vol.7 file ctwi9y - world bank

VOL.7 FILE Ctwi9YReport No. 1489-KO

Growth and Prospects RETUlN 4

of the Korean Economy REPORTS Dr

Annex F: Transport W1TH,J.

February 23, 1977

Country Programs DepartmentEast Asia and Pacific Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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ANNEX F

CURRENCY EQUIVALENTS

US$1.00 = Won 485.000 /1Won 1.00 = US$0.0206Won 1 million = US$2,061.85

ABBREVIATIONS

ADB - Asian Development BankEPB - Economic Planning Board

FFYP - Fourth Five Year Plan

GRT - Gross Registered Tons

IBRD - International Bank for Reconstructionand Development

KMPA - Korea Maritime and Port AuthorityKPDS II - Korea Port - Phase II Development

StudyMOC - Ministry of ConstructionMOT - Ministry of TransportationTCC - Transport Coordination CommitteeTCO - Transport Coordination OfficeWG - Interministerial Working Group on

Transport for Preparation of FourthFive-Year Plan

GOVERNMENT OF KOREAFISCAL YEAR

January 1 - December 31

/ The won was devalued from 400 to 485 won per US dollar witheffect from December 7, 1974.

FOR OFFICIAL USE ONLY

GROWTH AND PROSPECTS

OF THE KOREAN ECONOMY

ANNEX F

TRANSPORT

Prepared by T. Neuner

The full report consists of the following separately bound volumes:

Main ReportStatistical AppendixAnnexes: A - Agriculture

B - IndustryC - Human ResourcesD - Macro ModelE - EnergyF - TransportG - Public FinanceH - Financial SectorI - Foreign TradeJ - External Capital

This document hs a restricted distribution and may be used by recipients only in the perfonanceof their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.

GROWTH AND PROSPECTS OF THE KOREAN ECONOMY

ANNEX F - TRANSPORT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . 1

1. BACKGROUND, PROSPECTS AND SECTORAL STRATEGY . . . . . . . . 4Background . . . . . . . . . ............ . .. . . . . . 4Prospects . . . . . . . . . . . . . . . . . . . . . . . . 5Sectoral Strategy . . . . . . . . . . . . . . . . . . . . 7

2. DEMAND FORECASTS AND PROPOSED PLAN INVESTMENTS . . . . . . 8

Demand Forecasts .... . . . . ..... . . . . . . . 8

Plan Investment - Overall . . . . . . .. . . . . . .. 10Plan Investment - Railways . . . .. . . . . . . .. . 13

Plan Investment - Road Transport . . . . .. . . . . . . 19

Plan Investment - Ports and Shipping . . . . . .. . 23

Plan Investment - Aviation . . . . . . . . . .. . . 26Plan Investment - Conclusions . . . . . . . . . 27

3. TRANSPORT PRICING AND PUBLIC SECTOR FINANCE POLICY . . . . 29

Description of Pricing System . . . . .. . . . . . . . . 29

Characteristics of Price Regulation System . . . . . . . 31Transport Sector Finance - Government-Owned Organizations 32Transport Sector Finance - Private Organizations . . . . 33

Aim and Results of Government Policy . . . . . . . . . . 34

4. STRUCTURE AND OPERATIONS OF PRIVATE TRANSPORT INDUSTRY . . 36

Licensing System . .. . . . . . . . . . . . . . . . . . 36Operations ... .... . . . . . . . . .. . . . . . . 40

ATTACHMENTS

1. Traffic Performance2. Transport Infrastructure, Rolling Stock and Equipment3. Investments Proposed for Transport in Fourth Five-Year Plan4. Vehicles by Province and Type as of June 30, 19755. Transport Sector: List of Recommended Studies

MAPSNational RailroadNational Highway Network

GROWTH AND PROSPECTS OF THE KOREAN ECONOMY

ANNEX F - TRANSPORT

TABLES IN TEXT

Table No. Page No.

F 1 Major Commodity Movements, By Mode, 1974 . . . . . . 6F 2 Traffic Statistics 1971 (Actual), 1976 and

1981 (Projected) .... . . . . . . . . . . .... 8F 3 Modal Allocation of Transport Investments . . . . . . 12F 4 Public Sector Investment in Transport . . . . . . 13F 5 Investment PrQposed For Railways, 1977-81 . . . . . . 14F 6 Proposed Railway Rolling Stock Investmernt,

1977-1981 . ...... . . . . . . . . . . . . 17F 7 Investment Proposed for Road Transport . . . . . . . 20F 8 Proposed Highway Investments, 1977-1981 . . . . . . . 21F 9 Investnents Proposed for Ports and Shipping,

1977-1981. . .. . . . . . . . . . . . 24F 10 Proposed Ports Investments . . . . . . . . . . . . . 25F 11 Investments Proposed For Aviation, 1977-81 . . . . . 27F 12 Railway Ton-Kilometers and Revenues Per Ton-

Kilometer (1974) . . . . . . . . . . . . . . . . 30F 13 Licensing Authorities for Buses and Trucks . . . 38F 14 Motor Vehicle Licensees . ... . . . . . . . . . . . 39F 15 Vessels in Coastal Service . . . . . . . . . . . . . 39

ANNEX FPage 1

SUMMARY AND CONCLUSIONS

1. This report is part of the 1976 Basic Economic Report and discussestransport investment in the Fourth Five-Year Plan and major current issues inthe transport sector. It is based on visits to Korea in November 1975 andMarch 1976 by transport sector missions /1 and on discussions in Washingtonwith Government representatives in May 1976. Consultants attached to theMarch 1976 mission have prepared a separate technical study on major flows ofcoal and cement. This report incorporates the results of the technical study;however, the complete study has been submitted to the Government for itsconsideration and use.

2. Over the past ten years the relative importance of the railwaysin Korea's transport system has declined as the highway system expanded andthe economic potential of coastal shipping was exploited. This trend willcontinue though at a reduced pace, during the Fourth Five-Year Plan (FFYP)covering 1977-1981. The Government has projected transport demand to riseat about 10% yearly over the FFYP, with large increases in several bulkcommodities including coal, cement, and petroleum products. While theGovernment's forecasts are based on careful analysis of past trends andfuture plans, the forecasts could be improved by extending them beyond theFFYP and by analyzing how better transport operations and technologies wouldshift the share among the modes.

3. The proposed FFYP investment in transport is about 15% of all FFYPoutlays, which is about the same percentage as in the Third Plan. The valueof transport investments in real terms is substantially higher than in theprevious Plan. However, the projected rise in transport demand is propor.tionately even greater than in the previous Plan and the FFYP thereforeimplies significant productivity gains in the transport sector.

4. The overall scope and direction of modal investment plans aregenerally suited to meet projected demands. However, some schemes needfurther study including rail investments in the Seoul metropolitan regionwhich should be reviewed as part of an overall transport plan for that regionand improvements in the Seoul-Busan rail line which should be implementedonly after a comprehensive investigation of all transport needs in theSeoul-Busan corridor. In some cases cheaper means of meeting demand shouldbe investigated such as the construction of pipelines as an alternative tomoving large volumes of petroleum products by rail and truck, and the improve-ment of materials handling for coal and cement to raise utilization of railrolling stock and reduce the need for more wagons. In some instances Plantargets are expressed in physical terms such as paving nearly all nationalhighways and moving 50% of Korea's foreign trade ii. Korean flag vessels.These targets should be subject to an economic review ang revised if needed.

/1 Participants included I. Bradfield, T. Neuner, R. Sadove (Bank staff)and J. Broadbent, A. deJong, J. New and J. Revis (consultants).

ANNEX FPage 2

5. Considerable opportqip#ies thup pi,st for ecoppomizing on transpprt-investment. The largest single item which could be reduced without unduerisks is the expansion of Kprea's merchant ;m,,rin,e. Economies will alsoarise with detailed review of fixed infrastructure investments, notablyindustrial ports. Rationalization ,of ,ro investments below the natiopnallevel could be achieved through the development of a co,mprehepsive- ro,as planfor provinces and other suitable plann,ning r,egions. Despi tehe need forfurther studies of substantial parts of the rlan'fs investment proposals, theprogram, includes other capital exp,pTditure,s for which j4stification isavailable or could readily be obtained and which co,uld sustain transportinvest,ments ,,,ing the early years of th,e P1n. These include in particularroad improvements for which feasibility studies are in hand, expansion ofBusan port and somie of the' recommended purchases for railway and highwayrolling ,st,ck.

6. I,mprov,ment,s, utilization of existing assets can proyide addi-tional capacity at little extra cost. Specific schem,es are reco,mmended forimproving transport operations including the developien,t of action plansfor berter transpprtation of coal and other major bulk com,modities and forextending thoe hig4way maintenance program now being imple,mented on nationalhighways to local roads as well. If the economy griw,t more rapi,1y thanex'pected, Kore'a is largely protected against crippling bottlenecks by unusedcapa,,city in the country',s transport infrastr,uct,ure as a whole, by interimincreases in capacity available through Korea's skill in organizing effi-cieently the intep,sive use of mass facilities apd by Korea's ability to buildlarge scale public works q,uickly.

7. The Government intends to strengthen the project review capacitiesof the Economic Planning Board. This development is particularly significantfor the transport sector because it could provide coordination of all trans-port investment on an intermodal basis. To achieve this objective alltransport budgets should be controlled by the same staff in the EconomicPlanning Board and this staff should be supplemented by some-transportationspecialists.

8. While the Government nominally contrpls all prices in the transpqrtsector, prices actually charged for transport services may diverge consider-ably from Government norms. The regulatory system for transport prices hasonly limited recourse to cost data and does not inclu,de any mechanism forintermodal review of prices. The Transport Coordination Office in theMinistry of Transportation should have the resp,nsibility and staff to ens,urethat Government decisions on prices are based on proper cost informatipn andfull intermodal comparisons and the Office should establish a work programfor this purpose.

9. The flow of funds through Korea,'s transport enterprises is largebut the sector as a whole does not appear to generate significant su,rplusesfor use in other parts of the economy. It would be desirable to review thefinancial performance of these enterpries ,and to improve accounting proce-dures of public sector transport qFrganizations and for,mulate financialtargets for them.

ANNEX FPage 3

10. Although a major aim of Government price regulation is to assigntraffic to the most economical mode, regulation appears not to have had amajor effect on modal choice. As modal choice involves complex cost calcula-tions as well as subjective factors, Government policy in pricing and financeshould be redirected to objectives which are the Government's most immediateconcern and over which the Government has most control. These are pricingand finance of Government-owned transport enterprises and identification anddevelopment of improved transportation systems. The promr,otior of improvedtransportation systems should be the joint responsibility of the EconomicPlanning Board and the Transport Coordination Office.

11. Road transpcrt and coastal shipping are privately owned but theGovernment licenses all enterprises offering services for hire. Licensingpolicy seeks to limit licensed capacity to demand but concentrates on "forh;ire" operations without considering the continued growth of private ("ownaccount") operations in road transport and coastal shipping. Licensingpractices also may inhibit improved productivity in the transport industries.A study would be useful to recommend on licensing practices in road transportand coastal shipping and on desirable structural changes in these industries.

12. Most road transport licensees are loose associations of individualowner operators and only about 20% of the licensees are integrated enter-prises which own their own equipment and operate it under direct manage-ment. Although very little information is available on the physical andeconomic performance of the road transport industry, the Government wishesto move the industry to the direct management system (where the assets areowned and controlled by a single management). This change would interruptthe present system of supplying capital to the road transport industry andshould only be made after a thorough survey of the industry.

13. This report identifies several specific transport problenisdeserving further study, including feasibility studies, cost analyses andpolicy reviews (listed in Attachment 5). Korean experts can and should domost of the work but foreign transport specialists could support the Koreansin selected areas. The Government and the Bank have already discussed theBank's providing funds for expatriate specialists to help with transportstudies; the Government has given information on Korean firms and institutionsavailable for such work and it has been tentatively agreed that a forthcomingtransport project, would include finance for expatriate assistance in Koreantransport studies. The Government rightly attaches greatest importance tostudies of major investment projects. Other studies which deserve priorityattention are preparation of long range traffic forecasts, rationalization ofmovements of major bulk commodities, financial policy (including accountingand pricing) of publicly owned transport entities and the potential forexpanded use of coastal shipping.

ANNEX FPage 4

1. BACKGROUND, PROSPECTS AND SECTORAL STRATEGY

Background

1.01 The fundamental changes in Korea's economy over the past decadehave been accompanied by significant changes in the transport sector. AsGNP more than doubled and the share of industry in GNP rose from 14% to30%, the railway lost its preponderant position in transport and Koreaestablished a diversified road transport system. Paved roads more thanquadrupled over the decade and while the number of private cars in relationto population is lower than in such countries as Indonesia and Philippines,Korea about matches these countries in the ratio of trucks and buses toinhabitants. Coastwise goods transport also greatly increased its share intotal traffic, primarily due to the movement of oil products. The country'sexport drive and increased reliance on foreign trade has led to a six-foldincrease in the volume of port traffic, an eight times expansion of Koreanowned ocean-going vessels, and a twenty fold rise in the volume of inter-national air travel.

1.02 Traffic statistics, Attachment 1, demonstrate the changing struc-ture of the transport sector. The share of rail transport in passenger kmdeclined from 46% to 24% over the decade while road increased its share ofpassenger traffic from 53% to 74%; rail goods traffic went down over the sameperiod from 86% to 52% of total ton-km while road increased from 9% to 21% andcoastal from 5% to 26%. The statistics are based on official returns oflicensed carriers and therefore leave out of account the substantial volumeof persons and goods moving in privately owned (as opposed to "for hire")vehicles. This omission causes an understatement of road traffic volume; in1965, privately owned vehicles already represented 42% of sedan and 24% oftruck registrations and in 1974 these proportions had gone up to 58% and46%. The modal balance has thus changed to reduce the railways' erstwhiledominant position, but the railways have now assumed new roles in Korea'sincreasingly complex economy.

