freight and passenger operations in 2002 (Cantos, Pastor, Serrano, 2010).
In order to examine structural changes more holistically and to draw an analysis on their results, it will be useful to examine the railway reforms in European countries in a historical integrity. The details of the reform-studies on railway liberalization in European countries and the consequences of these works are discussed. In this context, the developments emerged as a result of railway reforms in Sweden, which showed a significant improvement in rail transport after liberalization, as well as in United Kingdom, which is a different country in terms of transport between countries and regions due to being an island country and experienced some negative impacts after liberalization, are discussed. In addition, the consequences of railway reforms in Germany, which came to the forefront in rail transport in Europe by adapting a holding structure after liberalization, in France, where the reunification issues on the railroads came to the fore as a result of the fluctuating developments after liberalization, and in Italy, where reform work is progressing very slowly and still cannot give up the traditional model, are addressed. In this context, the developments emerged as a result of railway reforms in Sweden, which showed a significant improvement in rail transport after liberalization, as well as in United Kingdom, which is a different country in terms of transport between countries and regions due to being an island country and experienced some negative impacts after liberalization, are discussed. In addition, the consequences of railway reforms in Germany, which came to the forefront in rail transport in Europe by adapting a holding structure after liberalization, in France, where the reunification issues on the railroads came to the fore as a result of the fluctuating developments after liberalization, and in Italy, where reform work is progressing very slowly and still cannot give up the traditional model, are addressed. There are also other remarks stated on the literature as key comperative points mainly focus on the freight transportation;
• Deregulation Experience as of 2020 (years)
• Type of Seperation
• Franchcising or State Owned (Freight)
• Number or Passenger Operators
• Number or Freight Operators
• Number of Total Employee
• Total Number of all Rolling Stock
• Volume of Tonne*Km
• Revenue per ton.km
• Train Km per Employee
• Modal Share (Freight)
CHAPTER 3
3 RAIL FREIGHT TRANSPORTATION IN TURKEY
In this section; overall position of the freight transportation, railway network, existing rolling stock types and characteristics of the transported goods are addressed from Turkey's perspective.