Filling the Gap in Urban Transport: Private Sector Participation in Transition Countries
Z Kominek, European Bank for Reconstruction and Development, INT
The paper reviews private sector participation (PSP) in urban transport in central and eastern Europe. It identifies a negative link between GDP per capita and the degree of PSP and a positive link between the degree of PSP and the reform process.
The paper provides a comprehensive review of private sector involvement in urban transport in the 27 transition countries of central and eastern Europe and the former Soviet Union. It documents that the degree of private involvement has been proportional to the unreliability and dilapidation of the publicly owned fleet. Although at first the degree of private sector participation appears negatively related to the general reform process, quantitative analysis shows that, when controlling for resource constraints (approximated by GDP per capita), there is a significant positive link between the two. The analysis demonstrates the importance of resource constraints, which appear to be the key driving factor for private sector participation in urban transport. If entry is not prohibitively expensive, the private sector is quick to fill the gap formed by substandard public services. It is also very capable of recognising demand patterns and providing the price-quality mix of services demanded by clients, as long as it can support profitable operations. The analysis of various case studies and typical development of a municipal transport system in transition countries has also confirmed the importance of institutional strengthening of local authorities. This would assist them to competently manage the system and also identify the oversights of private sector service providers.
The paper fits into the broad literature on the determinants of privatisation and private involvement in the provision of public services. It extends the results obtained in the US, where decisions to involve the private sector in the provision of services traditionally provided by the state are often driven by resource constraints and general reform drive. It also confirms the international experience on the importance of fiscal factors in decisions to involve the private sector.
The paper also provides an interesting insight for the increasingly rich theoretical work explaining private involvement in different sectors traditionally dominated by publicly owned enterprises. While the theoretical analysis of the benefits of private ownership is likely to remain important, much more analysis needs to be devoted to short-term constraints, particularly of a fiscal nature. These constraints often push authorities to make decisions on private sector involvement without the benefit of relying on fully?fledged, long-term cost-benefit analyses or the support of developed regulatory frameworks.
Association for European Transport