1.03 Three bulk items, anthracite, cement and petroleum products,represented nearly 60% of all freight ton-km in 1974 (Table F 1). Bulkmovements characterized both rail and coastal goods traffic; seven commod-ities made up about 80% of rail ton-km and petroleum products alone weremore than 70% of coastal shipments. Moreover, increases in the threeprincipal commodities accounted for more than 80% of the rise in rail ton-kmbetween 1965 and-1974. However, road transport is carrying mostly generalgoods, more than half the total traffic in this category for 1974.

1.04 Korea's rail and road network extends to all parts of thecountry and well developed ports are available at intervals of 200 km orless along the coastline. A system of farm roads aggregating nearly40,000 km by the end of 1974 was built up in recent years; it is notknown, however, how many rural communities remain without road access.Probably only a few areas are completely isolated from Korea's transportnetwork, but in many cases the only connecting link is a tortuous andbadly maintained road.

ANNEX FPage 5

1.05 Transport facilities are concentrated along the Seoul-Busan axisand the corridors serving the northeast quadrant of the country which con-tains its major coal deposits and most of the cement plants. Busan andIncheon (the city lying immediately west of Seoul) are Korea's first andsecond most important ports, handling in 1975, 25% and 17% of total traffic.The Seoul and Busan metropolitan areas also have Korea's largest concentra-tions of population and industry and the intervening corridor includesKorea's third most important industrial center at Daegu and the city ofDaejon with about half a million inhabitants. The corridor is served by adouble track rail line, by two main highways including a limited access fourlane road and by roughly one quarter of all domestic flights. The coal-cement region is traversed by an electrified rail line reaching from Seoul tothe East Coast port of Mugho and other rail lines radiate from this region tothe south and southwest. A high speed road was opened in the fall of 1975between Seoul and Mugho passing just north of the main coal-cement area; roadconnections from this area southward have been upgraded or are currentlybeing improved.

1.06 Other information on Korea's transport facilities is contained inAttachment 2. Only a few outstanding characteristics are mentioned here.Railway traction is now virtually all diesel or electric; rail freight ismoved in substantial loads (averaging over 40 tons per wagon) but overshort distances of less than 250 km on average. Railway finances havebecome increasingly strained with operating ratios in the range of 90% to100%. The highway network is still 80% unpaved and 52% of road vehicles arebuses and trucks. Tankers account for more than one-half of the GrossRegistered Tons (GRT) of coastal and ocean-going vessels.

Prospects

1.07 As Korea's economy continues to grow and the pace of industrial-ization intensifies, transport will experience a parallel expansion. Theinternal transport system will have to accommodate much greater consumptionof certain widely used bulk commodities. The Korea Port - Phase TwoDevelopment Study (KPDS II) projects that domestic demand will risebetween 1974 and 1991 for:

anthracite from 14.8 to 33.0 million tons;petroleum products from 14.6 (1973 figure) to 87.6 million tons;cement from 8.3 to 36.4 million tons;timber from 8.6 to 17.3 million cu m;iron and steel from 2.4 to 18.4 million tons;fertilizer from 1.6 (1973 figures) to 3.7 million tons.

The industrial complexes'which are growing up on Korea's south and southeastcoast will cause the import of large amounts of indu.itrial raw materials andthe shipment of intermediate products between plants. Some of these plantsmay also become large volume exporters. In addition, a more diffuse patternof growth in nonbulk traffic and in passenger traffic will follow upon thegeneral increase in GNP.

Table F 1: MAJOR COMIIODITY MOVEMENTS, BY MODE, 1974

POL Commodity Ores and Lumber andAnthracite Products Cement Grains Fertilizer Minerals Wood Products Other I Total

Tons ('000)_ ~~~~~~~~1 1Rail | 15,067 2,693 7,831 1,263 1,878 2,941 717 7,3181 39,70:8:Road | 7,156 4,121 4,060 7,880 2,241 3,030 3,333 49,8791 81,697Coastal 1,426 6,072 1,604 -55 105 445 19 1,4401 11,166

Total I 23,648 12,885 13,496 9,198 4,224 6,416 4-069 58-6351132,572

Ton-km ('000,000)1

I IRail 3,408 649 1,336 334 525 751 158 1,8441 9,005Road I 206 122 123 286 73 83 133 2,5591 3,585-Coastal I 475 3163 .520 . 6 42 48 -2 1701 41426

Total 4,089 3,934 1,979 -626 640 882 293 4,573| 17,016

Source: Economic Planning Board.

ANNEX FPage 7

1.08 These trends have been analyzed in detail only through the end ofthe Fourth Five-Year Plan (FFYP), 1981. An interministerial Working Group(WG) on Transportation, assisted by several specialists from semi-governmentresearch organizations, prepared detailed transport demand forecasts for thisperiod relying largely on contract work by Korea Development Association(KDA), a private consulting group. The WG's forecasts of December 1975 wereamended in recent revisions of the FFYP to allow for reduced consumptionof petroleum products and revised annual export targets and now foresee anincrease from 56.9 billion to 92.1 billion passenger km and from 19.6 to30.6 ton-km over the period of the FFYP.

Sectoral Strategy

1.09 The Government's basic policy, as stated in the FFYP document,is to develop Korea's transport system to meet increases in traffic demand.In addition, the Government aims to:

(a) increase transport efficiency by allocation of medium and longdistance traffic to rail by rate adjustments and other regulatorymeans;

(b) reduce the fiscal burdens imposed on the Government by the railwayby rate increases and improvements in operations;

(c) put greater weight on maintenance expenditures in transportover new investments;

(d) improve the organization and management of road transportenterprises;

(e) enhance Korea's international payment position by increasingthe share of freight carried in Korean vessels:

(f) use transport to promote balanced regional development; and

(g) reduce traffic congestion in the Seoul metropolitan area.

1.10 The Government's formulation has addressed most of the majorissues confronting the transport sector. Additional strategic objectivesemerge from the proposed FFYP modal investment programs, particularlythe emphasis in road transport on paving main roads and on restrainingthe growth of the private automobile fleet. The discussion in this paperwill consider these issues in a somewhat broader context grouped underthe following major topics:

- demand forecasts and investment plans, ir.-ludingformulation and review of investment proposals;

- pricing and finance policy; and

- structure and operation of the private transportindustry.

ANNEX FPage 8

2. DE! AND FORECASTS AND PROPOSED FOURTH PLAN INVESTMENTS

Demand Forecasts

2.01 Table F 2 summarizes the prospects for traffic demand in theFFYP ahd compares them with performance in the Third Plan. Passenger trans-port is projected to grow more slowly in the FFYP than in the previous Planperiod bUt will continue to increase (at 10.1% p.a.) slightly faster thanGNP. Freight transport will rise by 9.3% p.a., more than twice the rate ofton-km growth in the Third Plan which included the investment recession of1972. /1 Freight traffic is thus predicted to stay parallel with GNP duringthe FFYP in contrast to the Third Plan when freight grew more slowly than theeconomy as a whole. The absolute increase in volume of services to beprovided by the sector at the end of the FFYP is 35 billion passenger-km and11 billion ton-km, roughly 40% more than the increase in passenger km and190% more than the increase in ton-km in the Third Plan.

Table F 2: TRAFFIC STATISTICS 1971 (ACTUAL), 1976 and 1981 (PROJECTED)

Rate Rateof of

Item 1971 % 1976 % Growth 1981 % Growth

Passenger-km 32,237 100 56,868 100 12.0 92,089 100 10.1(in million) I

Rail 8,750 27.1 14,185 24.9 10.2 18,930 20.5 5.9Subway - - 377 0.7 - 609 0.7 10.1Road 22,917 71.1 41,709 73.3 12.7 71,628 77.8 11.4Coastal shipping 256 0.8 265 0.5 0.7 364 0.4 6.6Aviation 314 1.0 332 0.6 1.1 558 0.7 10.9

Freight ton-km 15,796 100 19,647 100 4.4 30,643 100 9.3(in million)

Rail- 7,841 49.6 9,962 50.7 4.9 13,638 44.5 6.5Road 3,302 20.9 4,333 22.1 5.6 7,649 25.0 12.0Coastal shipping 4,653 29;5 5,349 27.2 2.8 9,352 30.5 11.8Aviation - - 3 - - 4 - 5.9


/1 The Government's presentation on the transport sector used 1972 as thebase year, when freight traffic actually decreased and therefore showeda higher traffic growth for the Third Plan. This report uses 1971 as thebase year.

ANNEX FPage 9

2.02 For major bulk commodities, the WG based its transport demandprojections on Government forecasts of production and consumption and onanalyses of consequent traffic flows. These projections show that majoradded loads on the domestic transport system will arise from increasedconsumption of petroleum products, timber, anthracite and cement. More useof petroleum products and timber will depend on imports and would be sensi-tive to balance of payments and other external influences. Anthraciteand cement would reflect entirely a rise in internal production to targetlevels which are considered quilte feasible on the basis of past aclievementsin these industries. According to revised Government data, prcoductlon ofanthracite is slated to rise from 17.6 million tons in 1975 to 24.0 mill}ontons in 1981 and of cement from 10. 9 to 19.7 mi]lion tons. There appears tobe no possibility that ant:hracite (primarily consumed as houseLolel fuel1could be economically supplanted by imported oil in that use. At present theGovernment provides heavy subsidies in production and transport of coal buteven if these were eliminated local coal would probably be cheaper thati cilas a household fuel. Imported coal from Australia or Nlorth Americ& mighthave more opportujnity of making inroads on the local anthracite market butin that case total transport demand would remain unchanged though trafficflows would be altered substantially. For nonbulk commodities and passengertraffic the WG based its projections on extrapolation of past trends withregression analysis.

2.03 After determining the projected flows of major commodities inKorea's transport system, the WG assumed that individual modes would dividethis traffic as follows: short- and medium-range movements (generally 200 kmor less) would go to road, longer hauls (over 200 km) to rail, and bulkcommodity movements between coastal industrial areas to coastal shipping.This assumption reflected in part the existing pattern and in part thebelief of the authorities that such a split would be a least cost solution.However, the present traffic patterns are more complex with importantinstances of short hauls by rail and of long distance movement by truck.This confirms the observation in other countries that distance is not areliable guide for choosing the low cost mode which may be decisively deter-mined by such factors as speed, reliability and terminal handling costs.Finally, the WG's assumption makes little allowance for shifts in modal usethrough technological innovation (e.g. pipelines) or improved operations(e.g. better coastal maritime operations). Another example of a possiblechange in modal use emerged from the mission's investigation intc cementdistribution costs where the introduction of large bulk cement trucks couldsubstantially raise the economical distance for road haul (compared to railmovement with local delivery) from 75 km to over 150 km.

2.04 The WG made traffic projections 'by routes only for railways andfor major coastal movements and road expressways. By assuming continuationof the past modal split, the WG may have made inadecquate allowance fordiversion from railways to other modes and thereby overstated the demand onsome railway routes. On the other hand the WG did not analyze the likelyflows on most of the individual road links and therefore did not provide abasis for identifying potential bottlenecks in the highway system.

ANNEX FPage 10

2.05 The WG's traffic projections assumed the demand as given. They didnot analyze whether the provision of transport facilities would itselfinfluence transport demand and how transport considerations could affect:industrial: location and in turn the demand for transport services. Nor didthey consider the relationship between transport prices and demand. Koreahas uniform countrywide prices for several bas'c commodities (includinganthracite, petroleum products, cement, and fertilizer) and uses unifo'rmrailway tariffs without taper for distance. Some shifts in traffic patternsand modal spli'ts might occur if the Government were to alter these pricingand regulatory policies. While changes would develop slowly and be minorover the medium term (the FFYP), they should be significant for longer termplanning.

2.06 The five-year horizon for the demand projections correspondsto the FFYP investment period. However, most of the investments duringthe FFYP wil'l continue in use beyond 1981 and some may be justifiedsolely by post-1981 needs. Ideally, demand forecast would have gone wellbeyond 1981. However, short-term projections are not likely to causeserious investment errors for equipment such as rail rolling stcck, motorvehicles and ships. If demand rises unezpectedly, more equipment: can beproduced and installed quickly; if post:-1l9tYl demand falls below expactz-tions, adjustments can be nade through reduced replacements. A part ofthe FFYP transport investments does include long range projects such asnew ports, roads and rail lines (mainly industrial sidings) which shouldreflect corresponding long-term needs. Investments of this nature representno more than 20% of the total and have only a marginal effect on -i:he cverallprogram. Moreover, feasibility studies will be made for many projects andwould include forecasts correspcnding to f:hei 'conomic liveQ

2.07 In summary, the WG has made a. major e£fF!t "o measure overall futuretransport demand, and provided a useful bJasis f:,r pannino l''crea's t,port system. However, further refinements o- t:hic icorl nae be desirabl.C,e.Forecasts could be made for longer time sparns (!OQ rears or mI r)-', ;e, z:)..ated.periodically, investigate alternative traffic assignments an.d apnel-e road.traffic potential in more detail, The Transp(ort Coordinati.or Of f ice (7.CO) 'inthe Ministry of Transport (MOT) cculd cocrdinate thi.s wotk 'but: wculd ,i:ob a blhave t:o rely on the modal agencies (using their own staffs or private. coI-sultarts) and on private consultants to mah: most detailed analyses. Develop-ing these refinements will take time, however, and existing forecast:s villhave to be used to review 'the FFYP. These forecasts dc provide a generE.lguide to the level cf investments in the secter as a whole but may, have morelimited uise in the allocaticn, of ftnds to indi_idual modes.

