Document of The World Bank FOR OFFICIAL USE ONLY Report No. 12418 PROJECT COMPLETION REPORT KOREA SEOUL-BUSAN CORRIDOR PROJECT (LOAN 2600-iO) OCTOBER 22, 1993 MICROGRAPHICS Report No: 12418 Type: PCR Infrastructure Operations Division Country Department I East Asia and Pacific Regional Office T'his document has a restficted distibution and may be used by recipients only in the performance of their oflicfil duties. Its contents may not otherwise be disclosed without Wodd Bank authoon. CUPJENCY EQUIVALENT US$ 1 ' W 780 (as of May 1993) FISCAL SEAR January 1 - December 31 WE'GHTS AND MEASURES 1 meter (m) - 3.2808 feet (ft) 1 kilometer (km) a 0.62 mile (mi) 1 square kilometer (km2) - 0.3861 square miles (sq mi) 1 metric ton (m ton) - 2,204.6226 pounds (lbs) PRINCIPAL ABBREVIATIONS AND ACRONYMS ATS - Automatic Train Stop System ATC - Auto Train Control BOA - Board of Auditors CTC - Central Train Control EIRR - Economic Internal Rate of Return GTE - Government Invested Enterprise GNP - Gross National product CoK - Government of Korea 1CB - International Competitive Bidding mK - Korean Nationel Railroad MIP - Management Improvement Program MOT - Ministry of Transportation MOF - Ministry of Finance PCR - Project Completion Report PPAR - Project Preparation Audit Report SAR - Staff Appraisal Report SMESRS - Seoul Metropolitan Electrified Suburban Railway System FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation October 22, 1993 MEMORANDUM TO THE EXECUTIYE DIRECTORS AND THE PRESIDENT SUBJECTs Project Completion Report on Korea Seoul-kBusan Corridor Proiect (Loan 2600-KO) Attached is the "Project Completion Report on Rorsa -- Seoul-Busan Corridor Project (Loan 2600-KO)" prepared by the East Asia and Pacific Region. Part I; contains the Borrower's comments. Loan 2600-KO (US$67.0 million equivalent of July 1985) was to increase transport capacity in the railway corridor connecting the two major Korean centers. The Project encompassed track signalling, investments in rolling stock and equipment, technical assistance, and staff training. Except for some procurement problems and communication difficulties (arising out of the Borrower's shortage of English-speakers, snd a symmetrical shortage of Korean-speakers among consultants and technical a&sistance staff), implementation was smooth. The three-year delay in project completion was due to inappropriate selection of suppliers for cables and software. Overall, the project is rated as satisfactory, its sustainability as likely, and its institutional impact as substantial. The PCR offers an adequate account of project performance. It notes that processing of a "Railroad System Modernization Project" was suspended in 1992 because Government decided to delay the conversion of Korean Railways into a "Government Invested Enterprise". This strong stance by the Bank is the culmination of Bank efforts to persuade the Government that Korean Railways ought to be granted full autonomy, efforts which date back to the 1978 Sixth Railway Project. They continued under the 1980 Seventh Railway Project, the 1983 Coal and Cement Project, the 1985 Seoul-Busan Corridor Project, and the 1988 Kyonggi Regional Transport Project. In each and every case, Government promised to grant autonomy by a certain date and then explained that more time was needed. The project may be audited together with the Kyonggi Regional Transport Project. Robert Picciotto by H. Eberhard Kopp This document has a restricted distribution and may tt used by recipient enty in the perfance of their official duties. its contents may not otherwise be diictosed without Wortd Bank authorl2ation. FOR OMCIAL USE ONLY KOREA SEOUL-BUSAN CORRIDOR PROJECT (LOAN 2600-KO) PROJECT COMPLETION REPORT Table of Coutents Pare Evaluation Summary ..........i PART I: BANK' S REVIEW 1. Summary Project Data 1... .. . .. ....... 2. Background and Sectoral Information 1 3. Previous Bank Involvement 2 4. Follow-on InitiAtives 4 S. The Project ...................... 4 6. Project Implementation 6 7. Project Results and Lessons Learned 7 8. Sustainability / Remaining Issues 10 9. Bank Performance . ....... .***...... 11 10. Borrower Performance 12 11. Project Relationships 12 12. Project Documentation and Data 13 PART IIs BORROWER'S EVALUATION A. Conditions Leading to the Project .................... 14 B. Main Findinge and Lessons Learned 14 C. Summary of Bank Role and Performance 15 D. Evaluation of Borrower's Own Performance .......15 E. Remaining Issues .............................. 16 ANNEX 1: RNR MANAG5EMENT IMPROVEMENT PROGRAM PART IIIs STATISTICAL INFORMATION 1. Related Bank Loans and/or Credits . . . . . . . . . . . 20 2. Bank Resources . . . . . . . . . . . . . .r . . .. 22 3. Status of Covenants . . . . . . . . . . . . . . . . 23 4. Cumulative Estimated and Actual Disbursements . . . . . 24 5A. Domestic Freight Traffic 1985-1991 (tons) . . . . . . 25 SB. Domestic Freight Traffic 1985-1991. (ton - km) , , . . . 26 6A. Domestic Passenger Traffic 1985-1991 (passengers) . . . 27 6B. Domestic Passenger Traffic 1985-1991 (passenger - km) . 28 7. KNR Traffic: Forecast and Actual 1986 and 1991 . . 29 8. Passengers on the Kyongbu Line by Section. . . . . . .. 29A This document has a estricted distribution and may be used by reipients only in the performance of their off0cial duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents (cont'd) 9. Kyongbu Line Passenger Traffic by Train Type (1984-91), . * , 30 10. Kyongbu Line Freight Traffic by Section (1984-91) , , , 30A 11- Comparison of SAR and Final Project Cost . , , . , , . . . . .. 31 12. Procurement of Bank Financed Items, , . . . . . . 32 13. Impl-ementation Schedule , , , . . , . , . , . . 35 14. Oversesa Training . . . . . . . . . . . . . . . . . . . . . . . 36 15. Progress of Management Improvement Plan, . . .* * * , * * * 37 16. Income Statement . . . , , , , , , . , . . , . . . . , , . 39 17. Balance Sheet , ; , , , , , , . , , , , , . , . . 40 18. Liabilities and Equities,, , , , , , , , , , , , , , , , , ., 41 19. Economic Evaluation . . . . . . . . . . . . . . . . . . . . 42 (i) KOREA SEOUL-BUSAN CORRIDOR PROJECT (LOAN 2600-KO) PROJECT COMPLETION REPORT Preface This is the Project Completion Report (PCR) for the Seoul-Busan Corridor Project in Korea, for which Loan 2600-KO, in the amount of US$ 67.0 million equivalent was approved on July 2, 1985. The closing date of the loan Was extended froi December 31, 1989 to December 31, 1992. Disbursements under the loan totaled US$32.9 million, with final disbursement made on February 26, 1993. US$31.4 million was canceled effective July 16, 1986, US$1.0 million was cancelled effective September 26, 1989 and US$1.65 million was cancelled effective March 11, 1993. The PCR was jointly prepared by the Infrastructure Division of the Asia Technical Department (ASTIN), the Infrastructure Operations Division (UIIN) of the East Asia and Pacific Regional Office and the Borrower, and is based, inter alia, on the Staff Appraisal Report (SAR), the Loan Agreement, supervision reports, the Borrower's own records, correspondence between the Bank and the Borrower, and internal Bank memoranda. (ii) KOREA SBOUL-BUSAN CORRIDOR PROJECT (LOAN 2600-KO) PROJECT COMPLETION REPORT - Evaluation Summary Objectives The prime objective of the project was to make a direct contribution to the Government of Korea's (GOK) overall plan for increasing transport capacity in the Seoul-Busan Corridor. Another objective was to enable addition the Bank to continue its dialogue with the Government and Korean National Railroad (KRR) on institutionai strengthening, multi-modal transport planning, as well as longer term investment planned for the corridor. Implementation Experience Implementation was for the most part routine with two exceptions. On the one hand, local suppliers were able to substantially under bid the world market, resulting in savings which allowed the Central Train Control (CTC) re- signaling component to be expanded. Problems, however, were caused by a shipment of defective cables which had to be re-manufactured and software that required extensive re-working. The expansion in project scope, combined with the cable and software problems, extended the project implementation period by three years. Sustainabilitv The main part of the project which involved standard, well established technology - the signaling component - is expected to be adequately maintained, and the improvements brought about by its installation are likely to be sustained and even improved in the years to come. However, full utilization of the advanced technology in the computer aided CTC system will depend on the introduction, by KNR, of: (a) timely and appropriate training of concerned personnel; and (b) adequate maintenance of the computer system and related software. Findines and Lessons Learned There were a number of findings and lessons which resulted from this project. These include lessons arising from the introduction of computerized technology into a traditional organization, and the reinforcement of past lessons learned concerning ways to increase