Japan shows how private firms run public transport

By BLK   July 12, 2022 | 06:32 pm PT
Japan shows how private firms run public transport
The Cat Linh - Ha Dong metro trains in Hanoi, June 2021. Photo by VnExpress/Ngoc Thanh
If Vietnam wants its metro operators to be efficient and become profitable, it should learn from Japan's experience.

The effectiveness of metro projects has triggered some controversy after the Hanoi Metro Company, which operates the nation's first metro line, reported a loss of VND64 billion ($2.75 million) in 2021.

There's no question that cities should invest in and develop public transportation to become more efficient and make life more convenient.

Some countries prioritize convenient travel for people and limit traffic jams, and therefore, accept using the state budget to cover losses from operating public transport projects.

But there are also countries that do not choose to compensate losses made by public projects and allow private firms to do the business effectively and profitably. One of them is Japan.

I've been living in Japan for decades and have seen how it works.

The operator of Japan's public rail transport suffered losses for years and the government used its budget to offset those, resulting in a fiscal deficit.

Therefore, Japan later decided to have all public transport projects invested in and run by private firms.

Today, all public transport services are operated by private firms who run other businesses to earn profits, such as running advertisements on the tram system, leasing out kiosks in the station premises and operating stores in the vicinity.

Japan's two biggest public transport systems in Tokyo and Osaka, which suffered losses repeatedly, turned around after being privatized to become the Tokyo Metro and Osaka Metro.

These days, both networks are profitable.

In Japan, there is no monopoly. All companies have to buy land for their own business, and there is no such thing as land allocation.

Tokyu and Hankyu are both conglomerates with operations in several industries. As the name implies, these corporations are also railway companies ("kyu" means "express").

In addition to railways, they do real estate business (constructing apartment buildings for sale) and own department stores and supermarkets. All their businesses are located in major cities, some even in places that have no rail routes.

Japan has about 170 companies of different sizes that operate railway routes, and there is no tram or metro operator that is state-owned. Most of them are private companies and only a few are directly and independently operated by a city (not the state).

Until a few decades ago there was a state-owned firm that developed a network called the Japanese National Railways (JNR), commonly known as Kokutetsu (or "state railway"). It was developed by the Japanese government in 1857 to transport passengers and goods across the country. Even Japan's Shinkansen high-speed tramway running since 1964 belonged to JNR.

In 1986, the firm was privatized and split into many smaller companies operating in different regions, including JR West, JR East, JR Tokai, JR Hokkaido, and JR Kyushu.

Tokyo has 85 railway lines now, including both subways and regular lines, that are operated by 17 companies. The subway alone has 13 routes and 286 stations. It handles 7.5 million passengers per day.

Before the pandemic, the subway operators posted a profit of 49.7 billion yen ($362 million).

In Hanoi, public transport has not yet developed and there is just one metro line (Cat Linh - Ha Dong) now. This is not enough to meet the travel needs of people and the city has a long way to go before it can change habits and have people use public transport.

If it took 11 years to build the Cat Linh – Ha Dong metro line, how many more years would it take to complete all the other metros that have been planned? And it should be noted that the Cat Linh – Ha Dong route is an elevated railway, making construction simpler than those that have to be built underground.

In Japan, the first tram lines have been around for about 100 years. On average, Tokyo builds one line a year. How many years would it take for us to catch up with this kind of development?

It is self-evident that the current Cat Linh - Ha Dong metro route by itself cannot create a comprehensive public transport system for Hanoi. We have to connect many routes and buses to build a convenient system. If the Hanoi Metro Company wants to make a profit, it now has to learn the Japanese way of doing business.

If the country continues to take many years to build one route and then have it depend on the state budget to cover up losses, Vietnam will never be able to develop an efficient, convenient public transport system that people will use as their first option to get around.

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