Plan Investment - Overall

2.08 Transport investment in thie Third Plan is estimated (in 2975 'Won)at about W 1,860 billion, or 16.3% of the W 11,4310 billion total investment.while in the FFYP it will be W 2,7.84 billion or 14.6% of total investmentof W 19,028 billion. ln physical terms thiS meaTns that. in addition to

renewals, W 1,860 billion bought an increase cf about 25 billion passenger-l<mand 4 billion ton-km in the Third Plan while W 2,784 billico (50% moreinvestment) must provide an increase during the FFYP of abcut 35 billion

ANNEX FPage 11

passenger-km and of 11 billion ton-km. The traffic mix obviously changesover time and the investment needed to produce a passenger or ton-km varieson this account. Furthermore, the cost of renewals rises as the systemexpands. Thus investments cannot be related precisely to traffic. Whilethe increase in passenger-km (40%) roughly corresponds to the increases intotal investment from the Third to the Fourth Plans, freight traffic isgrowing much more rapidly than transport investments. Based on thesemeasures, FFYP transport investments are modest in relation to demand andimply significant productivity gains in the transport sector.

2.09 Moreover, the originally planned transport investments in theThird Plan were 22.5% of tqtal investments and realized investments fellconsiderably short of this target. Similar shortfalls could occur in theexecution of the FFYP (e.g. in the road program) and reduce facilities toserve demand. The national accounts data on gross capital formation alsosuggest that transport typically is somewhat over 20% of total capital form-ation and that the Third and Fourth Plan transport investment figures mayunderstate the full requirements of the sector. Therefore, if the forecastsof FFYP investment are inaccurate, the error is more likely to be an under-estimate and greater effort must be made to, achieve efficiency in transportinvestment to avoid the supply of transport services falling substantiallybelow demand.

2.10 On the other hand,-if the economy grows more quickly than expectedcertain factors of the Korean transport system should promote a rapid responseon the supply side without'great risks of crippling bottlenecks. The fixedinfrastructure in Korea (rail lines, roads and ports) in aggregate still haveconsiderable unused capacity which could be put into service in a short timeby additions to the vehicle fleet (for road and rail) and by Korea's skill inorganizing efficiently the intensive use of mass facilities. Such'measuresmight be regarded as higher cost interim measures to meet unexpected demandincreases until cheaper permanent solutions can be realized. Korea has alsoshown its capacity for rapid execution of large-scale public works (forinstance the Seoul-Busan toll road) which would ensure that interim measureswould not last unduly long.

2.11 The modal allocation of transport investment in the FFYP are givenin Attachment 3 and the proportionate shares in the Third and Fourth Plansare summarized below. Maritime increases its share substantially, partly as aresult of expansion of Korea's merchant marine and industrial ports andaviation is reduced by a large proportion because fleet expansion will bebased on leasing rather than purchases. Rail and road have a slightlyreduced share.

ANNEX FPage 12

Table F 3: MODAL ALLOCATION OF TRANSPORT INVESTMENTS

1972-1976 1977-1981

Rail ways 15 14Road Transpprt 47 44,Ports and Shipping 28 36Aviation 7 2Subway 3 4

Total 100 100

Source; Economic Planning Board.

2.12 The transport investment program does not show any obviousinternal imbalances; its emp,hasis on road transport reflects the fact thatmost of Korea's roads still remain unpaved and that its level of motorizationis low compared to countries of equivalent income. As already indicated,modal changes are likely to occur but only in the longer term and thereforeare no,t yet reflected in the medium-term investment projections covered bythe FFYP.

2.13 The table below indicates the budgetary implications of publicsector investment in transport under the FFYP. To meet Plan expendituretargets, average annual budgetary allocations will have to rise by about15%; with a gradual increase in budget over the five-year period, theannual budget in the last year would have to be about 30% over presentlevels to achieve the targeted investments. If the economy grows as expected,increases of this magnitude should be within the revenue capacity of theGovernment and not go beyond trends observed in the previous Plan. Theproposed investment in roads shows the largest increase but the actualexpenditures may be considerably less because of shortfalls in investment.The Government's revenue burden should also be decreased in the case ofrailways and ports through increased charges for services.

ANNEX FPage 13

Table F 4: PUBLIC SECTOR INVESTMENT IN TRANSPORT(in billion 1975 Won)

1975 1976 One Fifth ofRevised Proposed Proposed FFYPBudget Budget /a Investment

Railways 56.0 72.9 79.4

Highways (Ministry of 54.8 54.1 71.5Construction budget only)

PortsOrdinary 20.5 32.8 28.0Industrial NA 10.9 19.9

Total NA 43.7 47.9

Airports 2.8 5.7 10.9

Total NA 176.4 210.1

/a The actual budget figures have been deflated by 1.12 to arriveat 1975 prices.

Source: Economic Planning Board

Plan Investment - Railways

2.14 Table F 5 provides an overview of the investments proposed for therailways in the FFYP. It is predicated on an overall increase of 33% inrail pasenger-km and 37% in rail ton-km during the Plan period. About one-third of the program is represented by the acquisition of rolling stock.Another 25% is for increases in line capacity (including about 5% for doub-ling). About 17% is for renewals and improvements of tracks and bridges,and the remaining 25% represents miscellaneous investments. While theprogram includes substantial sums for replacement of existing facilities,the Government's presentation and the comments made here are directed mainlyto capacity increasing investments.

2.15 Railway freight traffic increases will be concentrated in coal,cement, and minerals (primarily limestone), particularly for shipments fromthe Taebaeg region in northeast Korea to the Seoul metropolis and to theindustrial areas on the southeast and south coast of Korea. Consumption ofcoal, almost exclusively for household fuel, in the Seoul area (including

ANNEX FPage 14

Table F 5: INVESTMENTS PROPOSED FOR RAILWAYS, 1977-81

(billion 1975 Won)Total Public Private

1. Major identified investments or 203.5 198.3 5.2programs, of which;

New lines (industrial sidings) 10.4 10.4 _

Electrification

(i) 64 km from Jecheon to Yeonju 6.8 6.8(ii) Seoul metropolitan area 6.0 6.0

Increase to two or more tracks

(,) Chungbug Line - 64 km 20.0 20.0

Bongyang to Jochiweon

(ii) Gyeongbu Line - 42 km 17.4 17.4

Seoul to Suweon

(iii) Taebaeg Line - 7.1 km 1.3 1.3

Jecheon to Jangrag

Subtotal 38.7 38.7 -

Rolling Stock 141.6 136.4 5.2

2. Other investments of which 198.6 198.6 -approximately:'

Tracks and structures 75.0 75.0 -

Yards and stations 27.0 27.0 -

Signalling 36.0 36.0 -

Rolling stock repair facilities 32.0 32.0 -

Other 32.0 32.0 -

Total 402.1 396.9 5.2

Source: Part 1: Economic Planning Board, Part 2: Korean National Railroad.

ANNEX FPage 15

the adjoining Gyeonggi province) is expected to rise from about 9.2 milliontons in 1974 to 13.5 million tons in 1981 and cement consumption in thesame area will increase from 3.0 million tons in 1974 to 4.7 million tonsby the end of the FFYP. At present Seoul is suppied with its coal andcement by way of the Jungang Line (Jecheon to Seoul) which was carryingnearly 11 million tons in 1974 (in the direction toward Seoul) and wouldhave to carry 17 million tons by 1981 to accommodate increased coal andcement movements. The Korean National Railroad (KNR) believes that theJungang Line cannot handle most of the added traffic and proposes to overcomethe problem by rerouting this traffic over the Chungbug Line (from Bongyang,7 km west of Jecheon, to Jochiweon) and then by the Gyeongbu Line (the mainSeoul - Busan line) to Seoul. This alternative would increase the length ofhaul from Jecheon to Seoul by about 100 km to 250 km and according to KNTRwould require double tracking the Chungbug line. The FFYP includes aboutW 20 billion for this doubling project.

2.16 KNR's capacity calculations rest on the assumption that presenttrain lengths and weights will be maintained and that the required tonnageswill require more trains than KNR's calculations for the maximum number of

trains on a particular line. However, on both Jungang and Chungbug Linesrelatively minor investments in lengthening sidings and the introduction ofdouble headed locomotives would permit the use of much longer trains; somebridge strengthening might also be needed if heavier cars were, put into

service. The first step toward meeting increased traffic demahds would thusbe adjustments on the Jungang Line; rerouting traffic over the Chungbug Linemight be considered once these increases in capacity had been exhausted.However, doubling of the Chungbug Line could then also be delayed by minorinvestments to allow longer trains. Finally, the 100 km extra haul overthe Chungbug line suggests that doubling of the Jungang line might be amore viable alternati-ve to doubling the Chungbug line even if the formerhad substantially higher capital costs than the latter. It would there-fore appear advisable before proceeding with the Chungbug doubling projectto explore in detail the alternative means for achieving the additionalcapacity.

2.17 Similar arguments are applicable to other proposed line capacityworks in the Taebaeg region including doubling of the 7.1 km line E fromJecheon to Jangrag and electrifying the 64 km southeast from Jecheon toYeonju. In addition, an investigation should be made to determine whethersome of the additional coal, cement and limestone being shipped south couldmove by coastal vessel and thereby relieve the burden on the railway linesleading south from the Taebaeg region. As the coastal movement would stillrequire a significant inland haul to the loading ports on the east coast,it would need to be organized on a large scale and make full use of modernbulk handling facilities in order to compete with the all rail alternative.

ANNEX FPage 16

2.18 The KNR rolling stock investment program is summarized inTable F 6. KNR estimated that the stock devoted to the transport of coaland other dry comm6dities in bulk form (hopper cars and gondolas) wouldhave to be increased from about 6,600 units at the end of 1976 to 7,647units at end of the FFYP, or roughly 15%, corresponding to an increase of26% in daily loadings of this type of car during the period. In addition toincreasing this fleet of wagons KNR plans to replace 1,192 over-aged unitsin the fleet with larger capacity equipment. The increase in hopper cars andgondolas accounts for nearly 90% of the total inctease in freight cars duringthe FFYP and nearly 60% of all wagon putchases (additions and replacements)will be this type of equipment. Reduction in turnaround time of this fleetcould effect significant savings in car acquisitions and may be essential ifthe targeted increase in dry bulk traffic is to be moved. Such savings aretheoretically quite possible in the case of coal, as the actual transit timefrom the coal fields to Seoul is less than 12 hours with the remainingroughly 100 hours being consumed by spotting, loading and unloading the cars.Severa-i- measures should be explored to improve car utilization and generallyto teduce the distribution costs of coal:

(a) reduce the number of grades in which coal is handled;

(b) rationalize the system of coal collection in the coalfields by improving road haulage conditions to rail loadingpoints (better roads and larger trucks), reducing the numberof such loading points and installing facilities for rapidloading of cars (feasibility of constructing 32 km of newline in the coal region should also be reviewed as part ofan overall study of transport within the coal region);

(c) rationalize the system of coal terminals by reducing theirnumber and equipping them with facilities for fast unloading(consolidation of freight terminals in Seoul is alteadyincluded in the Plan); and

(d) in conjunction with (b) and (c) above, revise the designof coal cars to permit rapid discharge without the assis-tance of manual labor.

Improved coal distribution requires coordinated action by several inde-pendent brganizations. A mechanism is needed to prepare and implementan action program covering the whole distribution system. The TCC withthe assistance of the TCO in HIOT could undertake this responsibility.The distribution system of other major bulk commodities should besubject to similar action programs.

2.19 KNR also prepared requirements for othet types of freightcars in 1981, based on the main commodities it is expecting to carrythen. For box cars KNR projects a daily increase in loadings of about27% primarily for increased traffic in general goods and in bagged

ANNEX FPage 17

Table F 6: PROPOSED RAILWAY ROLLING STOCK INVESTMENT, 1977-1981

End End1976 1981

Type Holdings Retirements Acquisitions Holdings

Powered Equipment

1. Diesel-electric 386 70 4562. Electric 82 - 8 90

3. Steam 75 75 - 04. Rail cars 128 6 1225. Suburban electric 126 - 90 216

Cost of acquisitions 57.1 b. won

Passenger cars 1,817 250 444 2,011


Freight cars 16,172 2,500 3,820 17,492


Total cost of acquisitions 141.6

Source: Korean National Railroad.

fertilizer, cement and limestone. The box car fleet will be reduced slightlybut about one quarter of the fleet will be replaced with higher capacity carswhich would be adequate to handle the additional demand. These cars shouldbe designed with large doors and strong floors to allow the use of fork liftsto move bagged cargo on pallets and thereby reduce the time wagons stand idleduring loading and unloading. In the case of the tank car program, no con-sideration appears to have been given to the possible installation of pipe-lines, such as between Incheon and Seoul and the effect on tank car require-ments. In general, KNR projects a significant improvement in the utilizationof its wagon fleet and a smaller increase in the fleet than might otherwisehave been required. However, concrete programs will have to be designed andimplemented for all major movements if better wagon use, as implied from thetarget for faster wagon turnaround time, is to be achieved. The case ofcoal is the most obvious example.

2.20 The program for the acquisition of passenger cars is rathermodest and provides for a proportionately smaller increase in cars than inthe projected overall traffic. However, certain categories of traffic

ANNEX FPage 18

are expected td rise sharply (super express trains /1 by about 106% duringthe FFYP and limited express /1 by about 57%). Accordingly, KNR has con-centrated its passenger car acquisitions in these categories of trafficand KNR's holding will increase in super express cars by 82% and aftericomipletion of its rebuilding program, its limited express cars will haveincreased by 66%. KNR is projecting only a 27% increase in ordinary pas-senger cars. KNP's analysis is valid to the extent that it projects growthin long distance passenger traffic rather than local traffic but it isdoubtful that the increase will be as large as KNR's forecast. Moreover,KNR has not made a line by line study of occupancy on its passenger trainsnor has it prepared separate configurations for passenger services on eachline, taking into account the likely negative effect on passenger serviceresulting from Korea's highway improvement program. Until this is done itwill be difficult to judge the true needs for passenger .rolling stock andrail cars.