the profitability of institutions like railroads. These lessons are: (iii) (a) As projects introduce advanced technology and computerized systems, the appropriateness of staff skills and institutional commitments become critical, both in the Bank and in the recipient institution. As a result, the projects need to be designed very thoroughly and be well adapted to the recipient's capabilities in implementation as well as ensuring future sustainability; (b) As agencies begir. to invest in and implement advanced computerized systems, their capacity to absorb the new technology into daily operations should be reviewed carefully. The capabilities of the staff responsible for operating the systems, and those responsible for using the information generated need to be carefully assessed, and an appropriate action program developed to introduce the required expertise. Training programs need to be provided by qualified experts who would not only train personnel (both staff and management), but also reinforce the need and usefulness of the systems. In addition maintenance contracts for the hardware and software should be included in the project scope to supplement capabilities, and ensure reasonable attention to system needs beyond project completion; (c) As projects become more computer oriented and technology more sophisticated, project teams need to include an appropriate level of expertise concerning system hardware and software so that the agency can be properly advised on a number of issues including contract packaging, appropriate bid pricing and relevant training and technical assistance. For example, in instances where bid prices are significantly below project estimates, the Bank needs to monitor results carefully to ensure that low bids do not adversely impact project implementation, and that technical assistance and training relates directly to the operation and maintenance of equipment concerned; (d) Domestic rail computer capabilities in Korea are still in an embryonic stage of development, and for this reason there remains the need to employ foreign expertise with local participation encouraged until an adequate level of competence can be developed; (e) Tariff increases are often difficult to achieve because of the strong social and political pressures against them. Therefore, care must be taken to ensure that all other options have been properly addressed before tariff increases are proposed. The measures that must be addressed include operational improvements to reduce (IV) per unit operating costs, marketing efforts to identify markets where the entity has a comparative advantage, service improvements to increase the volume of existing services, reduction of uneconomic services and operations, and proper compensation from the government for non-commercial services provided at the request of the government. KOREA SEOUL-BUSAN CORRIDOR PROJKCT (LOAN 2600-KO) PROJECT CONPLETION REPORT PART I: BANR'S REVIEW 1. Siumar_ Proiect Data Project Nt. s Seoul - Busan Corridor Project Loan Number s 2600 - KO RVP Unit s East Asia Loan Amount : US$ 67.0M Country s Korea Canceled Amount : US$ 34.1M Sector : Transport Disbursed Amount s US$ 32.9M Subsector : Railways Approval Date : 7/02/85 Staff Appraisal t Feb. 1985 Effective Date : 7120185 Amendmers Date s Nov. 1986 Completion Date: 12/31/92 Total Project Cost: US$178.3N Loan Extension : 3 years Appraisal ERR : 411 Re-assessed ERR s 502 Revised ERR : 502 2. Background and Sectoral Information Appraisal Context 2.1 In 1985, when the Seoul-Busan Corridor Project was appraised, the population of Korea was about 40 million. Almost 602 of this population lived in urban areas and per capita income was almost US$2000. Income nearly tripled in the period 1984-92 and although the population is projected to grow at less than 1Z in the period 1993-2001 (presently it is 43 million), urban growth is expected to continue at a much faster rate (about 32 annually). 2.2 Throughout much of the years preceding the project, the transport system had been strained by the demands of rapid growth. To alleviate the situation, significant public investments in infrastructure were made (152 of annual capital expenditure between 1977-86; and 122 between 1987-91). Railroad investments concentrated in the Seoul-Busan axis where most of the industrial development has taken place. In the early 1980s rail freight accounted for about 401 of total ton-km, road accounting for 232 and coastal shipping 372. The rail share of passenger-km accounted for 222 of passenger movement and road 762. By 1991 rail share in freight movement declined to 292 and road to 212, while coastal shipping and air carriage shares rose to 502 of total freight ton km. In passenger movement the railroad recaptured some of its lost traffic, increasing its share to over 262, while the road share decreased to about 692. -2- Seoul-Busan Corridor 2.3 The Seoul-Susan Corridor contain, some of the largest urban areas in Korea; Seoul, Busan, Daegu, and Daejon. In 1985 the population of these cities totaled 16 million, growing to almost 23 million in 1991. Together with a number of smaller towns, these urban centers now account for over 502 of Korea's population (compared to 401 in 1985) and 801 of the country's GNP (in 1985 it-was 70%). 2.4 At the one end of the Seoul-Busan Corridor is located the national capital, Seoul. As of December 1991, 24.52 of the national population lived in Seoul with a per capita income of almost US$6500. The increased income levels have led to tremendous increases in mobility, with the city taking various actions to re-direct growth south, to the Seoul-Busan Corridor. 2.5 In 1985 the population of the city of Busan was 3.5 million and although growth has been sloW (4 million in 1991), city size has increased substantially. This is due in part to the Port of Busan which is physically located within the city and has become Korea's main container port. Thirty-six percent of this container traffic remains in the Busan area, but over 50S moves to Seoul and its environs, and 121 to Daegu or Daejon through the Seoul-Busan Corridor. About 281 of this traffic presantly moves by rail on the Kyongbu Line, although it is projected that by the year 2001 this could increase significantly. 2.6 The Kyongbu Line is 445 km long, ard with the exception of the section from Seoul to Suweon (about 30 km) where there are four tracks, the line is double tracked and is not electrified. South of Suweon the signalling system in existence in 1985 required that the headway vary from between 6.6 and 13.2 minutes depending on the type of trains. The number of accidents due to system failures was low due to the strict safety precautions, but the failures disrupted the smooth running of the trains and created delays which reduced the capacity of the line. The line was approaching capacity on most sections when the project was appraised and the average speeds, especially of freight trains, were decliaing steadily due to the requirements of the freight trains to move to passing loops to allow the faster passenger trains to pass. Increasing the capacity of this line was critical if this vital region of the country was to continue to function efficiently. 3. Previous Sank Involvement 3.1 Since 1962, the Bank Group has assisted KNR through eight projects railroad projects amounting to US$501 million, and one multi-modal (railroad/port) project amounting to US$54.03 million. The Bank has traditionally made sector type loans for the railroad, financing time-slices of KNR'8 investment plans, and has maintained an active dialogue on KNR's financial situation, investment plans, and level and structure of tariffs. BSank-supported investments have concentrated on improved capacity and service for long distance passenger and bulk cargo transport. -3- 3.2 The Project Preparation Audit Report (PPAR-^10777), dated June, 1992, prepared for the Sixth and Seventh Railway Projects (Las 1542 and 1836-X0), and the Coal and Cement Distribution Project (Lu 2267-KO), outlines some of the mixed results of Bank involvement in the sector. Although physically all objectives were met, achievement of broader objectives (institutional) was less successful: (a) Insofar as modern business techniques are concerned, the Bank did facilitate their introduction into KNR, but since KRNR as a who.e continues to function as a government agency, benefits were not what they could have been; and (b) Bank scrutiny of KNR's Investment Plans did help eliminate, or postpone, certain proposals of dubious economic merit. But in the case of more politically sponsored investments Bank advice had little effect. Still, the Bank did succeed in getting the government to reimburse KNR for capital costs incurred for economically unjustified projects. 3.3 Transforming KNR into a competitive carrier, and granting KNR managerial and financial autonomy were not, as events have shown, top Korean priorities. Cultural and political realities made it difficult for the government to share the Bank's views concerning benefits from free competition, reduction in staff, and rate and tariff increases that would affect millions of passengers and induatrial entities. 