Sunday, December 03, 2006

Bullet train to turn profit within 24 months.

Bigfoot exists, UFOs are alien transport vehicles, and the Taiwan Bullet Train will make a profit in its 2nd year.

Taiwan High Speed Rail Corp (THSRC), which has built Taiwan's first bullet train system and is still awaiting the final go-ahead to begin service, said that it expects operations to be profitable by its second year.

'We are targeting operational profits in the second year of commercial services,' company chief executive officer Ou Chin-der told XFN-Asia on the sidelines of a media gathering.

It expects to break even 12 months after its first commercial run.

Here's the plan:

He said each train has 989 seats, of which 66 are business class. The fare for each Taipei-Kaohsiung journey is 1,490 twd for economy class and 2,400 twd for business class.

'The plan is for 60 pct capacity during weekdays and 80 pct on weekends,' Chiang said.

Samuel Lin, company deputy chief operation officer, said the bullet train reaches speeds of 300 km per hour.

Among the THSRC's operational targets is passenger volume of 150,000 passengers per day, representing a 70 pct load factor. It will provide services to Taiwan's western transport corridor, where 94 pct of the island's 23 mln people live.

The government is going to try to assure profitability by shutting down several express trains on the ordinary lines, forcing customers to the bullet trains. I suspect this is because, as many will find out, a passenger on the bullet trains is going to take about the same amount of time to get from point A to point B as he would have on the ordinary train. Most of Taiwan's train stations are centrally located and accessible from anywhere in the city. The bullet train stations, by contrast, are in areas far from the city center. The real justification for the bullet train lies here:

An official quoted estimates from the Council of Economic Planning and Development that construction of the high-speed rail network has created 480,000 jobs and may contribute 1 percentage point to economic growth.

Well, it's true that if you spend tons of money on public construction, an economic stimulus will result. But once the construction is over, those jobs will melt away. Essentially Taiwan is on the same construction-industrial state treadmill that Japan was, with large infrastructure projects driving local politics and reorienting local businesses on construction, in turn requiring further provision of infrastructure to keep the System going.

Michael Klein sent me some pictures of the inside of the train. It's quite attractive, and the business class seats all have built-in electric plugs so that you can plug in your laptop, camera, etc. Cool.

21 comments:

Anonymous said...

What happened was because of certain governmental policies, all the “traitor” business community repositioned their operations to better align themselves with the new world realities. So instead of having workable solutions for both sides of the strait, you have “traitors” heading for the greener side of the fence. It’s really just like the prohibition in the States during the 20’s and early 30’s, if you get my drift. (Not that I am claiming there exists a direct relationship between the prohibition and the great depression.)

As a result, a lot of people got laid off, and then a significant chunk of Pan Green’s support base start putting pressure to create more jobs. Like any government, public construction is usually the solution. But in East Asian’s constructions business, it’s business as usual. So the various construction projects start to run out of budget and start to use more taxpayer’s money. Then the taxpayer start to put pressure on the projects, and the projects becomes overpriced, under-constructed, rushed, and untested.

Not to mention, this particular project is a PR and fiscal nightmare. I have not personally seen enough evidence to suggest anything, one way or another. But one of the Head of this project really should get some PR and TV experience. In my opinion, He came off looking arrogant and insensitive to the fact that he is using taxpayer money instead of his organization’s own money. Also, while it’s a hard job for most involved, some should not have been involved in this at all.

Not to mention the bad PR created over how they are/were going to charge taxis for the rights to pick up passengers, a membership fee and an instances fee…. Guess I’ll stick with the cheapest slow train or the greyhounds. More money and sleep time for me.

Anonymous said...

The jobs creation part of construction in Taiwan isn't the only motivation--what about the fact that KMRT was using foreign laborers?

I think the problem is that Taiwan really gained a lot from infrastructure projects, starting from late Qing, through Japanese Colonialism, through early KMT till now. That's how they think they can grow the economy--make transporation that much better or build yet another science park.

The problem is our world doesn't work this way anymore. Look at the US. One of the most successful economies in the world but very widely spreadout. Big stuff isn't the only way economies grow and better financial markets, better laws for settling business disputes are all just as important as asphault. I think it's partly an issue of just not being up with the times and not yet understanding the deindustrialized (developed countries) globalizing economy.

Anonymous said...

Let's see the pics of the interior of the trains!!!

Mark said...

"The fare for each Taipei-Kaohsiung journey is 1,490 twd for economy class and 2,400 twd for business class."

That's more than plane tickets for the same trip cost. Last time I flew down to Gaoxiong, it was under $1100. Why would anybody want to pay more to ride the bullet train? Maybe they should shut down the domestic airports, too.

Prince Roy said...

the really dumb (or crooked?) thing they did is locate the stations so far from the cities they serve. I guess it makes the rural landowners ecstatic, and it may lead to the creation of satellite suburbs, but I still think this is a huge mistake.

Michael Turton said...

