The government split up the rail sector’s management of infrastructure and transport services in 2005, judging that a single national railway firm would not be able to meet the demand for better products.

Under the reform, the Transportation Ministry put about 80 percent of Korea’s railway stations under the ownership of state-run Korea Railroad Corp., which also operates railway services, as a form of investment-in-kind.

About seven years on, the ministry is seeking to retrieve that ownership, saying it wants to nationalize 435 rail station facilities by the year’s end.

Ministry officials said the nationalization would help improve KORAIL’s financial condition because the corporation is losing about 25 billion won ($21.3 million) a year from operating the stations.

Industry observers see the ministry’s nationalization drive as a way to reform KORAIL’s management.

They also speculate that the ministry thinks KORAIL’s monopoly over stations will have to end because the government may soon seek to open up train operations to competition.

But KORAIL and some civic groups oppose the ministry’s plan. The corporation fears that it may face a sharp decline in total assets as it will have to pay to use the stations’ facilities.

In the long run, nationalization would actually aggravate KORAIL’s financial status, an official said.

Analysts said the nationalization would force the corporation to lay off employees working at station facilities. Some said KORAIL will be hit by a huge deficit because it will no longer be able to develop land affiliated with rail stations. The financial value of KORAIL-owned stations and their associated sites amounts to 2 trillion won ($1.7 billion).

“We are preparing a request for re-assessment of the government’s plan. We are to talk through the issue and discuss the ratio (of the market share of train stations) if necessary,” KORAIL spokesman Chang Young-cheol told The Korea Herald.

He said that the government must revise a relevant law should it reclaim ownership of the stations.

Other officials said the government should take into consideration efficiency, KORAIL’s financial condition, and customer satisfaction.

The spokesman said that the firm expected the nationalization to cause inefficiency.

“Management skills matter. Even for corner shops, whether the door faces east or west or how to display products can really make a big difference.”

Other KORAIL officials said if KORAIL became a tenant of these stations, the level of customer service would inevitably drop. Immediate maintenance, including broken windows and facilities, would be difficult if the company does not own the stations, they said.

An official at the Citizens’ Coalition for Economic Justice, one of the nation’s leading civic groups, said the push for nationalization of station facilities seems to be part of its plan to eventually privatize rail operation and services.

The government may seek to hand over the rights to operate stations to private operators of railway services to be selected in future projects, he added.

The ministry plans to open bidding this year to operate new KTX routes that will open in 2015. Doosan Group and Kumho Asiana Group have expressed interest in the bidding.

By Chung Joo-won (joowonc@heraldcorp.com)