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Economic Daily News: Rescuing the high-speed railway

Economic Daily News: Rescuing the high-speed railway

Transportation Minister Yeh Kuang-shih resigned earlier this week after lawmakers shot down a financial restructuring plan proposed by the ministry to keep Taiwan's high-speed rail system from going bankrupt. The legislators alleged that the plan was "intended to benefit certain business conglomerates." Figuring out how to rescue Taiwan High Speed Rail Corp. (THSRC) in the most cost-efficient way is a highly professional and complicated matter. How can people deal with the issue using such simple political language? The ruling and opposition parties should sit down calmly for talks to find an efficient solution to the problem instead of blaming each other. According to the build-operate-transfer contract signed by the government and THSRC, in the event of a government takeover of THSRC due to bankruptcy, the government will have to spend NT$390 billion to buy the company's assets and pay another NT$300 billion in compensation. To avoid the massive outlay of funds, the Ministry of Transportation and Communications had proposed extending the concession period granted to THSRC by another 40 years, which would have greatly reduced the cost of depreciation and allowed the company to get out of the red. In addition, the ministry had planned to reduce THSRC's capital by 60 percent before engaging in a NT$30 billion capital increase that would have excluded the company's initial shareholders, paving the way for a takeover by the government or other new shareholders. The lawmakers argued, however, that THSRC will generate potential profits of NT$800 billion if the concession period is extended by 40 years. In fact, after deducting expenditures such as train replacement, facility maintenance and interest payments, the net profits will amount to only NT$196.4 billion, which translates into a rate of return of just 5.9 percent. (Editorial abstract -- Jan. 10, 2015) (By Y.F. Low)


Updated : 2021-09-22 22:45 GMT+08:00