Seoul city’s $7.7b light rail plans embroiled in dispute

Seoul City’s plan to build new light rail lines is mired in controversy as questions grow about its feasibility, cost-effectiveness and even the mayor’s political intentions.

Seoul Metropolitan Government in July unveiled the project to lay nine rail transit routes in 10 years to reduce gaps in the city’s public transportation network.

The total cost of construction is estimated at 8.553 trillion won ($7.69 billion). The city plans to fund half of it from municipal and central government coffers while attracting the other half from the private sector.

The announcement immediately drew fire. Critics point out that the construction and subsidies for private operators would aggravate the fiscal health of the city which is already more than 2.5 billion won in the red.

“The demand for more public transportation is obvious. But for private sectors, profits are important as well. The government might need to financially support the operators a lot as long as the city keeps the same fare rate as current subways,” said Kim Yeon-kyu, a senior research fellow at the Korea Transport Institute.

City governments have suffered from railroad projects that forced them to give private operators huge subsidies.

In Yongin and Uijeongbu near Seoul where light rail transits operate under the minimum revenue guarantee system, the local governments are compensating the operators for tens of billions of won in deficits caused by the numbers of passengers missing forecasts.

The MRG system was introduced by the former central government to encourage private investment in large infrastructure projects by guaranteeing a minimum level of return based on the anticipated number of passengers. But the demand forecasts were much higher than could reasonably be expected. When actual passenger numbers were much lower than these guaranteed minimums, local governments were left with heavy financial burdens.

In the case of Uijeongbu light transit, which started operations last year, the deficit soared up to 20 billion won as the rail attracted only 18 percent of the estimated demand ― 16,000 passengers a day.

Although Seoul said the project funding would not involve the MRG system, critics are still worried, based on previous experience with unsuccessful privately financed projects.

“If the government does not promise the profitability by covering deficits, no private players will be willing to invest. In other words, the government will have to give subsidies somehow regardless of the MRG policy. Why not just start with public funding in the first place?” said Hong Heon-ho, the head of the People’s Institute of Economic and Social Studies.

Among the nine planned routes, priority negotiators were chosen for only two lines and the city is still looking for investors for the rest.

While Seoul admits the advantage of public-funded construction, it also acknowledges the drawbacks.

“Because of the limited budget, it will take at least 20 years to complete the whole project. The cost of delayed construction will become the citizens’ burden,” said the city official.

Some politicians also harbor suspicions over the hidden motivation of Mayor Park Won-soon’s sudden announcement of the plan, claiming that it was designed to support his reelection campaign next year.

The plan was originally pushed by former Seoul Mayor Oh Se-hoon from the ruling party in 2008. Yet the incumbent mayor, who has had a negative stance on massive civil engineering and construction projects, suspended the project except for one line due to budget issues after taking office in 2011.

Park, however, started to review the plan for more than a year and came up with the revised version, increasing the number of lines from seven to nine and readjusting some locations.

The city government denies any political intentions.

“Reflecting circumstance changes to the plan is required every five years for 10-year projects in accordance with city railway law. The light transit project was initiated in 2008, so it’s natural to revise the plan this year,” said the city official.

Whether the light transit project will be approved is still uncertain. The detailed plan will be submitted to the Ministry of Land, Infrastructure and Transport after concluding public hearings and evaluations next month.

By Lee Hyun-jeong (rene@heraldcorp.com)