VI Public Private Partnerships Sectoral Constraints/Issues Transport Services Management

1. VI Public Private Partnerships Sectoral Constraints/Issues Transport Services Management

2. Sectoral Constraints/Issues Management and Supply of Public Transport Services Alok Bonsal, Edward Dotson and Ken Gwilliam World Bank The views expressed are those of the authors and should not be construed as official World Bank policy

3. Key Benefit of Public/Private Partnership Global Experience shows that the most cost effective provision of good quality bus services is achieved from a public/private partnership where • The public sector retains responsibility for planning, management and regulation of public transport service provision • The private sector takes responsibility for public transport service supply

6. Public Sector Role • Overall service planning and coordination • Setting service standards – coverage, hours of operation, frequency, vehicles, drivers • Route licensing/franchising/competitive tendering • Fare setting and concessions • Provision of information on services • Infrastructure provision – terminals, stops, bus priority • Monitoring and enforcement of standards/service contracts

7. PrivateSector Role • Provision of services – at least to standards set by the public sector agency/contract • Provision of buses, including crews and maintenance • Provision of depots • Fare collection • Local and operational service planning and coordination • Adjustment of services within parameters set by public sector in response to market demands

8. Private sector supply of bus services worldwide • Latin America: public companies have failed in the period 1960 –1990 in Argentina, Chile, Peru and Venezuala. Supply is now almost exclusively by an albeit fragmented private sector • Eastern Europe and Central Asia: public companies remaining only in Budapest and Moscow • Africa: In sub Saharan Africa, only three traditional urban public sector operators remain, while in North Africa, public operators still exist in Algiers, Cairo and Tunis

9. Private sector supply of bus services in Asia • China – public sector operators, but largely coporatised and operating on commercial basis like the private sector with franchising and some joint ventures • Indonesia – most services provided by the private sector, within a very regulated framework that allows several types of service (regular, A/C, minibuses) but without competitive tendering • Korea – private companies dominate • Malaysia - private companies dominate • Thailand – in Bangkok private companies on contract to BMTA provide the majority of the regular services • India – largely old style public sector operation

10. Public Sector Responsibilities Government/public sector has to establish and maintain • A clear legal and regulatory framework • An Authority for planning, regulation, procurement, monitoring and enforcement • A mechanism for realistic fare setting & periodic revision • A competitive environment for service provision • Contractual arrangements with the private operators for repayment of fare concessions • Contractual arrangements with operators for provision of “social” or other services that are not commercially viable

11. Key Issues • Competition in the market or for the market • Types of competition - gross or net service contracts, management contracts, franchising, concessions • Getting the right framework • Getting the framework right • Setting fares and subsidies • Vehicle size, age and quality • Mode, service and fare coordination • Services for the poor

12. Competition Competition in the market or for the market? Where public/private partnerships are established, the competition is generally for the market, where the private sector firm competes in the market in one of several ways

13. Competition for the Market • Gross cost service contracting • Net cost service contracting • Management contracting • Franchising • Concessions

14. Getting the Right Framework • Achievement of lower costs, modal integration, appropriate subsidies and services for the poor is easiest with a small number of suppliers (franchising or concessioning), but • Costs are likely to be lower with shorter service contracts. • If the authority does not have the skills, then management contracts or area franchises may be best

15. Getting the Right Framework It is easier to operate a competitive system if there are already several operators of appropriate size and competence But If there is only one incumbent public sector operator, it can (over time) be split into several smaller competing units (as in London)

16. Getting the Framework Right • Political supervision of public transport separated from professional management • Service planning separated from service provision • Acquisition of procurement skills • Operations privatised or at least commercialised • Public sector operating units restructured in a form conducive to competition or subjected to strong competition

17. Fare setting and fare concessions • Fares have to be set at a level that permits that private (or public) sector operator to be financially viable on long run costs, including provision for profits. OR • The operator bids for a “negative concession” • Loss of revenue from concessions has to be reimbursed to the operator

18. Driver Behaviour Racing and on other forms of behaviour and holding back at stops and terminals to maximise loads – can be reduced by the public sector either not allowing competition for the market or managing it and the company not allowing the drivers to rent the bus on daily basis, and by monitoring operations on street.

19. Vehicle size, age and quality Vehicle size - operators should be allowed to choose vehicle size based on the service frequency standard and the market demand, unless there are road capacity reasons to limit bus numbers Age - should be limited, but more important, the contracts should allow for bus replacement Quality – emission and safety standards should follow vehicle regulations - contract payments should allow operators to operate quality buses

20. Mode, service and fare coordination Mode and service coordination - at at city wide level, the public agency has to ensure coordination, especially if there is competition for the market. But it is also in the interests of the operator as in the long run it will result in maintaining or increasing patronage. Fare coordination – a public sector activity – it will help to keep public transport affordable and maintain/increase overall patronage/public transport mode share

21. Services for the poor The best way to ensure services are available is to ensure the operations are financially sustainable The poor generally willing to pay for good reliable services Holding overall fares down to benefit the poor has been shown to reduce services and therefore reduce the mobility of the poor If the poor cannot afford the commercial fare, then competition by private operators for “negative concessions” is still more cost effective than continuing public sector operation

22. Constraints • Lack of political will – if the current public sector operator is seen to doing a good (albeit costly) job – why change? • Existence of large vertically integrated public operator with monopoly on service provision and staff in excess of international benchmarks for efficient operations – so need for reform and labour redundancy - adverse union reaction • Insufficient qualified staff for the regulatory unit • Lack of finance for private operators