Transport policy – goods by rail
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2002
The way to an
open european
rail market
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Foreword
The Confederation of Swedish Enterprise views increasing growth and competition
as essential for the creation of a stable and affluent economy. Transport policy is
clearly an important link in the overall development policy. We know that Swedish
companies have the potential to acquire a larger share of the global market, enabling
Sweden to improve its position on international lists, which rank levels of prosperity
and competitiveness in different countries. However, in order to achieve this goal, a
change in public policy is necessary to stimulate economic growth. A modification
of the current tax system and tax base is considered an integral part of this transformation. Since the late 1980’s, a great deal of effort has gone into transforming the
Swedish rail system. Invaluable experience has been gained that can now be shared
with fellow EU members.
In the spring of 2002, the Swedish Shippers’ Council (SSC) discussed how to
improve the rail transport system in order to meet the demands of the business
community. The European Union (EU) has already initiated work on this transformation and it is clear that an effective transport system plays an important role for
international trade.
The next few years will be important in determining the future of the European
rail system. We have, in this document, identified a number of key issues that must
be addressed by the Swedish business community. We have proposed a framework,
a set of rules and prerequisites, as well as proposed resources for investments in the
infrastructure.
Stockholm, September 2002
Kenneth Ramberg
Confederation of Swedish Enterprise
Swedish Shippers’ Council
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Summary
• An effective trans-national railway system for freight transport is vital for Sweden’s
prospective to maintain a competitive position as an industrialized nation,
characterized by a dynamic and growing economy.
• EU’s ‘railway package’ has laid the groundwork for improving rail freight transport. Legislation concerning rail traffic and rules for official licenses and fees must
be harmonized throughout Europe.
• It is necessary to establish distinct and separate roles for the various actors on an
open European rail market. Rail operators should be responsible for the flow of
traffic, infrastructure managers should maintain the tracks, and regulatory authorities should establish a framework of rules equal for all players.
• The rules of competition applied to European railway companies must be the
same as the rules applied for commercial companies. Current exemptions for the
railway from EU’s rules of competition must be abolished.
• The Swedish National Rail Administration’s maintenance plan for the years 2004
– 2015, must be based on a corridor strategy for rail investments. Transport hubs
should be established, integrating various modes of transport to form a comprehensive Swedish freight supply.
• Investments in research and development aimed at the owner of goods within the
railway system need to be increased.
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Our Vision
The Confederation of Swedish Enterprise is working to attain
an open and effective European railway market. The goal is an
attractive and competitive railway, integrated in a trans-national chain of transport, built upon cooperation between various
modes of transport.
the need for cross-border transport increases, as business
becomes more international.
Over the past few years, companies from a broad range of Swedish industries (e.g.
steel, forestry, light consumer based industries) have taken initiatives to develop
solutions, where the railway works in close cooperation with other forms of transport – domestically, as well as internationally.
The railway system is ideal for the long distance transport of freight due to its
high level of ambition regarding frequency, precision, and capacity. This is relevant
for the transport of goods from Sweden to continental Europe, as well as for the
transport of raw materials and supplies from Europe for further processing and assembly in Sweden.
further development of the railway’s role
When the right conditions are created in Sweden and the rest of Europe, the railway
system will be well positioned to meet the high logistical demands for freight transport. To achieve this, it is essential to develop an efficient infrastructure and transport economy, along with technical and organizational development, and to establish well functioning rules and market conditions.
Together with other interested parties, Sweden can assist in accelerating this
process by taking a distinct and active role in the development of EU’s rail system.
The objective is to achieve an open, integrated, European railway market that ope-
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rates across national frontiers. Cost-effective solutions must be designed to meet the
high demands for sophisticated logistical solutions, such as reliability, safety, and
punctuality.
The rail system would cooperate with other modes of transport as a well-integrated part of a total transport network.
the railways must be integrated in the eu common market
The transformation of the rail system from a national monopoly, exempt from EU’s
rules of competition, to a matter of European interest and an integrated part of the
common market must be accelerated. The Confederation of Swedish Enterprise is
convinced that exemptions must be abolished that protect the railway from competition and hinder adaptation to the open market. All commercial companies must
work under equal and non-discriminatory conditions in the EU.
If the current trend of decreasing market shares in a growing transport market
continues, the role of Europe’s rail system will diminish. This would be a great disadvantage for Swedish and European industry, and therefore immediate changes are
necessary. There is a strong consensus among European players that a more effective
utilization of the rail system would make rail transport more attractive. Potential
problem areas have been identified and a large number of proposals for the revitalization and development of the European rail system have been presented.