3.4 The Project Completion Report (PCR) prepared for the Coal and Cement Distribution Project (Report #8265) outlined some specific findings and lessons which are particularly reflective of the present review. These include the followings (a) Flexibility in project design is a key ingredient to successful implementation; the Coal and Cement Project was downsized due to changes in the market conditions and this change was a significant factor in the ultimate success of the project; (b) Cost-under-runs in civil works and equipment have become somewhat of an issue in Bank projects in Korea where international costs do not tend to accurately reflect project costs; this has resulted in significant loan cancellations totaling US$138.41 million between 1985 and 1988 alone in four transport projects and the Coal and Cement Distributicn Project; it has become apparent that project costs in Korea should reflect more accurately local conditions; and (c) Implementation of regular tariff increases and the introduction of a cost-based tariff system to enable an organization to recover the cost of its operations remains difficult to implement for social and political reasons. Experience with recent railroad projects, to include the Coal and Cement and this project, suggests that efforts should be first directed at working with the institution to assist them in reducing operating costs and expanding markets where the railroad has a comparative advantage over other modes of -4- transportation. Only after these efforts have reduced per unit operating costs should tariff increases be considered as a means to increase profitability. 4. Follow-on Initiatives 4.1 In September, 1991, a Bank mission appraised the Railroad Systems Modernization Project. The objectives of that project were to: (a) assist KNR during its conversion to a Governmont Invested Enterprise (GIl)I (b) improve the management and operation of RNR by introducing improved management procedures and the use of modern computerized railroad operating and management information systemst (c) enhance the level of service and related capacity for freight movements through operational improvements and better intermodal integration; and (d) support the expansion of the Seoul suburban passenger system. However, in September of 1992, the Bank decided to postpone further the processing of the project because of the Government's decision to delay the conversion of KNR to a GIE. 5. The Prosect Objectives 5.1 In the autumn of 1984, the ORK requested Bank assistance to finance the re-signaling of the Kyongbu railway line in the Seoul-Busan Corridor. This project arose out of the study: Review of Long-Term Investment Needs in the Seoul-Busan Corridor, which was financed by the Bank under the Seventh Railway Project (1836-KO). The project was therein assigned the highest priority, insofar as it was expected to make a significant contribution to the safety of operations, provide increased capacity to the existing line, postpone other more costly investments, and make a direct contribution to GOK's overall plan for increasing transport capacity on this corridor. In addition, the project gave the Bank the opportunity to pursue a dialogue with the Government and KNR on institutional strengthening, multi-modal transport planning, and the longer term investment program planned for the Corridor. Description 5.2 The project formed part of RNE's Management Improvement Program (MIP) for the development of rail traffic in the Seoul-Busan Corridor, which was designed to reduce losses incurred for ordinary train services and decrease the unit cost of profitable services. The program comprised: (a) institutional and policy measures aimed mainly at ensuring RNR's long-term viability; (b) measures to improve intermodal complementarity and railway competitiveness; and (c) investments in track signaling to increase capacity as well as investments in related rolling stock and -.quipment. The Bank's portion of the project included funds to finance investments only for part (c), together with associated technical assistance and training. KNR and the Government funded the other investments. (see Annex 1). 5.3 The original scope of the Bank project included: (a) re-signaling of the Seoul-Busan double-track line between Suweon and Daegu (approximately 290 km); (b) installation of a CTC system that would increase capacity to 170 trains per day; and (c! power supply and covmunication systems as well as train indicators, buildings, supervision and training. A CTC already existed between Seoul and Suweon, and between Daegu and Busan the signaling system had recently been upgraded. By installing the new system, -he block length was to be reduced significantly from 2 km to 0.6 km, thus providing substantial capacity increase by allowing for a reduction of the interval between trains. The procurement of rolling stock, equipment and material to increase the number of trains in the Corridor were also part of the project, although financed by the Government. Design and OrganizatLon 5.4 The project was well designed to attain its objectives. The Corridor's capacity had been seriously constrained by an outmoded signaling system along a corridor that required additional trains to support the increasing traffic demand, both passenger and freight. It became apparent that additional investments in rolling stock and motive power, roadway improvements and station facilities could not be adequately utilized without a modern signaling system. Re-signaling, with the addition of computer aided CTC was, therefore, the next logical step to increase capacity. 5.5 The institutional design and organization of the project focused on KNR's well established programs of operational and administrative improvements goals, while the main focus of KNR's HIP was aimed at developing future rail traffic along the Seoul-Busan Corridor. This program is discussed in more detail in Annex 1. Revisions and Amendments 5.6 In July 1986, the Ministry of Finance (MOP) requested that the Bank cancel US$32.4 million of the loan. This was due to savings in procurement of the signaling and communications components. At the same time it requested that the Bank extend the scope of the project to include: (a) the upgrading of signaling in the southern part of the corridor between Daegu and Busan (US$10.4 million), and (b) the purchase of two container cranes (US$0.9 million) to handle the additional container traffic on the corridor resulting from operational improvements under the Pusan Port Project (Ln 2726-KO). This US$0.9 million was later re-allocated to the signaling component. The highly competitive bidding of the Korean suppliers and an agreement reached with the Ministry of Transportation (NOT), to use some of its communication channels on very concessional terms rather than laying its own signaling cable, allowed KNR to seek extension of the project. The savings due to aggressive bidding by Korean firms is not surprising as it has occurred in many of the Bank's other Korean transport projects. 5.7 With agreement reached to implement the Pusan Port Project (Ln 2726- KO), which would contribute to a further increase in both container and total traffic by rail along the Seoul-Busan corridor, the upgrading of the signaling system for the entire line became more urgent. Extending the contract for provision of signaling equipment to cover the extension of the scope of the project was expected to provide additional benefits in terms of: (a) time saving; (b) increased efficiency of operation and maintenance by standardizing equipment on the entire line; and (c) elimination of the extra cost of interface equipmert which would otherwise be needed to make two different systems operationally compatible. As a result, the project was extended for two years, to December 31, 1991. A second extension to December 31, 1992 was requested due to problems encountered with the cables and software (para.6.1). 6. Proiect ImDl_mentation Procurement 6.1 With two exceptions, implementation was routine. Local suppliers were able to substantially under-bid the world market with resulting savings which made the expansion of the CTC re-signaling component possible, In addition, a shipment of defective cable, which had to be re-manufactured, and problems with software, caused an additional one year delay. As a consequence, closing of the loan was extended by three years, from December 31, 1989 to December 31, 1992. 6.2 Procurement was implemented without serious problems, but it appears that both KNR and the Bank should have detailed more extensively the circumstances associated with the large variance in bid prices as compared to original estimates. Although it does not appear that the quality of the system installed was compromised by the low bids, problems associated with software installation may be indirectly related to the low price, by having cut into the contractor's allocation of resources for training and technical assistance for the computer system. 