Yongin off the railsAn international arbitration court has ordered Yongin City, Gyeonggi, to pay Yongin Rapid Transit 515.9 billion won ($437 million) in reparations for stalling the opening of a rapid-transit system connecting the city to the Bundang Line.
The construction of the 18.5-kilometer (11.5-mile) transit system was finished in July 2010, but its opening was delayed because the new mayor questioned the feasibility of the service and had safety and noise issues.
Yongin Rapid Transit filed suit with the International Court of Arbitration under the International Chamber of Commerce. One of its chief investors is a Canadian company.
The city now will have to pay nearly 40 percent its 2011 budget to reimburse the investors. It will have to come up with an extra 260 billion won if it loses a second trial in March.
The city, which now owns the line after nullifying the contract with the private consortium, is trying to negotiate a deal to run it with a private group.
But that too could be a problem. To guarantee 90 percent of the minimum operational revenues under a 30-year contract with the private consortium, the city would possibly have to subsidize the service to the tune of 150 million won a day, amounting to 1.65 trillion won over the next three decades.
No matter how you look at it, this train line has become a tax-draining white elephant.
Very poor administration and politicians who were addicted to winning public approval through extravagant pork-barrel projects that weren’t been thought through, caused this fiscal catastrophe.
The number of passengers that will use the service won’t exceed 30,000 a day, but when the project was being planned, the number was inflated to 140,000. Neither of the last two mayors or any other city official accepts responsibility. The city council that rubber-stamped the project also remains mum. Those accountable for such huge losses must be punished.
The city’s governance should come under more scrutiny. Nor can we allow the city to skirt its failings in management and budgeting by bailing it out with central government funds.
Yongin City should be placed on a watch list for financial risks and should face handicaps in its future budgeting and investment. It must be used as an example that proves to other local governments that there’s a price to be paid for causing the central government losses and an increased tax burden.