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VR rail monopoly to end – Six effects of the coming transport reform

Minister of Transport Anne Berner held a press conference on Wednesday detailing planned changes to the state-owned railway company VR. Passenger rail traffic will be opened up to competition from other transport firms in a series of phases. Read on for the five other main changes to be expected.

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The face of Finland's railway network is about to change drastically. Image: Jyrki Lyytikkä / Yle

In a press conference on Wednesday, Minister of Transport Anne Berner detailed six different ways in which planned changes to state-owned railway company VR will manifest themselves.

1. Passenger traffic opens to competition

Through a series of regional phases, domestic passenger rail traffic will be opened to competition from other transport companies, gradually ending VR's monopoly, which is in effect until 2024.

The first phase is to begin in Southern Finland, where post-competitive bidding traffic is to commence in the early 2020s. The competition phase will remain open in the whole of Finland until 2026.

The reform does not require a legislative change or a budget hearing. Opening up the railways to competition only requires a renegotiation of the terms of the operating agreement between VR and the Ministry of Transport and Communications.

2. Transport operator duties, safety priority

The passenger rail traffic competition scheme will use a licensing agreement model covering the whole country.

The licensing model means that companies will agree to certain stipulations in order to ensure a high standard of service. In this way services can be guaranteed even in areas whose traffic is currently composed of purchase-based traffic and so-called mandatory traffic, which VR currently still operates at a loss due to its sole right to long-distance service.

The safety of Finland's railways will be ensured by specifically obligating all transport operators to abide by national transport safety laws.

3. Three new companies

In order to facilitate competition, VR Group will be split into three separate, state-owned companies. These will respectively manage the equipment, maintenance and terminal real estate of Finland's railways.

The division is due to the competition deal requiring unbiased circumstances, so that all the services relating to railway operation are available to competitors even-handedly.

The real estate company will deal mostly with the rail network's stations and terminals. VR's competitors will be granted access to them.

The equipment concern will handle the renting out of train cars and engines to outside operators. Otherwise potential competitors would likely be stretched thin when investing in new trains.

VR staff will be transferred to the new companies as permanent employees with all their benefits intact.

4. Rural areas and big cities

The passenger traffic competition scheme will give rural municipalities, large cities and the capital region the chance to separately organise rail traffic for competition. Therefore further-flung areas will be closely involved in the nationwide scheme.

The change is intended to improve the potential for people to accept work from outside their own regions. The difficulty people face with long commutes has long been cited as a drag on the Finnish economy.

5. Better service, more train rides?

The reform also intends to improve the level of service and customer-oriented approach of on-track amenities, and to increase the proportion of railway trips in all passenger traffic.

"New regional traffic routes have opened up in most of the countries that have implemented this same competition scheme," Berner said in the press conference.

Ticket pricing competition and lowering cargo transport costs are also in the cards.

6. EU stipulation

The Ministry of Transport and Communications says that the competition deal requires the execution of the European Union's fourth railway package from December 2016, whose goal is to develop competition in railway passenger traffic.

"In Finland, passenger and freight transport has been opened to competition at land, sea and air but not on rails," Berner writes in Wednesday's release.

Most EU member states have already opened their domestic rail traffic to competition.

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