Chapter V.3 Transport
- International Monetary Fund
- Published Date:
- December 1991
The transportation system is a vital part of any economy, but it is particularly important in the USSR, which covers one-sixth of the world’s land surface. No less than other sectors, the transportation system will need to undergo significant reform and restructuring if it is to meet the demands of the future, in particular those of an economy operated on market principles.
Section 2 presents a statistical overview of the transport system of the USSR. The main transport subsystems are examined in successive sections, including the railways, highway and other road transport, urban and road passenger traffic, air transport and waterborne traffic.
2. A STATISTICAL OVERVIEW
The USSR is by far the largest country in the world (22.4 million square kilometers, 2.4 times greater than the United States or China), but at the same time the majority of the country is remote and uninhabited; more than three-quarters of it consists of deserts. About 30 million of some 290 million Soviet citizens are dispersed among settlement cores surrounding mining and industrial centers or strategic bases, isolated in the empty immensities of Central Asia, Siberia and the Far East. The size of the territory—8,000 to 9,000 kilometers from West to East, 3,000 to 5,000 kilometers from North to South—and the spatial separation of resources and population have created the need for vast transport networks which have to carry huge flows of passengers and freight across very long distances. The particularly harsh climatic conditions, except for the southern regions, reduce the availability of inland-water and maritime transport, impose heavy requirements for infrastructure maintenance, and necessitate—for every kind of transport—vehicles and equipment designed to keep working under winter temperatures as low as -30° or -40° C. Although international comparisons will help to illustrate the magnitude and specific characteristics of Soviet transportation, these very peculiar geographic, demographic and climatic conditions suggest caution in comparing the Soviet transport system to any other in the world.
a. Passenger traffic
The mobility of Soviet citizens is quite low by international standards. The average distance travelled by a Soviet citizen (all modes) amounted to about 4,600 kilometers, compared to between 10,000 and 12,000 kilometers per person for the largest Western European countries and about 24,000 kilometers in the United States (Table V.3.1). The comparison is inexact, however, because the passenger traffic given for the Western countries includes private car transport, which is not measured by the national Soviet transport statistics. But the bias is quite small, given the fact that private car traffic is very low in the USSR (Table V.3.2).
|(billions of passenger kilometers)||1,304||5,808||646||591||680|
|Mean distance per person|
|Billions of passenger|
|Kilometers per person||1,700||15,073||8,700||7,900||9,700|
|Billions of passenger|
|Kilometers per person||4,500||6,780||1,800||2,400||2,200|
|Billions of passenger|
|Kilometers per person||6,200||21,853||10,500||10,300||11,900|
Rough estimate of the upper limit.
Rough estimate of the upper limit.
The very low level of car ownership induces intense use of public transport; every Soviet citizen travels on average more than twice as much by train, bus, metro or tramway than the average Western European. The pressure of demand on public transport systems is correspondingly high; reportedly 20 percent of requests for train and plane tickets remain unsatisfied, and unsatisfied unregistered demand appears to be even greater, for all modes of transportation, with extremely long average queueing times.
The share of urban and short distance traffic is high in the USSR by international standards; urban and suburban trips account for 97 percent of all passengers and 53 percent of total passenger miles (Table V.3.3). Some 50-60 percent of local traffic is accounted for by buses. Metro systems play an important role only in Moscow and 11 other large cities. Tramway and trolley buses are more extensively used than in Western countries; 181 cities own a trolley bus network, and 112 a tramway network. Buses are, however, the only public transport available in most of the smaller cities. Intercity traffic represents only about 20 percent of trips and a little more than 40 percent of passenger kilometers traveled. Intercity buses are the most frequently used mode for short or medium distances, while trains are mainly used for very long distance travel. International passenger traffic, by contrast, is extremely low compared to levels in the West.
|Modal Distribution (percent) and Average Distances (kilometers)|
|Total Passenger Traffic||Number||Railway||Air||Bus||Trolley||Tramway||Metro||Taxi||Waterway||Total|
|Millions of passengers||10.6||54||40||2||—||—||—||—||5||100|
|Intercity (excluding rural areas)|
|Millions of passengers||1,556.1||27||8||61||—||—||—||—||4||100|
|Billions of passenger kilometers||557.1||52||36||12||—||—||—||—||—||100|
|Average distance (kilometers)||360||670||1,740||50||…||…||…||…||…||…|
|Suburban (including rural areas)|
|Millions of passengers||15,547.4||25||—||74||—||—||—||—||1||100|
|Billions of passenger kilometers||284.9||44||—||56||—||—||—||—||—||100|
|Average distance (kilometers)||18||32||…||14||…||…||…||…||…||…|
|Millions of passengers||64,205.4||—||—||59||18||14||7||2||—||100|
|Billions of passenger kilometers||401.6||—||—||54||17||13||12||5||—||100|
|Average distance (kilometers)||6||…||…||6||6||6||10||13||…||…|
|Millions of passengers||82,445.0||5.3||0.2||62||14||11||6||2||—||100|
|Billions of passenger kilometers||1,304.0||32||17||37||5||4||4||1||—||100|
|Average distance (kilometers)||16||94||1,816||10||6||6||10||13||…||…|
Passenger traffic grew at an average annual rate of nearly 6.5 percent in the 1970s (Table V.3.4). The main source of this growth was the rapid expansion in the use of buses and other public urban transport systems. Passenger traffic growth slowed substantially in the 1980s, to about 4 percent annually, reflecting a sharp decline in the growth of bus transport. The last two decades have been characterized by an emerging shift in the share of total passenger traffic from rail to private auto transport.
|Traffic in Billions of Passenger Kilometers|
(286 million inhabitants)
|Western Europe 1|
(395 million inhabitants)
|Bus, trolley, tram||269.5||497.5||599.9||259.3||338.4||376.8|
|Private car, taxi||54 2||260 2||470 2||1,578.3||2,303.0||1,786.1|
|Average Annual Rate of Growth of Passenger Traffic (In Percent)|
|USSR||Western Europe 1|
|Bus, trolley, tram||6.3||2.4||2.7||1.5|
|Private car, taxi||17||7.7||3.9||2.8|
|Modal Split (In Percent)|
|USSR3||Western Europe 1|
|Bus, trolley, tram||45.1||45.2||40.4||12.7||11.7||11.0|
|Private car, taxi||9.1||23.6||31.7||77.1||79.9||81.6|
Fifteen ECMT countries.
The estimate of passenger kilometers transported by private cars in the USSR is based on the assumption that every car transports 30,000 passenger kilometers a year.
Rough estimates due to imprecision of the private car traffic estimate.
Fifteen ECMT countries.
The estimate of passenger kilometers transported by private cars in the USSR is based on the assumption that every car transports 30,000 passenger kilometers a year.
Rough estimates due to imprecision of the private car traffic estimate.
b. Freight traffic
Noncommon carrier—or own-account—road and rail transport is almost three times as important in the USSR as common-carrier freight originating (Table V.3.5). But the hauling distances of own-account railway transport are very short (7 kilometers on average), so that the total traffic of noncommon-carrier railway transport represents only about 2 percent of total Ministry of Railways (MPS) freight traffic in terms of ton kilometers.
|(million tons)||(billion ton kilometers)||(kilometers)|
The situation is somewhat different in the road transport system. Total own-account freight on trucks belonging to enterprises of different sectors is three times larger than the freight on common-carrier truck transport enterprises, and the proportion is nearly the same for traffic expressed in ton kilometers. This implies competition as well as complementarity between common-carrier truck enterprises and own-account haulage by enterprises of various economic sectors.
The high degree of complementarity—as opposed to competition—between railway and road freight transport in the USSR is clear. The use of trucks has up till now been very largely restricted to local transport, although they are also sometimes used for long-distance haulage of urgent cargos or where railway services are not available (sometimes as a result of rail congestion). Consequently, the total amount of ton kilometers carried by road is only about one-eighth of that carried by train, although the volume of freight originating on the roads is much larger than on the railways. The comparison between railway and road average hauling distances (more than 950 kilometers for railway, less than 20 kilometers for road) suggests that the MPS is in an almost monopolistic position for longdistance, intercity and interrepublican freight transport.
Such a situation might be partly the result of decades of monopolistic state policies, giving constant priority to the MPS (heavily represented at the level of the union administration level), and hindering competition by the road transport sector (the enterprises of which were managed and represented only at republican and local levels). But it is also clear that geographic, climatic and economic factors have played an important role in bringing about such a situation. Roadbuilding is extremely expensive in many parts of the country (due to a lack of locally available stones and administrative distortions) and road and vehicle maintenance is difficult and expensive as a result of very harsh meteorological conditions in the winter. Consequently, railway transport is evidently a more economic and reliable technique for long distance freight transport in most regions of the USSR, except for southern parts of the country where the geographic and climatic factors could be more in favor of road transport.
The dominance of the railroads in the USSR contrasts with the relative importance of road-borne freight in Western Europe, and is much greater than the share of railway traffic in another continental-sized country, the United States (Table V.3.6). Along with the low share of common-carrier road freight in the USSR (3 percent, excluding pipelines, maritime and aviation), the share of inland waterway transport is also low (6 percent) due to the inaccessibility of many rivers and canals during much of the year.
|Fed. Rep. of|
|Traffic (in ton kilometers)||3,925||1,550||59||18||52||20|
|Modal share of total freight|
|traffic (in percent)||91||48||22||13||31||11|
|Ton kilometers per inhabitant||13.7||6.3||1.0||0.3||0.9||0.3|
|Ton kilometers per|
|US$1 billion of GDP||2.47||0.32||0.05||0.02||0.05||0.02|
|Traffic (in ton kilometers)||143||1,250||151||125||112||164|
|Modal share of total freight|
|traffic (in percent)||3||38||58||86||65||89|
|Ton kilometers per inhabitant||0.5||5.1||2.7||2.0||1.8||2.9|
|Ton kilometers per|
|US$1 billion of GDP||0.09||0.26||0.13||0.15||0.12||0.20|
|Traffic (in ton kilometers)||251||460||53||2||7||—|
|Modal share of total freight|
|traffic (in percent)||6||14||20||1||4||—|
|Ton kilometers per inhabitant||0.9||1.9||0.9||—||0.1||—|
|Ton kilometers per|
|US$1 billion of GDP||0.16||0.10||0.04||—||—||—|
|Traffic (in ton kilometers)||4,319||3,260||263||145||171||184|
|Modal share of total freight|
|traffic (in percent)||100||100||100||100||100||100|
|Ton kilometers per inhabitant||15.1||13.2||4.6||2.3||2.8||3.2|
|Ton kilometers per|
|US$1 billion of GDP||2.71||0.68||0.22||0.18||0.18||0.22|
The USSR must move three to five times as much freight to produce a unit of GDP as do countries in Western Europe. This difference is due to (1) the relatively heavy shares of agriculture and basic industry branches in the USSR, which generate heavy but low-value transport flows; (2) a heavy concentration of manufacturing activities, frequently quite distant from both sources of energy and raw materials and population centers where consumption is concentrated; (3) geographical and climatic constraints (the country’s vast size, and the harsh winters necessitating greater transport of energy supplies); and (4) certain irrationalities in the organization of freight transport flows, which generate a large volume of noneconomic cross haul freight. This latter factor was reinforced in the past by the very low freight tariffs. It could become less important in the future, given a progressive marketization of freight transport services on the one hand, and of intersectoral and interenterprise exchanges on the other.
The development of the Soviet pipeline network was spectacular in the 1970s and continued during the 1980s, leading to the world’s largest pipeline system, moving both oil and gas—with an average hauling distance by pipeline increasing from 80 kilometers in 1970 to 1,910 kilometers in 1980 and 2,350 kilometers in 1988. For other modes of transportation, the growth of freight traffic was faster than in the West during the 1970s—3.2 percent a year (by ton kilometer) in the USSR—but slower in the 1980s (1.7 percent for the USSR) (Table V.3.7). It seems very likely that the general freight traffic stopped growing in 1989 and 1990 (while it accelerated sharply in Western Europe).
|All other modes||4.3||3.2||1.1||1.7|
The most important change since 1970 concerning the modal split of freight transport (Table V.3.8) arose from the development of the pipeline network, the share of which in total ton kilometers increased from 11 percent in 1970 to 28 percent in 1980 and more than 35 percent in 1988, following the very fast growth of gas production, consumption and exports. The loadings of railway wagons decreased in the 1970s (from 41 percent in 1970 to 35 percent in 1980) in favor of truck loadings (which rose from 54 percent to 60 percent), but this trend stopped in the 1980s.
|Tons Originated, USSR|
|Ton Kilometers, USSR|
|Ton Kilometers, 15 ECMT Countries|
The present freight share of containerized shipments is surprisingly low (1.3 percent of tons loaded onto railway wagons and 1.8 percent on trucks in 1988) and it hardly increased during the 1980s (the figure was 1.1 percent for railway and 1.6 percent for road transport in 1980). As a comparison, the share of containerized railway shipments began to increase quite rapidly in Western European countries during the 1980s and now amounts to about 4 percent in France and 7 percent in the United Kingdom.
c. Infrastructure, rolling stock and motor vehicles
The road network is much less developed in the USSR than in Western countries. The number of surfaced roads available per 1,000 inhabitants is less than half (4.1 kilometers) that in the major EC countries and the quality of roads (capacity and maintenance) is generally much inferior as well, with few exceptions (Table V.3.9). The railway network is relatively more developed (0.52 kilometers per 1,000 inhabitants in the USSR, and 0.41 in Western Europe), which is of course necessary for the heavy long-distance and intercity traffic of the USSR, but a lot of railway track segments (including bridges and tunnels) need renewal. The inland navigation network is much more extended than in Western Europe, even on a per capita basis, but a very large part of it is unusable during more than half of the year for climatic reasons.
|Fed. Rep. of Germany, France,|
|USSR||United Kingdom, Italy|
|Navigable inland waterways||122,466||0.43||15,895||0.07|
As regards passenger transport, mobility for either professional or personal reasons is hindered by the insufficient number of vehicles, not only for road transport—as is well known—but also for railway and urban public transport. In 1987, the number of cars (including taxis and enterprise cars) per 1,000 inhabitants was only 55 in the USSR in 1988 compared with more than 400 in Western Europe (Table V.3.10). The number of buses and trolley buses per 1,000 inhabitants is a bit higher in EC countries (1.29) than in the USSR (1.22) and the figure is about the same for passenger railway wagons (0.19 in the USSR and 0.21 in Western Europe). Given the general lack of personal means of transport, it is clear that the capacity of collective transport (mainly buses, suburban and intercity trains) is insufficient to allow the degree of personal mobility typically found in developed countries.
|USSR||Fed. Rep. of Germany, France,|
United Kingdom, Italy 1
|Buses, trolley buses||346.4||1.22||299||1.29|
|Private cars, taxis, enterprise cars||15,632||55.2||93,228||403.5|
|Passenger railway wagons||56.2||0.19||49.1||0.21|
|Railway locomotives, (passenger or freight)||33.0||0.12||18.2||0.08|
|Freight railway wagons.||1,371||4.84||617||2.67|
|Trucks, vans and trailers (common & noncommon carrier)||2,528||8.9||10,342||44.7|
The situation does not seem to be much better for freight transport vehicles. The number of freight railway wagons is of course very impressive (nearly 1.4 million common-carrier wagons, i.e., about twice as many per capita as in Western Europe), but is insufficient to compensate for the very low number of trucks and vans. The total number of trucks and vans (including the ones owned by non-transport enterprises such as the kolkhozy and sovkhozy) is between 2.6 and 3.3 million compared to nearly 10.5 million for the four major EC countries altogether. The insufficiency of railway rolling stock is demonstrated by its extremely intense utilization by the MPS: a Soviet freight wagon carries on average between 2.8 and 2.9 million ton kilometers a year, i.e., nearly ten times more than an average West European railway wagon. It would appear that the lack of freight transport vehicles—both rail and road—is significant, especially in the seasonal peak periods of the year such as the harvest period.
