Reform of railway ministry a complicated issue

Reports say the Ministry of Railways is to be integrated into the Ministry of Transport in the central government’s next round of ministerial-level department reforms. It will be a very complicated reform because of the rail ministry’s huge debts, according to an article in the 21st Century Business Herald.

Here are excerpts:

By the end of the third quarter of 2012, the Ministry of Railways’ debt was about 2.66 trillion yuan ($422 billion) and its asset-liability ratio 61.81 percent. The ministry’s overall annual investment in 2013 will be 520 billion yuan, compared with 516 billion yuan last year.

The National Development and Reform Commission has defined the China railway construction bonds issued by the ministry as government-supported bonds.

As enterprises affiliated to the Ministry of Railways will finally be separated from it, the problem is how to define the nature of the bonds after the ministry disappears, because the debtor — the ministry — and the beneficiary — the railway enterprises — will be separated.

The ministry-level department reform is to mark the borders between government and market. Reform of the railways ministry should not create another blurred border. It has been suggested that the ministry’s debts should be separated among several enterprises. Also, the government-supported bonds should be transformed into government debts.

The key to solving the debt issue lies in transforming the Chinese railways investment and operating model, and improving the rail system’s competitiveness and efficiency. More private investment should be encouraged and more markets in the rail transport sector should be opened to non-State-owned enterprises.