The railway industry is an ever changing sector which needs constant updating and new legislations to function adequately and generate a more effective and active market. Therefore, the European Union strives to liberalize de sector and increase its competitiveness and efficiency. In this manner, there are many countries which have already evolved toward liberalization. Finland has been the latest country to embrace the new proposal.
The Scandinavian country is still studying what path to take to liberalize passenger railway transportation. Nonetheless, the Finnish Ministry of Transport is firm in its belief that without internal competition there is no way to evaluate neither the sector’s profitability nor its quality. For this reason, it is expected that in 2016 a new law will be approved to liberalize the sector. The legislation will terminate the exclusive rights of the state-owned railway company (VR Group) and will allow different businesses to propose projects on the management and optimization of the railway sector.
The Finnish Government wishes the process towards liberalization to be smooth, quick and efficient. To achieve this goal, the government must renegotiate the exclusive rights which VR Group holds until 2024. This potential setback has been settled with a four year agreement with the railway group. The company complies to provide basic public services and cutback on the least used railway lines. In this way, Helsinki Regional Transportation (HKL) intends to tender out the management of local train services once VR Group’s rights expire.
The process of liberalization of passenger rail transport in the European Union took off in the 80s. During that time, railway businesses were in trouble due to the loss of riders and an increasing dependency on public financing. Sweden was the first country to embrace transport liberalization and the experience was a success. The country enjoyed great improvements such as the reduction in both government subsidies and regional line costs. Over the years more countries have decided to liberalize railway transport. Germany is one of these countries who has been able to design such a successful system that it is now considered to be the third most liberalized country.
Germany opted for an integrated model. This means that the company that held the railway monopoly, Deutsche Bahn Ag, still has the right to participate in tendering procedures which it does through its branch DB Regio and it also controls the network with DB Netz. Likewise, the Länders (German regions) have created agencies which are in charge of local transport and have considerable freedom to organize and manage. All these elements make up a greatly advantageous and successful liberalization model.
The liberalization of passenger rail transport is an experience which has proven its efficiency and success. Riders will be the most benefited as they will have larger transport possibilities and a wider range of offers. What is more, liberalization has the potential to create new corridors in emerging countries and it allows transport operators to explore, manage and optimize railway lines that once belonged to public companies. Sweden’s and Germany’s experiences and currently Finland’s just come to demonstrate that liberalization is the future for rail transportation.