Derailment of train project feared

The world's biggest build-operate-transfer (BOT) project -- the north-south high-speed rail -- may run into financial difficulties, further burdening government coffers, opposition lawmakers warned yesterday.

"Eighty-four percent of the project's financing comes from the government. The BOT project is doomed to fail," PFP lawmaker Norman Yin (殷乃平) said yesterday at a meeting of the legislature's finance committee.

The Council for Economic Planning and Development under the KMT government in 1999 gave the project's contractor -- Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) -- NT$280 billion as a medium- and long-term loan.

The DPP government later dipped into the National Development Fund, giving NT$5 billion to the project in exchange for a stake in the rail line. Taiwan Sugar Corp (台糖) also put up NT$3 billion.

Legislators across party lines yesterday accused the THSRC of breaching its initial contract with the government. The firm had originally said the project wouldn't cost the government a single NT dollar and would instead generate NT$105.7 billion in guaranteed revenue for the government.

Minister of Finance Lee Yung-san (李庸三) said that Taiwanese banks had little experience financing BOT projects. To get them on board, the government had to endorse the project by putting up money of its own.

Yin noted that the THSRC, which has so far raised NT$49.9 billion in capital from private investors, is having trouble raising the NT$132 billion it needs to cover its portion of the project's enormous cost.

The PFP lawmaker urged the government to act soon to limit the financial fall out.

DPP legislator Wang Hsueh-fung (王雪峰) said the Cabinet should form a special task force to look into the project's finances and progress.

She also said the National Development Fund's committee should begin to think about ways to withdraw from its investment, which may not turn a profit.

A motion, proposed by KMT legislator Alex Tsai (蔡正元) yesterday, was also passed to forbid the fund from increasing its stake in the railway project.

Vice Premier Lin Hsin-yi (林信義), who doubles as the fund's chairman, assured legislators the government has no plans to do so.

Legislators yesterday also asked Lin to estimate the government's possible losses in the US$800 million civil lawsuit filed by the Alstom-Siemens Eurotrain consortium against THSRC. The group claims it unfairly lost the high-speed rail contract.

"It may cost the government up to NT$4 billion if THSRC loses the lawsuit," Lin said.

THSRC named Eurotrain as its "preferred bidder" in a preliminary 1997 deal for the supply of train carriages, locomotives, electronics and communication systems and maintenance.

But THSRC gave the US$3 billion deal in December 1999 to Taiwan Shinkansen Consortium, led by Japan's Mitsui Corp.