Light rail trains on track to white elephant station
At a station along the Uijeongbu Light Rail, otherwise known as the U Line, which began running on July 1, a notification was posted saying the train fare will be reduced by 950 won ($0.86), from 1,300 to 350 won, for a month.
The move is seen as a desperate measure to overcome financial difficulties.
“We had a free fare event for the first two days for passengers when the line opened,” said Lee Sang-cheol, an executive-level official of the Uijeongbu Light Rail. “But we judged it wasn’t enough to encourage passengers to use the line.”
The light rail lines that are currently operating or soon to open are in danger of becoming another white elephant.
According to U Line officials, about 12,000 to 13,000 passengers have used the light rail each day in the last 110 days, but that is only 15 percent of the forecasted demand (79,049). The line is operating at a loss of 2 billion won a month. The operators said they seriously worry about bankruptcy.
The Uijeongbu Line was built under a build-transfer-operate (BTO) contract system.
With this system, private investors receive concessions from the government to finance, construct and operate a business for a limited time that is stated in the contract and eventually return business ownership to the government. The length of the contract for the U Line is 30 years.
The Uijeongbu city government is anxious because there is a possibility that it will have to pay 10 billion won a year to the private investors. In the BTO contract, the city agreed to apply a minimum revenue guarantee (MRG) system in which the government guarantees compensation to investors when the business doesn’t meet projected revenues.
“If the private operators become bankrupt, the city government has to pay 385.1 billion won, 52 percent of the total investment, plus interest,” said Ahn Byung-young, mayor of Uijeongbu.
“About 48 percent of the investors’ money was supported by the funds raised by the central government, and they are also guaranteed for deficit covering,” said Lee Sang-yoon with the Uijeongbu YMCA.
“I can’t understand how this kind of contract was made between the city government and private investors. The officials who have carried out the business must take responsibility for this ridiculous project.”
The Uijeongbu Line is not the only problem. The forecasted demand for the light rail line built to connect Gimhae, South Gyeongsang, and Busan, which started running in September of last year, was 176,358 a day. But the line is only transporting about 31,000 passengers a day now.
The line was built in the same way as the U line with the MRG system. Gimhae now must pay 9.4 billion won, and Busan must pay 5.3 billion won in compensation to private investors for their losses.
The Yongin Ever Line, another light rail that will start operating in April next year, has the same problem. Yongin has been delaying the opening of the line in anticipation of the burden of the MRG system.
The city government hasn’t approved the line to begin operation, saying there are safety matters they must fix.
Yongin Rapid Transit, the operator of the Yongin Ever Line, brought the Yongin city government before the International Court of Arbitration last year, and the court ordered the city government to pay 778.6 billion won for a delay in rail service.
In order to solve these financial troubles, the three mayors of Uijeongbu, Gimhae and Yongin jointly visited the Land, Transport and Maritime Affairs Committee of the National Assembly on Wednesday to demand the central government support the compensations.
“The central government also has a responsibility for these projects because they contributed to the demand forecasting,” the mayors said.
By Jeon Ick-jin, Yoo Gil-yong [firstname.lastname@example.org]