Sweeping governance and policy reforms lead to dramatic productivity gains in transportation sector

    OTTAWA, June 25 /CNW Telbec/ - Productivity in Canada's rail freight, air
and trucking industries has increased sharply since the 1980s, largely because
of sweeping governance changes and an increased reliance on market forces.
This productivity growth has made a strong contribution to Canada's overall
business performance and led to lower prices for users such as shippers and
airline passengers, according to the first research study for the Conference
Board's Centre for Transportation Infrastructure.
    From 1981 to 2006, productivity grew, on average, by 3.6 per cent per
year for rail freight and 2 per cent per year for airlines. Data for the
trucking sector is available only to 2003, but that sector's productivity grew
an average of 1.8 per cent per year between 1981 and 2003.
    In comparison, productivity growth in Canada's overall business sector
rose only 0.2 per cent per year during the same period, which means that these
transportation segments made a disproportionate contribution to economy-wide
productivity growth.
    The study also examined the productivity performance of public transit in
Canada. Productivity declined, on average, by 1.2 per cent per year between
1986 and 2006, although the rate of decline slowed in recent years-which
coincides with the establishment of integrated regional transportation
planning agencies in the three largest cities in Canada.
    "The exceptional productivity performance of the rail freight, air, and
trucking sectors is due in large part to the sweeping changes in public
policies and regulatory reforms during the late 1980s through the 1990s," said
Mario Iacobacci, Director of the Centre for Transportation Infrastructure.
    The productivity figures do not include the safety and environmental
costs associated with transportation activities. Safety and environmental
factors will be part of a forthcoming study by the Centre for Transportation
Infrastructure addressing social efficiency issues.

    The strong productivity growth in these sectors can be attributed to
three factors:

    - changes in governance and ownership structures, through privatizations
      of Crown corporations and the transfer of facilities from direct state
      control to arm's length, self-financing entities;
    - deregulation of prices in air, rail freight, and trucking; and
    - increased competition in the air, rail freight, and trucking sectors,
      due to lower entry and exit barriers for businesses.

    "The conclusion from this study is that policy and regulatory regimes in
these sectors should continue to promote market-oriented organizations,
minimal economic regulation, and competition between carriers and modes of
transportation," said Iacobacci.
    In the public transit sector, major changes in economic regulation did
not occur, although the three largest cities in Canada established integrated
regional transportation agencies. These agencies are now spearheading a major
revival in capital spending to correct an extended period of underinvestment
in the1990s.
    The payback from high productivity growth is lower prices for end users.
Rail freight shippers saw prices fall, on average, by 70 per cent in real
terms between 1981 and 2006. Air fares declined by 25 per cent over the same
period and trucking rates dropped an average of 1.4 per cent per year between
1981 and 2003. Average fares for public transit, however, rose by about 1.7
per cent annually between 1986 and 2006-although the rate of increase has
slowed in recent years.

    The report, The Productivity Performance of Canada's Transportation
Sector: Market Forces and Governance Matter, is funded by the Conference
Board's Centre for Transportation Infrastructure. The Centre brings together
more than 20 private and public sector organizations to advance public policy
and corporate decision making in the development, maintenance, and efficient
operation of transportation networks.
    The report is publicly available at www.e-library.ca.

For further information:

For further information: Brent Dowdall, Media Relations, (613) 526-3090
ext. 448, corpcomm@conferenceboard.ca

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