Select Committee on Transport Written Evidence


Memorandum by Central Japan Rail Company (FOR 118)

THE BREAK-UP AND PRIVATISATION OF JAPANESE NATIONAL RAILWAYS (JNR)

  There are three characteristics of the JNR privatization that may serve as a reference in comparison with the case in the United Kingdom.

  1.  At the time of JNR break-up and privatisation, JNR owned and operated a 20,000-kilometre conventional line network as well as a 2,000-kilometre high-speed railway network comprised of the Tokaido, Sanyo, Tohoku, and Joetsu Shinkansen lines.

  Almost 90% of railway passengers involved transport within the Tokyo, Osaka and Nagoya urban areas and the Shinkansen network, covering transport via an approximately 6,000-kilometre major artery network. Much of the infrastructure for these major arteries was recently completed and brand-new. The infrastructure for other routes as well was sufficiently modernised, with all infrastructure being soundly maintained and updated.

  Meanwhile, the result of the inefficient operation and active capital investment was an accumulated debt of 25.4 trillion yen for JNR. Adding the Japan Railway Construction Public Corporations construction debt and the lack of pension reserves meant a JNR related debt of 37.1 trillion yen. In the break-up and privatisation of JNR, in order to avoid a vicious cycle created from the interest burden of the enormous debts to thereby avoid hurting the mission of future railway, the three mainland JR companies were obligated to bear the burden of only 145 trillion yen, with the remaining 22.7 trillion yen taken over by the national treasury.

  The new JR took over the modernised and well-maintained railway facilities and rolling stock. The companies were launched with the mission of preventing future deficits, through a reduced interest burden and efficient operation. These efforts have been successful to date. The three mainland JR companies currently are using only fare revenue to cover operation costs, maintenance and update costs, and investments for modernisation, with an ordinary profit ratio of a little over 8%. The three companies make over 370 billion yen in tax payments and approximately 500 billion yen in capital investments. JR has not engaged in any new route construction.

  2.  The railway is characterised technically by an integration of suprastructure and infrastructure, which are comprehensively controlled, managed, and exclusively used to allow efficient operation. On the contrary, for expressways, the suprastructure and infrastructure are fundamentally independent. The infrastructure is publicly owned and operated, while the suprastructure is privately owned buses, trucks, and cars, with open access for everyone. It was a rational move for JNR to privatise by allocating all facilities per each line to one company.

  In the United Kingdom, the infrastructure, roiling stock, and train operation were separated, as a form of horizontal integration. Furthermore, open access competition was considered to be necessary to promote efficiency. This ignores the technical aspect of railway, as an approach that overemphasised abstract economic principles. There was a fundamental error in basing railway on the expressway model.

  3.  Railway transport demonstrates its fundamental capability only when track, signal and communication, electricity, rolling stock, train operation, and other engineers closely co-operate with each other to function as a single unit. Moreover, each technology is not multipurpose, but rather is cultivated through specific experience that is unique to railway. In addition, the engineers must be well-versed in on-site work and have sufficient skill to superintend experienced onsite workers. Consequently, based on the premise of long-term and stable employment, it is essential to nurture highly educated, specialised engineers and to cultivate a strong sense of loyalty, rigid discipline, and highly experienced skills among on-site employees. Excessive outsourcing causes accidents. It is a strong emphasis on human resources that serves as the foundation of railways.

Yoshiyuki Kasai

President

October 2003





 
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