2.21 The program contemplates an 18% rise in diesel electric locomotivesand an 11% increase in electric locomotives. This compares to increases ofonly 11% and 8% in the holdings of passenger and freight cars. While theaverage weight of freight cars may increase somewhat during the FFYP andtrailing stock utilization is targeted to improve, the locomotive purchaseprogram may be somewhat larger than is required. Some economies in thisprogram may be possible if the supply of locomotive spares and maintenanceis improved and the utilization of the existing fleet is correspondinglyincreased.

2.22 The FFYP investment program includes an initial phase of upgradingthe Seoul - Busan main line by providing four tracks up through Suweon (41.5km). The Government contemplated improving the main line in stages with aneventual possibility of quadruple electrified tracks over the whole distancebut no provision for this is made in the FFYP. The initial-phase can beregarded as part of the Seoul suburban system and-therefore does not implyany commitment to further works. Before works beyond Suweon are begun,however, the Government should undertake a complete study of long-termtransport prospects on the Seoul - Busan corridor, encompassing not onlypassenger and freight traffic and all modes of transport but the relativedevelopment of Incheon and Gunsan as ports of entry and exit for the north-west region of Korea. The corridor is long enough to allow effective compe-tition among the modes and connects the main centers of development in Korea.There is broad scope, therefore, for a coordinated analysis of all transportproblems in the corridor.

2.23 Substantial investments are proposed for municipal and suburbantraffic in the Seoul metropolitan area. They include line doubling andelectrification of about 31 km of lines within Seoul and the purchase ofnearly 100 suburban electric passenger cars. Other related projects include

/1 Super express trains are the fastest trains with the fewest stops;limited express trains are slower and stop more frequently.

ANNEX FPage 19'

consolidation and' improvement of freight yards in the Seoul region. The'EPBis-planning to initiate a large study of 'transport by all modes in' the Seoulconurbation and it would seem prudent to postpone.final decisions on therailway investments in that 'area until the results of the study are available'.

2.24 A limited investment'program to increase capacity'shouid thussuffice to avoid major bottlenecks on Korea's railway.system. This assumesthat progress will',also be made in increasing utilization of existing assetsand in' realizing improved performance targets. Among significant measureswhere improvements could be achieved are: average number of passengers' pertrain, usage of freight cars (measured by lower turnaround time), average-freight train load, percentage of time locomotives ate available for use andlocomotive km per locomotive available for use. These are ambitious targetsand will impose heavy burdens on KNR's management. Effective management ofthe railway is made more difficult by the organizational framework in'whichKNR must operate. As a department of government, KNR is subject to detailedbudgetary control (all expenditures of W 50,000 or more require approval,ofthe budgetary authorities) and commercial accounting alid costing are verycomplex and not fully efficient as long as KNR must also maintain governmen-tal cash accounts subject 'to detailed annual appropriation. Under thesecircumstances it is also difficult to establish meaningful financial targetsand to hold KNR',s management'responsible for overall f'inancial results.Prompt review of' KNR's organizational framework, particularly as related to.its account, is therefore recommended.

Plan Investment - Road Transport

2.25 Somewhat over one third of road triAnsport investments are for'"high-ways, as indicated in Table F 7.' More than one half of the proposed road,'construction program is 'devoted to paving about 4,100 km of roads (includingabout'3,700 km of 'national'highways) and the' Plan document proposes, that 91%of all national'highways (not counting expressways) be paved by 1981,(Table F 8). Recent feasibility studies indicate that even at'relativelymodest,traffic levels of 300-500 vehicles per day-paving projects haveattractive returns.' But they,have also.shown that some paving projects havedoubtful economic validity; there may be,cases where the'road should remain'unpaved and others where a road on a new alignment might be justified. Theseissues would be resolved in the course of feasibility studies which'are beingmade for that part 'of the paving program (about 3,100 km) which,is to befinanced by the International Ba'nk for Reconstruction and Development (IBRD)or the Asian Development Bank (ADB). However, some 1,100 km of highways areslated for 'paving exclusively from the'Government's own budget'and withoutany present provision,for feasibility studies. If feasibility studies wereapplied to this portion of the paving program, some candidates will beeliminated, thus freeing. resources for other high priority investments.Application of economic criteria in the execution of the paving program wouldtherefore very likely reduce the total volume of work. This possibility,should be given recognit'ion in the formulation of the Plan and considerationmight be given to reformulating Plan targets more directly on the basis ofeconomic criteria.

ANNEX FPage 20

Table F 7 ,JNVE 5TfENT PROP$SEJ FOLRROAD TRANSPORT, 1977-19,1

Total Public Private(billion 1975 won)…

HIgt.w,ay

Exp"ks,sways (128 kim) 30.2 30.2Pa,ving ntigpial JhigIways (3,734 km) 187.1 187.0Upgrgading atiop4,a higbway,s (68 km) 9?7 9.7Payvig pr,vpinci,a highways (453 km) 27.0 27.0 -

I,us,tr,i,a,l ,rpads (113,km) 4.0 4.0Local ,a,uton,oimos bodies road projects 100.0 100.0Ma ~nti,ena,n,c.e 64.2 64.2,Qth'er 35.6 35.6

Sybt,otal A 457.8 457.8 -

Vehicle acquisitions 741.2 - 741.2

Terminals andwarehouses 26.6 3.0 23.6

Tot,A-1 1,225.6 460.8 764.8

S,o-rce: Economic Planning Board.

2,.6 The emphasis on paving virtually the whole national road system mayalso''r,esult in the neglect of investment opportunities-in the rest of Rorea'shighiway system,' which remains overwhelmingy unpaved-and contains many heavilytrav,elled links. The proposed FFYP investment'program does include a modestdire,ct contribution by the national Government for paving provincial roadsand for impro,ving roads in industrial areas (primarily in the coal region).Moreover, the FFYP for the'fir-st time includes a rough estimate (W 100 bil-lion )of the amount spent by lower levels of Government on their road proj-ects' Ho,w,ever, only with comprehensive traffic information on the'lowerlevels of t,he,road system arid with the preparation of 'integrated road plansfor part1cular areas of the country, will it be possible to ensure thatinvie>,meent funds from all levels of Government are being applied to thoseparts-,of the highway system which have the highest economic priority. It isthe-refore suggested that the-Government institute a program for preparationof,comprehensiye road plans by the provinces and other suitable planningregi.'o;s to insure integrated development of all' parts of the road system.Thi-siicould fpllow upon.completion of a study which the Government is noworgawpizing to determine priorities for improvement needs on all national andprovincial rpads.

ANNEX FPage 21

Table F 8: PROPOSED HIGHWAY INVESTMENTS, 1977-1981

PossibleLength CQst External Aid

(billion 1975 won)

ExpresswaysDaegu - Masan 84.5 11.7 IBRD Hwy IIIBusan - Masan 43.5 18.5 IBRD Hwy IVSubtotal 128.0 30.2

Paving National. HighwaysCovered by present or prospective 695 31.2 IBRD Hwy III

external aid 394 14.2 ADB Hwy III363 19.6 ADB Hlwy III389 21.4 ADB Hwy IV946 53.3 IBRD Hwy IV

2,787 139.7Not covered by present or

prospective external aid 947 47.4Subtotal 3,734 187.1

Upgrading National HighwaysDaegu - Gasan 13 1.5Daegu - Yeongcheon 16 1.9

Seoul - Incheon 15 1.8

Gyeongju - Pohang 24 4.6Subtotal 68 9.8

Paving Provincial HighwaysCovered by present or prospective 14 2.8 IBRD Hwy III

external aid 13 .6 ADB Hwy III28 1.6 ADB Hwy III

103 6.1 ADB Hwy IV169 9.6 IBRD Hwy IV327 20.7

Not covered by present orprospective external aid 126 6.3

Subtotal 453 27.0

Industrial Roads 113 4.0Local Autonomous Bodies Road Projects - 100.0 -

Maintenance 64.2 IBRD Hwy IIOther 35.6Total NA 457.8


ANNEX FPage 22

2.27 The proposed FFYP road program also includes about W 30 billionfor construction of new expressways (high speed, limited access roads) andfor upgrading about 70 km of national highways. With one minor exception,these roads are concentrated in the Seoul region and the 'industrial triangleDaegu-Pohang-Masan. Most of the expressways appear well justified, based onfeasibility studies already completed or under way, and the upgrading ofnational highways is concentrated on heavily travelled road links.

2.28 The FFYP road program sets aside W 64 billion for maintenance ofnational highways, reflecting the current establishment of a new mainte-nance system for these highways. While not all of the expenditures will bestrictly speaking investments, inclusion of the full maintenance costs inthe investment program will help ensure that the new system becomes firmlyestablished. When the new maintenance system begins to function effectivelyfor national roads, similar improvements should be undertaken' at the lowerlevels of Government. Accordingly, the Government may wish to study how itcould best promote this next step in road maintenance improvement.

2.29 About 60% of the proposed road transport investment are attribut-able to the increase in the commercial motor vehicle fleet. Of this amountabout 30% is for replacements and 70% for fleet additions. The investmentfigure is calculated on the following projected increases in the fleet overthe FFYP period:

- taxis from 30,000 to 36,000 units, plus 20%;- "for hire" buses from 20,000 to 28,000 units, plujs 40%;- trucks from 94,000 to 161,000 units, plus 71%.

About 60% of the investments are in trucks but as a large share of thesetrucks will be owned by nontransport enterprises, the cost of acquiring themmay already be included under investments of nontransport sectors. Thevehicle investment figure may thus be considerably overstated.

2.30 The FFYP document projects an increase in Korea's total vehiclefleet from 215,000 units at the end of 1976 to 360,000 units in 1981.Increases in the three principal types of vehicles over the five-yearperiod are:

Cars (all types) 91,000 to 146,000 plus 60%Buses (all types) 24,000 to 35,000 plus 46%Trucks (all types) 94,000 to 161,000 plus 71%

Car registrations which grew at only 6.5% over the past three years wouldrise by about 10% yearly in the FFYP. This implies no significant change inKorea's policy of keeping car registrations low and would require a verymodest increase of annual car production from about 17,000 to 23,000 units.The number of buses would grow more slowly than the projected 10% increase inroad passenger-km and suggests substantial improvements in utilization andincreases in the size of vehicles. If these expectations are not met, busproduction could be adjusted to make up the difference; it was 4,000 units in

ANNEX FPage 23

1975 and would need to rise to about 6,000 units if the increase in passenger-km were to be achieved without changes in productivity. The truck fleet in1981 would be 1.7 times its 1976 size while truck traffic (by "for hire"catriers) is projected to grow by a factor of 1.6. The increases to thetruck fleet will require expanding production from about 15,000 unitsannually, the level of 1975 production, to roughly 25,000 units to meetreplacement needs as well as expanding the fleet.

2.31 A fundamental issue has been raised concerning the appropriate tar-get for car ownership. The Ministry of Commerce and Industry is arguing thatcar ownership should be allowed to rise to about 500,OOC units in 1.931 (asagainst about 150,000 units recommended by the MOT) by temporary relaxationof some taxes on cars (no cwnership tax and reduction of the gasoline taxfrom 300 to 200%) and should then be retained at that level by partial reim-position of higher taxes. The initial requ'ireaents for expansion and thesubsequent replacement sales would provide a sizeable domestic base load forcar production at levels sufficient to make car exports competitive on theworld market. Additional exports would thus be created but at substantialcosts in imported fuel to operate the domestic car fleet (at an estimated tonof oil per car per year) and in additional investments in road capacity,particularly in the urban areas where new car ownership is likely to beconcentrated. While about one-third of Korea's sedans are employed as taxis,other company owned sedans are used to transport groups of employees to andfrom work and there is also growing (illegal) traffic by sedans as jitneys.The use of smaller motor vehicles in this fashion by several passengers(equivalent to "car pools") may be a means of-blunting the demand for privatecar ownership without undue social costs. The Government might wish toconsider moderate relaxation of the tax regime for cars in such use andlegalization of jitney operations. While car demand on this basis could onlybe met to a limited extent, the burdens on the economy of the increased carfleet could be counterbalanced by increased productivity of the additionalfleet.

Plan Investment - Ports and Shipping

2.32 Table F 9 summarizes the FFYP program for ports and shipping, withroughly 20% allocated to ports and most of the remainder to shipping. Thelist of ports where investments are recommended is given below (Table F 10).Except for a proposed expansion at Busan which is currently being appraisedby the Bank, and except for Sogcho, all ordinary port investments listed inTable F 10 are already under way and the FFYP expenditures will serve mainlyto complete ongoing works. (Ordinary ports include all first class portsconstructed and operated by the recently created Korea Maritime and PortAuthority (KIFA) under the MOT). KPDS II, (February 1976), has reviewed thetraffic prcspects until 1986 for Korea's ports and conc]uded that if worksare undertaken at Busan as recommended, ordinary ports will experience nocapacity problems until at least 1986. No works are I.resently under way atSogcho and would not be needed until after 1986, according to KPDS II, ifdouble shift operations were introduced in the meantime.

