What you need to know
While the government remains enthusiastic about railways, others suggest large-scale spending on new infrastructure is misguided.
By Matthew Fulco
The high-speed rail (HSR) has pride of place among Taiwan’s contemporary infrastructure. Modeled after Japan’s shinkansen (bullet train), the HSR is fast and efficient. Running along the island’s populous West Coast at top speeds of 300 km/hour, it reaches 90 percent of the population in just 90 minutes. In its decade of service, the HSR has boasted an impeccable safety record as well.
While the HSR faced daunting debt at its launch in 2007, surging ridership in recent years has brought the company into the black. In 2016, it posted net profits of NT$4.1 billion (US$137 million) and NT$40.6 billion in revenue.
The government has vowed to integrate the HSR and TRA, boost rail service in eastern Taiwan, expand urban rapid mass transit, and use rail transport to promote tourism in central and southern Taiwan.
In contrast, outside of greater Taipei, the rest of Taiwan’s rail system is ailing. The Taiwan Railways Administration (TRA), operator of Taiwan’s largest rail system, estimates that it will lose NT$2.8 billion (US$93.4 million) this year. That unenviable performance will actually be an improvement over 2017, when TRA recorded NT$3.4 billion in losses.
TRA’s technology is dated, so trains are slow. A “fast” train from Taipei to the eastern city of Taitung, a distance of 338 kilometers, takes nearly five hours. Compare that to a travel time of less than two hours by HSR from Taipei to the southern city of Kaohsiung, 362 kilometers away.
As a result, TRA ridership has been falling. Between 2013 and 2016, the average load factor on its trains fell from 66.85 percent to 63.28 percent, according to a December report prepared by Taiwan’s Legislative Yuan and cited by the Central News Agency (CNA). Fewer passengers signify TRA’s inefficiencies, the report said, advising the company to strengthen its competitiveness.
That’s where the government’s four-year NT$420 billion Forward-looking Infrastructure Development Plan (FLIDP) comes in. For the plan’s first budget term (September 2017 to December 2018), NT$16.6 billion is allocated for rail development.
On its website, the Executive Yuan says that the goal is to make the Taiwan railway system “a core transport service that is seamless, safe and reliable, convenient and easy to use, and sustainable,” while also benefiting industrial development and access to tourist attractions.
To accomplish that task, the government has vowed to integrate the HSR and TRA, boost rail service in eastern Taiwan, expand urban rapid mass transit, and use rail transport to promote tourism in central and southern Taiwan.
Some economists have expressed skepticism about the initiative. “There is concern that focusing on rail infrastructure isn’t sufficiently forward-looking,” says Darson Chiu, deputy director of the Macroeconomic Forecasting Center at the Taiwan Institute of Economic Research (TIER).
Taiwanese policymakers have pointed to the success of Japan’s rail network as a reason Taiwan should further develop its own rail system.
Taiwanese policymakers have pointed to the success of Japan’s rail network as a reason Taiwan should further develop its own rail system, Chiu notes. “Rail is Japan’s most important form of passenger transport, but it’s a system that was completed decades ago,” he says. “Taiwan needs to think about what future transportation trends will be.”
Paul Lee, co-chair of AmCham Taipei’s Infrastructure Committee, is more sanguine about rail’s potential in Taiwan. “For a small island like Taiwan, relying on highways is inefficient,” he says. “We don’t want to end up like Los Angeles [Lee splits his time between Taipei and LA] – with our freeways looking like parking lots. The key for Taiwan is to use railways more intelligently than it has in the past.”
The Tsai administration believes that a more comprehensive rail network can better distribute Taiwan’s population, businesses, and resources, observes Hank Huang, president of the Taiwan Academy of Banking and Finance (TABF), a research institute that trains financial professionals.
“They want young people in central and southern Taiwan to have access to better job opportunities, which right now are concentrated in the north of the country,” he says. “What we don’t know is if a better rail network will create jobs outside of greater Taipei and Hsinchu or simply attract more people to those cities, since it will be easier for them to travel back and forth to their hometowns.”
The Tsai government wants to develop east-west rail links that can be connected to the current north-south system, notes Liang Kuo-yuan, president of the Yuanta Polaris Research Institute and one of Taiwan’s top economists. “They think that it will promote development in areas that are currently underdeveloped,” he says.
In a May forum held by TABF, Wang Yi-chuan, Director-General of the Taichung City Government Transportation Bureau, suggested that TRA be transformed into a railway system for regional transportation. In his view, construction of railway lines that circle around Taichung’s borders – as they do in Taipei – could result in more of the city’s residents using railway service. In Taipei, many people commute to work from their homes in the suburbs thanks to convenient MRT access. Taichung should move in that direction, Wang said.
