Kallistratos Dionelis of ASECAP takes a look at transport infrastructure as a market product under public regulation
In the past a journalist had asked me whether free transport was a right for the modern citizen and whether environmental issues should affect the planning of transport scenarios.
Before answering I had to elaborate on the terms “state” and “citizen”. The social needs are not simplistic, mechanistic targets. A vision is always necessary to structure the future society. A chart with a policy scenario is always requested with well-identified objectives to pursue and – above all – a strategy to follow. After this priority is met, then, the necessary tools need to be found and properly used.
It is well recognised that in the present reality, into the world of scarcity, the State cannot any more play the role of the wise, benevolent strong monarch able to meet all the unlimited wishes of his subjects. In the modern world, the budgetary considerations become the key factor of defining the societal needs and preparing the phased approach to meet them. Much of the optimism of the past years has gone and the mood is transformed to a rather gloomy realism. Low economic growth and growing financial constraints are two factors to consider therein. The new era of the modern State leads to new definitions and to new questions. The new State, emerging as a two-fold entity, is the State of contradictions. In one hand we see the “State – wise politician” in permanent pursuit of social targets and priorities and on the other hand, the “State – hard manager” appears, knowing that the period of the fat cows is over and efforts are urgently needed to move its balance sheet from the red.
The policy makers recognise always the role of the transport to the socio-economic planning and stability, the economic growth, and the environmental protection. There are many endogenous parameters in the complex transport matrix, which will have to prove its worth as a well coordinated mechanism, serving the citizen’s needs. All these have to be seen not as theories, nor as a code of fixed principles but as a dynamic roadmap. Interpreting the term “transport” in a simplistic and purely mechanistic way calls these fundamental principles into question. The transport sector is not an end in itself but a tool used by the policy makers to meet their complicated social, economic and political targets. When entering the transport area, questions are raised in the form of priorities, implications, shortcomings and pitfalls.
Prudence and realism are requested. The society and its leaders were not always clear whether “growth” or “environment” were higher in their transport priority list. Without a common and fixed view on this, the policy shapers were never sure how to apply the transport instrument and to which direction. The situation becomes even more complicated when considering that this “priority list” changes dramatically when moving from one European region to another. This is mainly the answer to the question why the policy guidelines prefer to tackle the transport area in a fragmented manner. Infrastructure, safety, Intelligent Transport Systems, environmental requirements, taxation and charging policy, fair competition, congestion, etc.; all of them are important and vital parameters seen, however, separately in a fragmented way and not under a general well structured policy umbrella accompanied by a realistic action plan agreed by all the interested bodies from both the public and private sectors.
Why all these inefficiencies? The reason was a rather simple one. We did not know how to deal with transport. Perhaps we still do not know.
What is “transport”? Is it a public good or a market product? Or is it both? And if it is so, then, where “transport” stops being a “public good” and becomes a “product”?
In the areas of aviation, maritime, rail, even in the professional road side (the sector of the heavy lorries) the answer is easy and immediate: in these domains, transport is a market product. There are two professionals: the one who demands the product and the one who supplies. The one part of the market defines the product as a quality and as a price. The other part buys the quality of the product he needs, paying of course the proper price, i.e. the ticket.
In its great majority, however, the road sector has been considered as a sector serving the infinite needs of the free citizens! It is exactly here that the issue becomes complicated. The citizens – professionals, at a first glance, here become amateurs understanding as “transport supplier”. The state – obliged to provide all for free, and as demand – side themselves i.e. the “citizens” having the right to demand all for free. Unfortunately, in economic terms, both, “state” and “citizen” are not well-defined parameters. The link connecting the two entities is the “tax system” which – given its inefficiencies – is not always the most fair way to organise a modern State. In a rather simplified way, the society (also economically undefined term) believes that the “State” must spend ever more for the “public good” while “citizen” could and should always ask for more “rights” and “services”.
In the past, where the belief that “the state resources are unlimited” was the key factor, the above scenario was a functioning one.
