Just a big pork-barrel project

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Just a big pork-barrel project

The Seoul city government hopes to raise 50 percent of the funds from city and state coffers and 50 percent from private investors to build its light rail transit system in and around the capital over the next decade. The city is already sitting on a debt of 27 trillion won ($24.3 billion) and if it has to dig into the city’s resources to cover losses suffered by the light rail’s private operators in the future, the new lines could bring harm to the city as a whole. The city government has announced that it will somehow come up with half of the light rail’s 8.55 trillion won in construction costs, although it has not specified how. In short, Seoul city is not desperate enough to set up a light rail system using private capital.

The municipal government has said it will ensure reasonable returns for the city when negotiating with private investors and operators so that it does not repeat the same money-losing mistake it has made with other joint ventures with private enterprises. It will also make a more thorough study on demand estimates. It will apply the same fares for the new transit lines as with the existing subway. But in order to attract private companies and investors, it will inevitably have to compensate for losses or guarantee returns in one way or another. To start an infrastructure project that is not in immediate demand by attracting higher-risk private capital, the city would risk wasting public finances and could find itself accused of favoritism when it comes to selecting private bidders.

The law stipulates that private capital projects are preferred only when they are assured of creativity and efficacy. Attracting private companies should guarantee better quality and cheaper costs than public enterprises. But so far private business investments have only cost more because losses have had to be compensated with public funds. But, in fact, if the light rail fares are going to be the same as the existing subways, and if the government has the money to pay for 50 percent of the light rail project, private capital is not needed at all.

Seoul said it can pay for 4.23 trillion won of the 8.55 trillion won project. This implies that the city can afford to pay for 100 percent of a light rail system that is just half the current plans. With a project half the size, there would be no need to return profits to private investors. Therefore, it would be more economically reasonable to pursue one or two lines first, then study the results before pushing ahead with more lines. Rail lines could be extended and more could be built according to feasibility and necessity. That way, the project would be less burdensome to both the city and its residents.

The light rail transit system is basically a big pork-barrel project. The government has similarly not been transparent with other private-run projects from the preliminary stages, and, as a result, they have led to all sorts of controversies about inaccurate estimates, excessive guarantees and favoritism.

The Seoul city government claims it has completed a feasibility study. But instead it should disclose its original feasibility findings, reevaluation reports, demand estimates and financing plans, so that the public and outside experts can offer feedback. It also has to explain fully the ramifications of the light rail system on other public transportation, such as buses, in order to preempt any unnecessary conflicts.

The light rail project is only going to increase the city deficit and waste tax revenue, while it fattens the wallets of private investors. We can only suspect Mayor Park Won-soon has ulterior motives or ambitions if he pushes ahead with the project despite lingering controversies and suspicions.

Translation by the Korea JoongAng Daily staff.

*The author is the head of the National Projects Team at the Citizens’ Coalition for Economic Justice.

By Kwon Oh-in
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