Railway policy-makers have reiterated the sector will usher in more non-government investors to speed up its development. But so far there is a lot of talk but not much action.

The latest promise was made by high-ranking railway ministry officials and national policy-makers attending a forum that concluded yesterday in Beijing. They pledged the sector will experiment with a floating pricing regime, introduce a shareholding system and create more channels for non-State investment.

They do not only make promises, of course. The authorities have also been preparing for bolder reforms of the property rights management system that are currently in the pipeline.

The railway sector started in 2002 to establish passenger transport companies as the first step to separate railway network and transportation management. In 2003, the sector began to spin off non-transportation assets, such as schools and hospitals, to streamline its payroll. At the end of that year, three freight companies were established to prepare for partial listing of the nation's railway assets.

In March, the Ministry of Railways cut one tier off its previous four-level administrative management system in a bid to improve efficiency.

Reforms also include the controversial price hikes for passengers travelling during peak seasons, which fail to divert passengers but have led to a soaring number of complaints.

It is therefore unfair to accuse the ministry of sitting idle facing increasing market demand as the economy steams ahead.

The problem is that being marginal, none of the reforms has got to the heart of the matter. The current fatal drag on the sector is its management, which is administrative rather than corporate.

The ministry remains both industrial rule-maker and operator of the huge enterprise with assets valued at 500 billion yuan (US$61.7 billion). As the government has withdrawn from the telecom, power and petroleum sectors, the railways have become the last bastion of State monopoly.

With the administration being both player and umpire, it is unlikely that non-State investors will find themselves on a level playing field.

A key step should be taken to separate government functions from corporate management in the sector. The ministry must retreat to play a neutral role in the operation of the sector - masterminding its development blueprint, ensuring fair competition and preventing monopolization.

Without that key reform, it will be hard to keep the repeated promise of creating a favourable environment for outside investors.

We have little time to lose now that railway transportation has become a bottleneck for economic growth.

The network can satisfy only 60 per cent of demand during peak times, affecting power generation, agriculture and other sorts of production as raw materials and fertilizer cannot be carried to their destinations in the quickest possible time.

Widespread overloading on the highways also demonstrates the urgent need to reform the railways to enhance freight capacity.

At least 100 billion yuan (US$12.3 billion) is needed annually to expand the rail network from the current 73,000 kilometres to the planned 100,000 kilometres by 2020, according to the latest national blueprint. This is an unaffordable burden on public finances; the State cannot put up all the money.

Experts estimate less than 1 per cent of railway investment has come from the private sector in recent years.

Without a major reform of the management regime, investors will not swarm in to fill the gap.

(China Daily 09/22/2005 page4)