Free access to the railway infrastructure for various players will lead to a more
effective use of railways as a mode of transport. It is in the best interest of business,
and society at large, that the conditions under which the rail market operates are fair
and non-discriminatory. The EU has proposed two railway packages that would
provide the prerequisites necessary for reforming rail transport regulations.
Sweden has been involved in the transformation of the railways for quite some
time. At the end of the 1980’s, Sweden developed a model where there is a clear
separation of infrastructure management from transport operations. This model has
been heralded as a trendsetter and has since been adopted by several other countries
in the EU. The basic assumption for the discussions at the Confederation of Swe-
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dish Enterprise has been that Sweden and the other Nordic countries will continue
to act as forerunners by opening the railways to other players in the transport market. Current discussions and analysis regarding organizational changes and changes
in roles and regulations, will set the stage for this transformation.
The Nordic countries can take a leading role by jointly developing a customer oriented, cost effective, and technologically advanced rail system.
They can serve as a model by developing joint standardization and harmonization procedures, beginning with standards for heavier and wider trains and new
rolling stock. Such efforts would serve as a concrete application of the main principles inherent in EU’s rail packages: An open, integrated, Nordic rail market for the
transport of goods.
railway legislation must be harmonized and modernized.
Swedish and European rail legislation must be completely harmonized and modernized. The basis for this must be the EU’s railway package, which was adopted in
2000, and followed by a second package presented by the EU Commission in January 2002. There are two essential starting points: The first is to achieve a complete
separation of roles within the railway sector – Infrastructure management, transport
operations, and regulatory supervision. Second, the railway must be made part of
the common market and subject to EU’s rules of competition.
The key point of this transformation is to achieve an increased interoperability
by coordinating safety, signaling, electric, and regulatory systems for all of Europe,
in order to facilitate cross-border rail traffic. The continuous addition of new laws to
existing legislation has previously led to uncertainty and interpretive difficulties.
The Confederation of Swedish Enterprise envisions a thorough alteration of
railway regulatory systems that would reject all inappropriate and outdated rules.
Current rules that are relevant for future development, would be harmonized on the
EU level and reorganized into a modern, comprehensible regulatory system. To
achieve this goal, a separation of infrastructure managers, transport operators, and
regulators, is required.
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operator network on the european rail market
The Confederations of Swedish Enterprise advocates a Europe-wide market network where a variety of operators are given the opportunity to pursue cross-border
rail transport based on equal and non-discriminatory conditions. This development
would be based on right of access to rail systems and broadening the definition of
the traffic operators to include shippers and freight forwarders, also known as
authorized applicants. As a result, Swedish tracks would be open for foreign traffic
while Swedish operators would have the opportunity to pursue freight transport on
the railway network of other European countries.
On the European rail market today, there are numerous mergers and alliances
taking place between well-established transport operators. One example is the establishment of Railion, which was formed by the merger of the freight divisions of the
German and Dutch railways. Deutsche Bahn is majority owner and has also purchased the freight division of the Danish railway. It is, therefore, essential to guarantee
the principle of open access for a great number of traffic operators. An ominous
scenario would be a European market totally dominated by one or two players.
Other rail operators would then function as feeder companies and the market would
be locked in an oligopoly.
The European Commissions Competition Directorate must follow competition
and development on the rail market closely to ensure that new operators are given
access to the rail network under non-discriminatory terms. The effects of mergers,
both on a national level and on a European level, must be examined. The emergence
of new barriers, hinders to the establishment of new operators, and trends leading to
monopolization must be prevented. As a members of EU, the Swedish and other
European governments must work towards developing comprehensive rules of competition, equal for all companies, which would obstruct tendencies towards the formation of monopolies and oligopolies.
the harmonization of rail fees ensures fair competition
As the Swedish business community becomes more international, the level of crossborder transport increases, as do the number of operators and infrastructure mana-
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gers. If the railway is to be considered a viable means of international transport, the
infrastructure user fee must be harmonized and non-discriminatory. The principle
of marginal cost must be the basis for infrastructure pricing. Long-term stability
should be the objective when establishing these principles.
Necessary harmonization of european authorities
To accelerate cross-border traffic, the authorities must simplify routines concerning
operators’ requests for access to rail corridors. Authorities must also expedite applications for certification of vehicles involved in international traffic. A vehicle approved for rail traffic in one member country, should be approved for traffic along the
entire EU rail network.
