In parallel to this spending, the Turkish government also seeks to reform Turkish State Railways (TCDD) to ensure the huge sums being pumped into the network are accompanied by an efficient industry structure. According to Dr Göktug Kara, sector manager, transport policy for the EU delegation to Turkey, the main historical problems facing Turkey's railways were low market share; low network density, with low usage; substantial annual losses; and an obsolete organisational model.
The legislative response to these issues is largely based on European-style vertical separation. In March the government presented a bill to parliament which will break up TCDD, creating a separate infrastructure manager and train operator (dubbed Turktren), preparing the freight unit for eventual privatisation, and allowing open-access operators to use the network. In preparation for this, a rail regulator was established October 2012 under legislation approved by parliament in November 2011, and a safety authority has also been set up.
At this early stage, it's difficult to predict whether the regulator will have the teeth to ensure a level playing field. Experience in Europe shows anticompetitive behaviour is a recurring problem in countries with poorly-resourced regulators.
The new legislation will seek to establish a transparent financing system for TCDD, and will include bridging loans for the incumbent's freight operations as they undergo restructuring with the eventual aim of achieving profitability. This measure is intended to make railfreight more competitive and supports the government's objective of increasing rail's share of the inland freight market from 5% to 25% by 2023. For the passenger business, the legislation also proposes public service obligation contracts for regional services.
Depending on when the bill becomes law, operations and infrastructure could be split as early as next year, and the first private operators could be running trains by the end of 2014. "Once the law is passed we need to fearlessly push on with the process," Kara said at EurasiaRail. "The process is fragile and could still be interrupted. Turkey will be the first to suffer if that happens, and the government needs to learn lessons from EU member states on liberalisation of the rail sector."
The proposals in the bill reflect Turkey's accession to the EU and if adopted and fully implemented will go a long way towards aligning Ankara with Brussels on rail policy. EU institutions have played an active role in this process and for several years have been working closely with the Turkish government. Between 2005 and 2007 the EU provided €4.3m towards the Turkish Rail Sector Restructuring and Strengthening Project, which focussed on developing a sustainable long-term structure for the railway.
By committing to a programme of reform, Turkey has unlocked much larger grants from the European Union and loans from the European Investment Bank (EIB), supporting infrastructure projects such as the Ankara – Istanbul high-speed line.
Clearly restructuring is needed to enable the railway to operate as efficiently as possible and generate the best economic return on the vast sums being ploughed into new infrastructure by the government. But this is a process that doesn't end with a bill becoming law, and vigilance is required to ensure reforms are effective and properly implemented. As we have seen too often in Europe, liberalisation has not always brought properly resourced regulators, fair access to infrastructure, or transparent accounting.
Furthermore, the recent ruling by the European Court of Justice on institutional separation between infrastructure and operations and the concessions on holding companies included in the Fourth Railway Package demonstrate that after 20 years of restructuring, Europe itself has yet to nail down an effective universal formula for liberalisation, let alone one that satisfies the divergent demands of member states.
Against this backdrop, one might reasonably conclude that Turkey is adopting the best solution available at present – one that will move the country's railway on from the monolithic and inflexible structure of the past while also sending a clear signal to Brussels that it sees the system as an integral part of the European network. But as in Europe, achieving a successful transition will be a big challenge for the industry, and the government will need to monitor progress closely if reform is to deliver its desired objectives.