Also speaking at the forum, Feng Chia University Vice President Yang Lung-shih said that the Taichung government plans to create a circle line by using the TRA’s Taichung Shanshou Line to serve the city’s outlying Dajia and Houli districts and link with Taiwan Railway’s Mountain and Coastal Lines.
Meanwhile, the HSR can handle long-distance routes like Taipei-Kaohsiung, which takes more than five hours on a TRA train.
Assessing the pros and cons
Critics of the FLIDP – and the rail project in particular – consider that it’s a poor use of resources. Jason Hsu (許毓仁), a Kuomintang legislator who voted against the bill authorizing the infrastructure plan, told Taiwan Business TOPICS in an interview that property developers and large construction firms will be the biggest beneficiaries of the initiative.
“Developers will buy up land near the planned rail infrastructure, betting that its value will skyrocket,” he says. At the same time, “only the biggest construction companies – smaller ones won’t have the capacity to handle such large projects – will win project bids, and they’ll hire cheap labor.”
Rather than expanding rail lines, the government should focus on improving the customer experience on the TRA, Hsu says. To begin, he suggests that TRA’s ticketing system be upgraded. He points out that it’s difficult to purchase tickets online for Hualien and Taitung, especially during the summer, the peak travel season on Taiwan’s east coast.
“You often get a message telling you no seats are available,” he says. “But when I’m on the train to Taitung, I see lots of empty seats. There’s obviously something wrong with the TRA ticketing system.”
Some parts of the rail project appear to be designed primarily to satisfy political constituencies.
Construction delays could be another problem facing the rail projects, says Arthur Truman, an American railway engineer and former project director for the Taoyuan Airport MRT line. While Taiwan has done a “fantastic job” of developing rail transport since the late 1980s, “inefficiency in government bureaucracy is a concern,” he says, noting that the Taoyuan Airport MRT took almost 11 years to complete, seven longer than the original estimate. The delays cost contractors dearly, he adds.
Truman says that expanded rail service will benefit Taiwan, but he’s skeptical about certain parts of the plan. “There doesn’t seem to be justification for expanding the HSR from Kaohsiung to Pingtung,” he says. “That route would almost certainly have low ridership.”
According to a December report in the English-language Taipei Times, the Kaohsiung-Pingtung stretch would cause the government to lose NT$200 billion annually. It would serve only about 5,000 passengers per day.
“Some parts of the rail project appear to be designed primarily to satisfy political constituencies,” says Legislator Hsu.
One scholar familiar with the FLIDP, who spoke on condition of anonymity, worries that scandal will ultimately hobble the rail initiative. “The more construction, the more corruption,” he says. “Politically, this is risky for the Tsai administration even if it wins some votes in the short term.”
Even if new rail construction avoids scandal, it may spark other forms of controversy. For example, clashes with environmental activists may occur over the acquisition of land for the project, says TABF’s Huang. “Activists will want to know how rail construction affects the environment. It won’t be easy for developers to overcome that opposition.”
For its part, the government remains enthusiastic about the railway initiative. In an emailed response to interview questions, National Development Council Minister Chen Mei-ling (陳美伶) said that Taiwan’s overall use of public transport – just 18 percent in 2016 – has plenty of room to grow. “In advanced countries and cities, up to 60 percent or 70 percent of the population uses public transport,” she says.
In the email, Chen said that the government is carefully planning the construction of new railway infrastructure, conducting comprehensive feasibility studies. All aspects of the railway program “are subject to professional and prudent assessment procedures,” she says.
At the same time, the government expects new railway construction to have diffuse economic benefits for Taiwan. By increasing the flow of people and money, it will boost tax revenue, drive the development of cities, and ultimately help to transform local economies around the island, she says.
Not everyone is convinced. TIER’s Chiu notes that Taiwanese outside of greater Taipei are accustomed to using their own transportation. “It’s far from certain that building up the rail networks of other cities in Taiwan will cause people to change the way they move around,” he says.
He has a point. Kaohsiung’s MRT has been in service since 2008, but ridership remains low. About two-thirds of the city’s residents travel by scooter, 20 percent by car, and less than 5 percent by MRT. Overall, just 8.2 percent of Kaohsiung residents use public transport. Comparable figures are 10 percent in Taichung, 5.4 percent in Tainan, and 3.7 percent in Chiayi.
“We don’t know how important rail will be to Taiwan in 20 or 30 years,” Chiu says. “We need to think about whether it’s wise to invest so much in rail now instead of new technology like autonomous vehicles, which are more in line with deep-seated cultural habits here.”
(Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei.)
TNL Editor: Morley J Weston