FOLLOWING the submission of a report from investment bank Morgan Stanley (RG 11.03 p708), a committee of ’wise men’ forming Germany’s Railway Advisory Council decided on June 15 to recommend the listing of DBAG ’as an integrated business’ on the German stock market in 2006.
Made up of leading industrialists, academics and economists, the Council was set up on October 8 2002 with a brief to ensure the successful continuation and conclusion of the railway reform programme begun in 1994. Now it has called for an immediate start on privatisation of DBAG, suggesting that failure to take this step would leave the railway unable to take advantage of the liberalisation of rail transport policy in Germany and the opening-up of railway markets across Europe. It argued that a stock market listing would give DBAG the ability to improve its own capital position and to obtain the financial means to carry through its planned investment programme.
Among the conditions it lists for successful privatisation, the Council includes firm agreements between DBAG and the state covering infrastructure financing. This would ensure that investment in new schemes is limited to projects that were commercially worthwhile, it said. Also required would be agreements between the federal and regional governments about funding of regional rail services, which once in place should facilitate a move to the private sector, with competition continuing. The Council also recommended that railway staff be given the opportunity to purchase shares, to encourage them to work towards the success of the privatised railway.
No sooner had the wise men given their verdict than the Bundestag over-ruled the proposal to rush ahead with a 2006 target for listing. It called instead for DB to demonstrate that it can operate at a profit for several years in succession before such a radical change is introduced. DB expects to achieve a profit of around €1bn this year, perhaps setting it on course for this objective - and next year’s target is to achieve €1·8bn.
The Bundestag also called for further study to see if it would be possible to privatise DB without selling off the infrastructure, and suggested that December 2005 could be the last date in this legislative period when a final decision needed to be taken.
The Bundestag’s caution is welcome, for it is only too easy to make mistakes that are costly, painful and difficult to rectify when making such a fundamental change. Just try asking the railway industry in Britain.