Making the railways work
By Shahid Javed Burki
Monday, 01 Nov, 2010
THE Great Flood of 2010 not only killed a couple of thousand people, displaced millions of poor, also killed hundreds of thousands of animals on which the poor depend to generate some additional income, and laid waste to millions of acres of land. It caused an estimated damage of $10 billion to economic assets and will reduce the GDP increase by as much as one percentage point a year for several years to come.
The floods also exposed a number of weaknesses in the way Pakistan has been governed and the way it has managed its economy. Among these is the pitiful neglect of infrastructure that was built at great expense by the British rulers and from which the country could have drawn great benefit only if it had looked after what it inherited. In the days following the floods there was some commentary on the neglect of the system of irrigation but hardly any mention was made of the deterioration that has been allowed in the system of railways over the last many decades.
There are several reasons why successive administrations that have governed Pakistan since its creation allowed the well developed railway system to quite literally rot. One of these is the political power that was wielded by the rich who did not have to respond to the needs of the poor. The poor couldn’t afford air travel, didn’t have cars to use the roads whose development fared better than the railways in terms of the attention given by the state, and the state did not have the resources to invest in infrastructure.
Could this trend be reversed? The answer is “yes” but it will need those who rule to recognise that railways even now perform a major function in helping economies function and grow. Dozens of countries around the globe, both developed and developing, are heavily investing in improving the railways systems. Pakistan is not one f them.
A recent book by Christian Wolmar, a historian of railways, provides an overview of how the various large systems in the world were built and how they have contributed to economic advance. Railways, he maintains were the driving force behind the first age of globalisation in the nineteenth century. “Railroads let Kansas wheat farmers feed Manchester workers, and Indian cotton growers clothe Brazilian peasants. Railways drew those Irish and Chinese immigrants to America, and their counterparts from other countries to construction projects around the world.
Railroad-building enticed capital from developed to developing economies of the United States, India and elsewhere. Trains allowed people who might never have travelled more than 100 miles from their places of birth to roam around continents in comparative ease.” Railways, in other words, encouraged the movement of goods, commodities, people and capital to go to places where they would never have gone had the cost and pain of travel not been eased by them.
There are a number of management systems that have been tried in various parts of the world. In the United States, the business is almost entirely in the hands of the private sector in so far as inter-city transport is concerned. It is only the systems that run in the cities that the ownership is in public hands. In continental Europe the system combines government ownership with construction and maintenance largely in the hands of the private sector. This management model has given rise to large manufacturing companies that have dominated the sector before the recent arrival of the Chinese..
That the use of the management model can have profound – sometimes negative—consequences for the development of the railway system is demonstrated by the way the privatisation of the British system affected is efficiency. The impact of splitting up track from signalling, development from maintenance, management from coordination played havoc with the system.Today Britain is decades behind Continental Europe in terms of the efficiency of its railways.
The business of railways is changing and in dealing with the sector, Pakistan being a late starter in modernising the system, could possibly leap-frog into the future. There are a number of management systems that have been tried various systems of the world to improve railway transportation. In the United States, the business is almost entirely in the hands of the private sector in so far as the inter-city transport is concerned. It is only the systems that run in the cities that the ownership is in public hands.
That is largely because the operations are highly subsidised though taxes. In the Continental Europe, the systems combine government ownership with constuction, expansion and maintenance is largely in hands of the private sector. This form of management has given rise to large manufacturing companies that have dominated the system before the arrival of the Chinese companies on the railway scene – subject to which I will return later in the article.
It is the system of railway management in Europe that gave rise to equipment manufacture, track construction and maintenance behemoths such as Germany’s Siemens, United States’ General Electric, Japan’s Kawasaki, France’s Alstom and Canada’s Bombardier.
The Chinese have now entered the business of railways in a big way. Earlier this year China’s Xinhua news agency published a long article explaining how the country had “achieved 40 years of high speed railway development in just five years.” According to one analyst, the Xinhua “document should be read by all manufacturers doing business in China, a reminder that they are dealing with a nation that is no longer willing to be technology follower and is able to use the allure of its vast market to catch-up”.
As China did in several other sectors including coal and nuclear power generation and manufacture of automobiles it has granted access to its enormous market by insisting on the transfer of technology. It has managed to develop its railway industry to the point at which it was able to out-compete the established systems in Europe and North America in winning the contract to build a high speed line connecting Mecca with Medina.
India is also making impressive strides in the railway sector. The underground system in Delhi has won the admiration of many foreign experts for its engineering as well as management. The inter-city system is being modernised in terms of both the quality of service on offer as well as the new equipment being used.
The Indian and Chinese systems are by far the largest in the world and the two countries as a result of the advances they are making will come to dominate the world railway industry and business. Pakistan being a neighbour of these two rapidly growing and giant economies could benefit enormously from the development of the two systems.
Pakistan needs to move quickly and ambitiously in at least three areas. It should modernise the system by improving the track and increasing the speed at which the trains travel. It should use the railway system to provide mass transport in the major cities. And it should link its system initially with those of China and India but eventually also with those of Afghanistan and Iran. That way Pakistan will be able to make good use of its geographic situation.
As I have suggested on many occasions before, giving India the transit rights to Afghanistan, China, and Iran could yield enormous economic benefits to Pakistan. Such a programme will require large resources to be implemented but these should be available not only from the donor community but also through the international bond markets. As Wolmar describes in the work cited above, some of the major railway networks were built by tapping the international financial markets.