Probably the cost of acquiring land in nearer city centers was just too great, so they held costs down by making it more inconvenient. *sigh*

Michael

Anonymous said...

This kind of idle speculation of corruption is on the level of pan-Blue lawmaker.

Cost certainly was one consideration for where to locate the stations and tracks, BUT DID ANY OF YOU BOTHER READING THE BUSINESS PLANS FOR THE HIGH SPEED RAIL?

Besides extremely high cost of acquiring already developed land, they also purposely wanted to encourage development. Around every station, there is a deliberate plan for economic development. This is not the same as simple public pork construction that just "throws" money into the economy", but _if_ it does go according to plan, creates more "centers" that are well-connected.

This is not so different from creating science parks, and we can think about the Hsinchu Science Park as an example. Considerations of the time:
1) Well, obviously Hsinchu was a nice empty cheap place to dump a bunch of high-tech factories and R&D centers, Taipei would not have been
2) Yes, construction money and jobs does play its part in adding something to the economy, though, if it is creating something useless, then we have a case like Japan.
3) There was some cronyism going on, in that KMT used Aboriginals and Hakka to aid in suppressing the Min-nan. Hsinchu is a Hakka stronghold and many of the beneficiaries of the development of the science park were Hakka.

But if you think about 3) a little harder, what alternatives do you have? You have to make SOMEBODY rich. It's probably best to find the "best" cheap empty land from the perspective of the railroad. But because of the positive economic impact on the area, you may still be using "non-corrupt" logic to account for other considerations too--helping poorer districts develop up, locating near other new development projects, etc.

The railroad is still largely straight, especially a high speed railroad. Think about this. You can't just simply "give" the senior lawmaker's district a station. There is certainly some room for choice. How that decision is made can be somewhat dark and corrupt. But I've seen nothing in this thread that is any indication of corruption at all.

*There IS a case of corruption connected to the high speed rail involving anti-vibration devices to keep the rail from causing harm to factories in the Tainan Science Park. But that was about the devices not performing up to the spec required for the bid, not about the location of a station or of the tracks. In fact, locating near the science park (which is also very close to Tainan City), is exactly what Prince Roy is advocating, but then you see what kind of high costs you have because of that.

Michael Turton said...

I don't think anyone has suggested seriously that corruption is involved. I understand that somebody always benefits from land development.

The issue of location being tied to local development -- that may be the business plan (I discussed that in an earlier post) but plans have a way of being perfunctory.... plus, development hinges on several factors, such as the train system actually being used.

Michael

Wulingren said...

I don't know about Kaohsiung and other areas along the way, but the Taipei station is in Banqiao, not far from the metro, which really isn't that far from Taipei City center. The price is ridiculous--kind of reminds me of Amtrak. Well, like everything else, only time will tell whether people will use it.

Anonymous said...

"The government is going to try to assure profitability by shutting down several express trains on the ordinary lines, forcing customers to the bullet trains."

What is the evidence that this is the case beyond your suspicion? Since north-south transportation is already overstressed on weekends, this would be a particularly egregious move on the part of the government. I think this is the allegation of corruption alluded to in the previous comment.

You have been opposed to the HSR as long as I have known you, and even now you ridicule the concept that it could be profitable after two years of operation. But this attitude seems based in a desire to say "I told you so", rather than an objective view from Taiwan. Driving a car to downtown Taichung to take the train or pick someone up is an unholy mess. Flying domestic means sitting in a tiny, puddlejumping deathtrap, plus an hour drive to the Taichung airport. I don't know about Taipei'ers or our Kaohsiung cousins, but the HSR looks pretty good from the center.

Michael Turton said...

Karl--

AmCham has a review here.

Michael

Michael Turton said...

For shutting down the trains for the sake of the HSR, see here

Anonymous said...

That article doesn't say that there will be fewer trains going north-south, especially at the crush times. It certainly doesn't support the thesis that traditional rail lines are going to be gutted to force people to use the HSR.

If Taiwan does not have the population density to support a high speed rail, then what country does? Are all such projects around the world expensive boondoggles? If not an HSR, then how do you you upgrade the transportation infrastructure? More highways? More rail lines using 50-year old technology? More airports? Cost overruns and mismanagement aside, the HSR was the right technology for the problem.

BTW where do you park your car when you take the train to Tainan? I'm wondering if you might know about some super secret parking garage downtown that I have missed all these years. Otherwise, I wonder how we seem to describe two wildly different places when we talk about the traffic in central Taiwan.

Michael Turton said...

That article doesn't say that there will be fewer trains going north-south, especially at the crush times. It certainly doesn't support the thesis that traditional rail lines are going to be gutted to force people to use the HSR.

Ok.

If Taiwan does not have the population density to support a high speed rail, then what country does? Are all such projects around the world expensive boondoggles?

I don't know. There are 8 countries now operating HSR.

http://www.jrtr.net/jrtr40/f04_tak.html

But I've never been able to find anything that gets into the nuts and bolts of finances. The TGV in france paid for itself in ten years, is all I know.