In 2002, IKEA initiated an important pilot project that signifies a breakthrough
for cost-effective cross-border rail transport. IKEA Rails has taken advantage of the
deregulation of European railways to establish cross-border freight traffic. A concerted effort was made to look at the entire chain of transport, in order to get an
overview of the situation and gain control over the pricing structure. This included
a description of costs for international rail traffic, as well as a description of the cost
drivers. These issues are important and relevant to all shippers and owners of goods.
IKEA’s project is yet another example of the inefficiency of current licensing procedures. The company has been forced to find a temporary solution for its shipments
from Sweden to Germany. There is currently no suitable electric locomotive on the
market that is able to function on the different electric systems in Sweden and Denmark and is able to meet Sweden’s safety requirements.
Infrastructure investments based on a strategy of
rail corridors
The Confederation of Swedish Enterprise is convinced that the railway’s greatest
potential as a mode of transport lies in developing integrated transport solutions
from a European perspective. The railway would work together with other modes of
transport as an integral part of a well-integrated transport system.
Therefore, a European perspective is vital and must be the basis for strategic
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decisions regarding development of the rail infrastructure in Sweden during the
years 2004–2015.
The Confederations of Swedish Enterprise has suggested a number of rail corridors in Sweden that should be prioritized for freight transport. The objective is to
achieve an effective, flexible, large capacity railroad that can meet the demands of
the Swedish business community.
In 2001, the Confederation of Swedish Enterprise presented a corridor strategy,
whose aim is to concentrate investments to a number of main corridors with transport hubs for integration with other forms of transport. Due to limited economic
resources, priorities must be based on potential for growth. The level of investments
in the Swedish infrastructure over the past few years has been exceptionally low,
considering the need for maintenance and new investments.
Sweden’s geographical location on the outskirts of Europe warrants a high level
of ambition for new investments and maintenance of the infrastructure. It is necessary to compensate for the long distances covered during transport to the European
continent. During the coming years, accessibility and capacity could be increased
on these main corridors by adhering to these investment priorities.
The proposed corridor strategies are based on increased cooperation between
the various modes of transport. A number of strategic locations have been identified
to serve as main junctions for various forms of transport. New investments in the
infrastructure, roads, tracks, terminals, etc. will be aimed at these junctions in order
to stimulate cooperation between the different modes of transport. These main junctions will serve as hubs for the influx and reloading of goods.
The strategic plan for the development and maintenance of the railway infrastructure that the Swedish National Rail Administration, Banverket, composes, must
include investments aimed at connecting transport corridors. It should also include
the various pathways that feed into them, for example, via ports and industrial tracks.
It is clear that close cooperation between the Swedish National Rail Administration
and the Swedish National Road Administration, Vägverket, is necessary. The Swedish National Road Administration must simultaneously develop a comprehensive
national policy for the development and maintenance of roads.
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The objective of developing a well functioning system of freight transport throughout Sweden, will be achieved through investments in combined transport via
corridors, hubs, and main junctions.
Investments in the rail infrastructure should be carried out by coordinating
planning and expansion, irrespective of regional divisions that currently exist in
the Swedish National Rail Administration’s organization. In line with this strategy,
the Swedish National Rail Administration has created a specific entity at its headquarters that will manage investments made in cooperation with the business community.
The Swedish National Rail Administration should prioritize the implementation of investments that were agreed upon by the government in the general investment plan for 1998-2007, but which have not yet been carried out. It has been
suggested by the Confederation of Swedish Enterprise, that the Swedish National
Rail Administration should also be given a specific budget for investments in the
infrastructure.
The Confederation of Swedish Enterprise has proposed a business oriented
investment package divided into several projects. A large portion of the funds for
maintenance and expansion should be made available to the Swedish National Rail
Administration without being earmarked by the government for specific projects.
The Swedish National Rail Administration would then enter upon agreements for
these projects with the business community. This method would allow the State to
manage the varying transport needs of business, i.e. in conjunction with the changing
needs for freight traffic as a result of structural changes. Agreements between the
Swedish National Rail Administration and representatives of the business sector is
a way of ensuring that agreed upon investments are carried out as planned.
Investments in the rail systems should be directed, so that it is possible longterm to separate different types of freight goods on different routes. The long-term
goal for the Swedish rail system is to separate passenger traffic, as well as light and
express freight, from the transport of standard and heavy freight. It would then be
possible to increase capacity, reduce susceptibility to disruptions, and improve the
quality of transport.
