Privatisation of public transit: lessons from the wider experience

Abstract

Road-based public transport internationally is increasingly exposed to the economic elements of competition, private ownership and tendered operations as part of a strategy by governments to improve the efficiency of service provision and reduce the level of explicit subsidy from the State. The experience with increasing exposure to competition and privatisation is not limited to the passenger sector. In the United Kingdom for example, electricity, telecommunications, water and gas utilities have been privatised and opened up to competition. There are plans in progress to privatise the railways and the postal service. This paper reflects on the experiences to date across the set of utilities. The lessons for government, the role of efficiency objectives, exposure to capital markets, the weak bankruptcy constraint in the public sector, exposure to competition in the product market, price control, and the promotion of competition are addressed. The evidence has a direct bearing on future strategies for public sector transit agencies.