Queensland - a chance to get it right
In a not altogether unsurprising move the Queensland Government has announced that it will seek to privatise all of its rail freight operations. It says this is part of its response to a $14 billion revenue loss in State income over the next four years resulting from the global recession. The rail sale forms part of a broader range of asset sales which also includes the Abbott Point Coal Terminal.
Mark Carter
By Mark Carter
The proposed sell off will initially focus on QR’s above and below rail coal businesses while the Government investigates the options for the sale of QR's bulk freight and regional freight services which, through its ownership of Australian Railroad Group, includes similar services in Western Australia.
QR’s country and metropolitan passenger networks will remain in Government ownership while negotiations will commence with the Australian Government for the sale or lease of QR's regional non-coal, non-metro, below rail network to Australian Rail Track Corporation (ARTC).
The Government says the asset sales will be progressed over the next three to five years, noting that the timeframe recognises the complexity of the process and the need to prepare detailed plans on the sale structure.
And complex it will be. QR has been moving progressively to separate its above and below rail operations for a number of years. QR has long argued that its commercially separate, but physically integrated infrastructure model is the only way to go and no doubt vested interests will be reluctant to see this model broken down.
While the rest of the country has been dealing with on rail competition in one form or another for over a decade, it is only this year that competition has evolved on the Queensland coal haulage market.
It will be interesting to see how the sale will be structured and whether a bidder for above rail assets will be allowed to bid for below rail assets. The Government is suggesting its approach will be flexible and says for example, that an integrated sale could offer the Goonyella and Newlands systems along with the sale of Abbot Point Coal Terminal.
Of course the miners, already smarting from the fact they will now have to pay ‘upfront’ for infrastructure upgrades, will no doubt have much to say about how they access the infrastructure in the future.
Asciano, through its Pacific National (PN) subsidiary, will also be eyeing up its options and wondering where it goes from here. Despite its current financial predicament it would be likely, at the very least, to partner another entity in bidding for some of the above rail assets. It remains to be seen though, how any current uncertainty will affect its planned expansion in the Queensland coal haulage market.
It is also unclear as to how hiatus will impact upon investment associated with QR’s ongoing expansion into the national intermodal and bulk haulage markets.
Despite some of the comments to follow, privatisation of QR’s freight business is long overdue. No matter how transparent and corporatised people say things are, for me there has always been something a little unsettling about a government owned rail operator competing alongside private sector operators.
While the coal business will have the cash flows and structure to survive what ever the outcomes, this is not necessarily the case in relation to the sale and survival of the regional rail businesses in Queensland and Western Australia.
In fact it is a bizarre irony that the fate of regional rail freight services in Western Australia rests on the outcome of the sale of the related assets to the private sector by the Queensland Government.
Current events affecting rail freight services in Tasmania and Victoria, and grain lines in Western Australia demonstrate that privatisation of rail assets can have major failings. It is easy to point the finger at the private sector for much of this, but with some creative thinking from governments as part of the initial sale processes, some of these failures could have been easily avoided.
One would hope that the extended three to five year time frame does provide the Queensland Government with an opportunity to avoid repeating the mistakes of the past. Unfortunately its track record is not good with it already showing that it will stand idly by as substantial rail flows are lost to road.
It seriously needs to consider the safeguards it can put in place to ensure the retention of those marginal and semi-marginal rail traffics where there is an obvious community benefit to be had and to prevent asset stripping of previously publicly funded assets.
Is it wise?
Queensland has suffered from its historical rail layout.
Apart from the Townsville-Mt Isa line, the lines run west from the coast to waypoints of insignificant consequence and as the low frequency traffic moves west, so does it diminish.
But the tracks must of course be maintained at some cost.
If a new SG line were built from Tennant Creek east via Camooweal to Cloncurry, certain changes would take place.
First, rail tourism in the outback, both in Queensland and the Northern Territory would take an upward leap, and second, the way would be open for containers arriving at Darwin to be railed through to Brisbane and Sydney rather than via Tarcoola. Containers? What containers?
In April this year, the last gap in the line from London to the Indian sub-continent was built in SE Iran. This is an historic development. Standard Gauge to the Pakistan frontier and Broad Gauge thereafter for the Indian sub-continent.
The next move will be for Indian Railways to build from Silchar east via Imphal and then south east to Tamu on the Myanmar frontier. The Chinese meantime are building from Kunming to Lashio in Myanmar.
These two lines, like the arms of the letter ‘Y’, will bring countless containers into Myanmar and thence south to Singapore Island on the existing metre gauge line.
In time this line may well be converted to SG if the traffic so warrants - as it almost certainly will.
The ‘knock on’ effect of this flow of container traffic could well be the establishment of reciprocal container shipping services between Singapore and Darwin.
It is manifestly illogical to send containers from Darwin bound for Brisbane via Tarcoola Junction and Sydney. Even containers for Sydney would be better sent direct via Cloncurry and Bourke if there were a line in place.
The line from Darwin via Tarcoola to Adelaide is fine for containers to Perth, Adelaide and Melbourne, but less satisfactory for containers bound for east coast destinations.
For Queensland to sell off substantial chunks of its system may be precipitate in the light of these pending developments in SE Asia. Sometimes when a system is losing money, it can pay to invest more, rather than to sell off assets.
It took Australia long enough to build from Alice to Darwin, but as a result all the mainland state capitals are now linked by rail. More traffic can be drummed up if desired. An example might be reciprocal cruise ships operating between Darwin and Singapore – a week of luxury in the tropics – calling for a day at Bali en route!
What is now needed is a line between Queensland and the Northern Territory.
It will cost money and take time. Readers may care to be reminded of the question “How do you eat an elephant?” to which the answer is “One bite at a time!”
The Tennant-Cloncurry line construction could be spread over say 5 years with 20% of the required funding being produced each year.
Meantime it seems imprudent to sell off chunks of QR while apparently oblivious to what is going to happen up in Australia’s ‘Near North’ plus the potential of rail tourism.
What is needed is a little foresight and a little imagination.
The government of Queensland may be doing the right thing, but what if it is wrong?
New Zealand made a dreadful mistake in selling off its system, and ended up having to buy it back at a loss. Presumably we would not want to see this particular history repeat itself in Queensland.
Once everything settles down, the next stage is an SG line from Cloncurry South-by-east on an alignment via Mayneside and Bourke to Narromine Junction.
The ‘fork lines’ could be extended west short distances to meet it.
The Rockhampton-Longreach line rather quickly to give access to the Northern Territory at SG from Mayneside, and thereafter the other lines at a more gradual pace.
Later the fork lines could be slowly and sequentially converted to SG.
The bottom line cost will not be cheap, but remember how you eat an elephant!
Roger Lascelles is a New Zealander living in London. For some 35 years he was a publisher of international maps and travel guides and he has been interested in railway strategies during the last 10 years. He is involved with the Bering Strait Tunnel proposal recently endorsed by Russia. He is also pressing for a faster transit south of Budapest to Istanbul and across Turkey on the line to India. He is convinced of the importance of SE Asia in Australia’s future railway planning. As for North America he says “Don’t get me started on the three lines radiating out from Vancouver. They constitute classic mismanagement but will be overtaken by events.”