Part 4: Privatization, an Underinvestment Masking Strategy

Norway's railway privatization represents a classic case of using structural reform to address what is fundamentally an investment problem. When the Norwegian parliament approved the railway reform, the country was facing significant infrastructure challenges that stemmed from decades of underinvestment rather than organizational inefficiency.

The reform was implemented in 2017-2018, creating a fragmented system where responsibilities were divided among multiple entities, but the underlying investment issues remained largely unaddressed.

The Norwegian railway network faces unique challenges due to its harsh northern climate, which makes infrastructure maintenance particularly expensive.

Rather than committing to the necessary long-term capital investments, privatization offered politicians an appealing alternative—a way to appear proactive while deferring the fundamental investment decisions. This approach follows a pattern seen in other countries where privatization was presented as a solution to problems that were primarily financial in nature.

One advantage frequently cited for Norway's railway privatization was the opportunity to learn from other countries' experiences.

However, this advantage was not fully leveraged, as Norway adopted many of the same problematic structures that had led to difficulties elsewhere. The reform was implemented despite evidence from other nations showing that competitive tendering often fails to deliver the promised improvements without corresponding infrastructure investment.

The incoming Norwegian government's 2021 announcement to halt further privatization and tendering of rail services reflects a growing recognition that the reform failed to address the sector's core challenges.

Bane NOR's then-CEO, Gorm Frimannslund, acknowledged the confusion created by the unclear division of responsibilities, noting that "the sector is confusing" and requires "better coordination in the transport sector in general". This admission highlights how privatization created additional complexity without solving the fundamental investment deficit.

Critics of the reversal, such as the Alliance of Passenger Rail New Entrants in Europe, argue that competitive tendering improves service quality while reducing taxpayer burden. However, this perspective fails to acknowledge that Norway's railway challenges stem primarily from insufficient infrastructure investment rather than operational inefficiencies. The critical factor for success, as noted by industry representatives, is "investments in rail infrastructure to increase reliability, capacity and speed" —precisely the investments that privatization was meant to enable but largely failed to deliver.

The railway reform created a situation where private operators secured legally binding contracts, complicating any attempt to reverse course. This contractual entrenchment represents another hidden cost of privatization—the reduced flexibility for future governments to implement alternative approaches even when the original reform proves inadequate. Norway's experience demonstrates that privatization often serves as an expensive band-aid for what requires major surgery: substantial, sustained infrastructure investment.

Written with AI assistance