BTW, here's HSR Florida, from six years ago:

http://www.publicpurpose.com/ut-flhsr2000.htm

If not an HSR, then how do you you upgrade the transportation infrastructure? More highways? More rail lines using 50-year old technology? More airports? Cost overruns and mismanagement aside, the HSR was the right technology for the problem.

Perhaps. We'll see. Obviously the issue isn't so much HSR itself, as the absurd claims the government has made for this particular system.

Upgrading the transportation infrastructure? For starters, I would have spent that $13 billion converting local vehicles to hybrid or electric power systems.....if the priority is environmental gains and local development, things like that are far more important.

OK, you've convinced me. I'll stop hacking on the HSR.

BTW where do you park your car when you take the train to Tainan? I'm wondering if you might know about some super secret parking garage downtown that I have missed all these years. Otherwise, I wonder how we seem to describe two wildly different places when we talk about the traffic in central Taiwan.

Well, I park my car next to the train station, where there is a large private lot, adjacent to it, in fact. It's quite public.

Why do we have disagreement about traffic in central Taiwan?

Michael

Anonymous said...

North side or south side of the train station? No parking downtown is one of the reasons I never take the train.

I feel that we have a disagreement over the state of traffic here because if we shared the same view, then you would, like me, pray for the opening and successful operation of the HSR. If I were Dictator-Mayor of Taichung, I would raze half the city to build a subway here. Then I'd link the subway to the HSR station and the airport. Then I'd build more bike trails. Then I'd impose a zillion dollar tax on private cars.

Yeah, I know. That shit never works when I play Simcity either. But there's no point in bitching about something if you don't have a wild-eyed egalitarian plan to solve it.

taipeimarc said...

What scares the bejesus out of me is comments like this tidbit in yesterday's (12.04)TaipeiTimes:

Cheng said that Tanaka Masahiro, former vice president of Japan Railway Co, Tokei, which was also one of the contractors employed by the Taiwan High Speed Rail, had identified in a Japanese railway journal 26 major differences between the Taiwan system and the Shinkansen in Japan.

These differences included the design of the railway tracks, the signaling system and the communication methods among personnel.

And since the high speed rail in Taiwan will operate on a single track with two-way traffic, the traffic signaling system must also be extremely reliable.

>>I hate to be a pessimist, but I think its only a matter of time before something happens. Just like China Airlines and local bus companies. Taiwanese management just does not pay enough attention enough to safety issues. I am almost hardened to all the crying and agony I see every single day on TV by safety related accidents. It will be a struggle for THSRC to attract passengers other than CNY travel times. I see many discount promotions here for the next few years at least. (instead of a box of tissue papers from the gas station, get a free one way ticket to K-town ~ Gov't promotion to save gas).

david on formosa said...

I think the issue here may be the definition of "operational profit". I guess this means revenue from ticket sales covering day-to-day running costs of the HSR, but not the cost of the capital investment. There is no reason why this could not be achieved after two years or even after a few months.

Anonymous said...

The HSR if it doesn't succumb to safety problems will be a resounding success in terms of ridership. There is absolutely no doubt about that. You save way too much damn time with that thing.

Now whether it's cost effective or not--it's hard to say. The government probably subsidized it too much. They made China Airlines invest in it. The construction delays have been extremely costly, and I don't think the penalties that have been paid make up nearly enough for it. But still, it could work.

Michael Turton said...

Karl:

the parking lot is just north of the train station. The gate is right where the sidewalk from the train station ends. The lot itself abuts the tracks. It's roomy, and there are always plenty of empty spaces. A day is $160, which is why I take the motorcycle, which only costs $40.

If I were transportation czar of Taichung, we'd have a beautiful metro, a lot more bike lanes, methane/electric buses, and tolls for cars based on engine size and # of passengers. I don't think we're that far apart. And the betel nut girl density would be scaled up.

Michael C said...

I agree with David on Formosa. The definition of profit must be different from what we commonly thought.

THSRC will not recoup the capital investment with ticket sale along. The government knew it, THRSC knew it before it bided on this project. That’s why the government contract also granted the bid winner a 50-year right to develop a area in front of the train station. This is supposed to be the real moneymaker in the deal. Obviously, it makes no sense to demolish half of downtown to make room for HSR, so they have to be located in undeveloped area.

As for the vibration issue in Tainan Science Park, the media often missed a major point whenever this is reported. The alignment of the HSR was set way before the location of Science Park was chosen. It was a bad decision to put the Park there; train causes strong vibration (anywhere) and the local geological condition is extremely poor. Locating the Park in Shan-Hwa must have been some behind-the-scene political wrangling, so blame the decision makers. THSRC needs to do something to be neighborly, but they should not be responsible for it.

Anonymous said...

Today is December 7. Isn't this the day the bullet train was supposed to begin operations?