During the 1970s, employment in the transport sector increased on average by about 2.5 percent annually, while the growth of passenger and freight traffic exceeded 5 percent per annum (Table V.3.11). Traffic growth slowed to less than 4 percent for passengers and 2-3 percent for freight in the 1980s, while employment fell by about 1 percent on average. At the same time, the rapid development of the Soviet pipeline network during this period resulted in enormous productivity gains in oil and gas transport activities.
|Number of Employees||Average Annual Rate of Growth|
|1. All employees|
|2. Common carrier transport|
Not strictly comparable to 1970 and 1980.
Not strictly comparable to 1970 and 1980.
e. Transport costs, tariffs and profitability
The massive flows of freight and passengers generate intense utilization of assets, especially in the case of railways and urban metros and also, at least for the vehicles, in other modes of urban collective transport (buses, trams, and trolleys). Such intense utilization results in extremely low capital costs per unit of output. Despite large labor forces, average labor productivity (Table V.3.12) is also reasonably high, and, especially for railways, compares favorably—being three to four times higher—to that of Western European railways, which are more dominated by passenger services (though not so favorably to North American railways, where the predominance of freight transport, coupled with high wage costs, has contributed to far higher labor productivity).
|USSR||Fed. Rep. of|
|Billions of passenger|
|Billions of ton kilometers||3,924.8||73.0||53.8||17.3||20.5|
|Billions of unit kilometers||4,338.6||114.0||116.9||51.6||63.8|
|Thousands of unit|
|kilometers per employee||2.35||0.47||0.57||0.36||0.30|
In addition to the economic factors which have pushed costs down, the prices of resource inputs to the transport industry have been held very low by government fiat, in some instances (e.g., energy) to only a small fraction of international prices or opportunity costs to the Soviet economy. It appears, too, that capital depreciation charges are well below the actual replacement costs. Explicit wage bills are also held extremely low, although it is not clear to what extent the larger portion of labor benefits (including, for example, most of the costs of housing, health and education) may be separately provided by the government (a form of subsidy), or absorbed as nonwage labor costs by the transport enterprise.
Consequently, despite tariffs fixed at relatively low levels, all the freight activities without exception were highly profitable in 1988, with profit rates ranging from 30 percent for the least profitable (road transport) to more than 70 percent for the most profitable (maritime and pipelines), giving an overall average rate of profitability of 41 percent. The situation is more complex for passenger transport activities: three of them were highly profitable (aviation, railways, and taxis), while other urban services generated significant losses (ranging from -6 percent for buses, to -56 percent for tramways).
The economic significance of such costs, revenues, and profits, however, is difficult if not impossible to interpret, given the magnitude of price distortions throughout the Soviet economy, and the differences in Soviet accounting practices from those in the West (particularly with respect to the treatment of capital costs). There can be little doubt that the reported financial costs of transport are less than the economic costs. The allocative effects of this are not clear, however, for two reasons. First, price distortions in other sectors of the economy may have been even greater, i.e., other goods and services could have been underpriced even more, leaving transportation relatively overpriced in economic terms. Second, prices of transport may in any case have had little effect in determining the overall demand or modal split for transport services, given the extent of administrative controls in the economy and the fact that hard budget constraints did not exist in many state enterprises, so that many purchasers of transportation services were basically insensitive to transport costs.
The movement to a market economy will undoubtedly bring large changes in the structure of relative prices generally and in the prices of the inputs to the transportation industries in particular. The ostensible profitability of the entire industry could therefore easily be converted overnight into deficit if input prices were set free and transport tariffs held constant or less than fully responsive to input prices. Moreover, the real resources devoted to capital renewal and technological modernization in recent years have clearly been far below what would be required to meet the needs of a more open, market-driven economy. Soviet industry will not be able to compete successfully on world markets without extensive modernization and improvement of the quality of transportation services.
The one significant and favorable aspect is that the transport enterprises as presently constituted are not burdened with significant borrowing from the past, and thus are well situated to tap foreign as well as domestic capital markets to help meet future capital requirements.
Investment decisions, as well as the current investment financing process, are almost totally under the control of the central authorities. Until 1988, for example, 100 percent of railway investments were decided and financed by the central MPS authority, and 90 percent of the investment by ports and shipping companies was decided by Minmorflot. Every transport enterprise remitted 90 percent or more of its operating profits to the budget, keeping the small residual for wage incentives and the social fund or in some cases for minor self-financed investments, and claiming large resources from the center for infrastructure renewal and expansion and the replacement of rolling stock and vehicles. In a future market economy, such expenditures would normally be financed from transport revenues or user taxes, either directly or through loans serviced from such revenues.
More than half of the world’s railway freight (by ton kilometers), and more than 25 percent of its railway passenger kilometers, are carried by the MPS. The Soviet economy depends on the MPS for just over half of its freight kilometers and nearly 40 percent of its intercity passenger kilometers; if the urban/suburban services, including the metros operated by MPS in 12 cities, were included, the total would be even more impressive.
The importance of the railways stems partly from the same factors, noted in section 2, that make the Soviet economy so freight-transport intensive and partly from the predominantly flat terrain and long haul distances that particularly favor railways as opposed to both coastal and inland water transport, the normal competitors for this type of traffic. It also stems from pricing policies, which held railway tariffs fixed for long periods. Finally, government investment policies and administrative traffic allocation have also favored railways over other modes of transport.
Such heavy reliance on the railways, and on continued growth in their productivity, has not come without a price. Continued growth of the Soviet economy along traditional paths depends to a large extent on expansion of the capacity of the railways, whether through increased productivity or expanded investment. Soviet industry and passengers have largely been denied access to the services and flexibility afforded by modern highways, high-speed trains, and aviation, which have been exploited to a far higher degree in Western economies.
The railways are now approaching the limits of what they can do within their existing infrastructure, rolling stock, and operating systems. Productivity increased relatively rapidly in the 1960s, more slowly in the 1970s, but hardly at all in the 1980s. Moreover, recently there has been a rapidly rising backlog of unmet maintenance requirements, which must be met if present traffic volumes are to be sustained. If traffic volumes are to actually expand, major changes will be needed, both in operating systems and levels of investment. Some straightforward possibilities—particularly increasing train weights—suggest themselves, and warrant detailed study.
A more fundamental question is whether the railways will in fact be called upon to meet ever-increasing volumes. This issue also warrants more systematic study and in any case depends critically on the future development of the Soviet economy, in particular the share of heavy industry in the economy, plant size, and spatial location patterns, as well as the overall rate of economic growth. It also depends to a significant degree on how the railways respond to the opportunities and challenges which will arise in the new market economy. Of these, undoubtedly the most important is containerization, the most significant technological innovation in freight transportation since the end of World War II, but which so far has largely escaped the USSR. The railways would appear to have an opportunity to play a pivotal role, if it is decided to move aggressively to develop the use of containers for high-valued movements throughout the Soviet economy. They also have significant new opportunities in high-speed passenger service.
b. Organization of the railways
The public railways of the USSR have been organized as a vast monopoly, structured in 32 regional administrations of the MPS, with 147,500 kilometers of line and total employment of 3.5 million, of which 1.8 million are operating staff and 1.7 million are support staff in areas such as housing, health, education and the operating staff for the 12 urban metros. There is a high degree of centralization in decision-making, including the setting of operational targets and plans, allocation of rolling stock, investment and replacement decisions. The overall scale of investment, however, has been outside the control of MPS, being fixed by the Council of Ministers (with the assistance of Gosplan), while tariffs have been controlled by Goskomtsen. The railways, which have consistently shown an overall gross profit (despite heavy losses on certain services), have turned over their profits to the budget, which in turn has provided all the capital for the railways (although this system began to change in 1988). For construction of new capital projects, MPS relies on another monopoly, the Ministry of Transport Construction (Mintranstroi), and for manufacture of its rolling stock on two other ministerial monopolies, Mintiajmach and Minelectrotechpribor. To a lesser degree, it also depends on imports from CMEA trading partners, particularly the Czech and Slovak Federal Republic and the former German Democratic Republic.
There is also an extensive network of 113,900 kilometers of railways not under MPS authority. These, however, are predominantly short-line railways, providing intra-industrial transport and also feeder services to the main MPS network, with an average haul distance of under 8 kilometers. In addition, there are at least a few long-distance own-account services operated by particular sectors, which supply their own motive power and trailing stock, but rent the use of MPS tracks; it is not clear whether these movements are fully reflected in official statistics on the railways.
c. The railway network
Both the public and nonpublic railway networks have continued to grow over the past two decades, although the growth rate of nonpublic railways has been more than double that of public railways (Table V.3.13). Presumably, the more rapid growth of the nonpublic network reflects the growth of industry and the associated increase in short-haul movement demands. It undoubtedly has served to increase the traffic feeding into the MPS network and to increase traffic densities on that more slowly expanding network. MPS has met these growing traffic densities in part by continued electrification of the network and in part by double tracking. With 53,800 kilometers electrified, MPS has by far the largest electrified network in the world.
About three-quarters of the entire rail network lies in just two republics, the RSFSR and the Ukraine (Table V.3.2); Kazakhstan accounts for an additional 10 percent of the network.
d. The rolling stock
In 1950, 95 percent of traffic kilometers were covered by steam-powered locomotives, but by 1979 the last of the steam locomotives had been retired. In 1989, 63 percent of railway traffic was moved by electric power, with the balance powered by diesel engines. Even more powerful locomotives are now being introduced: 12,000 kilowatt electric locomotives and 8,000 horsepower diesels for mainline freight services, with a series production of 12,000 horsepower diesels soon to be initiated. For shunting services, diesel locomotives of 1,200-1,350 horsepower are presently being manufactured, and there are plans to purchase 2,000 horsepower (8-axle) units.
About 75 percent of the fleet of locomotives and trailing stock is composed of common types of wagons (covered, flat, gondola), reflecting the traditional Soviet reliance on a few types of wagons to serve a very large variety of traffic. (Western railways, by contrast, have tended to rely on specialized stock.) While the fleet size has continued to grow, it has not grown as rapidly as traffic, and consequently in recent years overage stock has increasingly been kept in service. The proportion of rolling stock standstill and outages is not known, but the figure is likely to be high given the high average age, poor maintenance, and poor initial quality of the fleet.
New rolling stock originate preponderantly from factories in the USSR (Table V.3.15), but imports of particular items are significant, with the Czech and Slovak Federal Republic providing annually about 400 diesel shunting locomotives and 60-80 electric passenger locomotives, and the former GDR exporting large quantities of somewhat higher-standard passenger coaches and refrigerated wagons. In the USSR, diesel locomotives are built in the Mintiajmach plants, and electric locomotives in those of Latvia, which is unable to keep pace with demand; the design of these vehicles is also outmoded, as it is based on rheostat technology with excessive weight and power consumption. Some consider the locomotive production in the USSR is adequate provided that current imports are maintained, while others consider that further passenger trains, electric, diesel, and shunting locomotive and coach production should be developed domestically, either by using spare capacity from the defense industry or by converting MPS maintenance shops into plants for manufacturing new rolling stock. Nevertheless, importance is attached to strengthening contacts between Soviet manufacturing plants and their Western counterparts to permit more rapid modernization.
Corresponds to 700 double locomotives.
Corresponds to 700 double locomotives.
There is a growing backlog of maintenance for permanent way and structures as well as rolling stock. Some 16 percent of the entire mainline network is in need of rail replacement, and only 60-70 percent of rail replacement needs are currently being met. Similarly 48 million (13 percent of the total) cross ties (or sleepers) need to be replaced. A large number of steel structures suffer such extensive unrepaired deterioration as to require restrictions on train speed and loads, thus reducing the capacity of the system. Overage passenger coaches are estimated at 20 percent of the entire fleet, and 17 percent of the passenger coaches are reportedly out of service in the Ukraine regional administration. MPS plans for a major capital renewal, modernization, and expansion program are discussed below.
f. Trends in traffic, productivity, and capacity
(1) Traffic: In terms of traffic-kilometers, freight exceeds passenger travel by a factor of almost 10, and the average haul distance of freight is more than 10 times the average passenger trip distance. In 1989, total freight was 4 billion tons and 3.8 trillion ton kilometers, reflecting an average haul distance of 962 kilometers, while there were 4.32 billion passengers and 411 billion passenger kilometers, reflecting an average trip distance of 95 kilometers (Table V.3.16). These numbers exclude the huge volume of freight tonnage (12.2 billion tons) loaded on nonpublic railways, which, however, travelled only 7.4 kilometers on average to generate just 90.2 billion ton kilometers. Nonetheless, with total combined traffic units (ton kilometers plus passenger kilometers) of 4.26 trillion, they dwarf the magnitudes of railway traffic anywhere else in the world. It should be noted that only a small proportion—9 percent—of the freight traffic is international traffic. Traffic grew relatively rapidly in the 1960s (5.2 percent per annum in ton kilometers and 4.5 percent for passenger kilometers), slowed significantly in the 1970s (3.3 percent and 2.2 percent per annum, respectively), and grew still more slowly in the first half of the 1980s (1.6 percent and 1.8 percent, respectively). Between 1985 and 1988, traffic growth picked up, but in 1989 both freight and passenger traffic declined in absolute terms. These trends reflect overall trends in the Soviet economy, as well as growing congestion in the railway network as capacity limits have been broached on key segments of the system. The declines in 1989 also reflect the earthquake in Armenia and the outbreak of major civil disturbances in Azerbaidzhan.
