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Korea to attract private sector for rail development

July 6, 2016 - 14:40 By Park Hyung-ki
The South Korean government seeks to attract private companies to participate and bid for local railway projects beyond the Seoul and Gyeonggi metropolitan areas amid difficulties in financing infrastructure development with state capital.

The Ministry of Strategy and Finance and the Ministry of Land, Transport and Maritime Affairs said Wednesday that the government seeks to attract some 20 trillion won ($17 billion) from the private sector to build and expand railway networks nationwide over the next 10 years.


The use of private investment for rail infrastructure will help Korea better manage its fiscal and social spending in the face of an aging population and depleting pension funds, the Finance Ministry said. Also, this is part of efforts to create some 450,000 jobs in the sector.

“The development and expansion of the railways through private investment will help meet transportation demand in a situation where the country’s fiscal capability is decreasing,” Finance Minister Yoo Il-ho said in a meeting on fiscal management.

“The government will allow the private sector to gain profit through business diversification, in addition to rail operations and maintenance,” he added.

It will decrease the amount of time it takes to file, bid for, negotiate and design railways to encourage more active participation from the private sector, the Finance Ministry and Transport Ministry said, noting that development time will now take about 3 and a half years instead of more than 5 years.

The Great Train Express, or GTX, linking southern and northern Gyeonggi Province with Seoul, will be one of the rail projects that will be developed through a speedier process. The construction of the GTX is expected to be pushed forward by a year from 2019 to 2018.

Although overall infrastructure spending has decreased over the years, rail development has been rising as more people take subways and trains to beat traffic congestion. Korea’s changing social demographic is also fueling rail transportation. The government hopes the private sector will fill this need as Korea seeks to tighten its spending by decreasing it from 5.2 trillion won to 4.1 trillion won for railways by 2020.

The Finance Ministry also said that it will submit a legislative proposal on strengthening its fiscal soundness to that National Assembly to ensure the country’s debt in proportion to its economic output does not get out of hand.

“This is to ensure the central government as well as regional administrations, state-run enterprises and pension funds remain fiscally responsible and counter problems in the mid-to-long term amid low growth and rising welfare spending,” Finance Minister Yoo said.

By Park Hyong-ki (hkp@heraldcorp.com)