ANNEX PPage 24

Table F 9: INVESTMENTS PROPOSED POR PORTS AND SHIPPING, 1977-1981

Total Public Private----- (billion 1975 won) -------

Ports

Ordinary 140.2 140.2 -Industrial 110.8 99.4 11.4Subtotal 251.0 239.6 11.4

Shipping 733.3 - 733.3

Gargo hapdXing. terminalsapd jiavia,tiobpaids 11.6 4.2 7.4

Total 995.9 243.8 752.1


2.33 Industrial ports are being built as part of industrial site devel-opment by the MOC but will be operated by KMPA. KPDS II has also made a com-parison between forecast traffic until 1986 and planned facilities availablein industrial ports over that time and concluded that no bottlenecks arelikely to occur. KPDS II has suggested, in fact, that substantial economiescould be achieved by combined use of facilities in the port of Yeocheon(Samil) and that planned installations at Onsan are more than needed bylikely traffic through that port. KPDS II also questions the stability ofthe proposed breakwater at Onsan. The Government should make a carefulreview of industrial port projects, particularly in relation to the rest ofKorea's ports and the establishment of a national ports authority provides anappropriate occasion for this review. There is some doubt, however, whetherany existing institution of Government now has the legal power to plan forall ports and port planning in Korea would undoubtedly be more effective ifthis hiatus were filled.

2.34 The GRT of Korea's ocean fleet (both owned and chartered) istargeted to rise in the FFYP by 2.2 times from an estimated end 1976 total of2.7 million GRT, and Korea's domestic fleet by 1.7 times from an anticipatedend 1976 estimated GRT of .2 million tons. The increase in the ocean fleetby 2.2 times is intended to match the increase in Korea's foreign trade,estimated by KPDS II to rise by a factor of 1.9 and, in addition, to giveKorean flag vessels a 50% participation in that trade by 1981, as against the1976 level of 38%. The addition to Korea's coastal fleet during the FFYProughly corresponds to the projected increase in coastal traffic, 1.7 timesin each case. The fleet increases could be met to a considerable extent fromdomestic shipbuilding facilities and would thus help to expand this importantindustry.

ANNEX FPage 25

Table F 10: PROPOSED PORTS INVESTMENTS

1977-1981(billion 1975 Won)

Ordinary portsBusan 71.3Incheon 9.8Mugho 2.9Gunsan 3.8Jeju 8.0Ulsan 2.9Sogcho 3.8Other 37.8

Subtotal 140.3

Industrial portsPohang 32.4Changwon (Masan) 15.8Yeocheon (Samil) /a 9.2Onsan /b 24.4Bugpyeong 23.4Other 5.7

Subtotal 110.9

Total 251.2

/a About 20 km north of Yeosu./b About 7 km south of Ulsan.


2.35 Nevertheless, no economic study is available which examines theeconomic advantages or disadvantages to Korea of operating its own merchantmarine. As elsewhere in the world, Korean shipping benefits from generousGovernment subsidies (no income tax on the shipping companies or their crews)and capital is supplied at concessionaly rates through the Korea DevelopmentBank and other sources financed indirectly by the Government. An economicstudy should evaluate the benefits arnd costs cf thece subsidies. examine thecomparative advantage of Korean Flag shipping cn various types of vessels,classes of services and routes and recommend a detailed strategy for achiev-ing increased trade participation by Korean ships. The 'goal of higher par-ticipation may need to be reconsidered as well. It is measured in tons, notton-miles and represents an average for all commodities and trades whereasKorean participation differs considerably in various categories. Forinstance, Korea has a high participation in the short distance trade with

ANNEX FPage 26

Japan. Raising Korea's participation, measured in tons, may become increas-ingly difficult and less attractive as Korea's merchant marine enters moreinto long distance trades and new markets.

2.36 A similar study is needed to assess the potential for expandingcoastal services; it would evaluate the incentives Korea provides for itscoastwise traffic; would explore the feasibility of coastwise transportationwith efficient specially designed ships and barges using the modern ports nowcoming into service, to connect the raw material centers in northeastKorea, the large industrial complexes which aie being built between Pohangand Mokpo on the southeast and south coast and the major manufacturing plantsin the Seoul-Incheon conurbation; and review phasing out gradually coastalmovements in ineffficient sized vessels currently in use (mostly 500 grosstons or less). As a result of such studies a reduction in the total invest-ments for additional tonnages might be achieved, concurrently with increasedefficiency in Korea's maritime sector and continued progress toward increas-ing the share of Korean flag vessels in Korea's ocean transport.

Plan Investment - Aviation

2.37 Proposed investments in this subsector are summarized below(Table F 11). Airport investments are concentrated in three facilitieswhich handle the bulk of international traffic and also are the termini ofthe best patronized domestic routes. Kimpo (Seoul) and Kimhae (Busan) servethe two largest metropolitan areas and the airport on Jeju island providesaccess for a large number of foreign and Korean tourists. Internationalpassenger movements at these three airports have risen rapidly from about510,000 movements in 1971 to about 1,570,000 in 1975 and an anticipated1,870,000 in 1976, an annual increase of nearly 30%. They are projectedalso to rise rapidly in the FFYP at about 20% p.a. to 2.5 times the presentlevel./l International freight traffic also has gone up rapidly from about20,000 tons in 1971 to more than 80,000 in 1976 (an increase of over 30%p.a.) and is projected to continue growing with the rise in Korea's foreigntrade at least at about 15% p.a. in the period 1977-1981. By contrast,domestic aviation all over Korea after sbme growth in the early 1970s,declined to about 900,000 passengers in 1975, the same level as in 1970 anddomestic air freight was only 6,000 tons in 1975. Even with a growth ofnearly 11% projected by the Government for domestic passenger aviation, it isclear that international traffic would claim the lion's share of Korea'sairport program. In addition, Kimpo may benefit from increased technical orgateway stops by long range flights due to rising congestion at Tokyo.Comprehensive studies by foreign consultants have been completed for phasedexpansion at Kimpo, which includes extension of the existing taxiway, addition

/1 International passenger traffic may be increased further if the Govern-ment implements proposals to allow more direct flights by foreign carriersto Korea. These proposals have significance not only to the competitiveposition of Korean aviation but to the development of Korean tourism.

ANNEX FPage 27

of another 3,200 m runway and taxiway and a new cargo handling area. Theseproposals have not been examined by the mission, however, to determinewhether the investments are correctly dimensioned and what are their likelyeconomic returns. The improvements at Kimhae and Jeju will provide extendedrunways of 2,700 and 3,500 m respectively and permit use by large medium- tolong-range jets.

Table F 11: INVESTMENTS PROPOSED FOR AVIATION, 1977-81

Total Public Private------ (billion 1975 won) ------

Airports and navigation aidsKimpo (Seoul) 28.6 28.6Kimhae (Busan) 9.8 9.8Jeju 11.4 11.4Sogcho 1.5 1.5Other 3.4 3.4

Subtotal 54.7 54.7

AircraftAdditional large jets 4.2 - 4.2

Total 58.9 54.7 4.2


Note: The breakdowns by airports are approximations due to uncertaintywhen expenditures will take place.

2.38 Korean Airlines (KAL), the privately owned national carrier,is responding to the large anticipated growth of international traffic byconcentrating its expansion during the FFYP on large long range jets. Itwill raise its fleet of B747s from 4 to 5 and of DC10s from 4 to 6.The amount of W 4.2 billion shown for investment in aircraft during theFFYP would cover only a small fraction of the price for these fleetincreases. KAL will therefore need to make leases to cover its require-ments. No additions for the domestic fleet have been proposed whichappears appropriate in view of the low load factors on many inlandflights. However, if KAL introduces air taxi services, perhaps insubstitution of some under-patronized internal scheduled services, it mayrequire modest investments for light aircraft.

Plan Investments - Conclusions

2.39 The FFYP investment program is an indicative plan. It includesa large list of projects proposed by individual modal agencies and screenedon a preliminary basis by the WG; these projects will be reviewed separately

ANNEX FPage 28

by EPB with the annual budgets. Under existing procedures, neither projectformulation nor review gives adequate consideration to new transport tech-nologies or to intermodal comparisons in meeting a particular transportdemand. The charter of the interministerial Transport Coordination Commit-tee (TCC) includes intermodal coordination of transport sector investment butTCC has not in fact exercised this function. The Economic Planning Board(EPB), which exercises budgetary control, inevitably has the dominant voicein decisions on investment projects. EPB plans in future to make much moreintensive reviews of investment projects presented to it under the budgetand to increase its staff for that purpose. Large fixed transport investmentprojects will be referred for review by EPB's budget officers to the Infra-structure Division of EPB's Planning Bureau. However, other investments suchas railway car purchases will continue to be analyzed only in EPB'S BudgetBureau and it would be highly desirable if these investments as well would besubject to an economic review based on intermodal comparisons. This end could be achieved by making the same group of budget officers responsible forall transport investments and training them in the appropriate analyticaltechniques. Intermodal coordination of transport investment projects wouldthus be provided by EPB.

2.40 The final size and structure of the transport investment programmust await detailed review of all its components which is to be accomplishedprimarily through feasibility studies. Such studies would be an appropriatereview mechanism for many investments although other analytical techniquesmay be more appropriate for some programs such as investments for the highwayvehicle fleet. Feasibility studies are available or planned for the bulk ofthe program of ordinary ports and national road works; based on the resultsof studies already completed, most of these projects are likely to be approvedand only a relatively minor part may not have adequate economic justification.On the other hand, few feasibility studies are available for railways andindustrial ports. Nonetheless, the mission's reviews suggest some preliminaryconclusions. Many line capacity problems for which the railway proposesdoubling or electrification could be met by cheaper methods particularlythe use of longer and heavier trains. Also, the design of several of theindustrial ports could be made more economical; design alternatives, scalingand timing of investments and locational considerations have not been prop-erly analyzed. In general, further scope still exists for improving mainte-nance performance and substituting modest expenditures of this nature forlarger investments in capital assets.

2.41 The need for further studies is particularly urgent where the pro-posed investment is part of a much larger transport complex; for instance,rail investments in Metropolitan Seoul need to be reviewed as part of anoverall transport plan for that region and improvements in the Seoul -Busan rail line should only be implemented after a comprehensive investi-gation of all transport needs in the Seoul - Busan corridor. In somecases, means of meeting demand by lower cost modes should be considered(after detailed feasibility studies), such as the movement of large volumesof petroleum products by pipeline instead of by truck or railway cars.

ANNEX FPage 29

Finally, some physical investment goals need to be moderated by economiccriteria, particularly the program to pave nearly all national highways andthe plan to move 50% of Korea's foreign trade in Korean flag vessels.

2.42 The overall scope and direction of modal investment plans are thusgenerally suited to meet projected demands, but there remains considerablescope for economizing on transport investment. Perhaps the largest singleitem is in the expansion of Korea's merchant marine, where continued use ofsome foreign shipping provides a readily available alternative. Economiesare also likely to emerge in the detailed review which is recommended forsome major fixed infrastructure (railways, roads and ports, especiallyindustrial ports). Finally, improved utilization, particularly in railwaysand ports, may permit cancellation or delay of some investments. However, afavorable judgment is possible with regard to a substantial part of theinvestment program, sufficient to commit expenditures in the early years ofthe FFYP on road improvements which have been subject to feasibilty studies,on expansion of Busan port and on at least some of the putchases recommendedfor railway and highway rolling stock.

3. TRANSPORT PRICING AND PUBLIC SECTOR FINANCE POLICY

Description of Pricing System

3.01 The Government has broad powers to regulate prices in the economy.While the application of these powers varies widely among sectors, theGovernment fixes all prices in the transportation industry. Prices forpublicly owned transport enterprises such as the railways are proposed byenterprise management to the Minister of Transport and he in turn submitsthe proposals to EPB. The Price Bureau of EPB analyzes the proposals andpresents them to a Government committee on utility prices. The recommenda-tions of that committee are then presented to the cabinet. Prices of pri-vately owned transport enterprises are subject to the same review except thatproposals originate in one of the Divisions of MOT, who act on the basis ofrepresentations made by industry organizations.

3.02 The regulatory pattern differs considerably among the modes. Rail-way passenger services are classified from the fastest express which costsabout W 4.2 per km to local trains charging only W 2.5 per km. Freightservices are divided into five classes; charges were recently raised for allcategories and now range from about W 3.70 per ton-km for Class V (whichincludes coal) to about W 6.20 for Class I. The railways also levy a numberof other charges for services such as spotting and removing of freight cars;the carriage of stock owned by industries such as petroleum and cement issubject to special rates. Table F 12 indicates ton-km for eight types ofgoods carried by KNR in 1974 and revenues associated with each traffic.Revenues per ton-km which represent the combined effect of all KNR chargesrange from W 1.85 to W 2.57 a much narrower spread than indicated by thepublished line haul rates.

ANNEX FPage 30

Table F 12: RAILWAY TON-KILOMETERS AND REVENUES PER TON-KILOMETER(1974)

Commodity Ton-Kilometers Revenue Rate per('000) (W Million) Ton-km

Coal 3,408 6,656 1.95Cement 1,336 3,436 2.57Ores 751 1,562 2.08POL 649 1,483 2.29Fertilizer 525 1,152 2.19Grain 334 781 2.34General 1,517 3,787 2.50Military 358 664 1.85

Subtotal 8,878 19,521 2.20

Other items 127 /a 1,245 /b -

Total 9,005 20,766

/a Railway Trafficlb Includes demurrage

Source: Korean National Railroad.

3.03 Highway passenger services include taxis at W 100 to W 60 pervehicle-km (depending on distance) and buses of various categories. Citybuses charge a standard W 35 per seat while intercity-buses on unpaved roadscharge W 5.79 per passenger-km and on paved roads W 5.18. Buses which travelon the expressway system have a fare of W 5.27 per passenger-km for trips upto 200 km; the charge declines to W 4.39 on trips over 400 km, just somewhatmore than the highest rail passenger fares. Motor freight rates fall intotwo general classes: "route cargo" for nonscheduled service at W 38.9 perton-km and "district cargo" for scheduled services at W 41.64 per ton-km oneway. The regulations make no distinction between charges for various typesof commodities moved by trucks.