|1. Network length (thousand kilometers)||125.8||135.2||141.8||144.9||145.6||146.1||146.7||147.5|
|2. Freight wagons (thousands)||720||916||1,263||…||…||…||…||1,371|
|3. Passenger coaches (thousands)||…||…||…||…||…||…||…||56.2|
|4. Locomotives (thousands)||…||…||…||…||…||…||…||33.0|
|5. Share of electric traction in ton kilometers (in percent)||211||481||541||60.41||61.5 1||62.41||63.01||63.5|
|6. Freight tons originating (millions)||1,885||2,896||3,728||3,951||4,076||4,067||4,116||4,000|
|7. Freight ton kilometers (billions)||1,504||2,495||3,440||3,718||3,835||3,825||3,925||3,849|
|8. Average haul distance (kilometers)||798||861||923||941||941||940||954||962|
|9. Passengers originating (millions)||2,231||3,354||4,072||4,166||4,345||4,360||4,396||4,323|
|10. Passenger kilometers (billions)||176||274||342||374||390||402||414||411|
|11. Average trip distance (kilometers)||…||82||84||90||90||92||94||95|
|12. Combined traffic units (row 7 + row 10)||1,680||2,769||3,782||4,092||4,225||4.227||4,339||4,260|
|13. Ton kilometers per wagon (thousands)||2,089||2,723||2,724||…||…||…||…||2,807|
|14. Wagon turnaround (days)||…||5.57||6.75||6.65||6.39||6.60||6.58||…|
|15. Passenger kilometers, per coach (thousands)||…||…||…||…||…||…||…||7,313|
|16. Freight ton kilometers per route (millions)||12.0||18.5||24.3||25.7||26.3||26.2||26.8||26.1|
|17. Passenger kilometers per route kilometer (millions)||1.4||2.0||2.4||2.6||2.7||2.8||2.8||2.8|
|18. Combined traffic kilometers per route kilometer (millions)||13.4||20.5||26.7||28.2||29.0||28.9||29.6||28.9|
|19. Combined traffic kilometers per locomotive (millions)||…||…||…||…||…||…||…||12.9|
|20. Average train gross weight (tons)||2,4092||2,574||2,819||3,033||…||…||3,120||3,105|
|21. Average freight train speed including stops (kilometers per hour)||…||33.53||30.63||30.91||32.31||31.81||32.31||32.5|
|22. Annual freight train kilometers (millions)4||1,095 24||1,710||2,152||2,298||…||…||2,327||2,272|
|23. Annual passenger train kilometers (millions)5||342||532||664||726||757||781||804||798|
|24. Combined train kilometers (millions)6||1,437||2,242||2,816||3,024||…||…||3,131||3,070|
|25. Combined train kilometers per route kilometer per day||31.3||45.4||54.4||57.2||…||…||58.5||57.0|
|26. Operating personnel (thousands)||…||…||2,074||…||1,991||…||1,847||1,814|
|27. Combined traffic kilometers per operating personnel (thousands)||…||…||1,862||…||…||…||…||2,349|
USSR Ministry of Railways.
Gross train weight for 1960 inferred from figure 3.1 of Boncher (1987).
Calculated by dividing freight ton kilometers (row 7) by a net train weight estimated by applying a gross to net adjustment of 0.57 (based on Hunter and Kontorovich (1987), p. 393) to gross train weight (row 20).
Calculated by dividing passenger kilometers (row 10) by estimated 515 passengers per train (from Hunter and Kontorovich (1987), p.393).
Row 22 plus row 23.
USSR Ministry of Railways.
Gross train weight for 1960 inferred from figure 3.1 of Boncher (1987).
Calculated by dividing freight ton kilometers (row 7) by a net train weight estimated by applying a gross to net adjustment of 0.57 (based on Hunter and Kontorovich (1987), p. 393) to gross train weight (row 20).
Calculated by dividing passenger kilometers (row 10) by estimated 515 passengers per train (from Hunter and Kontorovich (1987), p.393).
Row 22 plus row 23.
(2) Travel distances: Average travel distances increased significantly between 1980 and 1985 (from 798 kilometers to 941 kilometers for freight and from 79 kilometers to 90 kilometers for passengers), plateaued in the mid-1980s and then increased in 1988 and 1989. Increased hauling distances for freight added to the higher costs of exploiting natural resources that became even further removed from the main centers of resource use, and meant an increasing burden for the economy in general, and the railways in particular.
(3) Productivity: The key measure of line capacity utilization stood at 13.4 million combined traffic units per route kilometer in 1960, increased by 53 percent in the 1960s, 30 percent in 1970s and 11 percent in the period 1981-88, before declining by 2.5 percent in 1989 to 28.9 million combined traffic units per route kilometer. The rapid growth in utilization in the 1960s was aided by the supplanting of steam by diesel and electric traction, which contributed to increased train speeds (thus expanding line capacity) and to heavier trains, but this factor had largely spent its force by 1970, when only 5 percent of traffic kilometers were moved by steam.
The traffic increase per route kilometer was gained primarily from increased density (or frequency) of trains. Train kilometers per route kilometer per day increased by 45 percent in the 1960s and 7.5 percent during 1981-88, before falling in 1989 by 2.6 percent to 57 train kilometers per route kilometer per day. A further contribution to increased utilization was the increasing train weight, which rose by about 30 percent over the period 1960-88.
The low but slowly accelerating growth of train weights reflected in part an effort by MPS to address the growing problem of track congestion, particularly after 1982, when MPS launched a major effort to increase train weights. This campaign has had only limited success, however, and the gap between train weights in the USSR and in other countries with a similar proportion of bulk commodities, particularly the United States, has continued to grow wider and wider. The ratio of system-wide average train weights in the United States to those in the USSR increased from 1.57 to 3.5 between 1957 and 1985.1
Data on rolling stock productivity are fragmentary but it appears that freight ton kilometers per wagon year increased sharply in the 1970s, but increased in the 1980s by only an additional 3 percent to 2.8 million. This reflects the already high level of utilization of wagons, as is reflected in extraordinary wagon turnaround times, which in 1970 stood at only 5.7 days and then increased over subsequent years—particularly during the 1970s—at a rate averaging nearly twice the growth rate of average haul distances. At 6.58 days in 1988, for an average haul distance of 954 kilometers, MPS wagon turnaround times per kilometer haul were equalled only by those of the Chinese railway network.
(4) Capacity constraints: Average freight train speeds provide further telltale signs of encroaching capacity limits. Speeds (including stops) fell from 33.5 kilometers per hour in 1970 to 30.6 kilometers per hour in 1980, and have oscillated since, recovering slightly to 32.5 kilometers per hour in 1989. This may arise from any number of factors, including speed restrictions due to inadequate maintenance, as well as traffic saturation.
These system-wide averages, of course, conceal enormous variations across the various segments of the system. There are still many lines with spare capacity but those are not the lines where the burden of additional traffic will fall. The great majority of traffic in the Soviet system, as in any railway system, is carried by a small percentage of the network and it is these most heavily worked lines that will largely determine the system-wide capacity. The regional railways with the greatest train density, which are in the East (West Siberian, South Ural, East Siberian, and Trans-Baikal), have train densities of 76 to 106 trains per day, while those with the least density, which are on the periphery (Baikal-Amur, Baltic, Transcaucasus, Moldavian, and Lvov) carry only 6-29 trains per day.2
Within each railway administration, line densities vary also, with the most heavily trafficked lines in 1989 carrying as many as 200 freight trains plus 80 passenger trains per day (on the Center to Far East corridors) and 200 passenger trains plus 118 freight trains per day (on the October railway in the Moscow-Leningrad corridor). On a double-track line this implies average headway as little as 9 minutes (without allowance for track maintenance time) and, of course, individual runs are often even shorter. Clearly, the physical limits of the number of trains that can pass over a track per day have now been broached on these most heavily trafficked lines.
(5) Labor productivity: A final measure of productivity trends should be considered: employment and traffic units per employee. Total railway employment (including support staff and operating staff for metros), is known only for 1989, when it stood at 3.5 million. The size of the MPS operating staff (excluding metros) declined from 2.11 million in 1982 to 1.81 million in 1989. Combined traffic units per operating employee rose between 1980 to 1989 from 1.86 million to 2.35 million. This level of productivity is much higher than Western European standards, but these are not really comparable because of the very different types of freight and haul distances and the predominance of passenger traffic in Western Europe. North American railways are more nearly comparable in terms of freight types and haul distances, but have very little passenger traffic; consequently, their productivities are far higher, reaching 3.2 million for the Canadian Pacific in 1986 and as much as 9.3 million per employee for some U.S. railroads in 1987.
Even more significant is the huge number (about 1.5 million) of non-operating personnel in the Soviet case. Although in some cases redundancies in operating staff may simply be reclassified as non-operating personnel—which would imply a lower level of productivity than suggested above—it is likely that many provide services (education, health, housing, etc.) to the operating railway staff which in other countries would be externalized, the costs in those cases being reflected in much higher explicit wages. Although the explicit wages of MPS staff rose by almost 20 percent in 1989, their mean wage of rub 311 per month (including an average bonus of rub 23) was low by comparison with most Western countries.
g. Costs, Tariffs, and Finance
Railway tariffs are controlled by Goskomtsen. Passenger fares have been held constant since 1948 and freight tariffs were held essentially fixed from 1955 to January 1990, when an increase averaging 35 percent was granted.3
Official data indicate major distortions in the level and structure of tariffs. Overall average income per passenger kilometer is only 87.4 kopeks (or US$1.57, at an exchange rate of rub 0.55 = US$1), but dips as low as 15 kopeks (US$0.27) per kilometer for the first 10 kilometers of a suburban commute. It is thus not surprising that suburban commuters, who generate 90 percent of the passenger trips, contribute only 17 percent of the passenger revenues. Local and direct passengers each account for 5 percent of kilometers travelled, but together contribute 83 percent of revenues. Freight tariffs, after the 35 percent increase in January 1990, average 40 kopeks (US$0.72) per ton kilometer, with little variation across commodities.
(2) Revenues and expenditures
Total freight revenues in 1989 amounted to rub 15.8 billion and passenger revenues were rub 3.5 billion, representing, respectively, 81.5 percent and 17.8 percent of the total gross revenues of rub 19.4 billion, the small residual being made up equally of postal and parcels revenues. Total costs amounted to rub 15.8 billion, of which over 35 percent was wage costs and 13 percent energy costs. This yields a notional profit of rub 3.6 billion (or 18.7 percent of gross revenues), of which MPS paid a tax to the state of rub 2.3 billion, earmarked rub 0.15 billion for interest payments (on a loan of rub 1.9 billion), and the remaining rub 1.25 billion was allocated to three funds: the production development fund; the staff bonus fund; and the social welfare fund for staff (housing, etc.).
(3) Cost and revenue trends
The railways are anticipating major increases in costs for most inputs. The price of electricity, for example, was expected to increase by 150 percent, effective January 1991, and large wage cost increases are also certain. MPS has proposed a hike in passenger fares averaging 50 percent and a further boost of freight tariffs by 25 percent to meet the anticipated cost increases. If no additional tariff increases are granted, MPS is projecting a deficit of up to rub 10 billion for 1991, which would undermine its abilities to assume further responsibilities for new investment.
(4) Past investments
Although, by Soviet accounting standards, the railways have so far remained ostensibly profitable overall (with significant internal transfers from profitable to nonprofitable services), it is not clear that depreciation allowances have been adequate to meet actual replacement needs. Investments over the past 10 years have totaled rub 63.4 billion (at 1989 prices). In 1990, outlays are expected to reach rub 7.1 billion (of which rub 1.8 billion is borne by the state). Until 1987 all investment outlays were borne by the state, but that situation is now changing rapidly.
h. Proposed modernization program
For the years 1991-95, a total of rub 32.6 billion (or rub 6.5 billion per year on average) had been earmarked for investments, of which rub 9.6 billion was for infrastructure (new lines, double-tracking, electrification, automatic blocking, etc.). For the 1996-2000 period, investments in the range of rub 38-41 billion are planned, of which rub 10-12 billion would be for infrastructure. (These figures do not include investments for the urban metros.) In all, the program involved the construction of over 9,000 kilometers of new line; the electrification of 14,000 kilometers of line; and the addition to total rolling stock of 16,900 locomotives (80 percent of which are diesel), 50,000 passenger coaches and 840,000 freight wagons.
Although the number of new freight wagons appears quite high relative to existing stock, more detailed studies would be needed to assess how appropriate these proposed investments are, particularly allowing for the impact of the market reforms on future demand for railway services.
i. Future demands for railway services
The Institute of Complex Transport Problems (ICTP) has provided national aggregate forecasts (based on assumptions prior to the acceleration of the reform process and the economic downturn of 1990) which envisage railway shipments (tons originating) growing marginally (0.4 percent per annum) with an overall gain by 1995 of 3 percent over 1988 levels and an additional 2 percent by 2000. Ton kilometers would grow slightly faster, with overall gains of 5 percent by 1995 and an additional 5 percent by 2000, implying a steadily increasing average haul distance. MPS has reported that some other government officials envisage railway traffic declining after the advent of the reforms by as much as 30 percent, while MPS itself anticipates a decline of about 12 percent.
The variance in these estimates may be partly due to varying assumptions about the impact of three dimensions of the market reform process: (1) the potentially major revisions in railway tariffs; (2) the potential scope for eliminating wasteful cross haulage that now exists solely because of administrative controls; and (3) the extent and speed of structural shifts away from resource-based heavy industries, which generate large volumes of low-valued bulk commodities comprising the majority of railway ton kilometers.
There is no firm basis for estimation of the price elasticities of demand for railway traffic, but the structural market position of the railways is virtually that of a monopoly, and is likely to remain so at least for many years. For passenger traffic, there are potentially serious competitors—the roads for short distances and aviation for very long distances. However, the present low levels of human mobility suggest that there is large pent-up demand, which would possibly dominate and at least substantially counter any modal substitution effects for rail passenger services. Moreover, the potential introduction of high-speed rail services, as is the recent trend in Europe, could significantly extend the distances over which railways can successfully compete with aviation. Growing urban street congestion will not in any case favor abandonment of rail services in those large cities which already have them; it is more likely that other cities will be forced to consider rail alternatives.
The most important category of traffic which has normally been lost by railways to road transport in other countries is high-valued, time-sensitive manufactures and processed foods and perishables. In recent years, the major technological innovation of containerization, aided by computerized information systems, has considerably eased the problems and reduced the costs of intermodal transfers. Consequently, innovative and aggressive railways in several countries have launched new integrated intermodal (IIM) services which are now winning back an increasing share of the long-distance segment of this valuable traffic, with only the local pickup and delivery provided by complementary road services. Such service standards have been unheard of in the USSR to date. Nonetheless, circumstances of geography, climate, and the existing transport system place the railways in a highly favorable position to meet the potential new demand for such services. Haul distances are quite long, yielding a large cost advantage to the railways (and to the Soviet economy) if IIM services can be well organized. The organizational difficulties in establishing an extensive IIM system should not be underestimated, however, as the limited success (so far) of the high-potential trans-Siberian landbridge has shown.
It seems likely that there will continue to be a lack of alternatives to the railways for the foreseeable future for the vast majority of their traffic. Most oil traffic, however, (12 percent of ton kilometers) should be diverted to pipelines. Aviation could and should take away the very long distance segment of its passenger traffic, and highways a portion of the short- and medium-distance segment, but that would mainly free congested rail facilities needed for other traffic to which the railways are better suited.
