Impact model for socially low tariffs in Zairian river transport

Abstract

This article models the sequence of the effects of low tariffs in public river transport for goods. Within 10 years of deregulation, the public corporation had lost 83 per cent of its river traffic. The reasons for the inefficiency are made clear. The effects of low tariffs are examined, such as service rationing, overcharges, overcapacity and high budget claims, cost enhancement, and cross-subsidizing. The underlying objective is to formulate and apply an assessment method for transport policy that blends theories of rents and contestability in order to show how and why good intentions to boost demand by low tariffs in Zairian river transport produced very different results. Although illustrations are given for one mode of transport in one country, they are believed to be of much wider significance—to over 80 countries liberalizing their economies, including China, developing and east European countries. The National Transportation Authority (NTA, or Onatra) is a public corporation operating seaports, the Matadi–Kinshasa railway and an extensive network of river transportation 8,060 km long in the western half of Zaire. In the 1980s, it held monopolies on seaports and river ports, and shared the monopoly with the National Railway Authority (SNCZ) over the railways and the transport of mineral exports. The market in river transport appeared to be oligopolistic but it was dominated by the NTA. Since the NTA was one of the largest state-owned enterprises (SOEs), its experience is significant for many other SOEs and for the whole national economy. Ways to overcome inefficiencies are suggested, such as ending multiple public monopolies and cross-subsidies, privatization and deregulation.