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New Zealand Engineering 1998 May

Who Will Fill the Potholes?

Peter Goodwin is executive director of the Chartered Institute of Transport in New Zealand.

The road to reform continues to be paved with potholes.

Following the release of the Roading Advisory Group (RAG) report in November 1997 the Ministry of Transport reported that more than 13000 submissions were received. Many of those were substantial and added considerably to the debate, clarifying many of the issues. Minister of Transport, Maurice Williamson, says that the Government is still in the process of deciding which direction to take. The options are still open. The RAG proposal is "a proposal not the proposal", he says.

But he has also said that the Government had put in place some benchmarks that meant:

• No privatisation

• Businesslike management

• Roading network will be retained, especially in rural areas

• Communities will continue to influence roading decisions.

The level of interest may have slowed the process. It seems that there is less hurry to make decisions and introduce legislation by mid-1998, with the Minister now saying that decisions will be made towards the middle of this year. Slowing down may avoid some of the potholes along the way.

Road company structure

One of the key issues up for discussion will be the structure of the roading companies. RAG recommended from four to six regionally based companies. Many organisations support one company and others support various permutations of the RAG proposal.

Those who argue against more than one company are concerned at the unnecessary duplication of administration and management that would occur. They look at what happened in the health sector, with escalated management costs and a failure to account to the public effectively, and are concerned that roading may fall into similar traps.

RAG recognised that competing road companies in a natural monopoly were not a viable proposition but still considered it necessary to have more than one company, not for competition on price, but for "benchmarking of company performance". While benchmarking has its value, in itself it provides no guarantee of efficiency.

The disadvantages of more than one company seem to be greater than the benefits. Questions have been raised about how the pricing and charging mechanisms will work across boundaries. Australian inter-state transport operators have over the years complained about the simple issue of different road taxes between the states. The issues in New Zealand will be far more complex than a simple road tax and will affect every road user differently on every road at different times of the day. Acceptance of not only the concept of being directly charged for road use, but also being charged using sophisticated technology and according to what could be a complex tariff structure, will be a major political challenge.

There are other disadvantages. Transit NZ says one flaw in the report is a lack of focus on interregional routes and favours a holding company which owns regional companies to maintain consistency. It questions how consistent signage will be maintained and also points to the extreme difficulty of reinstatement of the network in the event of disaster.

Disaster
Communities will want to be assured that the same thing does not happen to the roading network as beset the Auckland power network. Roads are an essential service and must have backup strength and capacity built into them in the event of catastrophic failure. A ministerial inquiry after the network's collapse will be too late.

The issue of community involvement is central to many submissions. It is claimed that there will be a direct relationship between users and roading companies, something, it is said, that does not exist between users and local councils. It does not exist because users paid for road use through a variety of indirect mechanisms such as taxes, rates, petrol tax, licensing levies etc; but users do have a very effective and direct means of influencing those who made roading decisions. The triennial ballot box is something roading company directors will not face.

While the Government has given assurances that communities will continue to influence roading decisions, questions remain as to how that will be achieved. The only direct link to local community interests will be through the collection of roading charges, but without any direct accountability from the company to road users.

The justification for the roading reforms is that the other transport modes have been reformed and to ensure modal neutrality roading must similarly be reformed. Some question that need and consider that all that will result is a period of instability and uncertainty while the economic equilibrium adjusts to the new order.

The maritime industry was reformed in the late eighties and early nineties. Ports now operate commercially in a variety of ownership structures and waterfront labour is employed directly by stevedoring companies rather than being drawn from a pool. Ships trading internationally are able to trade on the New Zealand coast as well, and cross trade on the Tasman which was long protected by a union agreement. This important transport sector is haemorrhaging and the free market pill is being blamed.

Only last October this column reported possible ramifications of the industry's severe competition. Shipping leaders have been claiming for a long time that the New Zealand industry faces severe difficulties from which it may never recover.
Liquidation
New Zealand flagged operator South Pacific Shipping went into voluntary liquidation in February resulting in the loss of five ships from the Tasman. That was about a 20 percent reduction in capacity and a substantial loss in frequency. Since then other dedicated operators have cut back services, with Union Direct Line dropping one rollon/rolloff vessel from its fleet in March and cutting service to the South Island. After delivering power to Auckland the Union Rotorua's time charter is not being extended.

Exporters who are only just beginning to see a recovery from high exchange rates and increasing the volume of exports are being hit with reduced shipping capacity, reduced port calls, reduced frequency and rising freight rates.

On the waterfront profitability is marginal to say the least with New Zealand's largest stevedoring group being put into receivership, also in February.

All of these are symptoms of a severe, if not terminal, illness in the New Zealand maritime industry. A government-sponsored shipping conference in May will be exploring many of the issues confronting the industry. The conference is being held as a requirement of the Coalition agreement rather than as the result of any great willingness to investigate the industry's claims. Whether any change will result is very unlikely. Market forces will more likely be left to prevail.

Are there any lessons to be drawn from the shipping industry reforms for roading reform? While shipping directly affects few average New Zealanders in their day-to-day lives, roads affect everyone all the time and the effect of change will be far more noticeable. The complexity of the change will be greater and the results far wider, reaching into all aspects of the economy. If this country's shipping industry died foreign ships could fill the gap. But we cannot import another nation's cast-off potholes.