The commercial aspect
One of the enduring peculiarities of the road transport sector was the fear of all the interested bodies to call the sector an “industry”. In our days, understanding transport as an industry is no more a sin. When addressing the road transport as an industry we already inject a realistic, market oriented, approach based on the eternal balance of power between the concrete and defined terms “supply” and “demand”. The commercial aspect of the road industry does not necessarily contradict the state’s priority to meet the citizen’s concerns and requirements. On the contrary, under the new market approach, the previously obscure and undefined political messages are now translated as clear and concrete socio-economic objectives. Terms like “social development”, “sustainable transport”, “harmonised network”, “harmonious development”, etc., stop being just qualitative messages of politicians and turn to become quantitative priorities of a State functioning as a modern manager, respecting the priorities of its citizens while translating them into real and well measured market requirements.
It is a fact that, in the past, the terms “public interest” and “private capital” were – in broad terms – mutually exclusive. However, the modern society and the developments in the Eastern area of the EU led to a new understanding that finally recognises that the “transport industry” can be both caring and profitable. It was a reality that the cumbersome, inexperienced and tardy public procedures –accompanied by the absence of a legal framework – were never attractive to the private industry, which faced with great concern the absence of any realistic possibility to manage efficiently the political, economic and financial risks in the road infrastructure sector. The Public Private Partnership (PPP) message is the first effort of the policy makers to better structure the new “modus operandi”.
Beyond big words and visions things remain always simple: a transport scenario, a social growth, an environmentally friendly and sustainable behavior need an infrastructure network to be materialised. Such a network must always answer to the objectives of the states and the policy makers. The state will always be the regulator, preparing the legal framework within which the market players will appear to compete and cooperate, designing a transport network, financing this network, building it, managing and operating its traffic flows.
What I described in the previous paragraphs is simple and has a name: it is called “tolling industry”. “Toll” is the fairest instrument to provide a socially oriented road transport service to the end users/drivers quantifying with concrete and well measured “performance indicators” what the politicians dress with words. “Toll” is the cost of the road service, the product that the driver is ready to consume, to buy using the given infrastructure network, paying the proper cost. The priority for the states and the markets is to safeguard that the fee paid by the users is the correct one, representing the real cost of the transport product they buy. This exact “fair pricing mechanism” is already included in all the future scenarios of the EU Bibles and White Papers, which – always environmentally friendly – underline that the “use of smart pricing” is the sole instrument to get where we want to get, by defining the real and external cost and benefits that transport offers to the societies.
Of course the fees collected by the infrastructure users are not tax, so they must not be directed to the pockets of the finance ministers to serve other priorities at the expense of the roads. Without serious investments and proper maintenance, the roads will stop offering to their users the same high quality of road service, measured as safety standards, appropriate speed, safe parking, free flow, etc. The fees of the tolls are always understood as revenues reinvested in the same infrastructure network in order to further upgrade the infrastructure and the transport service offered. This truth is well understood. And the issue in question is how to start building a realistic legislative framework in the transport area connecting the basic political objectives, reinforcing in parallel the institutional, technological and budgetary foundations and procedures, establishing clear, fair and transparent rules.
Use of technology
So far I intentionally kept out of my analysis the intelligent transport and the ITS acronym. GALILEO and standardised technology will be of course properly used in the future as instruments needed to support the road managers in their job, to manage efficiently and safely their roads, and the states to regulate the transport system. ITS will help motorway companies transform into useful interoperable information, data from their transport operations, from their business partners and from their markets. ITS is a source of profitable innovations in the way a company interacts with its customers and its suppliers. ITS is developing to the key tool for “real time traffic flow monitoring and measuring” and the tolling sector has defined the targets and invests accordingly.
In the following years the guiding principle of the legislative framework will be the opening – up of a greener and caring transport market. “Transport” will be addressed as a product, “mobility” will be realistically measured, “social costs and benefits” will be calculated, “greener transport” will be defined and “getting the right prices” will be essential. Opening – up of the transport market will be the guiding principle in the legislative framework. Transport will be generally recognised as the key factor in the modern global world, the modern society and its regional diverging micro-systems. The public machinery will of course be present, guaranteeing to all the rules of the game. If no action is taken, transport will remain a big obscure incognita creating a permanent contradiction between society (demanding ever more mobility), economy (working for more and more growth), public opinion (becoming increasingly intolerant of chronic delays) and environment (falling in a degradation spin).
Beyond the big political targets and phrases things are much simpler and the citizen/voter/road customer just wants a good transport service and value for his money.