By Lee Hyo-sik
A government plan to allow a private company to operate KTX bullet trains in 2015 is drawing protests from Korail, the state-run railroad operator that has monopolized the country’s railway management for 113 years.
The government says Korail operates KTX and other train services inefficiently, incurring hundreds of millions of dollars in losses each year. It insists that if a private enterprise enters the railroad sector, it will boost the efficiency of railway operation and consequently reduce train fares.
But Korail argues it runs high-speed trains fine, stressing if a private firm takes over KTX operations, passengers will conversely face a steep rises in fares.
The unprecedented confrontation between the government and Korail began when the Ministry of Land, Transport and Maritime Affairs said on Dec. 27 that it will break down Korail’s monopoly on the nation’s train management by allowing a private company to enter the sector.
The ministry said a private enterprise will operate KTX bullet trains departing from Suseo, southern Seoul, for both Busan and Mokpo in 2015.
A new KTX line between Suseo and Pyeongtaek, Gyeonggi Province, is currently under construction. When the line is completed in 2015, a private company will operate KTX trains from Suseo to Busan on the Kyungbu line and Mokpo on the Honam line.
Korail will continue to operate bullet trains departing from Seoul Station and Yongsan Station for Busan and Mokpo, respectively.
The ministry plans to ask those interested in operating high-speed trains to submit a bid by the end of February and select the contractor by June. Many major business groups, including Doosan, Dongbu and Kumho Asiana, have expressed their interests. The permit is expected to last up to 15 years.
``The government will abolish Korail’s monopoly by introducing market economy principles to the nation’s train management sector. If the state-run railroad firm is forced to compete with a private enterprise, its operational efficiency will increase. Thus, it will cost less for Korail to operate KTX trains so that the company will be able to pay off its debts more quickly,’’ said Kim Han-young, director general for the ministry’s comprehensive transport police.
Kim said KTX fares will go down and customer services will improve if service providers compete with each other. ``As witnessed in telecommunications and other industries over the years, when service providers compete, consumers benefit from lower prices and upgraded services. Britain and most other advanced countries have allowed private entities to operate trains for management efficiency and cost-effectiveness.’’
The director general pointed out that Korail has been plagued with frequent KTX breakdowns over the past few years. ``If Korail is allowed to maintain its monopoly, more accidents will continue to occur, threatening the lives of millions of passengers.’’
The public firm is saddled with a 9.7 trillion-won debt and is unable to make interest payments of 400 billion won each year. It cost Korail 18.6 trillion won to build the existing KTX lines. The company has to pay 400 billion won in interests every year but is able to pay only about 100 billion won.
``The government has written off 3 trillion won from its balance sheet over the years. But it still has nearly 10 trillion won in debts and the amount grows year after year. It clearly shows Korail operates in an extremely unprofessional manner,’’ Kim stressed.
However, the state-run railway operator strongly protests the ministry’s plan, claiming that if a private firm is to manage KTX, it will increase fares sharply.
``A new operator has to spend an enormous amount of money to build necessary infrastructure, such as control centers, as well as to hire engineers, train operators and other personnel. The initial investment will be huge, which will certainly raise KTX fares,’’ a Korail spokesman said.
The spokesman said introducing competition to the railway sector is the latest in a series of pro-business policies of the Lee Myung-bak administration, designed to provide favors to certain business groups.
`` If KTX services are provided by private entities, it will undermine the train’s public purposes and eventually raise fares for users. Moreover, the new policy will eventually lead to the privatization of the nation’s entire railroad system. It will result in poor maintenance and risk passenger safety,’’ he said.
Korail has said that it manages manpower and operates bullet trains efficiently, generating more than 400 billion won in net profits last year.
``We make money from running KTX trains, which shows we operate efficiently. But with that money, we have to cover huge losses incurring from operating unprofitable low-speed train routes. The government should first privatize the money-losing lines if it wants to bolster competence in the railway sector,’’ the spokesman said.
On Jan. 10, 427 KTX train operators issued a statement, pledging not to allow a private enterprise to operate bullet trains out of Suseo.
Meanwhile, more than 2,000 Korail mid-ranking employees have decided to file a libel suit against the Korea Transport Institute. The institute issued a research paper claiming a private KTX operator could lower fares by as much as 20 percent.
``It makes no sense to say that privatization of the KTX would result in 20-percent cost savings. This falsity has tarnished Korail’s public image and depicted it as an efficient organization. To hold the institute accountable for its unfounded assertion, we decided to take legal action,’’ a Korail official said.