Part-privatization of the German national rail company Deutsche Bahn

Deutsche Bahn AG is Germany’s national rail company and as a provider of global logistics services and railroad operations abroad a big mobility and logistics corporation. The company is still 100% in state property, but the two parties of the government coalition finally agreed on selling off a stake of the transportation and logistics services while retaining the infrastructure (tracks, stations and the power grid) in state hands. Therefore, the company is split into two parts controlled by a holding which will be owned 100% by the state. 24.9% of the mobility and logistics part which will include most of the staff and generate most of the revenue will be sold to private investors. The value of this stake is estimated at about €6 billion. Two thirds of the money will be used for modernizing tracks and stations as well as to cut sound pollution along the tracks in inhabited areas. The remaining third will end up partly in the general federal budget and in the budget of the company.

The decision to partly privatize the last major state-owned company in Germany was preceded by years of political wrangling and protest by the unions. To settle down with the critics,  the government decided to take baby-steps on the way to privatization. The conservative party in the government coalition seeks to increase the participation of private investors up to 49.9% in the long term while the left-leaning social democratic party as well as the unions intend to fix a limit to the private engagement at 24.9%. The company had to sign an agreement with the unions which promises no change in the structure of the company and no layoffs until 2023. More ambitious strides towards an independent company are hopefully taken by future governments. To increase competition on the rail tracks the state should give up its participation in the company. Private investors are more likely to do a better job as regards service quality and efficiency. That former state-owned companies can be more successful without interference and paternalism by politicians can be seen at Deutsche Post – the major German postal company – which turned from an inflexible, inefficient agency into the world’s largest logistics company. Besides, Deutsche Bahn needs fresh capital that would enable further expansion and more focus on the highly profitable logistics business.

Opponents fear that service quality could deteriorate in less economic sectors, especially regional rail services in underdevelopped rural areas. But as the federal states spend millions annually on supporting the operation of unprofitable tracks, it’s likely that operations in these areas will continue – even if by a small competitor as it’s already the case in some areas.

Most important, the people would benefit from more competition as railroad companies would put more effort in service quality to get the license for operating a track and the virtual monopoly would be broken. The disadvantages of the dependence on Deutsche Bahn became clearly visible last year when the railroad engineers disrupted the service with a series of strikes. Another absurdity is a law that protects Deutsche Bahn from competition from inter-city bus services. This law was introduced in 1934 to make the state-owned railway operator profitable.

Now it’s time to deregulate the transportation sector completely in favor of better service and more competition. The revenues from the sell-off should not be used to make the federal budget planning look better but to improve and expand services and invest in forward-looking projects.,2144,3305655,00.html


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