6.3 All procurement was executed following International Competitive Bidding (ICB), with both domestic and foreign suppliers participating in the bidding. The main suppliers were domestic with one sub-contracted foreign supplier. Procurement of equipment was subject to ICB in accordance with Bank guidelines for procurement, except for a number of small items worth less than US$200,000 per order and totaling less than US$3 million. These were purchased on the basis of quotations received from three potential suppliers. All packages for equipment above US$100,000 were subject to the Bank's prior review of procurement documentation. In bid evaluation for equipment contracts to be let through ICB, Korean manufacturers were allowed a preferential margin of 15% of the CIF cost of competing imports, or the relevant prevailing level of customs duties, whichever was lower. For items not financed by the Bank, Government procurement procedures applied. Costs 6.4 The total project cost, at appraisal, was estimated at US$ 178.3 million, with equipment to be procured under ICB estimated at US$ 64.0 million, and local procurement of equipment and services estimated at US$ 114.3 million. SAR price estimates for the signaling component were based on world market prices at the time. Local suppliers were, however, able to bid considerably below that because of several factors which were not apparent at appraisal. These included a recession in the Korean electrical industry which developed after appraisal, - 7 - and a concerted effort on the part of local suppliers to break into this railway signal supply market. As a result, project costs were slashed through aggressive bidding which culminated in a large loan cancellation, of US$ 32.4 million, with actual costs totaling US$ 73.8 million. Notwithstanding this, the Bank's policy at the time dictated use of world market pricing for appraisal estimates, even though similar problems had been experienced in other projects. Consulting Services/Technical Assistance/Training 6.5 There were no consulting services as such, but there was a considerable element of technical assistance and training associated with the installation of the CTC, its computer aided control system and the MIP. All parties (INR, contractors, and the Bank) encountered some unexpected difficulties, but in the end, the technical assistance was reasonably effective. The problem with the CTC technical assistance was largely a result of inadequate language interface between the two contractors and KNR and a lack of railway expertise of the prime contractor. In addition to the CTC technical assistance, some training of higher management was carried out with World Bank and North American Railway Industry assistance. This training focused on top level marketing and management technology, such as intermodal and bulk cargo marketing strategies, rate structure policies, and computer aided management information systems, as a tool for efficient operations. The KNR Administrator and several associates took part in two separate visits to several railway management organizations in the U.S. Several of the management and operations techniques discussed during the training periods were modified to fit the KNR situation and were later implemented with success. 7. Proiect Results and Lessons Learned 7.1 Overall the project has been a success. All physical targets were met and Indeed exceeded. Although there were project delays in implementation, the delays which occurred were, by and large, beyond the control of KNR. The first delay related to the extended scope of the project and the second to technical difficulties. 7.2 The MIP, of which the Seoul-Busan Corridor Project was a part, was also successfully implemented. It was designed to reduce losses incurred for ordinary train services as well as to improve other readily profitable services by decreasing the unit cost of services offered. The results have been good. In total 216 ordinary trains have been discontinued; two unprofitable lines (57.5 km) closed; 31 stations downgraded; passenger trains' top speeds increased from 120 kph to 140 kph; and frequency of passenger trains on the corridor increased to one every 15 minutes from one every 30 minutes. In addition, the additional capacity on the Line has permitted large increases in freight moved along the Corridor which is best illustrated by the movements of containers which has gone from 883,000 tons in 1985 to about 3,500,000 tons in 1991. Financial 7.3 Tariffs were raised 10% and 12% in 1991 and 1992 respectively. These were the first tariff increases since May 1985, and while the rates do not fully compensate KNR for some of its services (fourth class passengers and coal), the rates for other services exceed the long run variable cost to provide the services. Despite this real decline in average tariffs, KNR currently has a positive contribution margin for most of its services due to the fact that it has been able to reduce the per unit operating costs for both passenger and freight services. These operating cost savinga are due primarily to large volume increases but also to management's efforts to control the operating expenditures. 7.4 As indicated above, two major services provided by KNR (fourth class passenger and coal) are provided at rates that do not compensate KRN for the long run variable cost to provide the service, and since the government does not fully compensate the railroad for providing these non-commercial services, KNR is obligated to cross subsidize these services with the profits generated from other services. Despite this problem, KNR is still one of the most profitable railroads in the world. Since there were no tariff increases between 1985 and 1991, KNR's revenue growth during this period was due to increases in volume of both passengers and freight and to a shift from non-commercial passenger services (fourth class) to commercial ones. From 1985 and 1991, the number of first and second class passenger km provided increased at an average annual rate of 9.12 (compared to the forecasted annual increase of 6X), and the number of non- commercial (fourth class) passenger km provided decreased at an average annual decrease in services of 14.2X. In addition, over this same period, the total number of freight ton km increased at an average annual rate of 2.51. 7.5 Despite KNR's strong results of operations over the last several years, the project's financial covenants were generally not met. This unsatisfactory performance in realizing the required rate of return on operating fixed assets and in maintaining the agreed upon current ratio is due to the government not properly compensating RNR for providing non-commercial services. The MTP intended to address this profitability issue through tariff increases, however experience with this and other railroad projects suggests that it may have been more useful to assist KNR to further reduce its operating costs and expand its markets in order to increase its profitability. In addition, more efforts should have been directed at having the government begin to fully compensate KNR for the non-commercial services provided. Economic 7.6 At the time of appraisal express passenger traffic (classes 1-3) on the Kyongbu Line was assumed to grow at an overall constant 7X per annum and freight traffic at 31. These e8tħmates appear to have been relatively conservative with regard to passenger traffic which in fact grew at an annual average rate of 10.51 from 1984 to 1991, and the growth for the period 1992 to 1997 is now projected to reach 151. The projections of growth in freight traffic were more accurate, but here the 31 annual average growth rate does not reflect the change in the mix from coal to container and other high value cargos. 