Korail-Suseo High-Speed Rail Integration Fails to Reach Conclusion... Effectively 'Separate Operations'

After over 20 discussions in the subcommittee
Decision deferred on maintaining or integrating railway public enterprises
Won Hee-ryong: "Encouraging healthy railway competition"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] The Ministry of Land, Infrastructure and Transport discussed whether to integrate railway public corporations but failed to reach a conclusion. This was due to sharply divided opinions between those advocating to maintain the public corporation competitive system and those supporting the integration of railway public corporations. Essentially, the current 'KORAIL-SR competitive system' will be maintained.

◆Introduction of Railway Public Corporation Competitive System in 2016... Integration Discussions Began During the Moon Jae-in Administration= On the 19th, the Ministry of Land, Infrastructure and Transport announced that it submitted to the government the evaluation results of the railway public corporation competitive system, which included the decision to defer the integration of KORAIL and SR.

The subcommittee, serving as an advisory body for the establishment of the '4th Basic Plan for Railway Industry Development,' has been conducting over 20 discussions since March 2021. It is composed of one labor and one management representative each from KORAIL, SR, and the Korea National Railway, as well as private experts recommended by each institution.

Previously, the public corporation competitive system was introduced as part of the railway industry structural reform initiated in 2004 to address the chronic deficit structure and inefficiency caused by the nationalized and state-run railway system. However, operating the railway as a national and state-run system made it difficult to respond swiftly to customer demands and market changes, and the integration of railway facilities and operations led to opaque cost structures. The accumulated debt reached 1.5 trillion KRW as of 2002 due to continuous annual deficits. To overcome these structural limitations, the government separated railway construction and operation in 2004 and shifted the operation system from direct government management (Railway Administration) to public corporation management (KORAIL).

Despite the reorganization into a public corporation operation system, the monopolistic operation by KORAIL led to a vicious cycle of accumulating construction debt. Consequently, SR was established in December 2013 under the 'Railway Industry Development Plan' of that year. With the opening of the Suseo high-speed railway in December 2016, SRT operations began, and the railway public corporation competitive system was fully launched. Since then, the issue of integrating the two institutions was actively raised during the Moon Jae-in administration, but due to significant differences in positions between the institutions and sharp divisions between proponents and opponents of integration, discussions did not progress properly and continued into the new administration.

The subcommittee reported that opinions were sharply divided between those who argued to maintain the public corporation competitive system because it increased benefits to the public through competition and those who believed integration was necessary to improve operational efficiency. Ultimately, the new government also failed to reach a conclusion on integration.

◆Fare Discount Benefits vs. Reducing Duplicate Costs= Those in favor of maintaining the public corporation competitive system argue that fare competition has reduced the burden on users. They claim that the existence of multiple railway public corporations has provided users with an additional annual discount benefit of 150.6 billion KRW through fare discounts by KORAIL and SR. This is due to KORAIL reviving the KTX mileage system and SRT fares being set 10% lower than KTX fares. Additionally, SRT applies a higher track usage fee system than KTX, creating a structure capable of repaying the massive high-speed railway construction debt. SRT pays 50% of its transportation revenue as track usage fees, while KTX pays 34%.

Opponents argue that the revival of the KTX mileage system is unrelated to the public corporation competitive system and that improvements in high-speed rail services result from various external factors beyond the introduction of the competitive system.

The Korean Confederation of Trade Unions' National Railway Union, mainly composed of KORAIL workers, also advocates for integration. The union claims that SR took over prime time slots on the profitable Gyeongbu and Honam lines, which were KORAIL's lucrative routes, operating only the profitable SRT high-speed trains, while KORAIL continues to operate less profitable local lines such as Saemaeul and Mugunghwa, causing its operating deficit to balloon.

In fact, since its launch in 2005, KORAIL received 4.3 trillion KRW in government support until 2012 but recorded operating losses of around 500 billion KRW annually, with debt surging from 5.8 trillion KRW in 2005 to 11.6 trillion KRW in 2012. However, the situation did not improve even after the introduction of the competitive system. KORAIL has continued to post deficits since 2017, recording an operating loss of 1.2114 trillion KRW in 2020. In contrast, SR posted operating profits for three consecutive years before COVID-19: 41.9 billion KRW in 2017, 45.5 billion KRW in 2018, and 32.7 billion KRW in 2019.

Proponents of integration cite reducing duplicate costs as a reason. They argue that integrating KORAIL and SR to operate high-speed railways could save up to 40.6 billion KRW annually in duplicate costs arising from the public corporation competitive system. They also point out inconveniences caused by the dualized services, such as the current inability to apply transfer discounts between RT and regular trains. The proponents claim that more efficient operation plans, such as running mixed trains, could even increase the total number of high-speed train operations.

Opponents counter that inconveniences from dualized services can be resolved through cooperation between KORAIL and SR, and that increasing the number of operations may be difficult to implement considering the current track congestion rate (92.6%), requiring comprehensive review of railway safety and other factors. They express concerns that forcibly pushing integration could revert to a monopolistic railway system, reducing efforts to improve services.

The Ministry of Land, Infrastructure and Transport stated that it respects and accepts the comprehensive opinions of the subcommittee, which were derived after long-term discussions involving stakeholders and experts. Furthermore, since the subcommittee's discussions confirmed the benefits of the public corporation competitive system in fare and service improvements and establishing a structure for repaying railway construction debt, the ministry plans to further increase public benefits and address shortcomings going forward.

Minister of Land, Infrastructure and Transport Won Hee-ryong said, "Although there are some differences depending on each country's social and cultural conditions, the basic direction for railway development overseas is a shift from monopoly to competition. We will promote healthy railway competition within the public sector so that the railway, responsible for the public's mobility, can develop further."

This content was produced with the assistance of AI translation services.