Far Eastern warns over toll contract

Far Eastern Electronic Toll Collection Co (遠通電收), facing a government threat to end its contract for the electronic toll collection (ETC) system, said over the weekend that the agreement cannot be unilaterally halted without compensation being paid.

The government will need to give compensation to the builder of the system before amending or ending the build-operate-transfer contract, no matter whether the deal is a private or public contract, Far Eastern Electronic said in a statement released late on Saturday.

The freeway ETC operator could be entitled to ask for NT$1.8 billion (US$55.5 million) in damages if the government terminates the contract and if the agreement is judged by the Supreme Administrative Court to be a public contract, local reports said yesterday without citing sources.

Far Eastern denied accusations by the government that it had engaged in bribery to win the contract, the statement said.

The Ministry of Transportation and Communications said on Saturday that it would end the contract if Far Eastern Electronic could not come up with a solution to guarantee the public's benefit by 5:30pm on Wednesday.

The ministry's move came after the Taipei District Prosecutors' Office indicted Tsai Chin-hung (蔡錦鴻), a former employee of Systex Corp (精業科技), one of Far Eastern's major shareholders, for alleged bribery during the ETC system bidding.

The ministry reportedly expected the company to offer cheaper or free on-board units (OBUs) -- which must be installed in vehicles for people to use the electronic toll service -- amid public criticism about the units' price tag. The units originally cost as much as NT$2,249, inclusive of the equipment, installation fee and a security deposit.

"We are formulating solutions with consumers' rights and interests as the top priorities," Far Eastern's spokeswoman Lin Li-ling (林麗玲) said in a telephone interview yesterday.

But Lin shied away from elaborating on the feasibility of free OBUs or details of the plan.

The automatic toll-ticketing service provider has invested NT$3 billion in the system and has incurred losses of NT$800 million so far.

Up to 125,000 motorists have purchased the service, the company said.

The episode was another twist in the drawn-out dispute between Far Eastern and the ministry since test-runs of the technology were delayed to Feb. 10 from the originally scheduled Jan. 1.

The government could commission Chunghwa Telecom Co (中華電信), the nation's largest telecom operator, to run the electronic toll system, reports said.

But a company spokesperson said such reports were premature.

"We are a private company now and need the board's approval before doing any business," Chunghwa Telecom spokesman Hank Wang (王漢朝) said.

The company will not step in until after the ongoing legal disputes are resolved, Wang said.

"Profitability [of the business] is another concern, as we have to look after shareholders' rights and interests first," Wang said.

Acknowledging that the government may have contacted chairman Hochen Tan (賀陳旦), Wang said that management had not yet been instructed to study the possibility of running the system.

Chunghwa Telecom tested electronic-toll collection technology about six years ago but the team responsible has since been disbanded.

The telecom operator completed its privatization process last August, selling a 17 percent stake to local and foreign investors and reducing the government's shareholding to 44 percent.