Is it scheme to privatization or not?

Gov’t, union on collision course over KORAIL affiliate

By Nam Hyun-woo

Unionized workers of the Korea Railroad Corp. (KORAIL) Wednesday continued their strike into a 17th day, the longest-ever walkout by the rail union, reducing Korea’s train services to 70.7 percent of normal operations.

The strike is in opposition to a government decision to set up a KORAIL subsidiary and allow this unit to operate a new KTX line which will depart from Suseo Station in southern Seoul starting in late 2015.

The union calls the government’s decision a disguised plan to privatize the company, while the government flatly denies this accusation.

According to KORAIL, the new line will pass through the eastern part of Gyeonggi Province, where Seoul’s satellite cities such as Dongtan are located, and run across the southwestern part of the country, stopping at Mokpo, South Jeolla Province. The line will end at the southern port city of Busan.

Unlike other KTX services, departing from Seoul Station or Yongsan Station in northern part of Seoul, the new line will serve as the sole KTX station in the southern part of the capital city. Transport experts say it will be a cash cow for KORAIL which is sitting on 17 trillion won of debt.

Unionists at KORAIL have been claiming that entrusting the operation of this new KTX line to a privately-owned company will cause inconveniences to the public, including fare hikes, line reductions and concerns over safety.

The government has long been trying to explain that its plan to set up the affiliate is not for privatization of the new line, but to strengthen efficiency of the debt-riddled KORAIL management and introduce a competitor into the monopolistic railway industry.

“The government has repeatedly stated that setting up an affiliate by KORAIL is not privatization of the railway service, but the strikers continue to claim this is the case,” Security and Public Administration Minister Yoo Jeong-bok said Sunday.

Land, Infrastructure and Transport Minister Suh Seoung-hwan, said, “The government has made a series of statements that no private capital can be invested into the new KTX line, and has come up with a plan prohibiting private investments down the road.”

According to the ministry’s plan, the affiliate will be a mutual investment company, and 41 percent of its shares will be owned by KORAIL. The remaining 59 percent will be owned by other state investment entities. Thus, there is not the slightest possibility of investment by the private sector in the affiliate, according to the ministry.

An official at the ministry said, “To prevent any concerns that this public capital could be sold to the private sector, the ministry has set up a number of measures to prevent that. And three well-known law firms, including Kim & Chang, have said such measures will be effective for preventing the privatization of the affiliate without KORAIL’s consent.”

However, KORAIL strikers say that there are still many paths toward privatization and claim that the plan is a “camouflaged prelude to privatization.”

They claim that the National Pension Fund and other public investors are looking to maximize profits, just like private funds. Thus, the affiliate has to secure a certain amount of operating profit and that is privatization in a broader context, unionists say.

Though the National Pension Service, the operator of the fund, said it has never received investment offers, the unionists say other public investors will invest in the affiliate and run it like a private company.

The unionists also point out there are no legal grounds to prevent conglomerates from setting up a separate private company to operate the new line.

They claim that the government decided to entrust the operation of the new KTX line to an affiliate of KORAIL after their criticism, but it is still suspicious that the government might sell the affiliate to large conglomerates, such as Daewoo Engineering and Construction, which have shown an interest in running the new KTX line.

As the strike drags on, the operation rate of subway services in the metropolitan area has decreased to 95.8 percent and KTX service has been reduced to 77.8 percent as of Wednesday. Only half of other slower passenger train services were available, and the cargo trains’ rate has dropped to 34 percent.

namhw@ktimes.co.kr,