Thus, the main traffic contingency faced by MPS is not intermodal competition, but the prospect of structural transformation in the economy away from resource-based heavy industry. In this respect, it should be noted that in the past two years railway traffic in Eastern European countries (particularly the former German Democratic Republic, Poland and Romania) has dropped by roughly one third. It is too early to assess to what extent this was due to temporary causes, rather than structural factors such as the possibly permanent decline of heavy industry and the effects of marketization in eliminating noneconomic traffic induced by administrative controls. It must also be noted that these smaller economies are much more exposed and vulnerable to international competition than is the much larger economy of the USSR. Nonetheless, such demand-reducing structural reform must be considered a major contingency for MPS, and any evaluation of its proposed investment programs must carefully assess this risk.
Prices throughout the Soviet economy are now so badly distorted that it is impossible to make many very definite statements about what a movement to market-based prices would imply for the transport sector. It seems likely that the relative prices of transport services in general and railways in particular would rise substantially. That is both because the relative prices of many if not all inputs to the sector would be much higher and because the inclusion of more adequate allowances for depreciation and provision for future capital requirements would greatly increase costs. It is clear that, if railway tariffs are not increased substantially, deterioration of the system’s finances would soon render it incapable of rendering the required level of services.
A detailed cost accounting study is needed to establish the overall structure of costs, and identify the costs of handling specific traffic more exactly, both in average and marginal terms. This would lay the basis for an entirely new structure of railway tariffs, based on market pricing concepts, to ensure both the financial viability and economically efficient use of the railways.
Unlike in the other modes of transport, particularly roads, where competitive conditions are much stronger, it is unlikely that competitive forces either within the railways or from other modes will be sufficiently strong to permit establishment of complete pricing freedom for the railways. Some regulatory controls on railway tariffs should therefore be retained, at least until more competitive market conditions are established.
(2) Organizational restructuring
It is certain that in the context of devolution of authority from the union to the republics, there will be political pressures for a reorganization of railways. These forces for change present an opportunity which should be taken advantage of, but organizational reform is a highly complex problem for railways—in notable contrast to other modes, particularly roads—due particularly to the technological interdependencies and economies of scale. Great care must be taken to channel the forces for change toward viable solutions. Simply dividing the railways into as many individual companies as there are republics could give rise to the same situation as that prevailing in Western Europe, where international traffic is abnormally low (especially for freight) because of the frontier effect. For the USSR, which is far more critically dependent on railways, this could prove a serious mistake.
It is essential first to identify those functions (e.g. technical standards, systemwide communications) which must be retained at the central level, and those functions that can as well or better be assumed by autonomous, competing enterprises (e.g. management of a fleet of purpose-built specialized wagons, track renewal, cleaning of rolling stock).
Next, those tasks which could best be separated entirely from the railways should be identified. Most obvious are the urban metros, which are from a technical perspective entirely separate operations in any case. Suburban railway services are a more complex problem because they share track and station facilities with intercity services. There is nonetheless an important economic argument for separating these services in order to prevent urban and suburban services from being cross-subsidized by long-distance services.
The Japanese experience could be of interest to the Soviet authorities. Japanese National Railways was split into some 10 companies in 1987. There are 6 regional railways which operate the passenger services and own and maintain the track. One company operates the freight services for the whole country, paying rent to the regional companies for the use of the track. Another company is in charge of research and development activities, with financial support from all the operating companies as well as the government. The experience with this new organization is generally regarded as highly positive; previous huge deficits of the railways sector have been eliminated and in most respects services have either been improved or remained comparable.
Another model would be the establishment of regional railways as in the United States. Eighty five percent of the rail network falls in just three republics (RSFSR, the Ukraine, and Kazakhstan), so that the railway systems in all the other republics would not likely constitute viable systems, while the Russian and Ukrainian systems would require further decentralization. The existing 32 regional administrations of the MPS would present a more natural base for consideration.
Various alternatives should be considered to find the solution most appropriate for the Soviet context. Detailed studies would be required to develop the most sensible strategy, but the scale and scope of the Soviet rail market suggests that some form of competitive model should work well.
(3) Modernization and investment priorities4
Much of the Soviet railway “hardware” relies on obsolete technology. This is particularly true in the case of electric multiple units (emu), passenger coaches, and freight wagons, but it also applies to locomotives, signalling, and telecommunication systems. In computerization, too, the Soviet railways are far behind. There are only 3,000 microcomputers against an estimated need of 40,000, and major problems are being encountered in introducing centralized traffic control systems. The computer-based reservation system for passengers is unable to reserve return seats, and the shortcomings are certainly far more serious in the freight sector, where, for example, there is no effective wagon monitoring system as on the railways of Western Europe or North America. Major investments in computers, electronic linkages, software, and not least in training of personnel will be required to bring MPS to the same level as its Western counterparts.
Integrated intermodal (IIM) services are virtually nonexistent in the USSR today. Intermodalism will play an essential role for development of both foreign trade with Western countries and long-distance domestic transport in the rapidly expanding high-valued commodities. A particularly important opportunity is the potential development of a major land bridge between Western Europe and Asia, which could earn large amounts of foreign exchange for the Soviet railways, though this will require more effective organization than in the past, to improve speed and reliability.
Given the extremely high volumes of traffic on the existing Moscow-Leningrad line (200 passenger trains and 118 freight trains per day over a distance of less than 800 kilometers), completion of a third track will be essential. Under these circumstances, the possibility that a modern high-speed train could be an economical solution appears reasonably high, and therefore it is recommended that a detailed feasibility study be undertaken.
(4) Cooperation with the West
Cooperation with the West could make an important contribution to the development of the Soviet railways in the coming years. Joint ventures with Western producers could be established as the existing production ministries in the USSR are dismantled. This would facilitate the necessary transfer of more advanced technology. Western companies could also assist in computerization, retraining of staff and managers, the introduction of intermodalism, and in the preparation of cost accounting studies as the basis for a new tariff structure.
4. ROADS AND ROAD FREIGHT TRANSPORT
The USSR has so far largely escaped the modern highways revolution, one of the major transport technological innovations of the 20th century. Important explanatory factors include the physical geography and climate (which disfavor roads more than any other mode except water), as well as the structure of the economy (largely oriented to the primary industries, which are not the natural markets for road transport). Governmental policies have also been major determinants, including not only pricing, investment, and administrative traffic allocation policies favoring other modes, but also industrial policies favoring primary industry and very large-scale plants. Not least has been the refusal of the government to invest the huge sums necessary to develop a modern road system.
Substantial progress has nonetheless been made in recent years in putting in place at least a skeletal network of all-weather roads, which doubled between 1970 and 1988 to 1.3 million kilometers, while the truck fleet increased by about 70 percent to just over 4 million vehicles and passenger cars increased eightfold to 15.6 million. As will be argued below, the USSR has now entered the threshold of the modern road era, but its future path is likely to be a modified version of that previously experienced by other countries.
b. Organization of the road sector
Prior to the onset of reforms in 1988, the union government exercised tight control over investment outlays in both roads and vehicles, fixed design standards and allocated equipment and materials for most road construction, fixed road transport tariffs, and collected the profits of the carrier enterprises. (Gosplan was the central coordinating agent, but real decision power probably rested with the Council of Ministers and the Ministry of Finance.) Its own financial contributions to roads, however, were limited: it funded only the national highways (8 percent of the public network according to Mintranstroi, which was responsible for their construction) and about one third (rising to one half during 1986-88) of agricultural feeder roads. For the rest, the public roads sector was organized and operated by each of the republics, or by localities for lower class roads, while the large network of “nonpublic” agricultural and industrial access roads was primarily the responsibility of the individual kolkhoz or enterprise.
Typically, a republican roads ministry (there was no union ministry for roads or road transport) financed, built and maintained the roads, while a republican ministry of road transport, organized as a vast vertically integrated monopoly, did all the rest. The road transport ministry bought, maintained, and operated the vehicles as the only common carrier; provided the gasoline filling stations, hotels, and other motorist services; and manufactured the equipment to maintain the vehicles and load and unload them. The only functions which were apparently not the responsibility of the road transport ministry were the road safety functions (which were and still are the responsibility of the union Ministry of Internal Affairs) and the manufacture of the vehicles themselves (the responsibility of the Ministry of Automotive Manufacture).
In 1988, most powers over the roads system were devolved to the republics, with the exception of tariff-setting which was retained by the center. As of October 1990, many if not all republican roads and road transport ministries were in the process of being dissolved. Some elements will be absorbed in new comprehensive ministries of transport, but their previous subsidiary enterprises will be free to choose whether to operate as independent companies, to form new conglomerates, or associate themselves in looser employer unions. Market entry will be open to any newcomer, and many new small companies have already been formed.
One aspect not yet settled is whether the union government will attempt to retain control of tariffs. It is unlikely, however, that the government could maintain its previous tariff-setting regime if it were to carry through with the decision to permit free entry, and if there were an ample supply of vehicles. In an industry with the economic structure of road transport, there will simply be too many entrants to control prices; price undercutting will inevitably occur whether it is legal or not. Shortages of trucks, however, are likely to remain a constraint on growth for some time to come, thus restraining new entrants and increasing economic rents to those fortunate enough to be able to get into the industry and to existing efficient carriers.
c. The road network
Table V.3.17 shows the development of the Soviet road network since 1960, and Table V.3.18 gives the same information for each of the republics since 1980. A major feature of the Soviet system is the classification of roads as public and nonpublic, the latter including two important ancillary systems, agricultural roads and industrial roads (for which, however, separate information is unfortunately not available). Another important deficiency of the statistical reporting system is that the important category of hard-surfaced roads does not distinguish between roads with modern asphalt or concrete pavements and those with lower-standard gravel or soil-cement surfaces.
|Total hard-surfaced roads||307.8||598.0||921.2||1,131.4||1,172.5||1,196.0||1,298.9|
With nearly 900,000 kilometers of hard-surfaced roads, a skeletal public roads network (albeit much of it to low standards) is now in place, thus assuring all-weather road access to most broad regions of the country. The interstices lacking feeder roads to access this trunk network, however, are quite extensive.
d. Design and construction standards and costs
The State Building Committee (Gosstroi) is responsible for setting design and construction standards for the different classes of roads, which are thus largely uniform for the whole country (with some exceptions, such as the 6-ton axleload pavement standards for certain Siberian roads versus the 10-ton norm). Geometric design standards are generally in accordance with standards in the West (Table V.3.19). Systemwide pavement strength for the existing network is a major question, affecting as it does the economics of more widespread use of heavy trucks. It is believed that the strength of much of the network is not to a standard that can long withstand usage by the heavy vehicles which have been increasingly introduced in recent years, and a systematic inventory of the network is called for.
|Pavement width (meters)|
|Roadbed width (meters)||36.0||35.0||15||12||10|
|Minimum radius of|
It is not clear whether the guidelines on standards have always been strictly adhered to. Engineers may have often (quite properly) exercised some latitude in dealing with specific site problems, shortages of materials, etc.; indeed, it would often be uneconomic not to do so, as adherence to excessive standards can make achievement of a needed highways program prohibitively expensive. Salient construction features include the scarcity of locally available building materials, extensive use of geotextiles (for structural properties as well as control of moisture condition), and extraordinary measures taken by the road authorities to reprocess poor quality bitumen received from the refineries to achieve reasonable bituminous binders for pavement construction.
(2) Construction costs
Table V.3.20 shows construction cost norms for different standards of roads in the RSFSR (similar data are not available for other republics). Roadbuilding in the USSR is likely to be expensive in comparison with other countries. Most importantly, this is because of the extraordinary distances involved in transporting building materials, with an average haul distance for stones of 200 to 300 kilometers for vast regions of the USSR (sometimes up to 1,000 kilometers in the Ukraine). Other factors include the absence of competitive tendering for construction contracts, the existence of perverse incentives for the individuals involved (whose pecuniary and nonpecuniary rewards may be positively related to the costs of the works they manage), and the relative weakness of controls on cost increases.
|Cost per Kilometer (in thousands of rubles)|
e. Road maintenance
Table V.3.21 depicts road maintenance cost and expenditures in the RSFSR. The same comments as made on road construction costs and organization apply equally here. It should be noted additionally that the harsh climate, which contributes to high construction costs primarily by reducing the length of the construction season, has a much greater effect on road maintenance costs, both due to the large snow-clearing operations and to the strong effect of freeze-thaw conditions on pavement deterioration.
|Cost Norm Per Kilometer (1990)||Actual Expenditures|
|(In thousands of rubles)||(In millions of rubles)|
|Local||4.7 2||1.2 2||1,163.0||1,221.1||1,256.3||1,334.5||1,295.6|
Actual 1989 outlays.
Actual 1989 outlays.