7.7 For comparative purposes the economic re-evaluation was based on the same methodology as outlined in the SAR, with benefits measured only for passenger traffic. The project benefits have been calculated in terms of consumer surplus, or travelers' "willingness to pay" for express rail services over that offered by road, specifically buses. The benefits have been calculated as the difference between that paid for the bus service and the express trains. In the SAR, a benefit of 6 won per passenger (constant for the project life) was assumed, while in actual fact the benefit has increased steadily reaching 7.5 won per passenger in 1991. The resultant re-evaluated economic internal rate of return (EIRR) is estimated at 48Z for the signaling component, and 59Z for the CTC component, with an overall weighted EIRR of 501. This compares to an appraisal estimate of 39Z for signaling and 471 for CTC, with an overall return of 411. The revised EIRR (prepared as a result of project revisions and amendments) was estimated at a composite 502, which is consistent with the re- evaluated estimate prepared for the PCR. (The benefits of the project have been apportioned one-third/two thirds between the CTC and the signalling components). Findings and Lessons Learned 7.8 The project reflects a mix of findings and lessons which underline issues arising from the introduction of modern technology into a somewhat traditional and conservative organization, and the reinforcement of past lessons learned concerning ways to increase the profitability of institutions like railroads. These lessons are: (a) Projects which introduce advanced technology and computerized systems need to be designed differently from those which finance more traditional investments. As components become more sophisticated and complex, the appropriateness of staff skills and institutional comtitments become critical, both in the Bank and in the recipient institution. As a result project design needs to be very thorough and well adapted to recipient capabilities in implementation as well as ensuring future sustainability; and (b) Tariff increases are often difficult to achieve because of the strong social and political pressures against them. Therefore, care must be taken to ensure that all other options have been properly addressed before tariff increases are proposed. The measures that must be addressed include operational improvements to reduce per unit operating costs, marketing efforts to identify markets where the entity has a comparative advantaget service improvements to increase the volume of existing services, reduction of uneconomic services and operations, and proper compensation from the government for non-commercial services provided at the request of the government. Experience with this and other railroad projects in Korea and other countries highlights the need for the Bank to promote all possible efforts to increase the efficiency of the transportation system and to reduce the total transportation cost to the country. Tariff increases can play an importent role in this process, but they should be one of many tools and should not be looked upon as the primary means of addressing an institution's profitability problems. 7.9 More specifically, project-wise, problems encountered in implementing the advanced technology for the CTC system also offered some useful insights: - 10 - (a) As agencies begin to invest in advanced computerized systems, their capacity to absorb the new technology into daily operations should be reviewed carefully. The capabilities of the staff responsible for operating the systems, and those responsible for using the information generated need to be carefully assessed, and an appropriate action program developed to introduce the required expertise. Training programs need to be provided by qualified experts who would not only train personnel (both staff and management), but also reinforce the need and usefulness of the systems. In addition maintenance contracts for the hardware and software should be included in the project scope to supplement capabilities, and ensure reasonable attention to system needs beyond project completion; (b) KNR does not yet employ a sufficient number of adequately trained personnel who can deal with the maintenance of computer hardware and software to accommodate changing conditions. Based on the experience of this project, domestic rail computer capabilities are still in an embryonic stage of development, and for this reason there remains the need to employ foreign expertise with local participation encouraged until an adequate level of competence can be developed; and (c) Arrangements for follow-up technical assistance from the foreign supplier, to ensure successful operation, should be a part of the initial contract. Such arrangements should focus on teaching KRN staff to be self sufficient with respect to software maintenance and improvements. A major consideration in contracting for such high technology transfer should be the requirement that the foreign supplier and local counterparts must have to be fully versed in the local language. The lack of language skills by the suppliers in this case was one of the primary reasons for the software problems which arose. 8. Sustainability/Re_ainina Issues 8.1 The Seoul-Busan Corridor has provided Korea with a significant challenge in coping with transport demand for almost two decades. The problems have been further exacerbated by KNR's tendency to focus on relatively short range planning which is neither strategic in nature nor geared to its competitive environment. The Project did, however, introduce advanced technology to KNR and increase the railroad's operating efficiency. The follow-on project, Railroad Systems Modernization (para.4.1), now suspended, would have complemented this work and helped KNR adapt more to the introduction of modern technologies. 8.2 Overall, the project is considered to be sustainable. However there are a number of issues of concern for the short-term. These include: (a) maintenance of the computer system and related software, and (b) appropriate and timely training of concerned personnel. 8.3 The investment portions of the project which involved standard, well established technology - the signaling component - are expected to be adequately - 11 - maintained and the improvements brought about by its installation will likely be sustained and built upon in the years to come. However, that associated with the advanced technology utilized in the computer aided CTC is more questionable. 8.4 Although software testing at the Busan CTC Center began in August 1992 and continued until near project closing, problems vere encountered vith several aspects which prevented a switch-over from manual to automatic mode. These included: (a) slow switch-over from the main computer to back-up if the main computer failed; (b) failure to register and remember some train tracking input from the older Seoul computer system; and (c) bugs in some of the graphic display programs. The first two would have had a serious impact on the effectiveness of the system unless corrective action was taken. Following a recommendation from the Bank's PCR mission, KNR, the prime contractor, and foreign sub-contractor met in Seoul with Bank mission members to work out a revised work schedule to ensure that outstanding problems were solved and installation completed by November 30, 1992 (30 days before project closing). The mission recommended that KNR take an active role in supervising the revised work schedule. KNR agreed to take on this role and instituted weekly meetings to monitor progress. The result has been successful, but underlines a basic problem KNR has in dealing with issues which are not clearly understood by them, or have been delegated to others; as well as demonstrating the fact that introducing a cooperative environment, where activities are coordinated, is an effort for RHR. There is, therefore, an undeniable need for some expert technical assistance from a qualified supplier to assist with the hardware and software maintenance as well as associated training of KNR personnel, over a reasonable period to ensure sustainability of the project. The existing problems with the system software are made more difficult to deal with because RNR staff do not yet have sufficient technical skills to operate snd maintain the system in the required state of readiness. The project plan envisaged a one year extended maintenance and training program to deal with this aspect, but this program was not in place in time to accommodate the need. In projects involving high technology, the Bank should remain involved to assist the agency to adjust to the new systems and procedures to ensure that the benefits obtained from the new technology are sustained. 9. Bank Performance 9.1 The overall success of the project can be attributed in part to the good performance by Bank staff during the entire project cycle. Supervision teams were sent to Korea on a regular basis and staff changes were kept to a minimum, thus enabling good relationships to be built up over the period of project implementation. The exceptions to this good performance includes (a) assistance should have been provided to the borrower in pricing and reviewing the bids for the technology components; and (b) the management performance goals, while needed, were set on unrealistic time schedules. 9.2 There was in fact one lesson which is specifically applicable to the Bank and which is worth noting: As projects become more computer oriented and technology more sophisticated, project teams need to include an appropriate level of expertise concerning system hardware and software so that the agency can be properly - 12 - advised on a number of issues including contract packaging, appropriate bid pricing and relevant training and technical assistance. For example, in instances where bid prices are significantly below project estimates, the Bank needs to monitor results carefully to sisure that low bids do not adversely impact project implementation, and that technical assistance and training relates directly to the operation and maintenance of equipment concerned. 