Korea heading for same privatisation mistakes

 

South Korea has an excellent railway system that has benefitted from expansion and considerable investment over the past thirty years. Usage is high, fares are low and it has had a high speed line linking the two biggest cities, Seoul and Busan, since 2004 and more sections are being built. So, inevitably, it has become a target for privatisation and fragmentation.

Korea also has a strong trade union movement which is well organised in the railway sector and therefore the elements of a major conflict are being laid out. Democracy in South Korea owes its very existence to protest and radical action by trade unions and students. In the country’s turbulent history, protests led several times to the overthrow of governments and, and ultimately, in 1987 to the creation of the present sixth republic which is largely a liberal democracy, though corruption is still rife.

As elsewhere in the world, the railways are a constant target for the promoters of liberalisation and privatisation. Three times over the past ten years, attempts to break up and privatise the railways have been abandoned following protests and strikes by railway workers. This has involved many losing their jobs, with the trade unions today still paying the livelihood of nearly 100 who have been sacked as a result of these protests with a special levy.

Now, however, the unions are preparing for the biggest of these confrontations, which may lead to an all out indefinite strike. This is the result of plans set out by the government of Park Geun-hye, which was elected in December last year, for the break up of the railways. The unions are particularly angered because during the election campaign,  Ms Park had stated clearly that she was ‘against privatisation of KTX [the high speed line services which are the biggest component of rail revenue]’ and that she would ensure the national assembly would set out a long term plan for the railways.

In fact, within a few weeks of taking office in February, a plan for breaking up the railways was set out by the Ministry of Land, Infrastructure and Transport. This involves the creation of an overall holding company, rather like the German model of Deutsche Bahn, and a series of subsidiaries covering passengers, freight, rolling stock and infrastructure. There will, in fact, be two passenger sections, one covering KTX, the high speed line, and the airport link, and the rest encompassing conventional services.

This restructuring worries the unions, and with good reason. They see it as the preparation of privatisation since shares would be able to be sold in these subsidiaries. In particular, they are concerned about the split in passenger services since the high speed line, which has revenue which is three times the level of the conventional lines, could be an attractive proposition to private investors.  Then profits from the high speed line services would end up in shareholders’ hands, rather than being used, as currently, to subsidise loss-making services. Consequently hiving off the high speed lines could result in multiple closures.

The Korean government has accused the railways of being inefficient and wasteful, but the unions counter this, arguing that in international terms productivity per worker is high and it is the underinvestment in the system that is the major problem. The unions are convince that the main motivation behind the break-up and possible privatisation is to break the strength of the union.

Oddly, Korea, like Britain where privatisation has resulted in a series of failures such as Railtrack and various train operators, already has similar the experience of a privatisation that has gone wrong. Numbers travelling on the airport railway opened in 2007 between Incheon and Seoul which was built by KOTI, a private consortium, did not meet predictions and consequently the owners sought subsidy from the government. After paying subsidies for the first two years, the government then decided to buy the line because KOTI’s demands were so high. Now, oddly, the government is seeking to reprivatise it, although it is likely to end up with the same problem of requiring ongoing subsidy.

All this is so drearily and tragically familiar. The privatisation of Britain’s railways was one of the biggest scandals of the Tory governments of the 1980s and 1990s and resulted in the waste of billions of taxpayers money. Yet, countries around the world, spurred on by international organisations such as the World Bank and the European Union continue to pursue rail policies based on privatisation with the ostensible aim of reducing costs and the unstated aim of breaking up union power. Yet, fragmentation and privatisation have been shown on numerous occasions to result in less efficient railways – and ironically in the UK they have actually strengthened the unions.

Despite the evidence to the contrary, the rush to liberalise, privatise and fragment the railways continues. According to opinion polls, the Korean public is resolutely opposed to privatisation and the trade unions are strong enough to put up a fight but, if the past record is anything to go by,  it is likely to be a bloody and lengthy confrontation.

 

Christian Wolmar travelled to Korea in August to speak at a trade union organised conference opposing privatisation.

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