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Received 08/10/2012 Accepted 26/03/2013
Keywords: infrastructure planning / procurement / public-private partnerships
ICE Publishing: All rights reserved
The latest subway line in Seoul, South Korea is different to the previous eight publicly funded lines in that its operational systems have been part-delivered by the private-sector in return for a 30 year operating concession. The first US$3 billion phase of subway line 9 opened in 2009 and is proving popular with commuters, while the remaining 14 km of the route is due for completion by 2016. However, the concessionaire has already run into trouble by trying to impose a 50% fare increase last year to improve its under-performing return on investment. This paper describes Korea's first urban rail project to be privately part-funded and operated and discusses the various issues encountered. It concludes with a number of lessons learnt for future public-private partnering infrastructure projects.
1. Introduction
Seoul, the capital city of South Korea, has witnessed rapid development over the last five decades, with the population growing from 2-4 million in 1960 to 10-6 million in 1990. Its underground railway has emerged as the only effective solution to tackle the resulting road traffic congestion and to keep the city functioning effectively.
The 'subway era' dawned in Seoul in the early 1970s with the completion of subway line 1 in 1974. Three more lines followed during phase I, bringing the total length of the network to 1245 km by 1985. Since then it has been growing continually. Phase II delivered a further 1748 km between 1990 and 2000, with extensions to existing lines and the addition of four more lines. Throughout this period, construction was financed and delivered in the traditional way, with Seoul metropolitan government (SMG) financing and implementing the projects and then handing over to the operators - in this case, two public corporations.
The model changed, however, with the construction of subway line 9, which was started in 2002 and partially inaugurated in 2009, when private partners were invited to participate in the delivery of the subway through a public-private partnership (PPP). The basis of this PPP was that the government would build the civil structures while the private partners delivered the operational systems and then ran them after completion. Subway line 9...