10. Borrower Performance 10.1 Overall performance of RNR was satisfactory. The Signaling Division, responsible for the CTC component, implemented the project with the International Co-operation Division responsible for administrative affairs. Most of the important project components were carried out without incident. Problems which arose were considered part of the normal learning curve related to the installation of a new system. The only area of concern related to the software where there were delays in achieving a useful functioning level. Instead of attacking the issue aggressively in its infancy KNR allowed it to fester until it reached such proportion that drastic action was necessary. These problems were not resolved until near closing. 10.2 The project introduced MM to a new system with which they were unfamiliar. Yet, beyond the provision in the loan for training of personnel, KNR did not look to organize any additional relevant in-house training program themselves. It was instead left rather loose with a general assumption that with the system in place, and some key personnel trained, all would be solved. Secondly, RNR did not appear to recognize the importance of setting up a formal maintenance program for either the hardware or software associated with the project. It was only after Bank recommendation that they considered possible options. 10.3 Finally, it was not until the Korean Board of Auditors (BOA) flagged the problem respecting adequate functioning of the project software that KNR appeared to become fully aware of the magnitude of the issue. The BOA identified the fact that the software was not functioning properly and instructed KNR to rectify the situation. Lack of knowledge concerning the systems and software appears to have been a key factor. Although a number of staff had been trained, English competency prevented them from learning as much as they would have otherwise. Also it is not certain that the appropriate type of staff were invited to attend the training courses. 11. Proiect Relationships 11.1 The parties involved in all phases of the project got along well with the resultant success of the undertaking. KNR's staff at all levels are well informed on railway operations matters and their top officers are professional managers with good insight into the workings of a large enterprise such as KNR. The other Government officials who were at one time or another involved in project planning and implementation were also quite professional. Bank staff for the project were well regarded in their fields and had a genuine interest in KRR development. Both groups were quick to develop a mutual respect, which made the project run smoothly. - 13 - 11.2 Where there was an obvious problem in relationships was that between KRR and its signaling suppliers. The software, when first introduced appeared to have problems and be somewhat incompatible vith the overall system. Instead of meeting the concerned parties at a decision-making level to rectify the situation and come to an appropriate solution, KNR allowed the issue to escalate to serious proportions. Had KRN met with concerned parties in a timely manner and discussed the issues as they arose, the problems would not have escalated to the degree that they eventually did. 12. Proiect Documentation and Data 12.1 The staff appraisal report provided a useful reference framework during the implementation of the project. 12.2 KNR has kept good records of the project, which assisted the Bank in its preparation of the project completion repott. - 14 - PART II: BORROWER'S EVALUATION A. CoaditIous Leading to the Project A.1 In 1985, at the time of project appraisal, the present rail system wes in such a state of deterioration that line capacity would gradually be reduced. The railroad's Kyongbu line was already beginning to lose significant traffic to the roads. System failures were more than was acceptable, being 1000/year and the systemo under consideration was under manual operation which impacted the capacity of the line. The option to simply overhaul the line was estimated to cost about 802 of that projected for the project and it was determined that it was time the railroad entered the automatic age, an action which was expected would allow for increased train speeds and increase line capacity significantly. B. Main Findinas and Lessons Learned B.1 The main findings and lessons learned include the followings (a) KNR has learned, through the project the most appropriate way to design and implement rail projects. It has also given them the insight into appraisal techniques, which they have modified for their own analyses; (b) It is very difficult for KNR to prepare specifications in Englis' finding it particularly painful to determine the appropriate level of detail necessary when dealing with ICB. In their experience different levels of detail appear to be necessary for different countries competing. Whereas, some are very familiar with Korean ways and as a result require less direction, others appear to be very unfamiliar, resulting in a level of detail which in normal circumstances they would not include. Given limited knowledge in some areas, which is the very reason for assistance, it is particularly difficult for KNR to be articulate. One possible solution would be to include, in prospective proposals an insistence on a certain functional level of knowledge of the Korean language by participating agencies, whether they be in-house or additional; (c) Although Koreans prefer to work on the basis general agreement, either verbal or written, it was found that in certain cases (i.e. certain countries) such a flexible approach invited catastrophic results, because it appeared to be too open to interpretation; (d) The advanced computer technology has met with KNR expectations, regardless of the issues which have arisen and the problems which have been identified; and - 15 - (e) The problems which KRR has had with the contractors have made them re-think the way they would implement future projects of this nature. In this project various components were procured under separate contract, which resulted in some incompatibility of supplies. In future KNR would go for a turn-key type of operation, with a central contractor responsible for delivery of a package. Nonetheless, local firms were able to develop more expertise in the - area of computers, and as a result successfully introduced them into new areas of activity. C. Summurw of Bank Role and Performance C.1 Bank performance was satisfactory. There was close co-operation between KNR and the Bank. As a result the scope of the project was extended without any problem, as was the scope of the training program. With project re- scoping KNR was able to fully utilize funds available, because the Bank acted not only quickly in re-allocation, but also because they allowed the extension of the closing dates to facilitate disbursal. Supervision was very good with proper frequency and adequate number and type of expertise. i. Evaluation of Borrower's Own Performance D.1 Overall performance of KNR was satisfactory, with project implementation proceeding more or less according to schedule. The two delays which occurred were outside KNR's realm of control, the first being the extended scope of the project and the second relating to technical difficulties. The Signaling Division of KNR carried out its responsibilities well without any major problems. D.2 At the time that RNR became interested in introducing an appropriate system for signaling, they compared the different systems available in the U.S., Germany and Japan. In their investigation it was found that the German and Japanese systems (Auto Train Control-ATC) were more similar to the Korean way of running trains. However, the systems used by those two couatries were still in an embryonic stage of development, while the American system CTC already had a proven capability. In the future KNR does plan to go for the ATC system, and plans to install it in the new Seoul Metropolitan Electrified Suburban Railway System (SMESRS) lines being constructed (Bungdang and Kwacheon). The two levels of technology are considered to be compatible with both using the control center provided by this project. D.3 With the installation of the new system under this project, KNR will be able to produce more complicated statistics, and will be in a much better position to more fully analyze and evaluate train performance more scientifically and precisely. It should prove to be a very helpful instrument in planning operations. - 16 - 3E Rem*Oainf Isaues E.1 There are two issues to be resolved; the first concerns software, and the second maintenance of the hardware and software system. It is however anticipated that both issues vill be resolved within the next few months. - 17 - Page 1 of 3 RNR Pbnageu!nt Improvement Program 1. IRN has for some time, had in place a Management improvement Program (MIP) as a means of guiding management decisions to attain short term as well as long term goals of providing Improved public service. The Seoul-Busan Corridor Project formed a part of the progrsm - the development of rail traffic in the Seoul-Busan corridor. The program was designed to reduce losses incurred for ordinary train services as well as to improve other already profitable services by reducing the unit cost of services offered. The program comprised: (a) institutional and policy measures aimed mainly at ensuring MR's long-term viability; (b) measures to improve intermodal complementarity and railway competitiveness; and (c) investments in track signaling to increase capacity and in related rolling stock/equipment in line with transport demand. The Bank project only included funds to finance investments for a portion of (c) together with associated technical asistance and training. KR and the Government funded the other investments. 