- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
Privatization and safety in transport
submited on 07.03.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 07.03.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
The most frequently used argument in defense of state interference in the economy is “the need” for guarantees for providing safety to the citizens. When we add to this also the understanding that some activities must be managed and maintained by the government, because they are “structure defining”, monopoly giants are being born, which most often accumulate losses, work inefficiently and sometimes become a field for human tragedies.
The transport infrastructure in Bulgaria (and to some extent inmost European countries) is public state property. Such are airports, harbors, roads, the railroad network. Apart from this here the railroad enterprise is a monopolist in the transfer of citizens. For now several initiail attempts for making a concession of harbors and airports have been made, and this has taken place in the recent years.
The picture of economic consequences is generally the following:
First, significant financing from the side of taxpayers. The reasons are two – low efficiency and attempts for pursuing some social policy via subsidized prices. Costs are paid vy everyone, not only by users of these “public goods”.
Second, these, managing the infrastructure, do not have stimulus to react to market signals. However, political goals are being pursued instead – renovations are being made not on the road that is most loaded, but on the road that leads to some particular point with special significance; The government maintains not railroads that generate highest revenue but those that guarantee that no line abolishment or closure of village stations will take place.
Third, the state management does not have incentives to provide qualitative service. This is brought up by the holes in the streets and the dangerous railroads or the non-working system for flight management under fogs in the Sofia airport. Even in the trivial characteristics of the service the private sector is doing better – this implies for example the comparison of the road signs and lights in private car parks or resorts with the one of state or municipal roads.
Fourth, the investment in safety under government ownership and monopoly is dictated solely by keeping regulations and fear of sanction. The client cannot “punish” the more careless by choosing the alternative – simply because there is none.
All these stimuli act in the opposite direction with the presence of private operators, the opportunity for profit and competition. Thus, for example, one concessionary of a railroad must provide the same road quality, justifying the toll-fee expense – otherwise the drivers will prefer another, better highway or a plain (and cheaper or free) road. The managed by the private investor must provide flights even if the meteorological conditions are bad, because it it does not, the fees would go to a competitive airport, which is closer and provides the same opportunities.
For now however the railroads are looked upon as a social program, not as one of the possible ways for transportation of passengers and loads, which must work on a market principle. The contemporary technologies allow for the railroad to be faster and better secured than the automobile and comparable to the air transport for short and medium distances. This is a market advantage, which a private entrepreneur could turn into a profitable business.
This however suggests a change in the management of infrastructure – allocation of investment in potentially profitable directions and liquidation of the losing ones. If fees from transportation are distributed proportionally between different parts of infrastructure, this will happen in a natural way.
The private operator will set its prices, its program and will take care of the free-riders. In order to attract clients, from which it will benefit (not lose, which is the case with the state-owned railroad company), it will make the service marketable, instead of turning its business into a social program for free or low-cost transport. And the good service includes security – the market shows that people in general are ready to pay for that.
The transport infrastructure in Bulgaria (and to some extent inmost European countries) is public state property. Such are airports, harbors, roads, the railroad network. Apart from this here the railroad enterprise is a monopolist in the transfer of citizens. For now several initiail attempts for making a concession of harbors and airports have been made, and this has taken place in the recent years.
The picture of economic consequences is generally the following:
First, significant financing from the side of taxpayers. The reasons are two – low efficiency and attempts for pursuing some social policy via subsidized prices. Costs are paid vy everyone, not only by users of these “public goods”.
Second, these, managing the infrastructure, do not have stimulus to react to market signals. However, political goals are being pursued instead – renovations are being made not on the road that is most loaded, but on the road that leads to some particular point with special significance; The government maintains not railroads that generate highest revenue but those that guarantee that no line abolishment or closure of village stations will take place.
Third, the state management does not have incentives to provide qualitative service. This is brought up by the holes in the streets and the dangerous railroads or the non-working system for flight management under fogs in the Sofia airport. Even in the trivial characteristics of the service the private sector is doing better – this implies for example the comparison of the road signs and lights in private car parks or resorts with the one of state or municipal roads.
Fourth, the investment in safety under government ownership and monopoly is dictated solely by keeping regulations and fear of sanction. The client cannot “punish” the more careless by choosing the alternative – simply because there is none.
All these stimuli act in the opposite direction with the presence of private operators, the opportunity for profit and competition. Thus, for example, one concessionary of a railroad must provide the same road quality, justifying the toll-fee expense – otherwise the drivers will prefer another, better highway or a plain (and cheaper or free) road. The managed by the private investor must provide flights even if the meteorological conditions are bad, because it it does not, the fees would go to a competitive airport, which is closer and provides the same opportunities.
For now however the railroads are looked upon as a social program, not as one of the possible ways for transportation of passengers and loads, which must work on a market principle. The contemporary technologies allow for the railroad to be faster and better secured than the automobile and comparable to the air transport for short and medium distances. This is a market advantage, which a private entrepreneur could turn into a profitable business.
This however suggests a change in the management of infrastructure – allocation of investment in potentially profitable directions and liquidation of the losing ones. If fees from transportation are distributed proportionally between different parts of infrastructure, this will happen in a natural way.
The private operator will set its prices, its program and will take care of the free-riders. In order to attract clients, from which it will benefit (not lose, which is the case with the state-owned railroad company), it will make the service marketable, instead of turning its business into a social program for free or low-cost transport. And the good service includes security – the market shows that people in general are ready to pay for that.
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