3.04 The two principal charges traditionally levied in Korea's ports aretonnage dues charged to the ship by the Ministry of Finance and a charge forthe use of port facilities levied by MOT. With the establishment of KMPA,the Government will introduce a revised charging system for KMPA, withrevenues based on the costs of services to be offered by KMPA and followingthe practices of ports in other countries. However, this may be delayed forseveral years by the need to introduce commercial accounting and costingsystems in order to establish the costs of various services.

ANNEX FPage 31

3.05 Coastal passenger transport charges range from W 13.8 per nauticalmile (W 7.67 per km) over short distances up to 20 miles to W 7.19 per nauti-cal mile (W 4.05 per km) for distances over 400 miles. Charges for coastwisefreight services are divided into two general categories - cargoes in vesselsunder 500 GRT and cargoes in larger vessels. The charge for cargoes on smallvessels is W 16 per ton-mile (W 8.89 per ton-km). On larger vessels, threecommodity classes are recognized in published tariffs between the principalports of Korea; for example, on the service between Mukho and Busan chargesrange from W 4.64 per ton-km in Class I to W 3.79 in Class III; charges perton-km decline with increasing distance and rise steeply on short hauls.

3.06 Civil aviation has the highest prices of any of the modes: W 15.68per passenger-km and W 404 per ton-km.

3.07 In addition to explicit regulation of transport prices, Governmentindirectly affects prices in this sector by taxing policies, subsidies tovarious transport operators, freight equalization of basic commodities (coal,cement, etc.) and user charges for Government furnished facilities, such asairports and roads. However, the procedures for setting transport pricesgenerally do not apply to these, other Government actions which may affectprices in the transport sector.

Characteristics of Price Regulation System

3.08 The system for regulating transport prices concentrates on standardline haul charges, the easiest and most obvious point to apply regulation.The system only gives limited attention,to the numerous special prices whichare used by Korea's transport agencies and which inevitably play a major rolein any complex transport operation. Regulations are based on cost datacharacterizing the modes generally, not detailed costs for point to pointmovements. Moreover, none of the modes has comprehensive costing systemsand, for highways and coastal shipping, the Government negotiates withindustry representatives on the basis of cost data supplied by them. Theregulatory system thus cannot make subtle distinctions; this is not neces-'sarily a fault but a limitation to be considered in evaluating the system.

3.09 The extent of regulation varies among the modes. In some modesand for some services, the regulation determines the rate (for instance,all railway services and bus fares) while in other cases (such as highwayfreight) the Government's rate constitutes a maximum only and may be nego-tiated downward. Truck rates may be as much as 40% less than the officialtariff.

3.10 While coordination of pricing is one of the aims of regulation,institutions have not yet developed nor information become available tomeet this aim effectively. The TCO in the MOT could play an active part inthis work but so far has not done so. The regulatory process also does nottake adequate account of the many transport activities which are not subjectto regulation but inevitably affect the regulated sector. These activitiesinclude the operation of cars, buses, trucks and ships by nontransportcompanies for their own account.

ANNEX FPage 32

Transport Sector Finance - Government Owned Organizations

3.11 The railways' finances are the largest single element in thepublicly owned part of Korea's transport system. In 1975 revenues werenearly W 77 billion which covered all costs including depreciation but notinterest charges. The Government therefore paid a subsidy of over W 14 bil-lion to KNR for 1975. KNR investments in that year were about W 45 billionof which about W 8 billion derived from KNR's own funds (depreciationreserves); the remainder came from Government loans and foreign credits.

3.12 The Korea Highway Corporation (KHC) had revenues (mostly tolls)of about W 8 billion in 1974. Its expenditures primarily for maintenanceof expressways amounted to roughly W 5 billion. The Government is sponsoringa study of Korea's toll system which will include a review of KHC finances.

3.13 No comprehensive data is available on port finances. A consultantestimated in 1971 that port revenues collected by 14 main ports amounted toW 820 million. This total probably has risen steeply in the interveningyears; in 1975 Busan alone had revenues of W 2.2 billion. It has beenestimated that by 1978 the revenues in Korea's main ports would exceed W 22billion. It is not known whether port charges now cover expenses but in thepast revenues had been only a fraction of expenses. Port investments areestimated at about W 40 billion in 1975. KMPA will establish a commercialaccounting and costing system for the ports under its control and an adequateassessment of the finances of Korea's port sector must await-this development.

3.14 While Korea's airports levy user charges including landingfees for aircraft and departure taxes for passengers, the mission wasunable to find out the total collected for use of Korea's aviation infra-structure. Also, no accounts are available to compare the Government'sexpenditures with its revenues for aviation. As the Government's investmentsin aviation infrastructure are relatively small in comparison to other partsof the transport system, it is reasonable to assume that Government expendi-tures and revenues related to aviation also constitute only a small part ofGovernment finances in the transport sector.

3.15 The annual flow of funds through Korea's publicly owned transportorganizations is thus of the order of W 200 billion, including both currentand capital expenditures. So far no common basis exists for measuring thefinancial performance of these organizations although available evidencesuggests that most are not self supporting. Better accounting proceduresare being considered for KNR and KMPA and should also be applied at KHC andfor Korea's aviation infrastructure. They will be an essential prerequisiteto formulating and coordinating financial policies of these organizations.Mention has already been made of the need for greater management and account-ing autonomy (especially for KNR and KMPA) if the Government's ambitioustargets for improved financial performance of these enterprises are to bemet (see Annex G on Public Finance).

ANNEX FPage 33

Transport Sector Finance - Private Organizations

3.16 Road transport and coastal shipping are privately owned. Acensus of transport enterprises was made in 1964 but since then no compre-hensive information has been collected on this subsector. However, roadtransport appears to be self supporting; no operating subsidies are paid bythe Government and capital is provided to the industry through commercialsources.

3.17 Although precise information is not available, highway usercharges (taxes on transportation, vehicles, and fuel) probably more thancover expenditures on roads by various levels of Government. In 1975, usercharges exceeded W 150 billion; the expenditure by the national governmentfor highways was about W 55 billion and by local authorities between W 20 toW 30 billion. However, the user charges include taxes on gasoline and dieselfor all users not only motor vehicles. Moreover, as about half of the userrevenues come from the gasoline tax, gasoline powered vehicles (mostly cars)may be subsidizing the diesel fleet (mostly buses and trucks). This distortionis reflected in the retail prices of the two fuels: gasoline sells forroughly W 200 per liter as against W 70 for diesel oil, and while gasoline ismore refined than diesel fuel, the additional cost of production should notbe more than 30%. /1 The price of diesel fuel is also low in absolute terms(about US$.58 per gallon) and a question is raised whether purchasers arepaying any tax on top of the real price of this fuel to Korea's economy whenallowance is made for the general incidence of indirect taxes on other goodssold in Korea.

3.18 Coastal shipping receives significant direct and indirectaid from the public treasury. Shippers of coal by coastal yessel receivea subsidy from the Government which is reported at W 1,300 per ton. Noinformation was received on the total amount paid each year for thispurpose. The Government also pays subsidies for vessels operating toremote islands. Coastal operators receive indirect financial support as wellthrough low interest loans for equipment from Korea Development Bank whichin turn relies on transfers from the Government budget and on borrowingsfrom foreign sources including IBRD. In addition, coastwide shippingalso benefits from the tax advantages applied to Korea's merchant marineand from port charges which may not cover the costs of port operations.

3.19 As indicated above, no accounts are available on the chargingsystem for Korea's aviation infrastructure and KAL (and in the case ofinternational airports, foreign carriers) may be benefiting from its use

/1 The relatively high price of gasoline might be viewed as a congestioncharge for vehicles in urban areas where cars are concentrated, butit also tends to distort the choice of technology to the extent thatmany taxis are now using liquified petroleum gas and very light trucksare powered by diesel engines. This tendencey will be further accen-tuated if the Government supplements proposals for further increases ofthe gasoline tax (see Annex G on Public Finance).

ANNEX ,Page 34

Without paying for its full cost. However, dofiestic tfansport plays only alimited role in KAL operations (in 1973 only about 20% of KAL r eviue pas-senger-km da'me frob domestic operations) and therefore has only a limitedeffect on its finances. KAL does not trceiVd signi{fiGaht help frbm theGovernment in financing, as most of its long-te'r debt comes from fbreignlehding.

3M2O The degree of finardial self-sufficiency thUs varies cohsiderablyamong parts of the transport system. As a whole the sector does not appearto generate significant surpluses for use in other parts of the economy.Only a more detailed teview by the Government could determine the scope anddesirability fot improved financial petformance of the sector anid foradjusting the fianadial burden among the modes. Such a review should bemade as ah essential adjunct to the Government's regulation ofprces.

Aim.and Restilts of Government Policy

3.21 The Government's prihcipal aims in setting transport priedsate to allocate traffic to the appropriate mode (medium and long distancesto railways and medium and short distances to highways) and to eliminatedeficits (particularly on the railways). Traffic allocation is supposed toensute optimum use of Korea's ttansport facilities while financial self-sufficiency in the transport sector reflects the policy applied by theGovernment eisewhere in the economy. However, the Government has had somedifficulty in' pUtting its policies into practice. In most cases the lowcost Tode can only be identified with complex studies which are not beingmade and for which no facilities are presently available. Even with bettercost data, the Government pricing regulation may not be able to influencemodal choice significantly which is frequently governed by subjective,nonquantifiable factors. Similarly; inadequate accounts and limited costand marketing data have prevented the execution of an effective policy offinancial self-sufficiency; despite numerous attempts to better financialperformance over the past decade KNR is not-financially self-supporting.Meaningful financial targets must be based on an appropriate accountingsystem which only now is being developed for some of the publicly ownedtransport organizations. Financial targets should not be met by across theboard price rises (as has been the case for KNR) but should be based on ananalysis of the costs of services and on a balanced ptogram of greaterefficiency and selective increases in charges.

3.22 In some cases, price regulation has had a measurable impact ontransport operations. For instance, some years ago buses operating overlong distances on expressways were making intoads into the competing expressservice on KNR. However, the Government raised bus fares to a level tiththe rail fares and, in addition, restticted the number of buses allowed tooperate on these routes. These actions helped to restore KNR's competitiveposition. Another case has been the tail rate for certain bulk commoditiessuch as cement which has been so low that shippers prefer to use KNR overall but the shortest distances (roughly 50 km). KNR had not increased itscapacity to meet these demands fully! instead in 1975 the Governnment has

ANNEX FPage 35

prohibited KNR from accepting most traffic with hauls under 100 km,/l hassubsidized coastal shipment to make it competitive with railways and hasintroduced rationing of rail stock during peak load periods. Loads whichcannot be accepted by KNR are forced onto competing modes, primarily high-ways.. This result may be more economical than expanding KNR but could havebeen achieved more directly by increasing KNR rates especially during busyseasons.

3.23 However, the foregoing cases are exceptional. In general, priceregulations appear not to have had a major effect dn modal choice andtherefore not created patent distortions. Cost data is lacking to assaythe effects more precisely. However, even with much better data, theGovernment might have difficulty in specifying the optimum modal allocationwithout enormously complex and finally ineffective regulations. As theGovernment's general policy is to use regulation sparingly, price reg-ulation in the transport sector may need to be redefined to more limitedand attainable objectives.

3.24 Pricing and finance policy would be most effective if it concen-trated in the areas where the Government has inescapable responsibilitiesand direct control: the pricing and finance (f Government owned enter-prises and the development and promotion of improved transportation systems.The Plan document emphasizes the importance of making Government owned enter-prises self-supporting and pricing would be a primary tool for meeting thisobjective. Effective pricing policy would not rely on across the boardrate raises but would be based on careful analysis of individual tariffs,consideration of trade practices and demand elasticities and comparison 6fcost structures of competing modes.

3.25 The Government also exercises considerable influence on theprices of transportation inputs (e.g. equipment and fuels) and thereby ontransportation services themselves. The Government could use this powerto foster the development of better transport technologies. For instance,the Government could facilitate much greater use of larger, more efficienttrucks by removing heavy duties presently levied on importing these trucksor by allowing Korean truck manufacturers to expand into this productline.

3.26 If the Government is to revise its approach to pricing policy,it would need to expand collection and analysis of data in such areas as:

(a) prices actually being charged for transport servicesand seasonal variations in these prices;

(b) total distribution costs for typical ma_or bulk move-ments; and

/1 This prohibition has now been removed.

AISNEX..FP'age 36

c3 ~finaiince bf transport sector enterprise (that ismaike anoth'ert censs of tratAhp6tati6h).

Policies wduid thenn heed to be de'veloped for:

(d) fianciai bobjedtives of public sector trahnspbt ehter-prises and the establishment of accounting systems tosuppo6rt those 6bj6ctiv;§

(e prlcing~ of-

(i) major bilk c6fomiiodities ad the trfins'port chatges fbooviing th-se cobfiditi8s;

(ii) railway services; with emiphasis on the traditional616 dof ra&iiway chatges as the pride leader -in thetrAtisport sector;

(iii) port 3ervices it4h pa'rticular attention to the effectof c6fompetition between ports and the trade off betweehthe d9e of alternat'ive ports And iilnad trah9pbrt;

(f) improving efficie'idy in pdblic sector ttafigpbtt hte't-pris'es and

(g) identifyifig arid promoting iinprovied transport tedhn6i6gies.