2. Results of the HIP were quite good. Where KR had full control of the decision process, results, for the most part, were better than expected and in those cases where EPB and other Government agencies were involved, the results were reasonably good, even though the timing was slower than anticipated at project appraisal. Results of the program are discussed in the following brief detail: (a) Short to (1985-1986) (i) The further discontinuation of ordinary (Bidulgi & other) trains in 1985; 14 euch tralns were discontinued in 1985. In addition, 202 Bldulgi trains were discontlnued from 1985 to the end of 1991. (ii) the closure of one uneconomic line and the conversion to private sidings of two othersl two unprofitable lines totaling 57.5 Jw were closed by January 20, 1990. (iii) the downgrading of fifteen full service railway stations into "simple stations"; 31 stations were downgraded from 1985 to 1991. - 18 - ANNEX I Page 2 of 3 (iv) an increase in the Seoul-Pusan Corridor speed from 120 kph to 130 kph, and also in the number of air-conditioned coaches to improve service to passengersl this speed has been increased to 140 kph as a result of the CTC and re-signaling supported by the project and air-conditioned car for first class service increased from 170 in 1986 to 221 in 1991. (v) an increase in passenger train frequency by decreasing train interval from 30 minutes to 20 minutes; the frequency of passenger trains on the corridor has been increased to one each 15 minutes. (vi) seeking EPB approval for 1985 tariff increases on freight service and passenger services (52), and the introduction of flexible (volume dependent) freight tariffs. KNR was unable to get Government's approval to increase tariffs untll December 1990 and again In July 1992. These increases were allocated as follows: 1990 increase - S 1991 increase - 2 Saemaul 15.0 17.7 Mugunghwa 8.0 12.0 Tongil 8.0 8.0 Bidulgi 8.0 8.0 Freight 15.0 7.0 (b) In the lonzer term (two to five years) (vii) the formation of joint ventures with publicly held real estate development companies to rebuild 4 major stations (Seoul, Daejon, Daegu and Yongsan) as commercial centers; Through joint venture arrangements with private developers, RNR was able to modernize three major stations: Seoul, open March 1989; Tonginchon, which opened April 1989; and Youngdeungpo whicb opened May, 1991. Six other stations are under reconstruction or planned for opening In 1995 through 1996. They are: Pupyong, Puchon, Chongryangri, Daegu, Daejeon, and Wangsibri. (viii) the introduction of feeder bus and car rental services, to enable KNR to provide a more complete service and improve KNR's competitiveness in relation to bus transport; - 19 - Page 3 of 3 Rental car service was made avallable from private companies by KNR beginning In 1986 and as of September 1992, the service was available at 35 stations. No feeder bus servlce is yet available. (ix) marketing container services, pickup and delivery of freight parcel.; Much progress has been made In container marketlng and operations which can best be descrlbed by the table below: CONTAINER TRAFFIC GROWTH 1986 - 1991 (thousand TEU) Year 1986 1987 1988 1989 19 1991 Total Containers Received in Pusan 1,393 1,796 2,104 2,175 2,228 2,363 Shipped Via Raft 147 199 233 248 307 329 Rail Share CX) 10.6 11.1 11.6 11.4 13.7 13.8 Total Trains Daity 24 (x) further reductions in staff through automatic fare collection systems and central traffic control systems. Total personnel has declined In recent years, from 38,111 In 1989 to 37,882 In 1992. Durlng this period, productivlty has risen from 368 units for freight and 682 for passenger to 383 and 887 respectlvely In 1992. When compared to some of the European railroads, the results are mixed as Indlcated below: [NR FRANCE GR. BRITAIN W. GERMANY Traffic Units Per Employee (0003 1,040 537 350 397 Employees Per Km of Line 11.9 6.7 9.0 9.2 -20 - Page 1 of 2 Part III - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 1: Related Bank Loans and/or Credits Yew iLou45Ciedit - Pufpoee Approval i Stats Comments Raimoad Project, To assist In financing a significant part of the Korean 1962 Completed PCR was not Credit 25-KO National Railroad's 1KNR) first Five Year Development prepared. Poram 1 962461 through procurement of 1 t 5 passenger cars and 800 coal care and the services of foreign consultants to assist in the establishment of a modern accounting and statistical system for KNR. Second Rairoad To assist in financing the first three years of the 1967 Completed PCR was not Projet, Second Five Year Economic Development Plan 41967- prepared. Credit 110KO 71) through construction of new lines, increased station and ine capacity, track and structure Improvements, and the acquisition of motive power and rolling stock. The credit to finance the Import of 600 hopper cars required to meet an unexpected increase in coal traffic by about 25% and 450 tank cars to provide for the expected doubling of the volume of oi traffic over the project period and consuting services. Third Railway The Project is based on KNR's proposal to expand the 1969 ComplWed PCR issued; Project, 1967-71 investment plan beyond that approved as a PPAR No. CR 183/LN 669 KO basis for Credit 110-KO. Government's plan was 3034, June revised In 1968 to meet the needs brought about by 1980. the rapid pace of development and KNR aiso revised Its Tnvestment in transport capacity to meet the growth In the economy. The project Includes motive power and roling stock, increase In station and line capacity, track renewals and Improvement in telecommunications. Fourth Railway The Project consists of the first three years of KNR's 1972 Completed PCR issued; Project, investment plan 11972-76). To complete the already PPAR No. Loan 863-KO started electrification of industrial lines connecting 3742, Dec. Seoul with the north-eastern part of Korea where coal 1981. and cement Industries are located; electrification of KNR lnes In the Seoul suburban areas as part of the rapid transit project for Seoul Metropolitan area; construction of a new link from the Second Incheon Port to an exstng railway line; instaRation of centralized traffic control in the Seoul area; Improvement of marshalling yards and freight handling facilities; compldon of track and rail renewals; bridge strengthening; procurement of track maintenance and renewal equipment, purchase of passenger and freight cars; improvement of facilities for repair of motive power and rolling stock; and instalhtion of some telecommunications facilities. - 21 - Paae 2 of 2 Year at LoanlCredl. Purpose Appovat Status Comments ifth Railway Project, The project consists of the investments which KNR 1874 Completed PCR Issued; Loan 1101 -KO intends to make during the last two years of the Third PPAR No. Plan 11972-76). It consists of: (a) completion of the 3742. Dec. electrification of industrial and suburban {Seoul) lines; 1981. ib) completion of centralized traffic control In Seoul area; Ic) continuation of double-tracking of the Honam line; Id) acquisition of 50 diesel and 10 electric locomotives, etc. Sixth Railway The project forms part of KNR's Investment Plan 1977 Completed PCR No. 6090 Proect, (1977-81). and alms at providing KNR with the of May 1984. Loan 1542-KO capacity required to meet forecast traffic. The project will enable the railways to move Increasing quantities of bulk commodities and passengers on routes for which the rallways remain the most economic mode of transport, thus realizing sizeable savings in transport costs to the entire economy. Seventh Railway To Increase the capacity of the transport system in the 1979 Completed PCR No. 6196 Project most economically efficient way and to develop and of May 1986. Loan 1836-Ko strengthen the instiutons dealing with the transport sector. The main component of the project is the 1980-81 part of KNR's 1977-81 Investment Plan which aims at (a) initiating the institutional changes necessary to gradually transform KNR into a public corporation; ib) providing KNR with the capacity required to meet forecast traffic; and {c) reducing operating and maintenance costs. Coal and Cement To provide necessary capacity in rail, ports and inland 1983 Completed PCR No. 8265 Distribution Project, terminals to efficiently handle the forecasted coal and of December Loan 2267-KO cement traffic through the 1980s and to correct 1989. system inefficiences In coal and cement distribution which Included: la) dealing with the complexity of the distribution system due to