High Speed Hope

Economic News

22 Jul 2010
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On January 4, Taiwan's high-speed rail network opened to the public for the first time. Once fully completed, the train will take passengers from Taipei in the north to Kaohsiung, the island's second biggest city in the south, in 90 minutes compared to four hours on the standard network.



The 345km line runs down the western side of the island, through the country's most heavily populated area. The train can reach speeds of up to 300km an hour, which is comparable to the speeds of the French TGV or the Japanese Shinkansen (bullet train).



Taiwan High Speed Rail Corporation (THSRC), which beat competitors to build and run the network for 33 years, awarded the main contract to Japan's Shinkansen consortium in 1998. It had initially signed a memorandum of understanding (MoU) to award the contract to a European consortium in 1997 but this proved costly, as the corporation eventually had to pay out $65m in compensation.



It is hoped that the rail link will encourage the growth of new towns along the line. According to reports, around 1500 hectares of land has been made available for development and it is hoped that the project will stimulate economic growth in a more even way across the whole island. The project has cost around $15bn.



Ralf Scheller, the Managing Director of TUV Rheinland in Taiwan, which operates a railway technology safety consultancy division, told OBG he doubts whether the project will cover its costs explaining that "...as low end industry has moved abroad and economic growth has slowed there will be less of a demand for the service than originally expected." Scheller also felt that the mix of Japanese and European technologies would add to the cost of maintenance.



At this first stage, only 19 services will run each day and the final 10km stretch of the line outside Taipei is yet to be completed. Eventually THSRC hopes the line will carry 150,000 passengers per day.



Domestic airlines are set to lose out if the new rail service becomes a success, as most of the population will be able to get to Taipei within two hours. A spokesman from a Taiwanese airline was reported as saying that they will continue to grow their operations internationally to offset an anticipated reduction in domestic demand caused by the new rail service.



The government is keen to establish Taiwan as a "Green Island" and is promoting the new service as environmentally friendly.



The launch of the service was initially expected in 2003 and had faced continuing delays. The opening ceremony, which was supposed to be on December 7, was cancelled because of a couple of minor derailments in testing.



Some consumer groups have been warning the public not use the new service until safety concerns have been addressed. The local press reported demonstrations at Banciao station, near Taipei. A pressure group that organised the protest explained that they were unhappy at an apparent 33 safety points that THSRC had not addressed.



To ease the public's concerns and frustrations at ticketing problems THSRC has extended a period of half price tickets.



These challenges have caused concern among the public but if the service overcomes its difficulties and finishes the last leg of the line with full service, then it is likely to succeed. According to local reports, THSRC expects to have enough customers to break even within a year.

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