3.27 The TdO has so far played only a liiMited role in f6rmulating theGovernment's prici'ig ard finance pblicy in the trahsport sector. With astaff df only 23 professionials, TCO may hot be Able t-o petform all the datagathe6irin Arid Adaiysis which is needed. However, it co6ld supetvise a lakgeprdgrafmf of research by other GoVernment bodies Arid private otganizat-ions andit dould fortflilat6 Govehmiiient policy and coordihAte its establishment andekecuti6h. Steps shouid therefore be taken td estAblish a work program f6rTCO ahd to provide TCO with funds to carry it out. TCO shbuld collabotAtewith EPB in niorijtotihg the tedhhical progress bf the transport sectot, inidentifying prdmising new transport technologies Anid designihg programis to'put them into effect.

4. STRUCTURE AND OPERATION OF PkIVATE TRANSPORT INDUSTR4Y

The Licensing System

4. oi The Goverhient licenhses privAte firfis which operate fbr hire ser-vices ih Kidrea's road and cdastal transport systems. Road transpott liidetsesare issued for scheduled services alohg established rbutes (buses and trucks)or for ndnscheduled operatibris within a defined area (taxis and trucks);.There is nb comniodity licensing fbr trucks, however special licf'eses &teissued for trActor trailers, tank ttucks a'id cbhtAither trailers. The typesof road licenses and the issuing duthdtities Are summarized in Table F 13.

ANNEX FPage 37

4.02 In 1974, about 2,000 licenses were outstanding for operation ofmotor vehicles for hire, as shown in Table F 14. In the three largestcategories the average fleet per licensee ranged from 44 to 48 units.However, some firms are much larger than the average. Kwangju HighwayCompany operates over 200 buses in all but one of Korea's provinces. KoreaExpress Company has more than 1,700 trucks which also operate nationwide.Express bus companies and scheduled trucking enterprises tend to be larger onaverage than other operations.

4.03 Attachment 4 shows the place of registration for road transportvehicles in Korea and indicates clearly the concentration of vehicle regis-trations in the two large metropolitan areas; 68% of cars and jeeps; 41% ofall buses and 55% of the largest buses; and 47% of all trucks and 52% oftrucks under 5 tons. Only the larger trucks are spread more evenly through-out the country.

4.04 MOT issues licenses for coastal shipping. In 1975, it had licensed64 companies. with about 140 ships (equivalent to about 16,000 GT) for passen-ger service and 241 companies with about 1,300 ships (equivalent to about81,000 GT) for cargo business (excluding petroleum). Table F 15 indicatesthe types of vessels in use in Korea's coastal trade in 1970. Most vesselsare small, of less than 500 GT. For several years since then, the Governmenthas sought to increase the average size of cargo ships in the coastal tradebut this statistic has remained almost the same (61 GT in 1970 and 62 GT in1975). Small ships will probably continue to play a role for service tooffshore islands and remote locations on the mainland with limited portfacilities. However, only larger vessels could compete economically for thelarge volume flows of coal and other bulk commodities presently being carriedby the railways from northeast to southeast and South Korea.

4.05 The authorities follow a similar procedure in licensing roadand coastal operators. They attempt to lay down minimum requirementswhich licensees must meet. In the case of road transport, the licenseemust operate a minimum number of vehicles:

Taxis (Seoul and Busan) 50 unitsTaxis (other cities) 20 unitsTaxis (outside cities) 5 unitsBuses (other than local buses outside cities

and other than charter buses) 30 unitsLocal buses outside cities (other

than charter buses) 10 units

Charter buses (Seoul and Busan) 20 unitsCharter buses (outside Seoul and Busan) 20 unitsTrucks (scheduled) 30 unitsTrucks (unscheduled)

(Seoul and Busan) 30(other cities) 20(outside cities) 5

ANNEX FP,ageN 38

Table F 13i LICENSING AUTHORITIES FOR PUSES AND TRUCKS

Kind of License Service Ar,ea, Licensing 4uthorties

Buses

Line ltcenses intraprovincial Governors of provincesand mayOrs of specialcities

intraprovincial MOT

Ieprepways. and MOTdesignated industrialr,oads

Trucks

Scheduled services intraprovincial Governors of prpyinces

interprovincial MOT

expre,spways and MOTdesignated industrialroads

N,qscheduled s,ervices intraprovincial Governors of provinces(greg 1iceDnqs) and mayors of special

cities-

interprovincial Governors of proyincesMOT /a

/a Only in c,as gpvernors do not agree mutu,ally.

Source: BCEOM Highway Organization and Transport Coordination SurveyFipa ,R,ep,t

Taxi and truck licensing requirements have recently been relaxed to allow theissuance of licenses to owner operators of one vehicle, to allow waiver of the5 unit fleet requirement in appropriate cases and to exempt pickup trucksfrom licensing completely. The minimum fleet requirement for road transportdoes not mean that the licensee must own the requisite number of vehicles;freq4ently vehicles are owned individually ,pa licenses are issued to a looseassociation of single pwwners. Road transpqrt licensees must als,g havecertain minimal office and parking f,cilities and provide their own capitalfor rpughljy 30% of their ,ssets.

ANNEX FPage 39

Table F 14: MOTOR VEHICLE LICENSEES

Number of licensees Number of vehicles Vehicle licensee

Taxi 669 29,558 44Bus 341 16,547 48Trucks 674 32,308 48Other 332 7,778 23

Total 2,016 86,191

Source: Ministry of Transportation.

Table F 15: VESSELS IN COASTAL SERVICE(By Type and Size 1970)

Total Passenger Cargo OilNo. of GT No. of GT No. of GT No. of GTVessels Vessels Vessels Vessels

100 GT 1,648 38,660 NA NA 1,288 26,419 167 4,762

100- 500 GT 167 35,727 NA NA 80 16,537 44 10,407

500-1,000 GT 37 26,390 NA NA 22 14,620 13 10,317

1,000-5,000 GT 25 63,581 NA NA 12 28,168 13 35,413

5,000 GT 2 13,322 NA NA - - 2 13,322

1,879 177,680 238 17,715 1,402 85,744 239 74,221

Source: KOREA Port-Phase I Development Study

4.06 For coastal shipping the minimum requirements are that the licenseemust control ships aggregating more than 100 GT (150 GT for cargo vessels),must have capital of at least 1 million Won (about US$2,000) per vessel, andmust have shore facilities to handle passengers or cargo.

4.07 The licensing authorities attempt to match licensed capacityto demand. In the case of road transport, surveys are made annually todetermine the number of passengers carried per day by taxis and buses and

ANNEX FPage 40

the number of km that trucks are moving each day. If the utilization factorexceeds a set daily standard (for buses 29 persons and for trucks 170 km)additional capacity is licensed. This system obviously is based on fairlyuniform vehicle sizes and makes no allowance for improvements in productivityeither through larger vehicles or better utilization of equipment.

4.08 The licensing authorities have tried to maintain the number oflicensees stable and to achieve added capacity by authorizing additions toexisting fleets by proportionate increments to each licensee. They also havetried to authorize proportionate increases in the fleets of all licensees tomaintain the relative position of licensees to each other. Over the past fewyears the number of bus licensees has fluctuated in a range between 378 and328 and that of truck licensees, between 769 and 614; in both cases the totalnumber of vehicles has'increased steadily. Where licenses are issued byroutes (there are about 4,000 bus routes) capacity assessments are made routeby route and additional vehicles assigned accordingly. The licensing authori-ties also control the number of daily runs to be offered by each bus licenseeon a particular route; the exact time of these runs is selected by theoperator and is only reported to the Government. New routes are authorizedwhen a demand has been demonstrated for this service.

4.09 Coastal shipping passenger services are organized by routes (143in 1975) and operators provide monthly reports on performance. If thereports show vessels to be utilized at more than 70% of their capacity ona particular route, MOT authorizes additional ships for that route. Newroutes are authorized based on demand. Coastal cargo vessels are licensedfor operations anywhere in the coastal trade. MOT, in consultation withothet Ministries, makes detailed annual forecasts of the principal commodi-ties'to be moved and of the share to be assigned to coastal shipping. Theforecasts also include an assessment of likely peak periods. Coastal cargocapacity is licensed on the basis of these demand forecasts.

4.10 In summary, the Government restricts entry into the "for hire"road and coastal transport industries. However, the restrictions have notbeen so onerous as to discourage growth of these industries or to preventinfusion of additonal capital. On the other hand, the mechanisms to con-trol entry may hinder increased efficiency. Finally, the continued growth.of private (that is "own account") haulage has not been explained; it mayresult from the existing licensing system and may imply an inefficient use ofresources. The Government may, therefore, wish to consider to what extent itshould continue to restrict entry into road and coastal transport, whether itshould seek structural changes in these-industries and how it can best effectsuch changes. A thorough study of these issues is recommended.

Operations

4.11 Comprehensive information is not available on the performance ofthe road and coastal transport industries. Small sample surveys of thefinancial operations of land transport enterprises by the Bank of Koreaindicate rapidly rising revenues and profits in 1973 and 1974 after declinesin 1972. Similar patterns apply to a sample of ocean and coastal transport

ANNEX FPage 41

companies. Productivity measured in turnover of assets also rose for bothgroups of companies throughout this period. No measures of physical perfor-mance and service characteristics such as transit times are available.However, inquiries by the mission suggest that shippers were generallysatisfied with goods transport services by road.

4.12 In the FFYP document the Government stated as a major policygoal "the improvement of the management of transportation industries andimprovement of public services." This policy is directed particularly toroad transport where the Government' noted that as of the end of 1975, 2,167separate enterprises operated 89,777 vehicles, with the bulk of theseenterprises being quite small. The Government also pointed out that mostroad transport enterprises are subject to "indirect management" (that is,the enterprise consists of an association of owner-operators whose activitiesare loosely coordinated by the enterprise management) and that only 390companies (or 18% of the total) have assets wholly owned and operated by thecompany itself. The "indirect management" system is held responsible forlow efficiency of road transport enterprises and for their failure to growthrough internally generated funds. The Government therefore proposes toeliminate "indirect management" by introducing tax penalties for enterprisesusing this form of organization and by requiring vehicles to be transferredto direct company ownership as they are worn out and replaced. Concurrentlythe Government wishes to encourage the trend toward heavier trucks and tostimulate the construction of freight terminals.

4.13 The Government proposals imply a fundamental change in thestructure of the road transport industry. By eliminating the small owner-operator this change would cut off an important source of capital for theindustry and force road transport to rely much more on organized capitalmarkets. As the sums to be raised are very large, this change may havedirect and measurable effects on the capital mobilization goals of theFFYP. Moreover, the available evidence does not demonstrate that there areobvious inefficiencies in road transport due to the prevailing pattern of"indirect management" or that companies not using this system are noticeablybetter than the rest. Before attempting such a major change, the Governmentshould consider making a thorough survey of the industry. Such a surveywould include a census of transportation (already mentioned above) and, inaddition, should mdeasure service characteristics and physical performanceindicators of various enterprises.

4.14 A similar survey should be made for coastal shipping to establishrealistic goals for this industry within the transport system and toprepare a feasible plan for its technical improvement.

ANNEX FAttachment I

KOREA

TRAFFIC PERFORMANCE1965-1975

Domestic Traffic 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Freight (million tons)

Railway 22.4 24.1 27.4 28.9 30.6 31.6 32.0 31.5 37.8 39.7 42.8Highway 24.0 24.5 28.6 46.1 56.6 61.8 73.9 58.7 72.0 81.7 84.5Coastal shipping 2.7 2.7 4.2 5.6 8.1 10.5 11.3 8.8 9.7 11.2 11.8

Total 49.1 51.3 60.2 80.6 95.3 103.8 117.2 99.0 119.5 132.6 139.1

Freight (billion ton-km)

Railway 5.0 5.5 6.2 6.9 7.3 7.7 7.8 7.2 8.6 9.0 9.3Highway 0.5 0.6 0.7 1.1 1.3 1.4 3.3 2.5 3.1 3.6 3.8Coastal shipping 0.3 0.7 1.0 1.4 2.1 4.2 4.7 3.9 4.2 4.4 4.7

Total 5.8 6.7 7.9 9.3 10.7 13.4 15.8 13.6 I5.9 17.0 17.8

Passenger (million pass)

Railway 107.2 138.3 152.0 151.0 154.7 131.0 128.2 137.1 143.0 160.2 197.8Subway - - - - - - - - - 24.4 56.8Highway 1,195.5 1,51i.6 1,674.8 2,018.9 2,418.6 2,743.8 3,024.2 3,308.5 3,855.8 4,155.9 4,342.7Coastal shipping 5.5 5.9 6.7 6.5 6.1 5.9 6.4 6.3 7.2 6.6 5.9Air transport 0.2 0.2 0.2 0.3 0.6 0.9 1.1 1.1 1.3 1.0 0.9

Total 1.308.4 1,656.0 1,833.7 2.176.7 2,580.0 2.881.5 3,159.9 3.453.0 4,007.3 4,348.1 4.804.1

Passenger (billion pass-km)

Railway 6.9 8.7 9.6 10.6 11.1 9.8 8.8 10.1 10.7 11.1 13.1Subway - - - - - - - - - 0.1 0.3Highway 8.0 .11.5 11.7 13.9 16.7 20.0 22.9 26.2 32.1 35.4 38.9Coastal shipping 0.2 0.2 0.2 0.2 0.3 0.2 0.3 0.3 0.4 0.2 0.3Air transport 0.1 0.1 0.1 0.1 0.2 0.3 0.3 0.3 0.4 0.3 0.3

Total 15.1 20.4 21.5 24.8 28.2 30.3 32.2 36.9 43.7 47.2 52.9

Port (million tons)

Exports 1.6 1.7 1.8 2.3 2.9 3.6 4.2 6.0 8.0 8,3 10.1Imports 5.2 6.8 9.7 13.5 17.1 18.7 24.3 24.7 31.9 33.8 35.1Coastal shipping /a 4.6 4.6 8.3 11.2 16.2 21.0 12.5 17.6 17.6 21.7 23.1

Total 11.4 13.0 19.9 27.0 36.2 43.3 51.0 48.3 57.8 63.8 68.2of which Incheon (X) 12.2 14.7 14.8 15.2 15.1 18.5 18.0 19.7 21.0 18.1 17.4

Pusan (X) 38.5 40.4 32.0 26.1 22.2 21.3 21.4 24.0 23.0 22.2 24.5

Air ('000 passengers)

International - In 37.0 65.0 87.0 112.0 133.0 191.0 241.0 372.0 666.0 572.0 1.566,0- Out 40.0 66.0 88.0 116.0 135.0 2p1.0 267.0 400.0 703.0 616.0

Domestic 207.0 192.0 215.0 312.0 627.0 909.0 1,105.0 1,121.0 1,269.0 991.0 906.0

Total 284.0 323.0 390.0 540.0 825.0 1,301.0 1.613.0 1.893.0 2.638.0- 2,179.0 2,472.0

La Includes both entered and cleared coastal cargo.

