Title: The Economics of Railways Restructuring in South Korea
Abstract: South Korea, like many countries, is engaged in a policy debate concerning possible railways reforms, inspired in part by perceived inefficiencies of the incumbent monopolist and in part by the potential of traffic diversion from road to rail to result in significant reductions in the use of energy and the generation of greenhouse gases. However, unlike most countries, here the focus of rail reform discussion has been the government’s proposal to open high-speed passenger train lines to a second train operator. While such a policy may indeed lead to lower fares and greater efficiency, the world experience suggests that it is doubtful that it would lead to such dramatic increases in ridership that the level of subsidies to the overall rail system could be reduced, as the government hopes. We argue that a more promising reform strategy may be to introduce competition into freight rail. A competitive freight rail sector would likely be more successful in taking container traffic off the crowded Seoul-Busan highway than the monopoly Korail has been, and thus in furthering the government’s policy of reducing the carbon-intensity of the economy. Moreover, based on the Latin American experience, creating independent, vertically integrated, competing freight railway companies could be expected not only to lower shipper rates and increase efficiency but also to raise considerable revenues from the private sector in franchising fees and new investments.
Publication Year: 2013
Publication Date: 2013-03-01
Language: en
Type: article
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