Maintenance receives considerable attention and apparently is often accorded budget priority over new construction (contrasting with experience in many other countries). Data from the (former) Ukraine Ministry of Highways indicate that approximately 70 percent of the rub 1.5 billion annual budget of that ministry was spent on maintenance, with the residual 30 percent being spent on new construction. There is, nevertheless, concern about a growing backlog of deferred maintenance. The exact basis for the estimated requirements, however, is not known, and apparently there is no systematic monitoring of the physical condition of the network. A comprehensive inventory and continuous condition-monitoring of the road network would be necessary to establish a realistic picture of actual present conditions and future trends.
f. Road financing
The only published data on expenditures relate to national aggregate capital investments in the public road sector (including vehicles), and those figures are not broken down according either to source or category of expenditure. Capital expenditure on public roads and vehicles as a percentage of total capital investment in the Soviet economy has remained basically constant since the beginning of the 1970s, hovering between 2.7 and 2.9. (The picture would be slightly altered if data on nonpublic roads and vehicles, which have grown much more rapidly than the public sector, were included.) Data provided by and for the RSFSR (see Table V.3.22) include information on capital investment and (for 1986-90) on road maintenance, but they do not include the vehicle fleet.
|Capital investments in public roads and vehicles|
|As percent of total USSR|
|Capital investments in public roads|
|RSFSR (by the Ministry of Highways)||4,500||6,400||7,700||6,600||1,900||2,100||2,600||3,200|
|Road maintenance expenditures|
|Total road expenditures in the RSFSR||…||…||…||…||3,987||4,297||4,874||5,614|
|Road maintenance as percent of total expenditures||…||…||…||…||52||51||47||43|
Marginally more information is available on financing sources and mechanisms. As noted above, the primary burden of financing the public road network has fallen on the republics and, for lower-class roads, the local level of government. In the RSFSR, earmarked road use taxes (a 2 percent gross turnover tax on common carriers and various other unspecified use taxes, see Table V.3.23) have not expanded as fast as total finance, but still account for about 63 percent of road finances (compared with earlier years when they accounted for as much as 75 percent). The increasing gap has been filled by the state. Less extensive information from the Ukrainian Republic indicates that earmarked taxes there account for roughly 80 percent of total road finances (13 percent from the 2 percent turnover tax on common carriers and 67 percent from a 0.4 percent net profits tax on all other enterprises), with the remaining 20 percent from the union budget. In addition, in 1988, a union tax on vehicle ownership was imposed which now raises about rub 1 billion, though this revenue is not specifically earmarked for roads.
|2 percent gross revenue tax on common carriers||0.6||0.7||0.8||0.8||0.7|
|Special taxes on road users||2.2||2.3||2.6||2.6||2.9|
g. Road accidents
Property damage statistics from road accidents are not available, as many motorists are not insured and noninjury accidents are apparently often not reported. But standard statistics are available on accidents involving injuries and fatalities, including the assessed causes (Table V.3.25). With nearly 59,000 fatalities in 1989, against a very small vehicle population and an even smaller number of vehicle kilometers driven, the Soviets have one of the highest traffic fatality rates in the world (a large multiple of the rates in the OECD countries). The injury/fatality accident rate is vastly higher for private vehicle operators than for public vehicle operators, presumably reflecting the higher level of training and professionalism of the latter. The reported level of alcohol involvement in accidents on national average, is, surprisingly, one of the lowest in the world (21 percent), partly due to stiff enforcement measures.
|1. Public use trucks||627||710||741||740||736||727|
|2. Agricultural vehicles|
|(presumed to be trucks)||…||1,212.6||1,425.2||1,444.7||1,450.0||1,453.0|
|Special vehicles (light and heavy; presumed to be predominantly trucks)|
|3. Public use||9.7||25.3||31.9||32.5||33.2||30.6|
|5. Public buses||178||277||310||316||319||318|
|6. Public taxis (light)||90||135||128||131||133||133|
|7. Public passenger cars (light)||12.3||17.5||17.2||17.1||16.9||16.1|
|8. Nonpublic passenger cars (light)||451||519||389||390||400||399|
|9. Private passenger cars (light)||1,395||8,218||12,444||13,309||14,194||15,084|
|10. Total freight and special|
|vehicles (rows 1+2+3+4)||1,318.71||3,386.9||3,966.1||4,034.2||4,067.2||4,011.6|
|11. Total public buses (row 5)||178||277||310||316||319||318|
|12. Total public taxis and|
|passenger cars (rows 6+7)||102.3||152.5||145.2||148.1||149.9||149.1|
|13. Total nonpublic and private|
|passenger cars (rows 8+9)||1,846||8,737||12,833||13,699||14,594||15,483|
|14. Total passenger vehicles|
|15. Total freight and passenger|
|vehicles (rows 10+14)||3,4451||12,553.4||17,254.3||18,197.3||19,130.1||19,961.7|
Excluding agricultural vehicles.
Excluding agricultural vehicles.
|1990||…||330 1||59 1||…||…|
Provisional, based on extrapolations of first six months.
Provisional, based on extrapolations of first six months.
Other than driver training (which is far more rigorous for professional drivers than for the individual motorist) and strict enforcement of traffic laws (at least in populated regions), particularly with respect to drunk driving, there are virtually no special efforts to address the accident problems. There is no “black spot” program to identify and improve particularly dangerous points in the highways system. There is no program to ensure appropriate safety standards in vehicle design (safety glass, improved brakes, driver restraint systems, etc.) or vehicle inspection programs to ensure proper maintenance. Although front seat belts are installed in new vehicles, there is no program to educate the public on the need to use them.
h. The road transport industry
As explained earlier, road transport has been the responsibility of republican-level ministries, which have operated common-carrier and many ancillary support services as local monopolies. However, in this industry, unlike other segments of the transport sector, individual enterprises have had the freedom to buy and operate own-account vehicles. This freedom was fully exercised at an early point, to the extent that, by 1970, just over 70 percent of freight ton kilometers were carried in own-account vehicles, despite the fact that policies which prohibited own-account carriers from selling surplus transport capacity to third parties increased the costs of such services.5
Goskomtsen has retained control over tariffs. Although freight tariffs have been allowed to rise as necessary to retain profitability (which averaged 23 percent of gross revenues in 1988) and taxi services even more so (the average profit rate being 34 percent), urban bus tariffs have been held fixed since 1948 throughout the USSR. This has given rise to increasingly large deficits, which have so far been met by cross-subsidies from the profitable taxi and freight services. The large (and growing) deficits in urban bus services added to the underlying problems of poor roads, poor vehicles, and poor vehicle support services. Road transport thus became extremely expensive relative to other modes of transport, particularly railways. The average ratio of road freight tariffs to railway tariffs rose to nearly 19 (as compared with the United States where, under very different conditions, the multiple is only about 5). The high costs of road transport, along with institutional factors, helped to confine the role of road common carriers predominantly to local distribution, with an average freight haul distance of only 21 kilometers (which has remained essentially constant for at least the last decade).
Large trucks and truck-trailer combinations have been introduced in recent years, but are in short supply, and the use of containers until now has been minimal. International road transport (less than 1 percent of Soviet trade) has been the responsibility solely of Sovtransavto, an organization run by the RSFSR Ministry of Road Transport, which carries more than 90 percent of the traffic, the other part being carried by foreign truckers. Despite bilateral agreements which would have entitled foreign carriers to a much higher percentage of the traffic, they allegedly have chosen not to do so because of currency convertibility problems and poor Soviet roads and support services.
i. Vehicle supply and support services
Broad information on the motor vehicle fleet by type and ownership is given in Table V.3.24. There is reportedly an ample supply of trucks only for the medium weight range truck (3 to 10 tons), which is the traditional mainstay of the Soviet industry but is not well adapted to existing or new market opportunities. There are huge unmet demands for small trucks (under 2 tons) to serve local distribution requirements and also large unmet demands for very large trucks (15 tons and above) to meet rising longer distance and container transport demands. Partly because of perceived profit opportunities arising from the expected new foreign trade relationships and partly because of the difficulties associated with the inconvertibility of the ruble, there is particular interest in international trucking opportunities which would offer the prospect of convertible currency earnings to pay for imports of modern heavy trucks. Not only are the latter more fuel efficient than any currently manufactured Soviet vehicles, but they also meet environmental standards required for trade with Western Europe.
Soviet-made vehicles are outdated in design, suffer from poor fuel efficiency, high downtime and repair costs, and only a limited range of vehicle types and sizes is available. Medium-sized trucks accounted for 70 percent of Soviet output in 1980 (and the percentage probably has changed little since), in contrast to countries such as the United States and the former Federal Republic of Germany, where trucks of less than 2 tons payload account for 88 percent and 66 percent, respectively, of the vehicle fleet. Vehicles designed for specific functions are rare, with shortages of refrigerated trucks, livestock rigs, and milk tankers particularly inhibiting the distribution of foodstuffs. Just 10 percent of the estimated need for trucks specially equipped for cold weather operations—with fuel heaters, dual lining of metal surrounding the engine block, and half-tracks—is available.
Freight turnover accounted for by diesel trucks is expected to reach at best 60 percent by the end of 1990. Most of the new, large diesel trucks in the fleet are the product of the Kama River Truck Plant, the most important addition to Soviet truck manufacturing in the past two decades. The production of large diesels should increase further by expansion under way at two engine plants, the Kustanay Engine Plant (Kazakhstan) and the Barnaul Transport Machine-Building Plant (Altai Krai). Yet even these new facilities will be limited in their ability to produce high quality diesels (particularly turbo chargers) because of limitations in the use of precision casting, stamping, and pressure the casting due to shortages of superior quality metals.6
The network of ordinary vehicle repair stations, even of gasoline filling stations, is so sparse as to constitute a major hindrance to the road transport industry. Vehicles are reported to be down for months at a time while awaiting spare parts. Many hours each week are lost while vehicles wait in queues simply to refuel. Moscow is privileged to have 211 filling stations, resulting in a ratio of 42,498 inhabitants per station, but Leningrad’s 24 stations yield a ratio of 209,167 inhabitants per station, which even allowing for the low levels of motorization, would appear economically absurd. These problems pose a barrier to market entry, as many support facilities have had to be provided by the larger transport enterprises themselves for own-account use, and these would presumably be used to competitive advantage under free market conditions. However, if market entry into support services is not blocked by misguided government policy, the sizeable profit opportunities should quickly give rise to a surge of new entrepreneurial activity in this sector, perhaps usefully with foreign participation.
j. Trends in traffic, productivity, and capacity
According to official statistics, the decade of the 1970s was a dynamic period for the roads sector compared with subsequent years, agriculture being the principal exception (Table V.3.26). During the 1970s, there was relatively rapid growth of traffic (just under 7 percent per annum for both public carriers and own-account). The industrial own-account vehicle fleet grew even more rapidly (7.8 percent per annum), while public carrier and agricultural own-account vehicles both grew much more slowly (1.5 percent per annum). And, as discussed above, there was rapid growth of the all-weather roads network. By comparison, the 1980-88 period was much more stable. Traffic overall grew by just 2 percent per annum with own-account carriers (industry and agriculture combined), at 2.4 percent, outstripping public (or common) carriers. Total vehicle fleet size grew much more slowly than in the 1970s, primarily due to the slowdown in industrial own-account vehicles, although agricultural vehicles grew faster at 2.3 percent per annum.
|Total trucks (thousands)||2,362.5 1||3,386.9||3,966.1||4,034.2||4,067.9||4,011.6|
|1. Common carriers|
|3. Other special vehicles||682||1,439||1,768||1,817||1,848||1,801|
|4. Total excluding common carriers||1,7261||2,651.6||3,193.2||3,261.7||3,298.0||3,254.0|
|Total ton kilometers (billions)||220.8||432.1||476.3||489.8||492.0||508.0|
|1. Common carriers||64.2||131.5||141.6||141.3||141.0||143.3|
|3. Other special vehicles||…||…||…||…||…||…|
|4. Total excluding common carriers||156.6||300.6||334.7||348.5||351.0||364.7|
|Average ton kilometers per truck|
|1. Common carriers||100.8||178.8||183.2||182.9||183.3||189.1|
|2. Total excluding common carriers||90.7||113.4||104.8||106.8||106.4||112.1|
|Public roads (thousand kilometers)||1,106.1||1,001.3||971.5||968.4||971.2||972.1|
|1. Hard-surfaced (including gravel)||489.0||723.5||812.3||827.0||842.7||857.5|
|Nonpublic roads (thousand kilometers)||225.0||340.0||571.1||618.0||638.7||764.9|
|1. Hard-surfaced (including gravel)||109.0||197.7||319.1||345.5||353.3||441.4|
|Total roads (thousand kilometers)||1,331.1||1,341.3||1,542.6||1,586.4||1,609.9||1,737.0|
|Total hard-surfaced roads|
|Ton kilometers per total road|
|Ton kilometers per hard-surfaced|
|road kilometer (thousands)||369.2||469.1||421.0||417.7||411.4||391.1|
|Ton kilometers per public|
|hard-surfaced road kilometer||451.5||597.2||586.4||592.3||583.8||592.4|
Trends in productivity of trucks (in terms of ton kilometers per vehicle per year) have been derived from the reported developments in traffic and fleet size. Over the 1970-80 period, average productivity increased by an impressive (and perhaps questionable) 77.4 percent, or 5.9 percent per annum, for public carriers, but has since more or less stagnated. By the same measure, productivity of nonpublic vehicles declined by 7.5 percent per annum during 1980-85, reflecting a more rapid growth of fleet than traffic; it has recovered somewhat in recent years.
From 1980, there has been a gentle decline in traffic density (to about 292,000 ton kilometers per route kilometer in 1988), amounting to just over 9 percent over eight years, reflecting the fact that the total network has grown slightly faster than traffic.7 If attention is focused on the measure for the public hard-surfaced network, which is undoubtedly where the great majority of traffic actually occurs, the picture is only slightly different, with a less than 1 percent overall decline to 1988. These figures would suggest that congestion in the network as a whole has not been, and probably is not today, a major problem. These system-wide averages, however, conceal enormous variations across individual route segments, and important fluctuations in demand (across the hours of the day and across the seasons of the year, with a particular peak in road transport demands from agriculture during the harvest season) undoubtedly stress capacities at times and on specific links.
The conclusion, at least for the short run, is rather positive: aside from particular problem areas (most notably the need for all-weather access to farms), there is some slack in both the highway infrastructure and the truck fleet (predominantly 2 to 8 tons capacity). The operating efficiency will remain low, however, with outmoded vehicles and vehicles poorly adapted to traffic demands operating over predominantly low-standard roads.
k. Future demand for road transport services
Because of climate, geography, and certain underlying structural characteristics of the Soviet economy, the role of road transport will continue to differ from that in other modern economies. But it is likely that, despite much higher cost per ton kilometer, roads will become a more popular mode for high-valued goods over much longer haul distances than at present. Shippers in market economies pay several times the cost of competing rail transport in order to obtain the superior service and flexibility of road transport, and there is no reason to think that similar Soviet industries, operating under market incentives, would be different. A substantial fraction of the high-valued traffic presently moving by rail will shift to door-to-door road transport, as will also a significant percentage of short- to medium-distance passengers. Such high-valued traffic will grow far more rapidly than the production of primary products, with highways capturing the major share of the increase, at least to the extent that the economy is reoriented to serve consumer needs and associated light manufacturing. The political imperative to solve food problems, coupled with a restructured agriculture operating under market incentives, will require a vast increase in the agricultural feeder road networks to address this need. A growing number of personal automobiles will add to the political lobbies pressuring for improved roads, and improved roads will lower the costs of road transport inducing further growth of freight as well as passenger transport. Thus, the share of road transport in the total transport sector is likely to rise significantly in the coming years.
(1) Pricing and regulatory policies
All restrictions on market entry and pricing should be eliminated in road transport. There are no significant economies to firm size, and the market entry requirements (either financial or technical) are minimal. Unfettered markets, as in many countries, are characterized by a vast number of efficient one-vehicle owner-operators (with regular bankruptcies of inefficient carriers at the margin), and the sector is normally a focal point for dynamic small scale entrepreneurial activities, capital accumulation, and employment generation. Individual enterprises are in the best position to make decisions concerning the services to be offered, and the size and number of vehicles to meet their demands.
A comparative study of the costs, user taxes, and tariffs for all the modes of transport should be undertaken, not only to help better define the potential economic role of the different modes, but also to provide a new basis for user taxes for roads (and other modes of transport where public investments would be expected to continue to play a significant role in the provision of infrastructure in the future). This study should include an examination of how the costs of constructing and maintaining the infrastructure are to be covered. It is essential, if the market allocation mechanism is to work properly, that the different modes of transport compete on the same footing. The degree of cost recovery for investments by the state should thus be essentially equivalent in the various modes, although the mechanism may, of course, vary across modes.