Source: Ministry of Transportation.

March 9, 1977

KOREA

TRANSPORT INFRASTRUCTURE, ROLLING STOCK AND EQUIPMENT

1965 1967 1969 1970 1971 1972 1973 1974 1975

I. RAILROADS

Length of Line (km) 2,980 3,104 3,193 3,193 3,198 3,121 3,133 3,143 3,144

Locomotives - Steam 272 203 115 109 95 95 93 68 87- Diesel 125 252 282 277 337 336 336 336 375- Electric - - - - - - 57 66 66

Railcar - Diesel 83 163 163 158 158 157 133 12'6 123- Suburban electric - - - - - - - 126 126

Passenger cars /a 1,390 1,245 1,544 1,563 1,513 1,597 1,577 1,660 1,717

Freight cars 10,587 12,617 13,994 14,407 15,189 16,808 16,269 16,117 15,866

Average haul per passenger (km) 64.5 63.0 71.6 74.8 -68.3 73.4 75.0 74.5 58.5

Average haul per ton of 225 -225 239 244 246 229 227 227 217cargo (km)

Operation ratio (%) 89.0 85.8 75.1 83.9 102.0 95.0 91.9 103.1 98.5

[a Excludes rail car trailers.

Source: Korean National Railroad. 09 rt,0m m 1

to

1965 1967 1969 1970 1971 1972 1973 1974 1975

2. ROADS

1. Road network

National highways (km)Paved 1,042 1,442 1,957 2,461 2,943 3,307 3,868 4,084 4,762Gravel 4,849 6,651 6,407 6,158 5,818 5,585 5,400 5,206 4,601Unrepaired 8 93 205. 40 26 25 19 12 12Subtotal 5,999 8,186 8,571 8,659 8,787 8,917 9,237 9,301 9,375

Local roads (km)Paved 585 650 1,013 1,403 2,846 3,462 3,952 4,556 5,238Gravel 17,874 21,860 23,954 26,803 25,863 27,111 26,847 26,925 26,694Unrepaired 3,787 4,104 3,630 3,380 3,139 3,139 3,495 3,394 3,598Subtotal 22,146 26,614 28,596 31,586 31,848 33,951 34,294 34,875 35,530

Total (km) -Paved 1,627 2,092 2,970 3,864 5,789 6,769 7,820 8,650 10,000Gravel 22,723 28,511 30,362 32,961 31,681 32,696 32,247 32,131 31,295Unrepaired 3.794 4,197 3,836 3,420 3,165 3,403 3,514 3,406 3,610

Grand total 28,145 34,800 37,168 40,245 40,635 42,868 43,581 44,177 44,905km/sq km (km) 0.29 0.35 0.38 0.38 0.41 0.41 0.44 0.45 0.46

2. Motor vehicle fleetPassenger cars 13,001 23,235 50,299 60,677 67,582 70,244 78,334 76,462 84,212

buses 9,316 11,499 14,237 15,831 19,411 ].7,550 18,871 20,060 21,818Trucks 16,015 22,955 40,134 48,901 533405 55,116 64,534 76,833 82,862Others /a 3J17 3,003 3,999 3,962 5 7125 8,925 10,189 11,629

Total 41,511 60,697 108,669 129,371 144,337 150,035 170,714 183,544 200,521

Persons/vehicles 771 527 294 2b7 225 217 193 189 176 b 2D ;U m

/a Includes motor cycles.

Source: Ministry of Construction and Ministry of Transportation.

-1965 1967 '1969 19,70 '197.1 :1972 1973 1i9'74 1975

'3. VESSELS (Cross tonnage)

'Ocean-tgoing: -Pasesnger 915 '91'5 ;91'5 :9'1595 -T-.

'Cargo '156,844 258,33.7 .463,440 467,878 487,983 5-34,689 :556,472 i626,296 74'Z,.116Oil tanker 5.242 r52.,721 275,455 248.887 253,764 331.238 5J9.,'333 579.,.026 37.7'.969

'Subtotal .163,001 '411,9-73 739,81:0 717,:680 741,,747 865,927 835,805 .1.,205,322 1,320,'085

Coastal: Passenger '14,886 15,168 17,'2:27 17,742 18,000 18,355 :19.,.641 '19,263 1;8,-042Cargo 42,498 '66,859 '85,358 96,073 '97,'00 .93,268 86,392 '81,054 78,549-Ojltanker ' 8.616 3.281 36,107 :74.2 2 4 93,710 '97.,387 94,45'4 .95,520 107,988

Subtotal 66,000 '85,,308 138,692 188,'036 198,72'6 2-09.000 '200,487 T95,,83:7 204;5.79

Others: 156.,485 209,924 290,:638 -298,9'48 346;000 389.430 _418,5/79 496,'080 .552,503

'TOTAL 385,486 707,205 1,169,140 l,204,-664 1,286.,473 1,464,357 1,454,'87.1 .1,897.,'239 '2,077,167,

'Source: Ministry of Transportation.

tD $ ; r>e1 n

./ X;rt

ANNEX FAttachment 3

INVESTMENTS PROPOSED FOR TRANSPORT IN FOURTH FIVE-YEAR PLAN(billion 1975 Won)

Public PrivateItem Sector Sector Total

RaiIwa sy 396.9 5.2 402.1

Road transp.rtHighways 457.8 -- 457.8Motor vehic:Les - 741.2 741.2Other 3.0 23.6 26.6

Subtotal 460.8 764.8 ,225.6

Ports and shippinPorts 239.8 11.4 251.2Shipping - 733.3 733.3Other 4.2 I 7.4 11.6

Subtotal 244.0 752.1 996.1

Air transportAirports and nav. aids 54.7 - 54.7Aircraft 4.2 4.2

Subtotal. 54.7 4.2 58.9

Subwag 101.1 - 101.1

Total 1,257.5 1,562.3 2,783.8


ANNEX F

Attachment 4

KOREA

VEHICLES IXPOV.C AND TYPE AS OF JUNE 30. 1975

Ch~ung Chung Jean, Jeon Gynong Gyeong-Type of vehicle Seoul Busan Gyeonggi Gangveon Bug Eamn Bug Namn Bug Narn Jeju Total

Total care and ieeps 46,307 8,683 4.749 1L8 945 2.933 1.980 3,014' 7,063 3.049 759 81.070Corond- 11,209 1,740 1,592 422 277 1,054 703 . 1,025 2,604 790 161 21,597Cortina 16,313 2,268 935 225 133 558 354 `458' % 1,330 783 195 23,552SaeeNara - - 4 - - - 17 - 21Publika 1,273 145 63 -16 38 26' 28 90 40 4 1.723Crown 2,638 285 64 28 22 43 .70 123 220 100 18 3,611Ford 20 M 1,607 200 33 8 6 28 18, 28 100o 72 7 2,,307Fiat 3,916 647 192 46 52 94 46 161 243 109 38 5,544Chevrolet 2,754 1,849 888 34 116 462 .125 238' 601 310 40 7,417Rekord 1,220 119 M2 7 39 16' 16' 275 92 6 1,867Kia Sedan 2,474 552 207 114 108 193 183 ~ 414 459 179 133 5,016Others 191 313 - 29 - I - 35' 8 41 5 623Imported 694 17 140 142 5 5 177 5172 47 12 1.382

JeepsHomne 1,143 123 458 200 135 193 221 202 299 179 119 3.272Imported 675 425 98' 318 68 205 41 235 745 307 21 3,138

Total buaea 6.531 1.972 3.094 819 629 1.094 867j 1.584 2.127 1.884 272 20.873For 16 persons & under 239 51 41 18 27 4 9 17 42 - 8 456For 25 persons &under 2 21 61 - - - 8 2 '.9 18 - 12117-25 persons 308 133 173 53 29 43 7 35 101 128 35 1,04526-40 persons 553 228 462 216 150 314 180 295 347 258 27 3,030~41-SO parsons 1.874 226 1,428 264' 200 359 448 772 845 968 84 7,468~51 persona 4 above 3,555 1,313 929' 268 223 374 215 463 '783 512 118 8,753

Total trucks 28.210 9.906 8.984 3 .561 2m272 4,691 jftjj 4.380' 9.486 5.402 867 80.596Ordiniary trucksLeap than I ton 4,791 1,025 1,190 469 277 647 268 513 1,160 579 64 10,9831.5-2 ton 3,150 990 460 465 130 263 227 713 505 381 188 7,473

3tron 5,432 1,175 1,559 301 218 716 346 155 1,363 671 78 12,0054 ton 319 438 170 449 69 236 109 483 489 238 27 3,027

- 5 ton 1,354 361 658 539 295 714 316 50 1.086 355 48 5,7766-7 ton 708 216 445 306 . 214 474 342 580 568 907 43 4,8037-8 ton 829 869 1.269 310 222 409 453 517 833 619 30 6,3609-10 ton 70 258 208 41 17 50 36 121 61 168 - 1,025

Over 10 tons 212 183 183 35 30 - 45 24 171 54 3 940

Dump truCks4 ton 268 247 90 152 114 64 91 194 2 28 57 1,3075 ton 706 154 41 44 110 84 63 33 3 57 3 1,2986-7 ton 678 145 410 183 153 303 69 141, 343 160 115 2,7007.5-8 ton 726 450 303 95 132 112 109 84 602 211 25 2,8499-12 ton 83 143 2 28 21 3 16 32 2 34 364Over 12 tons - 85 7 6 - -- 20 3 25 -146

Van type (large) 330 100 367 53 38 109 50 86 91 98 59 1,381

Ambulance 134 37 49 26 10 31 18 36 43 22 10 416Funeral 86 31 25 3 6 15 10 17 44 8 3 248Tank lorry (oil) 635 141 262 5 37 81 37 69 116 10b 15 1,498Tank lorry (water) 4 28 11 21 4 14 7 1 7 2 - 99Tank lorry (compressed gases) 59 15 7 1 - -3 18 26 - 129Others 165 78 87 5 5 13 .3 40 37 51 7 491

Three-wheelersLeaps than 1 ton 3,678 1,073 609 6 71 84 63 . 102 .692 198 35 6,6111-1.5 ton 51 16 415 4 -130 - 3 15 3 -637

Above 2 tons 3,742 1,648 166 14 99 139 158 363 1,232 412 57 8,030

Total small light type 6 20 - -14 - - - 257 6 -303

Special typeTractor 194 118 621 2 2 11 5 7 87 82 3 1,132Trailer 192 1,148 811 1 3 20 8 10 103 II7 2 2,415Tow (breakdown truck) 132 - 16 2 10 3 6 21 16 - 2066Others 292 346 110 89 13 119 76 91 16 - 24 1,176

Total special 810 1.612 1.558 92 20 160 92 114 227 215 29 4.9Z9

Grand total 83,589 22.759 19.019 6.380 4.130 9.460 6.141 9.370 20.350 10.31 2.014Q 194.136

ANNEX FAttachment 5Page 1

KOREA

TRANSPORT SECTOR.

List of Recommended Studies

Planning and Investment Studies.

A. Long Range Traffic Forecasts, periodically updated.B. Seoul Metropolitan Area Transport.C. Seoul - Busan Corridor Transport.D. Comprehensive Road Plans for Provinces.E. Improved Road Maintenance at Provincial and Local Levels.F. Economic Plan for Expansion of Ocean Shipping.G. Specific Investment Reviews:

1. Chungbug Line.2. Railway Tank Car Purchases.3. Road Paving Program.4. Onsan Port.5. Samil Port

Operational and Technical Studies.

A. Improved Handling of Major Bulk Commodities, Especially Coal,Cement, Pettoleum Products, Fertilizer and Grain.

B. Improved Accounting in All Government-Owned transport Organizations.

I. Economic Studies of Transport Sector Operations.

A. Prices and Costs.

1. Survey of Prices Actually Charged for Transport Services.2. Total Distribution Costs for Major Bulk Commodities.3. Costs of Typical Movements on all Modes.

B. Finance and Cost Recovery.

1. Financial Performance of All Government-Owned TransportOperations and Financial Performance of All Private SectorTransport Enterprises (Census of Transportation).

2. Assessment of Financial Self-Sufficiency of All Parts ofTransport System and of Government Taxes on and Subsidiesto Various Parts of Transport System.

ANNEX.FAttachment 5Page 2

C. Structure and Efficiency of Privately-Owned Transport.

1. Organizational Structure of Road Transport and Coastai

2. Physical Perf6r-mance and Efficiency of "Fot Hire" andtIOwn Account"i Road Transport anid Coastal Shipping.

D. Review of Objectives and Mechanisms for Regulation of TransportPrices and for Licensing of Transport Enterprises.

IV. Periodic Review to Monitor Technical Progress and Efficiency ofTraftnport Sector and Identify New Transport Systems.

A. Potential for Expansion of Coastal Shipping.

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