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the capillary rail network – ports and industrial tracks.
The capillary railway network is an important complement for feeding freight to
larger freight routes and junctions to avoid time consuming and costly reloading of
freight. The essence of the corridor strategy is to merge smaller freight routes with
the main routes, thus generating a larger, more efficient flow of freight traffic.
The need for improvements and repairs of the capillary railway network should
be an integral part of the Swedish National Rail Administration’s plans for a more
open distribution of funds intended for infrastructure maintenance and development. Including the capillary railways in the Swedish National Rail Administration’s
investments in the maintenance and development of the infrastructure, would meet
the needs of specific businesses or entire sectors for an advanced system of freight
transport and eliminate the need for re-loading.
pursue the deregulation of the railway in sweden
To achieve further development of the Swedish market for freight transport, it is
essential that numerous operators be given the opportunity to act in an environment of real, long-term competition. Therefore, an open European rail market where it
is possible to choose between different rail operators is a necessity. The Confederation of Swedish Enterprise would like to encourage the establishment of new rail
operators on the Swedish freight market. Foreign operators should be given the
same possibilities to establish themselves on the Swedish freight market as domestic
operators. Swedish freight operators should simultaneously be given the opportunity to run freight traffic on an open European rail market.
Sweden has come further than most other European countries in deregulating
the railway market, which has provided the state owned rail companies, SJ AB,
Green Cargo AB, and TGOJ Trafik AB, with invaluable experience and knowledge.
The benefit of having more experience with an open rail system offers Swedish rail
operators a competitive advantage vis-à-vis state-owned operators in other countries.
Simultaneously, the establishment of new rail operators has been limited in Sweden.
The deregulation of freight transport on the Swedish rail system occurred almost
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six years ago, and the acquisition of market shares by new freight operators is still
marginal. Green Cargo’s share of the market is over 90 percent. A number of new
operators, including several feeder companies, have evolved. Many have left the rail
market, and several feeder companies have gone bankrupt. Other companies have
been acquired or have closed down operations.
The Confederation of Swedish Enterprise is convinced that it is time to take
further action to stimulate diversity within the Swedish rail system.
TGOJ Trafik AB should be decoupled from Green Cargo and sold. This would
establish a new actor with a long history of rail transport, ultimately creating a more
dynamic Swedish rail market.
The next step in this process should be the sale of Green Cargo AB. There is no
reason as to why the Swedish State should own a company for freight transport by
rail. On the contrary, the sale of Green Cargo AB may lead to the creation of new
constellations on the European rail market.
An important prerequisite for this scenario is that the effects of mergers and
acquisitions of rail companies, in respect to competition, are examined in the same
way that mergers of commercial companies in other sectors are examined today.
research and development of the rail systems
An important ingredient in a collective Swedish strategy for freight transport is the
support for applied research among purchasers of transport services and shippers.
The Confederation of Swedish Enterprise believes that railway research currently
focuses too little attention on issues associated with the use of the railway as a means
of transport.
We believe that VINNOVA, as the official authority responsible for transport
research, and the Swedish National Rail Administration as the authority responsible
for R&D within the rail sector, should prioritize research with a focus on owners of
goods. Both authorities should also increase their involvement in disseminating research results of interest to purchasers of transport services and the owners of goods.
The introduction of new technology provides potential for increased profitability.
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R&D projects aimed at, for example, higher axle loads and new loading and wagon
profiles, should be designed so that new findings can be disseminated quickly and
easily throughout all of the EU.
technical coordination for cost effective freight transport
Implementing new technology within the railway sector is often associated with
difficulties, e.g. joining new locomotives and freight wagons with new bogies.
New technology is crucial in improving the railways’ profitability. It can be applied in many areas including cross-border transports, new universal locomotives,
higher axle loads, and the design of railway cars that are broader, longer, and lighter.
The rate of development is adversely affected by the norms for technical standards that were stipulated many years ago by the international organization, UIC.
Manufacturers also have a responsibility to respond quickly to demands for modern
rolling stock and to make universal locomotives accessible to the market at reasonable prices.
EU level agreements for standardizing new train technology are necessary. The
guiding principle must be that a vehicle approved for rail traffic in one member
country, is automatically approved for traffic along the entire EU rail network. As a
result, the market for rolling stock in Europe would be broadened. Production would
be standardized and volumes would increase, ultimately leading to lower prices.
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