Present road user taxes in the USSR are not well structured from an economic perspective,8 relying as they do on quite poor proxies for road use (gross enterprise revenues and, to a lesser extent, engine size). Only the 2 percent tax on common-carriers’ gross revenues, a small portion of total tax receipts, is a reasonable proxy, since it is at least directly related to road use, if not to specific vehicle loadings. One aspect that is particularly important in the field of road transport is the fact that damage caused to roads has been shown to be geometrically proportional to the weight on the individual axle. Thus, user taxes should be designed to encourage the use of multiple axles under heavy trucks, and such vehicles should be taxed according to the damage they cause to the roads (although stronger pavement designs should of course be the first policy measure if heavy loadings are anticipated). As a practical matter, governments normally levy taxes on proxies for road use, such as fuel consumption or on vehicle ownership, in order to avoid the difficulties of monitoring road use directly, but present Soviet taxes would need to be restructured to better approximate road use.
Other than the provision of roads (see below) and establishment of efficient user charges, the principal government interventions required are related to safety (to ensure sound vehicles and vehicle operation) and air pollution. Safety regulations normally include restrictions on maximum driver work hours, as well as traffic laws and vehicle design requirements (of which safety glass and occupant restraint systems are the most important). Axleload restrictions are also employed in most countries to protect the public roads from excessive wear and tear.
(2) Institutional reform in provision of highways
Although some roads may be provided through toll financing (with or without government participation), few would dispute that there is also a role for the government in the provision of road infrastructure more generally. At issue here, however, are the respective roles of the different levels of government. Although the financial contributions of the union government have never been more than a minor component of total highways funding, the union government played a key role, until 1988, in planning and approving highway development plans, budgets, and allocation of materials. Since 1988, the union government has withdrawn from this sector, and the responsibility for almost all road planning, finance, and development has shifted to the republics and the localities. There has ceased to be any national highway development plan. In the republics, where an association of the various Ministries of Highways (led by the RSFSR) previously kept records of road development of general interest, these ministries are now being dissolved and new ministries of transport, encompassing a different role for the republican governments in all modes of transport, are being established.
The question arises as to whether there will be sufficient attention to road development in the future, or sufficient cohesion to guide the development of the network to meet the needs of society as a whole, particularly as it concerns the national (or inter-provincial) network. As far as the political momentum behind road development is concerned, there may be no cause for concern. Local lobbies may actually be more influential under a devolved than under a centralized system. And trends toward greater road usage, of the kind described earlier, would strengthen these lobbies further.
There are, however, some obvious pitfalls which can be foreseen and should be avoided. One concern is the need to establish new mechanisms to protect the public interest in the quality as well as cost of road construction and maintenance. The former ministries of highways will now be profit-seeking monopolistic enterprises, and whatever interest they may formerly have had in ensuring the quality of construction may be greatly diminished, although this will depend obviously on the type and form of contract by which they are employed. Great care should be exercised in establishing new procurement systems for road construction and maintenance that will ensure that the public interest in obtaining the best quality roads for the least cost is well served. This is, of course, one of the oldest and best understood problems of public administration, but one with no simple solutions. Experience of other countries should be closely heeded. That said, there are good prospects for obtaining major reductions in the costs of roadbuilding and road maintenance from introducing competitive tendering practices. For the largest construction projects, worldwide experience over many years has demonstrated substantial benefits from international tendering.
A second concern relates to the loss of national perspective in decisions concerning international and interrepublican roads. It may often be the case that the benefits to the nation of a particular project are greater than the benefits to the particular republics involved, and in other cases some republics may benefit more than others in circumstances where it is difficult to apportion the costs and benefits in a manner acceptable to all parties. Thus, it is possible that high-standard highways linking different republics and linking the country with other countries may receive insufficient support. There is thus a strong argument for the union government retaining, in some institution, at least a monitoring function and analytical capability for assessing the major trends in demand and supply and the extent to which national needs are being met. A national forum for exchange of information and professional debate would also be valuable, perhaps modelled on the United States Transportation Research Board, which is centrally organized but managed primarily by the respective state highway authorities. A case could be made for further involvement, including a role in funding of highways of national interest, again perhaps as in the United States, where the Interstate Highway Program was widely seen as a successful intervention by the federal government, greatly speeding up the development of the national highway network.
(3) Technological modernization and investment priorities
In a deregulated road transport system, investment priorities (other than in the roads themselves) would of course be determined by individual enterprises or entrepreneurs, according to prevailing market conditions. However, some of the likely priority areas are clear. The expansion and modernization of the small truck and van fleet, where more fuel-efficient and specialized vehicles are badly needed, is one example. Development of the network of filling stations and vehicle repair centers is also likely to be a high priority.
As far as the road system is concerned, a major program for construction of a new high-standard intercity highway network spanning the nation does not appear economically warranted at this time. As argued earlier, in general the capacity of the main Soviet road network, given rapid expansion during the 1970s and 1980s, now appears adequate for any likely level of demand over the foreseeable future. Rather, a more selective approach is indicated, focused on a progressive upgrading of the existing network as traffic materializes and road conditions warrant. There are four obvious priority areas: (1) existing roads which are already or soon will be badly congested, where widening or in some cases entirely new highways will yield large economic benefits and should not be delayed—most of these are likely to fall in the core network emanating from the major cities west of the Urals; (2) one or more links to meet the expected upsurge in trade with Western Europe, where either the existing highways should be upgraded or a major new link constructed, possibly following the existing proposal for a major toll highway in the Moscow-Minsk-Brest corridor; (3) pavement upgrading for the most highly trafficked roads where the existing surfaces are either already very rough (e.g., gravel sections of the national network) or at a critical stage of fatigue life, where a relatively low-cost strengthening now could avoid far higher reconstruction costs subsequently; and (4) a systematic program to identify and eliminate the most dangerous points in the roads network (“black spots”) where the deficiencies have been proven in terms of high numbers of injuries and fatalities.
In addition, there would appear to be a very strong case for new investment in all-weather farm access roads. The lack of adequate hard-surfaced roads in many rural areas is cited as an important contributory factor to the high proportion of each year’s harvest that is left to rot in the fields (see Chapter V.5). The responsibility for these roads, however, should remain at the local level, with costs being borne by those who would benefit most directly from the additional investment.
(4) Cooperation with the West
In the area of policy and institutional reform—pricing, taxation, regulatory policies, and institutional organization—there are many lessons to be learned, both positive and negative, from the diverse experience of other countries, most having constantly experimented over generations with alternative approaches as they have struggled to make market economies function better. The Soviet authorities should take full advantage of this experience. Some of the most obvious lessons have been outlined above, but there will be a need for more detailed examination of particular issues. Examples where Western expertise and experience could be most useful include the organization of road authorities and public works procurement; systematic road inventories and condition surveys; studies of the costs of road transport services, optimum vehicle sizes and load limits; and in road cost recovery and road safety.
5. URBAN AND ROAD PASSENGER TRANSPORT
Due to the very low levels of private car ownership in the USSR, collective urban and road passenger transport networks are by far the most important part of the global passenger transport system, at least in numerical terms. They play a central role in the economic and social life of every Soviet city, as well as in rural areas. Official figures indicate that, in 1988, the average Soviet citizen travelled 288 times using public transport including 177 trips (61 percent) by bus, 90 trips (31 percent) by trolleybus, tramway or metro, 5 by taxi, 15 (5 percent) by railway and only once either by plane or by ship. Nonetheless, as mentioned earlier, collective urban and road transport is not sufficient to compensate for the lack of personal vehicles, so that average personal mobility remains far below the levels in Western countries.
b. Overview of the system
Buses account for more than 62 percent of total passenger trips and nearly the same proportion of the global passenger kilometer traffic. Trolleybuses and tramways come far behind (Tables V.3.1-4). Metros are available only in 12 big cities, where they play of course a major role, but altogether represent no more than 6 percent of the global traffic of the subsystem. Suburban railways have in major cities as important a role as metros, given the fact that the average distance travelled is relatively high.
Altogether, the average distance travelled in 1988 by a Soviet citizen using urban and road transport was between 2,500 and 2,600 kilometers. Assuming that the annual distance travelled by car or taxi was not much longer (and may be shorter) than 1,000 kilometers, it is clear that personal mobility is much lower than in Western European countries, where the average annual distance travelled by car alone is 8,000-10,000 kilometers per person—and at least twice that in the United States (see Table V.3.2). The low level of personal mobility has various important economic and social consequences: less work force mobility, more time spent commuting and shopping, as well as reduced opportunities for family, social and cultural life.
(2) Vehicle fleet and motor vehicles
The growth of the total number of vehicles available was rapid during the 1970s—more than 4 percent per annum—but slowed dramatically during the 1980s, growing little more than 2 percent per annum from 1980 to 1985, and less than 1 percent per annum from 1985 to 1988. The present figure is not known, but a net reduction in the number of operating vehicles between 1988 and 1990 would not be surprising. The number of buses and trolleybuses per 1,000 inhabitants is smaller in the USSR than in the four major EC countries—where personal means of transport are much more widespread (Table V.3.10).9
(3) Institutional organization of the sector
Bus transport enterprises, intercity and suburban as well as urban buses have been managed by regional departments of the republican ministries of road transport. The public taxi enterprises, truck transport enterprises, garages and maintenance services and freight and passenger road terminals are also run by these integrated road transport organizations, which tend to be enormous bureaucracies. The Kiev District Road Transport Union, for example, one of 26 similar Ukrainian organizations, is in charge of 33 freight or passenger transport enterprises, 1,500 trucks, 3,000 buses, 3,000 public taxis and more than 30,000 employees. Metro transport organizations have been under the direct managing authority of the Union Ministry of Railways (MPS): the state budget financed the current operating deficits, rolling stock replacement and other investments, as well as the major part or totality of extension works managed by other union ministries. Other “electric” transport means, i.e. trolleybuses and tramways, have been the responsibility of city councils or municipalities. Additionally, the transport departments of important municipalities tried to coordinate current management and improvement of urban transport networks, through Urban Transit Commissions where executives in charge of different transport enterprises or organizations can meet. All tariffs had to be approved by republican-level price and tariff commissions, (for bus, trams and trolleys, taxi fares) and by Goskomtsen for metro and railway fares.
c. Main problems of urban and road passenger transport
(1) Inadequate vehicle fleet
A shortage of vehicles has prevented the necessary expansion of the bus and tram routes in many suburban residential areas. Consequently, frequencies are too low and vehicles are commonly overcrowded. Metros appear to be an exception, reportedly having sufficient rolling stock for very high frequencies at peak hours.
Buses are apparently excessively fuel-consuming and polluting. For this reason (at least partly), many city councils—in Moscow and Kiev for example—give official priority to electric transport (metro, tramway and trolleybuses) in their transport development plans. A program of compressed gas energy for buses was initiated in the mid-1980s but the proportion of gas-powered buses was only 1.2 percent by 1988. The proportion of diesel-powered buses is also relatively low, at 30 percent in 1988.
(2) Financial disequilibrium
Until the early 1980s, urban and road passenger transport was not profit-making, but operating costs were roughly covered by revenues, despite very low tariffs, thanks to enormous economies of scale. As costs rose, however (by 2.6 percent a year for metros, 1.3 percent for trolleys and 2.5 percent for tramways between 1980 and 1988), the tariffs were not changed. In 1988, the global operating deficit was rub 407 million for the bus enterprises, rub 267 million for the trolleybus network, rub 334 million for the tramway networks and rub 67 million for the 12 metro networks. The deficit of bus enterprises was financed internally by the road transport unions using a part of the net revenues from their taxi enterprises (rub 724 million in 1988) and of their truck enterprises (rub 2.5 billion net revenue). Deficits of tramways and trolleybuses were financed by city councils.
The financial situation deteriorated sharply during 1989 and 1990. A rise in tariffs for taxis and truck transport implemented in January 1990 covered the additional costs in these subsectors, but bus fares were not increased, and additional deficits were taken in charge by the municipal and republican budgets in order to keep the other urban fares stable. Given sharp rises in energy costs at the beginning of 1991, and continuing rapid growth in wage costs, substantial tariff increases will be needed in the near future if deficits are to be kept under control.
(1) Tariff reform
One way to approach the problem of tariff-setting would be to give complete freedom to bus enterprises, road transport unions, metro authorities and municipalities to set tariffs according to costs. This would entail very large increases, however, with potentially serious social consequences.
A more prudent way might be to set limits on the subsidization of urban and road transport, say to 30-50 percent of costs. Rates of subsidization of metros, urban and road passenger transport of this order are quite common in many Western countries. In general, tariffs should become more closely related to distances travelled, particularly in suburban areas.
(2) Renewal and extension of vehicle fleets
The expansion and modernization of the system’s vehicle fleets high priorities. Given the scale of the problem, imports from the West and from rormer CMEA manufacturers would be needed to supplement new production from Soviet-Western joint ventures (one of which, a bus manufacturer, has already been established).
(3) Modernization and extension of urban road transport networks
Two different medium- and long-term scenarios can be outlined for the Soviet urban and local transport system. In the first scenario, car ownership would spread very quickly during the 1990s. In this case, state and local authorities should give priority to extended works of renewal and extension of road infrastructures (urban, suburban and intercity) and parking facilities, as well as implementing regulatory policies aimed at limiting urban automobile congestion. Alternatively, economic constraints and policy decisions, in addition to geographic and climatic factors which are not in favor of road transport in many regions, would restrain the growth of car ownership. Higher priority should then be given to extension of collective urban and road transport networks.
(4) Institutional issues
The unions of road transport operators should be phased out. Wherever possible, sectors should be opened to private competition (with legally-defined private enterprise status) and possibly privatized, starting with truck enterprises, taxis, garages, and including eventually intercity bus enterprises. Sales of public enterprises to foreign partners could generate convertible currency for use in importing Western technology. The urban and suburban or local bus enterprises, as well as the road passenger terminals, could come under municipal authority. Responsibility for the metro organizations and suburban railways should likewise pass to the municipal authorities and should be separated from MPS, for current management decisions at least. MPS could remain in charge of definition and implementation of standards and general regulation of the metro and suburban railway networks (including safety rules).
The municipal transit authorities may find it convenient and less costly to invite competitive tendering for management services and for the provision of equipment rather than attempting to own and manage the entire system. If they choose to subsidize fares, they should bear the fiscal responsibility.
(5) Role for Western involvement
Soviet-Western cooperation could play a part in upgrading the technology used in the metro and other urban transport networks; in improving the information and control systems (including the use of computerization) for all forms of mass transit; in updating the ticketing and other payment systems; and in management and personnel training. Scope for joint ventures and, perhaps, foreign direct investment, is likely to be greatest in the privatized, competitive sectors. It should be recognized, however, that most such ventures would be unlikely to earn foreign currency directly, and their development may therefore be limited until ruble convertibility is achieved.
6. AIR TRANSPORT
The importance of air transport for economic and social life in the USSR is already considerable, and its potential development is still greater. Aviation is the only efficient transport means available to link many remote areas of the country. It is well suited to the geography and climate of the USSR, requiring relatively little in the way of ground infrastructure and being usable all the year round. Besides that, it will clearly have a major role to play in the future development of international travel to and from the USSR.
