Tashkent, Uzbekistan (UzDaily.com) -- The Japanese railway system is one of the most developed in the world, with a total length of 30,625 km of railway lines. Rail transport occupies an important place in the transport system and economy of Japan. Railways account for 25% of domestic passenger traffic and 10% of domestic freight traffic. Overall, Japan’s high-speed rail lines are the second largest in the world in terms of traffic.

The Japan Railways (JR Group) group of companies operates in the railway sector of Japan, which consists of 8 private companies. Other private railway companies also exist.

The JR Group forms the backbone of Japan’s railway network. It accounts for a large share of intercity (including high-speed lines) and suburban rail traffic. This group of companies was established in 1987 through the transformation of the state-owned company Japan National Railways (JNR).

Such performance of railways in Japan is the result of reforms that allowed private capital to be attracted to the railway industry. So, before the start of the reforms, there were several systemic problems in this area that led it to unprofitability:

1. The government and individual politicians interfered in the management of the JNR. For example, they put pressure on the construction of unprofitable new lines.

2. The JNR administration was not autonomous. For example, the budget, staff and salaries were determined by Parliament or the Cabinet.

3.The management has been standardized. Key issues such as tariff levels, schedules and station locations were dealt with centrally, and local conditions and requirements were taken into account.

4. There was no coordination between managers and workers’ unions. The unions were ignorant of the company’s costs and demanded benefits without considering further consequences.

5. The size of the organization and the bloated staff were not amenable to effective managerial control.

6. Managers and employees lacked awareness of what competition is, because such a system did not exist.

Japan’s railway sector reforms contained the following key points:

Competition has been introduced. First, by dividing the national company into several private ones. Secondly, through the parallel development of other modes of transport. Thirdly, by pricing. Thus, the railway companies had sufficient motivation to increase profits.

The excess staff was reduced. To address the issue of excess staff (277 thousand people), the government adopted a special law that ordered the various national sectors to actively contribute to the issue of employment. As a result, 203 thousand people were employed by the new railway companies, while the rest changed jobs or retired.

In addition, a clear separation of functions and operational responsibilities was introduced. This has helped achieve smooth, efficient and safe rail operations.

An impetus was given to the development of affiliated business. As passenger companies were motivated to develop their market segment, they began to engage in affiliate business, actively using and developing space in and around stations. In particular, they mastered and began to receive additional profit from the management of hotels, real estate development projects, including commercial and residential, located near major railway stations.

As a result of reforming the industry, traffic volumes and productivity increased, which allows us to consider these reforms quite successful. For example, if in 1987 the Japanese Railways transported 7.4 billion passengers, then by 1991 the figure had grown to 8.7 billion passengers (an increase of 17.5%) [5], and in 2019 - 25.1 billion passengers (an increase of more than 3 times).

Thanks to the reform, railways in Japan have little need for subsidies from the central government. For comparison: in 2016-2017. the UK government subsidized the national railway with £4.2bn and provided £5.7bn in loans.

Conclusions for Uzbekistan

In the field of railway transport in Uzbekistan, it is advisable to introduce the principles of PPP to improve the railway infrastructure, build new and modernize existing lines, create conditions and incentives for updating the fleet of freight and passenger cars, and radically change transport services, including in railway stations and stations.

It is also advisable to involve private capital in the construction of second tracks along single-track sections, the construction of new and the modernization of existing marshalling yards and access roads.

State support for PPPs can be provided not only in the form of asset transfers, initial investments and long-term service contracts, but also in the form of tax incentives. A typical railway PPP transaction is the construction and operation of a branch line or city rail to an airport. The government can provide the land, and the private operator will build the line and provide services for the duration of the PPP agreement and assume the associated risks.