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Korea:From Rags to Riches

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Korea From Rags to Riches
Subway ― A Credit to Korea
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Subway A Credit to Korea

 

I By Kim Sun-woong

 

 

 Most foreign visitors to Korea would instantaneously recognize the extensive use of railroads in urban transportation. In the capital city of Seoul, more than 40 percent of commuters use the subway system every day ― the largest share among all modes of transportation. Also, Seoul's subway system is truly underground. Seventy percent of the routes are subsurface, and the underground spaces are also used for pedestrian walkways, shopping and dining.

 

 The heavy reliance on the subway for urban public transportation is not particularly surprising in Korea, where the population density is one of the highest in the world and more than three-quarters of its land is so mountainous that urban development is virtually impossible.

 

 What is surprising, however, is the fact that its high level of services (clean and quiet trains, a frequent schedule with journeys as short as two minutes, and the dense network reaching many destinations across the metropolitan area) are provided at a relatively modest fare. The current base fare is only about $0.80. While this is more expensive than the basic fares on the Moscow or Mexico City subway systems, it is less than half of those found in most cities in Western Europe and North America. The Seoul subway is not merely an urban transport system for low income citizens, but a lively living space for millions of middle class residents.

 

 The Seoul subway system, which started operations in 1974 with less than 10 km of underground track, is the third largest subway system in the world in terms of ridership now. Subways were built in other major cities ― Busan, Incheon, Daegu, Daejon and Gwangju. Only the systems in Tokyo and Moscow attract more passengers than the Seoul subway system, although some in Chinese cities will soon become larger. Currently, with the nine main lines featuring 291 stops (and increasing), complemented with several other surface, underground and aboveground railroad lines, the system serves approximately 5.6 million passengers per day. In a city with a population of 10 million (24 million if the surrounding metropolitan areas are included), the subway system is the main artery of urban life in Seoul. Since Korea's system is relatively new and has been continuously upgraded with better technology and management practices, it will serve as a great example for major cities in developing countries that are experiencing a rapid increase in population.

 

 The necessity for the subway system in Seoul was part of public discussion during the rapid industrialization due to the successful economic planning and accompanying urbanization that started in the early 1960s. In 1960, Seoul's population was less than 2.5 million. It swelled to 5.5 million in 1970 and more than 8 million in 1980 due to large scale rural-to-urban migration. As the expansion of the existing roads and the construction of the new arterial roads system could not successfully meet the bulging demand for urban transportation, the citywide subway system was conceived in the late 1960s.

 

 

 Competition With Bus Service

 

 The construction of underground rail system was not only extremely costly compared with other transportation infrastructure such as road construction but also technologically challenging. The first line, No. 1, had less than 10 km of underground tracks. The rest of the system relied on the existing rail system run by the state-run Korea Rail Corporation. Political and financial support from central government was essential in order to build the system even though the project mainly benefits local residents, due to the large construction cost. Line No. 1 was met with considerable enthusiasm as the subway became a viable urban transportation alternative. Initially, the construction and operation of the system relied heavily on Japanese technology.

 

 However, the successful technology transfer significantly reduced costs and the time for construction of new routes and stations. While the frequent changes of routes and political wrangling over the financial viability created on-and-off excitement on the expansion of the subway system, the improvement of Korea's technical capability in building subways generated continuous expansion of the system through the 1980s and 1990s.

 

 One of the biggest challenges created by the emerging system was how to handle the competition with the existing bus service. Before the subway was introduced, there already existed an intricate bus network run by many private providers. Although routes were regulated, there was substantial competition among the bus companies. Since each route had a local monopoly of passengers, any adjustments of routes were always contentious and the process could be corrupted easily. More importantly, the fact that the subway was run by the government and buses were run by many private companies made cooperation between the suppliers difficult.

 

 From the perspective of passengers, it would be beneficial to transfer freely across the modes or between buses to complete a trip. Also, rapid transit has the advantage of hauling many passengers over a long distance in a limited corridor, while buses are more economical to provide feeder services to reach more destinations. If each supplier charges separately for their services, there is an incentive for the passenger to stay in one mode in order to save extra fares for transfers. At the same time, knowing this each supplier could provide socially-inefficient but- ridership-maximizing routes. Consequently, there were duplicate services between suppliers. Even though the subway is operated by a public company, it has to take away passengers from the competing buses in order to be financially viable, rather than cooperating with them in delivering a more efficient combined transportation service.

 

 

Free Transfer Across Services

 

 The complicated coordination problem was resolved by region-wide negotiations between the Seoul government, and subway and private bus companies in the early 2000s. In exchange for a guaranteed subsidy, any public transportation service suppliers within the Seoul metropolitan region allow free (or at nominal cost) transfer across services. The bus routes were overhauled, and the free transfer system substantially increased the efficiency of public transportation as a whole and demonstrated an important point that system-wide efficiency can be achieved even though a large part of it is private. If such a cooperative mechanism were in place earlier, the routes of Seoul metro system would have been used more efficiently for long-distance commuting.

