Assessing Regulatory Policy
Many indicators of national road transport performance can be defined to assess costs, efficiency and level of service of road transport, but in practice adequate data are rarely available for use in meaningful analysis. The accuracy of national road transport statistics is generally poor and so assessing performance requires surveys to be carried out.
The effectiveness of regulatory policy can be assessed broadly in terms of how well it promotes competition and efficient use of roads while meeting safety and environmental concerns (ideally by including, in the cost of transport, the environmental cost imposed on society by transport activity). When assessing regulatory policy, account should be taken of the following considerations:
- Many road transport regulations arise, historically, from the desire to give unjustifiable protection to railways (and even established bus operators).
- Studies of the economic characteristics of road transport suggest that there is little need for intervention by government to ensure efficient allocation of resources, except to ensure that there is free competition and that safety, environmental and other externality considerations are taken fully into account (meaning that there is rarely need for tariff or entry controls designed to balance supply and demand).
- Justifiable regulations should take account of the costs and benefits. (For example, the setting of safety standards for buses should take into account that the consequent higher costs may deter some would-be users.)
- Transport regulation is more effective when focussing on outputs rather than inputs. (For example, ensuring that drivers do not drive when drunk is more effective than specifying how bus and truck operators should check drunkenness of their drivers.)
- Ultimately the rules applying to transport activities should be clear and known to road users, so that compliance is encouraged and enforcement made more transparent.
In many cases regulations fail to set minimum acceptable safety standards and they impose unjustifiable constraints on transport services. Market distortion may arise from other government interventions, such as state ownership of transport enterprises. For more details on how to spot possible regulatory problems and for terms of reference of a study to assess regulatory policy, see Assessing Regulation of Road Transport. For a description of a suitable approach to analysing regulatory problems, see Approach to Analysis. For futher details on assessing the potential for reducing accidents and other environmental impacts, see the Road Safety and the Roads and Environment transport Web sites.
Significant benefits have been estimated to result from regulatory reform, especially from deregulating the trucking and intercity bus businesses. The extent of the benefits will depend on the degree to which the former regulatory regime imposed harmful constraints - consequently greater benefits have been estimated from trucking deregulation in the USA and Mexico (where costs reductions of typically 20% were observed) than in Canada. Even greater reductions in costs have been achieved from deregulating bus services (up to 35-45%), reflecting the extent to which they were formerly regulated. Cost reductions occur not only through lowering of staff costs and profit margins, but also through the development of more efficient services. Some of the cost reductions on certain bus services arise from abolishing cross subsidies. Within urban areas the effects of deregulation and related policy issues are more complicated. For further discussion of policy issues concerning deregulation of urban bus transport, visit the Urban Transport Web site.
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Establishing a Strategy for Improving Regulation
An effective strategy for improving regulation could involve, among other things:
- reviewing road transport policy, to provide a clear direction for improved regulation,
- reviewing and amending the legal framework, and
- institutional strengthening measures in the regulatory agencies.
The precise needs vary depending on circumstances. The scope of changes can be considerable for countries without a history of a market economy, where the legal system has remained unaltered for many years or is based on an inappropriate legal system developed by a former colonial power. A priority concern is usually to put in place an effective means of setting and enforcing driving and vehicle standards (including size and weight limits), the main constraint usually being the administrative capacity of the government to enforce these standards in practice.
In other cases the main need for reform may just concern the regulation of passenger and freight services, especially to remove obstacles to providing a level playing-field and encouraging passenger and freight services that are efficient and responsive to demand. In the case of countries wishing to develop improved trade and transport links with other countries in their region, involving new international agreements and protocols, there will usually be a need to develop effective international road transport and customs agreements and to incorporate these agreements into national law.
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Developing the Role Played by Trucking
Raising professional standards in trucking is important if road transport is to play its full role and offer high quality services. Two approaches (not mutually exclusive) are possible here: regulation by government through some form of operator licensing, or self-regulation by the trucking industry through setting of professional standards of certification. Enforcement constraints limit the scope for using operator licensing, although this is common practice in European and other developed countries. Accreditation can be used by qualifying operators to attract potential customers, can increase the creditworthiness of operators, and provides the practical basis in the longer term for incorporating effective professional standards into operator licensing and gaining support in the industry for enforcement efforts.
For road transport to play its full role in international transport, particular attention must be given to minimizing border delays due to customs and other procedures. These cause significant impediments to trade in regions such as Europe, where transit movements are common, and become an issue where trade facilitating measures are proposed in other regions, such as by SADC in Africa and ESCAP in South East Asia. Although international treaties or agreements, such as the TIR road transit agreement, are being adopted increasingly in such areas, implementation is far from easy due to the need to build up trust and appropriate safeguards among operators and customs. Furthermore governments are often concerned about their national trucking industries being unable to compete with foreign companies from more developed economies with higher technical and professional standards. However, protection of national operators only increases impediments to trade and does not encourage efficiency - so the preferred solution is to enable the operators to adapt to the higher international standards. See International Transport
for a description of how international road transport agreements are being introduced in a phased way in the SADC region and how border delays can be reduced through introducing the TIR system. See
Ensuring Competitive Bus Transport
Ensuring adequate competition in bus transport is not easy. It is not unusual for established operators to dominate certain services, partly due to government intervention through entry and fares controls and through state ownership of major bus companies. Even without government intervention competition is not assured on every route, because dominant operators or groups of small operators can adopt anti-competitive practices to deter small independent operators from offering alternatives.
Three important issues commonly arise when seeking to improve regulation:
- What should be the basis of competition, either free competition (or 'competition in the market') or some kind of contracting or franchising (or 'competition for the market')?
- What rules should apply for accessing and developing bus stations, both to allow equal access by operators to main stations and to allow bus operators to establish alternative facilities?
- How is a government to monitor services and control anti-competitive abuses?
In the case of urban bus services, particular issues arise over planning and regulating services, and these are discussed at length in the Urban Transport Web Site. For non-urban bus services there rarely appears to be a case for major intervention by government in planning and controlling services. Leaving operators free to plan services in accordance with the needs of the passenger encourages service innovation and frees government to concentrate on the important task of setting and enforcing safety standards and of ensuring that competitive conditions prevail. In non-urban bus transport, unjustifiable intervention by government in bus station provision can distort service patterns and increase transport costs. To avoid this, bus operators should be free to choose whether or not to use bus stations, subject to basic safety considerations. If necessary alternative uses for superfluous bus stations, or means of financing them, should be found. Monitoring of bus service competition can often be carried out without much additional information collection beyond that already possessed by regulatory authorities. The main issue is how to combat anti-monopoly behavior. Punitive action could be controversial and risk causing disruption, so a more effective approach could be to encourage more competition by ensuring that other operators have access to bus stations and removing unnecessary entry barriers. See Bus Competition for further discussion on these topics.
