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Rail project needs better scrutiny

Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) chairwoman Nita Ing (殷琪) recently visited Premier Frank Hsieh (謝長廷) to ask for the government's financial help so that the project can be completed on schedule. The project's current crisis highlights the THSRC's fundraising difficulties.

The THSRC should provide a detailed explanation of this crisis to the public. The Ministry of Transportation and Communications should also monitor the project more effectively.

It is appropriate for the government to specify a stop-loss point, the point at which no extra funds will be provided regardless of the consequences. A special task force should also be set up by the ministry before the system opens to raise questions and develop response measures pertaining to interface coordination, operational safety, financial management, passenger volume, passenger transfer infrastructure and other concerns. If the government continues to inject funds into a project whose viability remains unclear, it will be unfair to taxpayers.

Although the delay does not violate contractual obligations, the fact that the THSRC's budget is constantly growing and that it has difficulty in obtaining sufficient funds highlights its inability to carry out the project effectively. The government should take active measures in response, rather than dumbly meeting the THSRC's requests.

The government continues to find all possible means to pump more capital into the project. But there should be a limit to this, and the government should clearly inform the public on how much more capital it will provide.

Although the the railway will be to everyone's advantage, and although one cannot ignore the considerable achievements of the project to this point, the government cannot continue pouring money into a black hole. The government's involvement has long since violated the "build, operate, transfer" (BOT) model -- which is intended to encourage private sector investment -- on which the project was conceived.

In order to ensure the success of BOT projects, governments often provide companies commissioned for the projects various guarantees and subsidies. These include operating revenue guarantees, special funds, government loans and investment and establishing special laws to safeguard company interests.

The high-speed rail is the nation's largest BOT project, and in the course of pushing through this highly complex project, various legal and procedural gray areas have emerged.

It is therefore understandable that the government should intervene to support completion of the project. But this support should be subject to the supervision of the legislature and the general public.

The main area of delay is the core mechanical and electrical systems, which are only half-completed. There are also questions of interface integration for tracks, rolling stock, the signaling system, the communication system and the electrification system, which are of even greater complexity. The amount of financial support that the government can be expected to provide for this part of the project is difficult to calculate.

Similar projects in other countries -- such as KTX in South Korea, AVE in Spain and Acela in the US -- have also experienced integration problems. As a result they had to push back target dates for the beginning of commercial operations. In the case of KTX, this was by as much as three years.

If the scheduled opening of Taiwan's high-speed rail next October is postponed again, the THSRC will not only suffer from revenue losses, but will also find it more difficult to raise funds in future. Given these circumstances, will the government continue to provide funding to cope with future problems?

Even when the high-speed rail is up and running, during the initial period it will not be fully integrated into local transport systems, which means that passenger numbers may be lower than expected. This will put additional pressure on the THSRC.

The government should therefore draw up a set of criteria for when and how it will provide financial support, the extent of that support and the benchmarks that must be met.

Government assistance in the completion of the high-speed rail project is appropriate, but the government must have a concrete set of publicly accountable guidelines if it provides help to the THSRC in the course of the construction process.

The situation the THSRC faces now is different from the planning stage when the corporation was able to present magnificent financial prospects. Now, it is faced with delays, problems over system integration and difficulties in raising funds.

If the government continues to offer financial support in the same way, its stake will likely exceed the total amount invested by the five original major shareholders.

In this situation, the government should consider reclaiming its leading role in the project, and revise the entire model and response strategies. However the high-speed rail project develops from now on, the government should make preparations so that it is able to respond in an appropriate manner.

Cheng Yung-hsiang is an assistant professor in the department of logistics management at National Kaohsiung First University of Science and Technology.

TRANSLATED BY LIN YA-TI
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