Air transport has always been considered by the Soviet Government as a strategic issue, so that very few data have been published. This situation is gradually changing, though the most recent statistical publications still contain very little concerning air transport. This section therefore draws to a large extent on information provided by the International Relations and Economic Affairs division of the Ministry of Civil Aviation (MGA), as well as by Aeroflot and airport authorities in Leningrad, Kiev and Odessa.
a. Overview of the Soviet air transport sector
(1) Air routes network, traffic, and airports
Aeroflot presides over the largest single air network in the world. According to Goskomstat figures, the Soviet national airline covered routes totaling 1,150 million kilometers in 1988. Besides an extensive domestic network, Aeroflot also links the USSR to 131 cities in 99 European, Asian, African and Western Hemisphere countries. Many new regular international routes have been opened in the past two or three years.
Aeroflot also carries the largest number of passengers of any single air carrier: 120 million in 1988 and 132 million in 1989. Only 3-4 percent of these were on international flights. The proportion of international passengers was increasing slowly in the 1980s (from 2.5 percent in 1980) and seems to be rising faster now. The mean distance travelled was about 1,816 kilometers in 1988. Originating passenger traffic increased by nearly 4 percent a year during the 1970s, but slowed to 2.3 percent a year during the 1980s; the rates of growth expressed in passenger kilometers were higher (7.5 percent in the 1970s and 3.7 percent in the 1980s) due to a steady increase in average distances travelled. These trends are comparable to those experienced by Western air carriers, although a bit slower.
There are approximately 200 airports in the USSR. Moscow is of course the hub, with not less than six different airports (Sheremetevo 1 and 2, Vnukovo 1 and 2, Domodiedovo, and Bykovo), followed in passenger volume by Leningrad, Kiev, Sverdlovsk, Novosibirsk, Krasnoyarsk, Khabarovsk, Tashkent, Simferopol and Sotchi. The network is largely centered on Moscow. Very few Soviet airports are open to international flights to and from Western countries, the situation being somewhat different with respect to central and Eastern European CMEA countries. Regular flights to and from Western Europe land and take off almost exclusively in Moscow, Leningrad and Kiev. About 85 percent of international passengers arrive at and leave from Moscow’s Sheremetevo 2.
(2) Aircraft fleet
The exact size and structure of the Aeroflot fleet are not known. There is, however, information on the average range and number of hours of flight for all aircraft having more than 80 seats: these data are shown in Table V.3.27. Given certain assumptions, it is possible to estimate the total number of aircraft of this type in Aeroflot’s fleet at 1,200. This figure, however, appears very low. Western sources have estimated Aeroflot’s total fleet at around 16,000 aircraft (in 1989). Thus, either the number of cargo, small passenger and specialized aircraft is very large or much of the fleet is idle at any one time (perhaps because of maintenance problems or fuel shortages). According to the MGA, the current capacity of the domestic aircraft industry would be sufficient for the replacement needs of a fleet of only 1,000 aircraft over a 20 year period.10 The first units of new generation aircraft—TU 204 (200 seats, 3,000 kilometer range) and IL 96 (300 seats, up to 9,000 kilometer range)—were scheduled to be delivered at the end of 1990 (for IL 96) and in 1991 (TU 204); they should fly a great deal more hours every year than the existing fleet.
|Hours of Flight|
(3) Current organization of Soviet air transport
Every national air transport system in the world relies upon three groups of functions: (a) air transport management (including maintenance of aircraft), (b) airport management (including passenger, luggage and freight handling), and (c) air traffic control (ATC) services (including airport ATC towers, regional ATC stations, VOR and DME radio beacons, instrument landing systems, etc.). In most Western countries, these three functions are now fully separated. Air transport is the responsibility of airlines, either public or private but largely or totally autonomously managed. Airport management is handled by airport authorities which are in most cases public institutions under national or local government, but autonomously managed and contracting with numerous categories of private or public partners (air carriers, trading and catering firms, maintenance and cleaning services, etc.). Air traffic control is most frequently under the direct management of a Ministry of Civil Aviation of some kind, which is also typically responsible for enforcing regulations and standards agreed internationally by such institutions as ICAO and IATA.
The traditional Soviet organization has up to now been quite different, being fully centralized under the exclusive authority of the MGA, with little or no separation of different functions, and no management autonomy at regional and local levels, either for air transport, airport management or investment decisions in any field. MGA is divided into 31 regional directorates which also happen to be regional departments of Aeroflot: MGA staff commonly wear the same uniforms as Aeroflot staff.
Every MGA directorate has direct and exclusive authority over all the airports in its region. Every airport is a department of the MGA regional directorate and a local department of Aeroflot, and is responsible for airport ground personnel and Aeroflot flying personnel, passengers and luggage handling airport services, maintenance of aircraft, air transport using aircraft based at the airport, and local ATC. This confusion of functions is personified by the staff managers of airports, who are frequently also practicing chief pilots.
Within this general structure, however, there appears to have been some moves in the direction of decentralization in recent years. Projects for the expansion and modernization of airports are now initiated and discussed locally (the agreement of the MGA authority still being required); and local airports and Aeroflot departments have recently been authorized to keep and deploy a larger share (to be increased further) of their revenues in foreign currency.
b. Key problems of Soviet air transport
A major problem with Soviet air transport, the main origins of which will be analyzed below, is the lack of adequate capacity. According to MGA, every year 30 to 40 million requests for domestic airline tickets cannot be satisfied, i.e., 25 to 30 percent of the satisfied demand; and the unobserved (deterred) demand is probably as great or even greater. The situation is similar, although less severe, in the case of international flights; the waiting list for seats on the newly opened Leningrad-New York Aeroflot flight, for example, is already four years long for passengers paying in rubles. The necessary expansion of supply is hindered by a number of factors.
(1) Obsolete aircraft and short flying times
The technologically outdated aircraft operated by Aeroflot constitute a major bottleneck in supply. Most of the components of the planes in use are outdated, but the main problems arise from obsolete engines. Jet-fuel consumption is enormous: an IL 86, for example, burns 2-3 times more fuel per hour of flight than an Airbus of similar capacity. In the present situation of chronic fuel shortages in the USSR, this leads to many canceled flights, so that potential capacity is lost.
Fuel inefficiency also limits the range and transport capacity of Soviet planes. In order to respect the maximum take-off weight with full tanks, the 350-seater IL 86, which is used for flights to North America, can take only 250 passengers and has to make two refueling stops en route. In addition, the aircraft engines’ outdated design leads to longer and more frequent maintenance operations (a problem which is aggravated by long delays in obtaining spare parts and general organizational inefficiency).
Annual flying time is below 2,000 hours for the long-haul IL 62 and around 1,700 or 1,800 hours for the other medium-haul aircraft (Table V.3.27). By comparison, French air-carriers Air France and UTA operate their long-haul B747 and DC 10 between 4,000 and 5,000 hours a year; and the medium- and short-haul B727, B737 and Airbus of Air France and Air Inter fly at least 2,000 to 3,000 hours a year. Modernization should give Aeroflot and other future Soviet air carriers the ability to reduce drastically fuel consumption and maintenance delays. As a result, transport capacity—in terms of seats supplied—could easily double within a few years, with a given (or even decreasing) total number of operating aircraft.
(2) Overloaded and outdated air terminals
A second important constraint on overall capacity is the lack of adequate air terminals. Most of these were built or enlarged in the 1950s and 1960s; since then, little or no additional investment has been made, at least in the European part of the USSR. Since passenger traffic has risen by 85 percent since 1970, the handling capacity of most Soviet airports is now woefully inadequate. To take a particularly severe example, Lvov airport in the Ukraine had to cope with an average of 840 passengers per day in 1989, having been designed to handle only 200. Queues to buy tickets and check in are lengthy and slow-moving, particularly for domestic flights. Luggage-handling is still mostly manual (at least within the terminals); computerization is minimal (except at the main Moscow international airport); and the various passenger services common to most Western airports are virtually nonexistent.
(3) Outmoded air traffic control system
The Soviet air traffic control system needs to be significantly expanded and modernized. MGA estimates that US$2-3 billion needs to be spent on updating the local systems (particularly at international airports) to increase the frequency of takeoffs and landings. The ground network of regional ATC centers and radio beacons is also inadequate. There are only about ten regional centers covering the whole country, most of them equipped with outmoded “START” systems and only very few using the more modern “TRASSA” system. The navigational infrastructure falls far short of what is required in many parts of the country, mainly Central Asia, Siberia and the Far East.
There will continue to be an acute need for training of ATC specialists, technicians and engineers, to enable them to use and maintain the new computerized ATC systems. In addition, the development of international air traffic generates an increasing need for foreign language (mainly English) speaking ATC professionals. Three hundred Soviet ATC technicians are presently following training programs in the United Kingdom and Scandinavia, and similar programs will be needed in the future.
c. Recommendations and Western assistance
Programs of technical modernization, capacity expansion and the training of personnel in the air transport sector will have to be closely coordinated, with a view to relieving the three main bottlenecks described above.
(1) Updating of aircraft and aircraft engines
A principal aim should be to modernize, rather than expand, the airline fleet, so as to increase dramatically average utilization rates. A high priority should be given to engine replacement. Soviet-built aircraft could be retrofitted with more fuel- and maintenance-efficient Western-built engines. And Soviet-Western joint ventures could be created for technology transfer and the manufacture of modern engines, avionics and other aircraft components in the USSR.
Complementary steps would be needed to develop efficient aircraft maintenance services. This could involve the reorganization of existing airport maintenance services and aircraft repair plants; the training of personnel for modern maintenance techniques; and the creation of joint ventures with Western air carriers or specialized enterprises for managing aircraft maintenance services.
(2) Capacity, expansion and modernization of air terminals
Successful efforts to raise aircraft capacity would then make the need for enlargement and construction of new air terminals, and the updating of techniques for passenger, luggage and freight handling, all the more urgent. (Some such projects, involving joint ventures, are already planned or are under discussion.)
The problems of financing the necessary investment could be solved in the future for new international air terminals, the foreign currency revenues from which (in the form of landing taxes, and profits from hotels and airport services) would facilitate the servicing of international loans. The financing problems could be more difficult to solve for the enlargement and modernization of domestic air terminals, until convertibility of the ruble is achieved.
(3) ATC network modernization and expansion
The outmoded equipment used by airport and regional ATC centers needs to be replaced, either with Western-made equipment or with systems built in the USSR under joint ventures. New regional ATC centers will need to be established to cover all parts of the country adequately. This could be facilitated by the use of satellite-based systems, which would be particularly well suited for the Siberian and far eastern regions of the USSR. The MGA should be charged with designing and managing a fully-integrated ATC network that confirms to ICAO standards.
(4) Organizational issues
The need for decentralization of current management and investment decisions, and the systematic separation (and better coordination) of functions, is clear. There is no ideal model for the air transport sector that would be appropriate for every country. Nonetheless, a few basic common principles have emerged from Western experience. First, a clear separation of functions and responsibilities is essential. The types of resources and organizational structures needed to manage air transport enterprises, airport complexes, air traffic control functions and to implement regulations are entirely different. Thus, Aeroflot should be given complete independence from the MGA. Airport authorities should be run as local or regional operations, either publicly or privately owned. And the MGA should be responsible for the management of the ATC network and for the supervision and regulation of the entire air transport industry, according to international standards.
The regional directorates of Aeroflot could become increasingly autonomous over time. Eventually, with full independence, they could provide the nucleus for a set of competing, regionally-based carriers and could be privatized.
Airport authorities, for their part, should be free to contract with various Soviet and foreign enterprises, to establish joint ventures with private and public partners, and to manage enlargement and modernization projects in conjunction with republican and local public authorities.
7. WATERBORNE TRANSPORT
Waterborne transport has played a relatively less important role in the USSR than in most major economies, in large part due to circumstances of climate and geography. Outside of the southern regions, the climate causes many Soviet ports and inland waterways to be closed for long periods of the year, while others are kept open only by extensive and costly icebreaking operations. Most navigable rivers either flow in the wrong direction (mainly north-south, contrary to the predominantly east-west traffic flows) or are so meandering as to double, in some cases, the distance by competing railway. Domestic coastal shipping is similarly restricted by the long access distances to the ocean from the interior points of origin or destination, and by the vast perimeters between the European, Middle Eastern, and Far Eastern portions of the country. A voyage from the Baltic ports to Vladivostok via Gibraltar, the Suez Canal and the Indian Ocean is more than half the circumference of the world, and while the distance via the Arctic Ocean is less than half, it is costly because of the necessary icebreaking operations. These factors obviously will not change, although their importance could be diminished by major new technological innovations not yet foreseen.11
Another important factor, which is certain to change with time, has been the foreign trade regime of the USSR. Foreign trade has been relatively limited in scale, and focused predominantly on relatively nearby CMEA countries, which can be accessed directly by land transport as easily as by sea for many purposes (including energy exports by pipeline, to both Eastern and Western Europe). The exception is Cuba, trade with which has constituted about 10 percent of total Soviet shipping tonnage for the past 30 years. But this merely serves to demonstrate the small scale of Soviet shipping, since the traffic with Cuba only amounts to about 25 million tons per year, out of the total 240-260 million tons in Soviet ships. (Total foreign marine trade amounts to around 400-410 million tons.)
The particular trading relationships of the USSR (induced in part by Western boycotts of Soviet shipping) have also served to isolate it to an extraordinary degree from the major technological innovations which have transformed the international shipping industry in the rest of the world during the past 35 years, particularly the container revolution. This has left the USSR and its trading partners with a largely outmoded inventory of vessels and ports. Major investments will be necessary to bring Soviet shipping up to competitive standards with the rest of the world, not only in vessels and ports, but also, very importantly, in the transport facilities and organizations linking the ports with their domestic hinterlands. Some of these investments are already being undertaken, and today the Soviet merchant marine is the largest buyer of new ships on the world markets.
b. Organization of the sector
Prior to the onset of reforms in early 1987, the marine segment of the industry (i.e., excluding river and inland canal transport) was organized under the Ministry of the Merchant Marine (Minmorflot), a vast vertically integrated monopoly. Reporting to Minmorflot were 17 marine shipping companies based at ports spread throughout the country, each of which in turn was responsible for managing not only the shipping fleet but also the ports and ship repair yards in its respective territory. The companies themselves tended to be very large, with the largest, the Black Sea Shipping Company (Blasco) based in Odessa, operating more than 250 vessels totalling 5 million deadweight tonnage (dwt) and employing some 70,000 workers, including those in the 11 ports and 3 ship repair yards which it managed. There was no competition among the various Minmorflot companies, and shipping as well as port tariffs were fixed by the authorities. Although about half of the foreign trade was traditionally borne by foreign carriers, there appears to have been no price competition from that source either.12 Any profits of the Minmorflot companies (after deductions for wages and employees’ welfare, but apparently not for amortization of capital assets) were returned to Minmorflot, which in turn provided the capital and made the decisions concerning investments in vessels, ports, and yards. In this context there were few incentives for efficiency and little investment in labor-saving innovations, and staffing levels were high by modern world standards.