 

 The current subway system is operated cooperatively by three entities. The early lines, Line 1 through Line 4, are operated by the Seoul Metro; Line 5 through Line 8, which were opened during the mid-1990s, are operated by the Seoul Metropolitan Rapid Transit Corporation; Line 9, the newest, is owned by Seoul Metro Line 9 Corporation. The first two corporations are public enterprise owned by Seoul Metropolitan Government, while the last one is a for-profit company.

 

 

Introduction of Private Investments

 

 The introduction of private investments in urban infrastructure has been experimented with in Korea to varying degrees of success. In a typical arrangement, a private corporation (often a consortium of large corporations and private investors), is allowed to build social infrastructure and operate it for a fixed number of years (15-30). The operations (such as prices and service levels) are regulated, but the activities are for-profit with a guaranteed minimum profit rate.

 

 As private investment was mobilized to finance infrastructure construction, it reduced the outlay by the government. However, such an arrangement has a serious moral hazard problem. There is a strong incentive for the private participants to overstate the benefits of the project, and end up relying on public support when the actual market demand falls short of the forecast.

 

 A similar arrangement was made for the rapid rail line (AREX) that connects the two major international airports (Incheon and Gimpo), to Seoul Station in the middle of the city (not finished yet). Initially, the line was constructed by a consortium headed by Eukorail, which includes a French company Alstom and Hyundai Rotem (a subsidiary of Hyundai Motor Co.) that manufactures Korean high speed trains. However, as the actual user rate has fallen much shorter than forecast by the planners, Korail has taken over 88 percent of the company making it virtually a government-owned one.

 

[picture 1, 2]

The Seoul subway system, which started operations in 1974 with less than 10 kilometers of underground track, is the third largest in the world in terms of ridership. In 2010, the Seoul subway system has 9 routes in total with the opening of Line 9 on July 24, 2009.

 

 While AREX trains are designed to run at 120 km/hr, KTX (Korea Train Express) trains run as fast as 350 kilometers per hour. KTX is the high speed rail (HSR) system that connects Seoul to Busan and Mokpo located at the southeastern and southwestern tips of the Korean peninsula(about a little bit over 400 kilometers from Seoul). Although road transportation using private cars and express buses are still more widely used in inter-city passenger transportation, the KTX is getting more popular over time. In particular, it has nearly replaced air transportation on those domestic routes.

 

 The primary railroad network in Korea was developed during the 1910-1945 Japanese colonial occupation. During the period of industrialization, gradual improvements were made to the system ― diesel and electric locomotives, double tracks and improved signaling were introduced. When demand for fast inter-city travel increased with economic development, it was first absorbed by the domestic airline industry, as the old tracks were not designed to accommodate modern high speed trains.

 

 Planning and construction of a new high speed rail system (HSR) started during the early 1990s. As the country lacked the technical expertise to develop its own HSR, an international bidding war for the general contractor was opened, and the French system of TGV was chosen. In 2004, after 12 years of construction, some portion of the KTX started operation. If the Seoul-Busan line is completed with a new set of tracks in late 2010, the travel time will be reduced to 2 hours 18 minutes from 4 hours 10 minutes on conventional trains. The adaptation and expansion of the KTX will put all of South Korea within effective daily commuting distance, promoting business activities between major cities.

 

 

Technology Transfer

 

 In the evaluation of the initial adoption of foreign technology for the HSR in the early 1990s, the opportunity for technology transfer was one of the most important considerations. As there were only a few countries that possessed the technology (Japan, Germany, France and Italy) then, they were not eager to share their knowhow of the cutting-edge technology. The first train, the KTX-1 was based on the French company, Alstom's TGV Reseau to accommodate the mountainous terrain of Korea.

 

 In 2004, South Korea became the seventh country after Spain and China to develop independently HSR technology by successfully test-running the new HSR-350x train that was designed to run at 350 kilometers per hour. The prototype is now in the production as the KTX-II. While other countries currently possess more advanced HSR technologies, Korea's success in developing independent HSR trains enables it to manufacture the KTX-II domestically without any royalty payments and technology transfer limitations, thereby creating employment and technical expertise for future exports.

 

 This is the result of a successful public-private partnership in the G7 Project comprising the Korea Railroad Research Institute, the Korea Institute of Industrial Technology and Hyundai Rotem. While the majority of the project's research and design was supported by the government through the two research institutes. The technology was transferred to private companies for a fee. As private companies are reluctant to face the uncertainty of the development of new technologies with massive investment, the government took the risk for initial development. On the other hand, private companies are able to exploit the new technology for economic gain better than government.

 

 

Mega Asian Cities Embrace Subway Systems

 

 The Seoul metro system, which started operation in 1974, is relatively new compared with other major cities in the world. London, the first city that adopted underground railroads for urban transportation, started operations in 1963. However, the popularity of subways started with the availability of electric trains in 1890. Paris started its first subway operations in 1900, followed by New York City in 1904. In Asia, Tokyo was the first city that built a subway. Currently, the Tokyo subway system has the largest ridership in the world. Recently, major Chinese cities have adopted subways as the most important urban transportation system.

 

 In 2020, the Shanghai system is expected to become the largest in the world with 22 lines and being 877 kilometers in length. The Beijing system is expected to expand to 19 lines and 561 kilometers of track by 2015.

 

[table]

 

Major Subway Systems in the World