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The government has decided to establish a second public firm to operate the country's KTX high-speed trains in an effort to inject greater competition into the railway system monopolized by the state-run Korea Railroad (KORAIL), officials said Wednesday.
The move is expected to be finalized in a report to President Park Geun-hye slated for later this month, according to the officials from the Ministry of Land, Transport and Maritime Affairs.
The new railroad company will likely handle the operation of new KTX services currently scheduled to be launched in 2015.
The ministry had once considered entrusting the operation of the new KTX service to a private company, but it reportedly feared public opposition against handing over the lucrative business to any private firm.
The government believes the new, second public railroad firm will still bring much needed competition into the business, leading to a drop in overall fees and thus prompting the existing railroad company, KORAIL, to accelerate its ongoing reform measures.
KORAIL's debts totaled 13.5 trillion won (US$12.1 billion) at the end of 2011, with the company running an operating deficit of more than 500 billion won every year on average.
"The effect of establishing a new public firm may be somewhat less than that of introducing competition from a private company, but it is still expected to help minimize the negative effects stemming from KORAIL's monopoly while preventing concerns over special favors to any specific private firm," a ministry official said, asking not to be identified.
"It is a realistic alternative that can introduce competition to the KTX service industry," he added.
Rep. Cho Hyun-ryong, a ruling party member of the parliamentary land, transport and maritime affairs committee, agreed.
"There is no better card than a public firm to introduce competition in the railroad service while minimizing public opposition," the lawmaker said.
Ministry officials said the new railroad firm will cost around 350 billion won to establish, which will likely be shouldered by the government, at least in the initial stage.
Creating a new public firm requires parliamentary approval. The ministry officials said a government committee will be set up soon after the Cabinet and the National Assembly endorse the move. (Yonhap News)
The move is expected to be finalized in a report to President Park Geun-hye slated for later this month, according to the officials from the Ministry of Land, Transport and Maritime Affairs.
The new railroad company will likely handle the operation of new KTX services currently scheduled to be launched in 2015.
The ministry had once considered entrusting the operation of the new KTX service to a private company, but it reportedly feared public opposition against handing over the lucrative business to any private firm.
The government believes the new, second public railroad firm will still bring much needed competition into the business, leading to a drop in overall fees and thus prompting the existing railroad company, KORAIL, to accelerate its ongoing reform measures.
KORAIL's debts totaled 13.5 trillion won (US$12.1 billion) at the end of 2011, with the company running an operating deficit of more than 500 billion won every year on average.
"The effect of establishing a new public firm may be somewhat less than that of introducing competition from a private company, but it is still expected to help minimize the negative effects stemming from KORAIL's monopoly while preventing concerns over special favors to any specific private firm," a ministry official said, asking not to be identified.
"It is a realistic alternative that can introduce competition to the KTX service industry," he added.
Rep. Cho Hyun-ryong, a ruling party member of the parliamentary land, transport and maritime affairs committee, agreed.
"There is no better card than a public firm to introduce competition in the railroad service while minimizing public opposition," the lawmaker said.
Ministry officials said the new railroad firm will cost around 350 billion won to establish, which will likely be shouldered by the government, at least in the initial stage.
Creating a new public firm requires parliamentary approval. The ministry officials said a government committee will be set up soon after the Cabinet and the National Assembly endorse the move. (Yonhap News)