Reforms began in earnest in early 1987 and are still in train. New cost accounting procedures were introduced in January 1987, and all 17 shipping companies were granted greater operating freedom and allowed to retain a portion of their own earnings in the first steps toward financial self-sufficiency. At least in theory, all routes have now been opened to competition (at state-fixed tariffs), but the companies must still meet state requirements to service unprofitable routes. Company finances, moreover, have not been adequate to meet the vessel replacement needs, which have therefore remained largely under Minmorflot control (see below).
From January 1991, the shipping companies were scheduled to become financially autonomous enterprises, operating under accounting procedures more akin to Western concepts, and using retained earnings (after meeting a new form of corporate tax) to meet or finance their own investment needs, including fleet renewal. The restructuring process will not stop there, however, as now ports and shipyards will be free to separate from the shipping companies, and the sub-enterprises within the ports and yards will also be free to separate, and so on down the chain. It is already clear that at least several (and probably most) ports and shipyards will separate from their parent shipping companies. Minmorflot itself, once most of its former responsibilities have been shed, might then be dissolved, with the few remaining functions reallocated to other agencies of government or to the ports and shipping companies themselves.
Among the issues not yet decided, the most important economic question is how tariffs (for both shipping and ports) will be determined—whether by the market place or by government authority—and the related question as to how financially unprofitable, but socially desirable, services may best be organized and financed. If tariffs are retained under government authority, it is not clear whether the union or the republic where the respective ports and shipping companies are based would be in control. A related question, of potentially even greater financial importance to the enterprises themselves, is the level of taxation on the enterprises. It has been proposed that, from 1991, the overall level of taxation on the shipping companies would be reduced to 35-45 percent, firms being required to keep two sets of accounts, one for rubles and one for convertible currencies, with different tax rates applied to the two accounts.
c. Traffic: past and present
Shipping (in Soviet ships) more than doubled over the decade of the 1960s (an annual growth rate of 7.9 percent); continued to grow during the 1970s, but at less than half the rate (3.5 percent per annum); slowed further over the first five years of the 1980s (1 percent per annum); and then began gaining again in 1986, with 2.3 percent per annum growth to 1988 (Table V.3.28). The largest traffic is in oil, which, however, declined by about 7 percent from 1980 to 1988, when it was 98 million tons (or 38 percent of the total). Grain, on the other hand, grew by nearly three times over the same period to become the second largest category by 1988, at 21.3 million tons.
|International trade by Soviet public carriers||…||89.5||150.6||155.3||163.8||169.6||179.5|
|Domestic trade by Soviet public carriers (residual)||…||72.5||77.4||84.7||85.2||82.4||77.5|
|Total Soviet public carriers||76||162||228||240||249||252||257|
|Total Soviet nonpublic carriers||…||…||11.4||12.3||12.9||12.8||13.1|
|Total all Soviet carriers||…||…||229.4||252.3||261.9||260.8||270.1|
|Iron and manganese ore.||…||…||14.0||12.4||11.7||10.0||10.2|
|Nonferrous ores and sulphur||…||…||4.9||5.4||5.5||6.0||6.0|
|Chemicals and mineral fertilizers||…||…||4.4||5.0||6.3||5.8||7.6|
|Grain and grain products||…||…||8.0||18.3||20.2||21.5||21.3|
|All other (residual)||…||…||58.9||78.7||83.4||80.6||87.6|
Figures for the important (typically high-valued) category of general cargoes are approximated by the “all other” category; this traffic grew by nearly 30 million tons over 1980-1988 (5.2 percent per annum). The amount of container tonnage handled in Soviet ships grew from a negligible 0.8 million tons in 1970 to 6.1 million tons by 1980, and then doubled again by 1988 to 12.6 million tons, rising far faster than either total shipping or the “all other” proxy for general cargoes. Containers and other general cargoes (breakbulks) now take just over 18 percent of general cargo.
(1) The ports
There are some 70 officially recognized ports in the USSR, of which 26 are classified by Minmorflot as major ports. None is large by world standards, and most are general purpose, handling all three classes of cargo (liquid bulks, dry bulks, and general cargo). Although there is considerable specialization in specific terminals, the volumes for the most part are not high enough to realize the economies of scale of the world’s larger and more specialized ports, except in liquid bulks (predominantly petroleum).
The handling of liquid bulks (a much simpler operation than either dry bulks or general cargoes, due to the relative ease of constructing pipeline access to the vessels and the high productivity of pumping operations) is dominated by six ports, two (Ventspils and Klaipeda) in the Baltic republics, three (Odessa, Novorossisk, and Tuapse) in the Black Sea, and one (Baku) in the Caspian; together these ports account for over 120 million tons (or 80 percent of marine handling) of liquid bulks.
The volumes of general cargo (breakbulks and containers combined) are particularly small, reaching 4 million tons only at Ilyichevsk and as much as 3 million tons at four other ports (Reni, Klaipeda, Leningrad, and Mariupol). Container traffic reaches 1 million tons only at three ports (Vostochny, Ilyichevsk and Riga). These low volumes of general cargo, coupled with a trading pattern focused on Eastern Europe and the absence of international competition, have all contributed to the lack of stimulus for modernization of the ports. Vast redundant investments have been made in outmoded breakbulk handling technology, much of it occupying valuable waterfront space which will have to be cleared in order to build modern ports or be put to alternative uses.13 Associated with these obsolete technologies are large numbers of workers, many of whom will be made redundant by the introduction of modern port technologies. Resolving similar problems of labor redundancy proved one of the most difficult facets of technological modernization of Western ports in earlier decades, and it is likely to prove problematic in the USSR as well.
(2) The vessel fleets
As of January 1, 1989, Soviet maritime shipping companies possessed 2,827 vessels totaling 22.8 million dwt. Of these the largest category, in terms either of number of vessels or of tonnage (8.6 million dwt), was general cargo vessels followed by oil tankers (6.0), ore and bulk carriers (4.5), and combination ore/bulk/oil carriers (1.5). There were only 65 container ships totalling 0.8 million dwt. The average size of ship is relatively small, the diversity of vessel type limited, and the average age of the fleet is something over 15 years. These factors all combine to suggest that a major fleet renewal is needed.
Minmorflot and the Soviet shipping companies have already initiated the largest fleet purchase program on world markets. This is merely to replace tonnage that will soon have to be scrapped (100 vessels within Blasco alone); no fleet expansion is envisaged. Only about one third of the expected vessels will be built in Soviet shipyards, partly because they do not have the requisite capacity and do not possess the latest technologies sought by the shipping companies, and partly because of the perception that (at the official exchange rate) Soviet yards are much more expensive than foreign ones. No major new shipyards are being planned in the USSR, but serious consideration is being given to the conversion of former naval shipyards, now idled in an era of disarmament, into merchant builders. This will not be a quick nor entirely adequate solution to the huge fleet renewal needs of the Soviet merchant marine, but it could make a significant contribution.
The size of the financing needs for fleet renewal coupled with the problems of ruble inconvertibility have led to the creation of complex financing mechanisms, under the aegis of AKP Sovcomflot, a holding company formed by Minmorflot and seven Soviet shipowners. One important mechanism has involved extensive outflagging of existing Soviet ships. In order to secure foreign financing for new ships, existing debt free Soviet-flagged ships have been transferred to foreign-flagged companies which have then been able to obtain first mortgage financing from Western (particularly Scandinavian) banks, who have received additional security from long-term charters to Soviet shipowners and guarantees of various forms from Minmorflot.
(3) Inland water transport
The major rivers—particularly the Don, Dnepr, and Volga—have historically played important roles in transport and were instrumental in determining early settlement patterns in the USSR. The advent of the railways in the 19th century provided alternative and generally superior means to connect not only existing populated areas but also to make accessible new areas, many with rich natural resources. Despite sporadic efforts to develop inland waterways—mostly during the Stalinist era—they have been eclipsed in importance by the railways, and more recently by pipelines. Today, they only account for about 5 percent of freight ton loadings and 3 percent of ton kilometers. That small share is not, however, an insignificant amount in absolute terms, since the freight totals in the USSR are so enormous. Indeed, the number of tons originating is much larger than for marine transport, reaching 691 million tons in 1988.
Moreover, inland waterways have shown a certain resiliency in recent years, with traffic tonnage growing by 70 percent over the decade of the 1960s, by another 60 percent in the 1970s, and by a further 22 percent between 1980 and 1988 (Table V.3.29). Ton kilometers have not kept pace, however, as shorter-haul traffic has grown faster than longer-haul traffic, reducing average haul distances from 486 kilometers in 1970 to 364 kilometers in 1988. In fact, traffic volumes in the three most important commodities (timber, oil, and coal) have all decreased in absolute terms since 1980.
|Domestic tonnage by Soviet public carriers (million tons)||…||…||…||…||…||…||…|
|International tonnage by Soviet public carriers (million tons)||…||3.6||10.5||13.9||15.6||17.3||19.5|
|Total tonnage, all carriers (million tons)||210||358||568||633||649||673||691|
|Total ton kilometers (in billions)||99.6||174.0||244.9||261.5||255.6||252.7||251.2|
|Average distance (in kilometers)||474||486||431||413||394||375||364|
|(billion ton kilometers)||…||…||26.2||21.1||20.1||19.6||19.0|
|(billion ton kilometers)||…||…||0.08||0.08||0.08||0.1||0.2|
|(billion ton kilometers)||…||…||48.2||49.7||48.0||47.3||45.3|
|Iron and manganese ores|
|(billion ton kilometers)||…||…||9.8||8.5||6.6||6.8||7.3|
|Nonferrous ores and sulphur|
|(billion ton kilometers)||…||…||2.8||4.4||4.2||3.4||3.9|
|(billion ton kilometers)||…||…||6.4||8.1||5.6||5.8||6.3|
|Chemicals and mineral fertilizers|
|(billion ton kilometers)||…||…||1.6||4.1||5.0||5.2||5.7|
|(billion ton kilometers)||…||…||2.7||1.5||1.5||1.3||1.3|
|(billion ton kilometers)||…||…||35.2||35.6||37.8||37.3||37.4|
|(billion ton kilometers)||…||…||—||—||—||—||—|
|Grain and grain products|
|(billion ton kilometers)||…||…||6.2||7.0||7.2||6.4||6.6|
|(billion ton kilometers)||…||…||0.6||0.6||0.8||0.8||0.8|
|All other (residual)|
|(billion ton kilometers)||…||…||90.7||120.8||118.7||118.7||117.4|
Responsibilities for inland waterways and transport were devolved from the union level to the republics shortly after World War II, except for tariff setting which remained in the hands of Goskomtsen. River transport services have been organized as monopolies for important segments of the industry having control of access to vessels, so that it was not even possible (as in the road transport sector, for example) for enterprises to escape the monopoly by buying vessels and operating on their own account.
d. Future prospects
The value, volume, composition, and geographic patterns of trade can be expected to alter substantially in the future, following the introduction of new CMEA trading arrangements. It is likely that natural resource products (perhaps with an increased degree of primary processing), which have dominated Soviet maritime trade volumes, will remain a major earner of foreign exchange. Since most dry bulk exports (the majority of the commodity categories listed in Table V.3.28) are natural resource based, their internal origins, exit corridors, and ports of export are likely to change relatively little; only the volumes would change, predominantly upward, wherever new market opportunities arise. Opening of major new sources is not foreseen at this time, although there would be a continuing expansion of activities in Western Siberia (minerals and timber). The major task in predicting future demands for these commodities would be to assess the resource base of the USSR, its accessibility, prospective costs of exploitation relative to other world suppliers, and anticipated world demand. Projections of this kind would be extremely useful for planning railways as well as waterborne transport facilities.
Prediction of future volumes and patterns of general cargo is more problematic. The changes are likely to be much larger in percentage terms, and the choice of mode and corridor much more open. For these high-valued products, the costs of transport are often much less important than speed, dependability, and flexibility of transport. Since a large portion of the increased general cargo trade will be with Western Europe, it is not unlikely that land transport modes, both railways and direct road transport, will capture a substantial portion of this traffic. The share to be captured by the water shipping companies depends very much on how quickly they respond to the new market opportunities, their marketing efforts, and the quality of the door-to-door services which they are able to provide.
While the exact extent of the expansion of general cargo trades is unclear, it is likely to be substantial. It is also clear that there will be a massive conversion of general cargo movements to containerization. The ports and shipping companies that move most quickly and effectively to meet these developments will be the winners—but they must also collaborate closely with the railways and road transport companies to ensure an effective door-to-door service.
The present move to dissolve the former monopoly and the huge conglomerate shipping companies under Minmorflot control should be completed. The 17 shipping companies should be separated from Minmorflot and each in turn should be encouraged to divide further to establish independent, competing enterprises, free to make their own decisions concerning markets to be served, vessel purchases and other capital investments. Establishing competitive market conditions and the mechanisms by which such conditions can be preserved should be the key focus of the present reform efforts. Freedom of entry for new firms is of central importance, but natural barriers to entry (capital requirements, organization scale, and technical know-how) are much greater in the shipping sector than in road transportation, the number of potential competitors is much smaller, and mobilization times much longer. Thus the best hope for rapid advance is in the dissolution of the existing companies to the point where several viable companies are established in each major market segment. The same argument applies a fortiori to the inland water transport monopolies. The degree of monopolization there has been even more severe, with neither foreign nor own-account competition permitted. The natural barriers to free entry and competition are also less than for marine shipping.
Government policies should encourage the establishment of integrated intermodal (IIM) transport services. Both the marine and inland modes have advantages (despite climatic and geographic factors) for certain types of traffic that could be better exploited if IIM services were established. One key policy measure would be the development of single through bills of lading to simplify services to the customer, provide an instrument for financing of cargos in transit, and establish standard practices for allocation of cargo casualty liabilities. Containerization is the most important dimension, but movement of bulk commodities by inland and coastal shipping in conjunction with rail may find a useful niche also, helping to relieve railway congestion in particular corridors.
Investment priorities are likely to be focused on the renewal and modernization of the vessel fleet, with particular attention to the impending container revolution; the equipment of selected ports with modern container handling facilities (paced as demands actually materialize), and other ports with specialized, high-volume handling equipment for bulk shipments; and the establishment of express container handling services with the port hinterlands. The likelihood is that, at most, there would be development of one hub port in each of the three major marine basins (Baltic, Black Sea, and Pacific) for containers and for dry bulks, with the other ports in those regions offering feeder services to the hub ports. Indeed, until the Soviet transatlantic trade reaches a substantially higher volume than at present, Western European ports may continue to serve as the hub ports for the USSR, particularly for containers. An overall development strategy is needed to guide the future development of individual ports.