New Zealand government buys back rail-ferry network

Jul 1, 2008, 0:52 GMT

Wellington - New Zealand's rail and ferry network, which was privatized 15 years ago, was restored to state ownership on Tuesday when the Labour-led government completed formalities to buy it back.

In a political twist, the government appointed Jim Bolger, who was prime minister of the opposition conservative National Party, which sold the railways in 1993, to head a new company to run the network, renamed KiwiRail.

The Labour-led coalition is paying Australian transport company Toll Holdings Ltd a total of 690 million New Zealand dollars (about 524 million US dollars) for the national network, including a rail and car ferry, which crosses Cook Strait separating the North and South islands, and leases on two other ferries.

The Bolger government received 328 million New Zealand dollars in 1993 when it sold the network to a consortium headed by US-based rail operator Wisconsin Central and a local investment bank. Toll Holdings acquired it later.

Finance Minister Michael Cullen said that the privatization of the railways and their subsequent deterioration had been a painful lesson for New Zealand and proved that the network could not be run without heavy state subsidies.

The government bought back the track infrastructure four years ago.

'By bringing our rail system back into public ownership we will spare future generations from subsidizing a private rail operator and will be able to create an integrated, sustainable transport system,' Cullen said.

Political commentators saw the appointment of Bolger as a deliberate move to prevent the renationalization becoming a campaign issue in the general election due later this year.

Labour had already appointed Bolger, who was prime minister in 1990-97, as chairman of the state KiwiBank that it founded and New Zealand Post.

It is Labour's second major transport renationalization. It bought back the national airline Air New Zealand after it nearly collapsed in 2001, 13 years after the carrier had been privatized.