The Economics of Investment in High-Speed Rail

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High-speed trains can compete successfully with road, air and conventional rail services on densely trafficked routes where willingness to pay is sufficient at the relatively elevated fare levels needed to cover costs. High-speed rail investments can also relieve congestion on the conventional rail network, and the capacity for high-speed rail to provide fast city centre to city centre services creates new possibilities for day-return business trips and short-stay leisure trips.

The long cost recovery periods for high-speed lines imply government involvement in the financing of most investments. The high costs mean that governments can be exposed to accumulation of large debts, particularly if demand develops more slowly than expected. Where high-speed rail investments are designed to promote regional integration rather than meet commercial demand, significant subsidy from central and regional governments will be needed for the construction of infrastructure and possibly also for train operations.

This report examines the key factors that drive the costs of high-speed rail investment and reviews the economic benefits delivered by high-speed rail services on the basis of experience in countries that have developed large high-speed rail networks.



Shinkansen investment before and after JNR reform

International Transport Forum

The high-speed railway system, namely Shinkansen, was initially introduced by the Japanese National Railways (JNR) in 1964. As JNR was reformed in 1987, the schemes for construction and operation of Shinkansen were also modified accordingly. This paper primarily discussed Shinkansen’s effects on the operating companies and tried to evaluate the financial effects of Shinkansen operation depending on its traffic density. The study also showed that Shinkansen transport is competitive against other transport modes and is increasing its transport revenue by a much higher rate than conventional lines operated by those railways. Along with the passenger increase in the inter-city services such as the Tokaido and Sanyo Shinkansen Lines, the number of Shinkansen commuters has been also increasing especially around Tokyo metropolitan area. As a result, the share of revenue brought from Shinkansen operation has been increasing in those railway companies in Japan.


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