Waste of Taxpayer Money

It's Time to Overhaul Infrastructure Projects

It's bewildering to know that the government has decided to let the state-run Korail to take over a railroad linking Incheon and Gimpo international airports. The decision is intended to help the state reduce its burden on the loss-making railway. But it is just a ploy to share the burden with Korail without any plan to scale down the astronomical operating losses.

Korail will soon sign a contract with the government to pay 1.2 trillion won (966 million won) to acquire the 61-kilometer double-track railway with 10 stations. An official said the deal will help the state reduce its burden by nearly half to 6.7 trillion won by 2039. But Korail is required to take over the other half of the burden. There is no doubt that the rail operator, which suffered a 740-billion-won net loss last year, will see its deficit soar due to the takeover.

The Airport Railroad is the nation's first railway to be built and operated by private capital. The government allowed a consortium led by Hyundai Engineering and Construction to build the railway and operate it until 2040. Under the ``build, operate and transfer'' contract, the state is obliged to make up for 90 percent of the railway's operational losses. Officials might claim that the deficit compensation scheme was inevitable because the government had to attract private investment into the railroad project.

However, the real problem is that the government recklessly pushed the project without making a correct estimation about the potential number of railway passengers. Hyundai and other consortium members only proved that they had inflated the projected number of daily railway passengers to 210,000 in 2007, the first year of operation. They also predicted the number would jump 490,000 in 2010, when the Airport Railroad has a direct link to Seoul Station. But the average daily passengers were estimated at only 16,000 last year.

This means that the private builders played a hoax to get compensation for operational losses from state coffers. Taxpayers are forced to shoulder the burden on the unprofitable railway because of policymakers' negligence and poor preparation for the project. The government paid 104 billion won to the Airport Railroad operator to make up for its losses in 2007. The sum surged to 166 billion won last year. More worrisome is that the accumulated losses are expected to snowball to 13.8 trillion won by 2040.

First, the Lee Myung-bak administration should find who is responsible for incurring the huge losses to the state budget. And the nation must learn a lesson from the railway in order to avoid a recurrence of the same mistake. It is urgent for the government to overhaul private-funded infrastructure projects. In addition to the railway, the government paved several highways by tapping capital from the private sector. Thus, it had to pay a total of 351 billion won in compensation for operational losses to private investors in 2008, up from 266 billion won in 2007. What a waste of taxpayer money!