Who is the architect of the urban railway bankruptcy crisis?

▲ Sam-Woo Nam, head of policy at Seoul Transportation Corporation

The Seoul Transportation Corporation’s labor union withdrew the strike scheduled for last month through a temporary labor-management agreement. Regarding restructuring, which is a key issue, it was agreed to ‘to ensure that there is no forced restructuring due to the financial crisis, and to form a labor-management joint council to discuss ways to strengthen safety and improve financial conditions’.

Seoul Transportation Corporation is in an unprecedented financial crisis, with a loss of 1.6 trillion won this year, following a loss of 1.1 trillion won last year. This is attributable to the fact that the cost of free rides provided to the transportation vulnerable, such as the elderly and the disabled, is increasing year by year, and transportation revenues have significantly decreased due to the COVID-19 crisis. In addition, the cost of replacing old facilities has skyrocketed, causing the deficit to snowball. The corporation complained, “If there is no special measure, default, such as default, may occur.” However, the government and the Seoul Metropolitan Government postponed their responsibilities as if they were ‘throwing a bomb’, and pressed the construction company to come up with a self-rescue measure. In response, KDHC drew up a restructuring plan to cut costs through large-scale layoffs and outsourcing of safety and essential maintenance work. The subway financial crisis was the reason for the intensification of labor-management confrontation.

Labor and management managed to reach an agreement, but the problem has not been resolved. It is impossible to find a solution to the trillion-level deficit and the resulting operational crisis if labor and management are preoccupied with it. The previous labor-management agreement put the blame on the fact that the government and the city of Seoul should take responsibility for the urban railroad financial crisis and come up with a solution.

Now it is the government’s turn to respond. It is not that there is no solution. The union is insisting on the establishment of a government support plan for the cost of public service (PSO) costs so that urban railroad operation can be normalized and safety investments can be made in a timely manner. In order to prevent the current financial crisis from leading to a ‘safety crisis’ and ‘public transportation crisis’, support measures should be instituted quickly. In the case of KNOC, the cost of the free ride system is close to 70% of the net loss.

In fact, at the regular National Assembly last year, the PSO support bill had an opportunity to cross the legislative threshold. A number of lawmakers from the opposition and opposition parties proposed the amendment to the Urban Railroad Act, which stipulates support for PSO state funding, and passed the bill review subcommittee of the Land, Infrastructure and Transport Committee. However, the Ministry of Strategy and Finance was none other than the Ministry of Strategy and Finance, as there were those who ultimately opposed the passage of the bill and crushed the golden opportunity. At that time, the Ministry of Strategy and Finance argued that the final responsibility for the operation of urban railroads was the local government and that it should not pass a bill that placed a burden on the government. It was the moment when the 16th rejection of the proposal to support the cost of the urban railway PSO, which started in 2005. There were protests from lawmakers saying, “What if I come here and turn over?”, but it was unheard of. The free system of urban railroads across the country is not limited to transportation welfare for local residents. It has been a long time since the metropolitan transportation network has been extended to Gangwon-do and Chungcheong-do, but the Ministry of Strategy and Finance has struggled to close its eyes. Moreover, the free-riding system was established by the government in 1984, before the implementation of the local self-government system, in terms of transportation welfare.

The amendment bill is pending in the National Assembly, but this year does not look promising. On the one hand, the Ministry of Strategy and Finance is only thinking about shifting the burden to the citizens by raising the fare and reducing the free-riding system. As a result, urban railroad institutions are struggling to procure safety reinvestment costs such as replacement of outdated facilities and electric vehicles. At this point, it is no exaggeration to say that the Ministry of Strategy and Finance is the designer who neglected the bankruptcy crisis and passed it on to workers and citizens. It’s not just the city rail. After the COVID-19 disaster, the Ministry of Strategy and Finance has been stingy in providing measures and increasing budgets for essential public services such as medical care, care, housing, education, and social security, as well as supporting the socially disadvantaged. The fact that the ratio of public social welfare expenditure to gross domestic product (GDP) hovers at the bottom of the Organization for Economic Cooperation and Development (OECD) countries proves this. This is the reason why the Ministry of Strategy and Finance, which monopolizes the budgetary powers and reigns supremely, has to take issue with it. Although he claims to be a ‘storekeeper’, in reality he is waving the state responsibility for the people’s livelihood and wielding fiscal policies that are concentrated on chaebol conglomerates like ‘the king’.

The Ministry of Strategy and Finance, which is at the peak of bureaucratic control over the public sector, shutting its ears to demands for expansion of the public sector, is the enemy and the target of reform.


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