the fragmented coal mining and briquette industries, and the utilization of scale economies in the transportation of coal imports, and (b) reversing the habit of transporting and distributing _ large proportions of cement In bags rather than bulk. - 22 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 2: Bank Resources A. Staff Inout st_eg _o Number of Staff Weeks Through Appraisal 23.7 sw Appraisal through Board Approval 20.0 sw Board Approval through Effectiveness 7.2 sw Suparvision 38.5 sw 8ASW B. Missions I ;a< -: ^ . No.of - - * Performance { >.:Pdsons oays in Field Speialization- - t1 __~~~~~ _ _ _I _ _ _ PreParation: Mission data are not available. Supervision Nov. 2-13, 1987 3 6 FA/REIPE 1 Junte 26-July 5, 1988 3 9 FAIECJConsultant 1 Nov. 7-12, 1988 2 6 FA/Consultant Apr. 24-May 4, 1989 2 10 FA/Consultant 1 Feb. 12 - 20, 1990 3 8 FA/Consultants (2) Nov. 17 - 20, and 2 9 FA/Consultant 1 Dec. 7- 13, 1990 __ _ _ May 26-June 7, 1991 2 12 FArTE PCR Sept. 14-Oct. 8, 1992 3 1 7 =FA/OA/RE/EC FA: Financial Analyst RE: Railway Engineer PE: Port Engineer TE: Transport Engineer OA: Operations Analyst EC: Economist - 23 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 3: Status of Covenants ;. e_t- - Description Covenant Comments 4.01 KNR shall provide audited financial statements Complied. The Bank agreed for for the organization and a separate opinion for KNR to submit reviewed financial the statement of expenditures by June 30 of reports, Instead of fully audited each year. reports, due to lack of information on fixed assets of KNR 4.02 KNR shall earn a rate of return on commercial 5.0% in FY 85 services of not less than 4% (FY 85), 5% (FY 5.1 % in FY 86 86), 5.5% (FY 87) and 6% (FY 88 and 5.1% in FY 87 thereafter} on the average current net value of 4.6% in FY 88 fixed assets in operation. 4.4% in FY 89 3.8% in FY 90 3.7% in FY 91 2.3% in FY 92 4.03 KNR shall maintain a ratio of current assets to 0.43 in FY 85 current liabilities of not less than 1.5 by 0.43 in FY 86 12/31388 and thereafter. 0.33 in FY 87 0.32 in FY 88 0.50 in FY 89 0.47 in FY 90 0.48 i, :Y 91 ______________ ____________________________________ 0.37 in FY 92 4.04 KNR shall not incur any debt, unless a 0.81 in FY 85 reasonable forecast of the revenues and 1.05 in FY 86 expenditures of KNR shows the estimated 1.17 in FY 87 revenues for each fiscal year during the term of 1.09 in FY 88 the debt to be incurred to be at least 1.1 times 1.07 in FY 89 the estimated debt service requirements of that 1.12 in FY 90 year. 1.07 in FY 91 0.67 in FY 92 4.05 KNR shall comply with the terms and measures, Complied. which are required to carry out the investment plan. Any substantial (50 billion won) changes in the plan will only be made with the concurrence of the Bank. 5.02 KNR shall comply with the necessary measures Substantially complied with. to carry out the Management Improvement Program, and consult with the Bank in order to review and evaluate the progress achieved. - 24 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 4: Cumulative Estimated and Actual Disbursements (US$ million) --IBRD FicaYear | Appraisal Formally J Actual Actual as % of Estimate Revised | Appraisal Est. Estimate 1__ ___ December 31, 1985 0 6.02 6.02 June 30, 1986 2.8 6.02 6.02 215.0 December 31, 1986 12.9 9.00 9.00 69.76 June 30, 1987 23.1 12.86 12.86 55.67 December 31, 1987 30.5 15.91 15.91 52.16 June 30, 1988 38.0 22.87 22.87 60.18 December 31, 1988 52.5 22.90 22.90 43.61 June 30, 1989 67.0 25.13 25.13 37.51 December 31, 1989 27.70 27.73 | June 30, 1990 33.40 29.92 | December 31, 1990 33.50 31.01 June 30, 1991 34.16 31.26 __ _ _ September 30, 1991 34.36 31.48 June 30,1992 34.60 32.15 _ _ _ December 31, 1992 32.79 June 30, 1993 32.94 Note: US$31,409,000.00 was cancalled on July 16, 1986, US$995,000 was cancelled effective September 26, 1989, and the undisbursed balance of $1,651,598.95 was cancelled effective March 11, 1993 (total cancellation 434,055.598.95). Date of Final Disbursement: February 26, 1993 KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 5A: Domestic Freight Traffic 1985-1991 (Thousand Ton) _ 1985: 1 19§86 1 1987 1 1988 Transpati ;d a . . r , | ~ ~ ~ ~ ~ r . l Grow th r O 4 hr| Growth GrwhJ Growth Growth Got e- I t T - -; T Sha -RaI l To- S 1Tn Railway 65,346 23.2 3.1 58,238 22.0 6.2 69,280 21.5 1.8 60,737 20.7 2.5 Road 148,699 62.5 3.5 168,779 63.8 13.5 176,281 63.6 3.9 184,559 62.9 6.3 Shipping 34,179 14.3 7.7 31,605 14.2 10.1 40,747 14.3 8.3 48,041 16.4 17.9 Aviation 68 - 17.2 78 - 14.7 93 0.0 19.2 111 0.0 19.4 . TOTALL 0 238,292 100.0 4.0 264,721 100.0 11.1 276.403 100.0 4.0 293,448 100.00 6.0 -hlppkv 54 874 1989 1 63,985 1990 16__ 76_124 1991 19. .'espr M . *rwt - GW N 0: 1rowth 1 . ; w| < > > f ; Toni Share Rafte (%1 Too L Share Rate (% Ton *Shars | RatetS Railwa 1 8,0701 18.71 -3.41 57,922 t 17.2 -1.3 |61,215 1 t6.01r 5.7 Road 1199,945163.71 8.1215,1256 64.8 7.6 |245,126 I 64.01| 13.9 Shipphng 6 4,874 17.56 14.21 63,9856 18.9 16.5 |76,124 19.9 | 19.1| Aviation 155 0.1 39.6 184 0.1 18.1 200 0.1 1_ 931 TOTAL 313,644 100.0 6.9 337,145 1000 7.6 382,666 100t 13.5 Source: Minstry of Transpori_on, Statstical Yearbook, 1992. KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 5B: Domestic Freight Traffic 1985-1991 (Million Ton-kmn) '~~~~ ; i6 7 '':i 1. :___ 1987P Tansport || Growtr Growt; Growth - Growth _________________j n-kIwi Shr at % Tnk Sae te.1%) Ton-lwm S'hare Rat j% o-km share Rae" 1%) Railway 12,296 39.5 2.2 12,813 37.8 4.2 13,061 37.3 r 1.9 13784 35.3 5.5 Road 7,008 22.8 4.f 8,034 23.7 13.7 8,376 23.9 4.3 8 645 22.1 3.2 Shipping 11,639 37.6 4.6 13,034 38.4 12.0 13,502 38.8 3.6 16,617 42.5 23.1 Aviason 26 0.1 18.2 29 0.1 11.5 36 0.1 24.1 43 0.1 19.4 TOTAL 13,029 100.0 3.6 33.910 1 0. 9.3 34,975 t100. 3.1 39,089 100.0 11.8 3:1 i T989 3199 _33_910_1_1991 t .Trnsport Mode Growth IGrowth I Growth N - : ~~~Tbnk -.Mwhae Rate tl To-km4 Store Rate 1% Ton-krn |share Rato (%I Railway 13,605 33.6 -1.3 I 13,663 30.9 0.4 14,494 1 29.1 6.1 Road 8,958 22.1 3.6 9,325 21.1 4.1 10,530 21.1 12.9 Shipping 17,852 44.1 7.4 21,127 47.8 | 18.3 24,731 49.6 17.1 Aviation j 63 0.2 46.61 72 0.2 14.3 79 0.2 9.7 TOTAL 40,476 100.0 3.6| 44,187 100.0 I 9.2 | 49,840 100.0 12.8 Source: Ministry of Transportation, Statistical Yearbook, 1992. lU KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 6A: Domestic Passenger Traffic 1985-1991 (Thousand Passenger) : ' ' , '198 .Y _ ..~ 198 :.:. ,... ..._;. ''-195 :\ ''.j 19.8_ Transport Modei I rwh1Gotrwh. Growth, _ _I Share Rate (er t:Share: Rate (%i as3e Share at% seGer Sire Ra _G Railway 503,123 4.4 2.9 613,966 4.3 3.1 525,066 4.2 1.2 564,240 4.2 7.6 Subway 325,233 2.8 53.0 330,492 3.8 78.5 649,347 6.1 11.9 799,949 6.0 21.1 Road 10,601,047 92.7 3.9 10,932607 90.3 3.1 11,455.734 90.0 4.8 11,905,341 39.6 1.9 Shippin 3,534 0.1 -8.9 8,727 0.1 2.3 8,028 0.1 -8.0 9,838 0.1 10.1 Aviatn 3,467 0.0 20.8 4,091 0.0 18.1 6,101 0.0 24.6 6,297 0.0 23.4 TOTAL 11.441,409 100.0 4.8 12,044,875 100.0 5.3 120643,816 100.0 .0 13.284,665 100.0 6.1 e \ n; = .~ . ,.i-- -- v- - * - ,i - - - - - . = s . -l * . . . . ; . aA 10 90 . 1,91 Transport Mad. I Gr~~~~owth I Growth' I rowth ________________~~~~~~~~~P Pasenew( P Gre': Shre Rae '% Rawa 584,695 4.4 3.6 644,314 4.4 10.3 679,281 4.6 5.3 Subway 886,008 6.6 10.8 1,101,677 7.6 24.3 1,249,137 8.4 13.4 Road 11,349,830 88.9 0.4 12,721,877 87.8 6.5 12,854,212 86.8 1.0 ShIpping 8,850 0.1 0.1 8|260 0.1 -6.7 8,486 0.1 2.7 Aviation 8,962 0.1 42.21 11.0641 0.1 23.6 12,253 0.1 10.7 TOTAL 13.438.299 100.0 1.2 14.487,692 100.0 7.8114,803,368 100.0 2.2 Soure: Miniy of Transportaton, Statistal Yeabook, 1992. KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 6B: Domestic Passenger Traffic 1985-1991 (Million Passenger - kmn) l98i 19 19R7 ' -r 18 T. : i : - . ..PA *~ .:. Growth f.assene Grow,. tTranpr Mode :hr P sO r' fo§e 8 ,:: wt Passene Shr | G %o P n sr ro~4% Railway 22,595 21.1 3.2 23,563 20.9 4.3 24,457 21.1 25,978 25,978 21.2 6.2 Subway 4,477 4.2 93.8 7,228 6.4 61.4 7,965 6.9 8,567 8.557 7.0 7.4 Road 73,025 73.0 2.1 79,732 70.9 2.2 81,265 70.1 85,325 85,325 69.6 3.0 Shipping 570 0.5 1.9 551 0.5 -3.3 489 0.4 529 639 0.4 10.2 Aviation 1.187 1.1 16.8 1,431 1.3 21.1 1,770 1.5 2,191 2,191 1.8 23.8 TOTAL 106,849 t00.0 4.6 112,505 100.0 5.3 116,946 100.0 3.1 122,590 100.00 5.7 ... :__ : .......~ :..... ,U _ss~~~~~~~ rr___s ...... _. I N 1989 - : 1990 1991 ao Transpon Mode Passroerwh Paseriger Growth Passenger [ Growth km,- Share Rate (%) km Share Rate % -km Share Rate 1%) Railway 27,390 21.7 5.4 28,963 21.6 5.7 33,562 24.3 15.9 Subway 9,352 3.4 9.3 11,229 8.3 20.1 11,891 8.6 5.9 Road 85,608 67.9 0.3 89,712 66.7 4.8 87,985 63.5 -1.9 Shipping 546 0.4 1.3 520 0.4 -4.8 524 0.4 0.8 Aviation 3,179| 2.5, 45.1 4,011 3.0 26.2 4,443 3.2 10.9 TOTAL 126,0765 100.0 2.8 134,435_[ 100.0 1 06.61 138,4251 100.01 3.0 So-ce=gstryof Tasort. . Ye arboo-_-9 . -92- Source: Ministry of Transportation, Statistical Yearbook, 1 992. - 29 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 7: KNR Traffic: Forecast and Actual 1986 and 1991 (Millions) 1986 1991 Growth Rate 1% p.a.1 I 1~~ ^--T- --- ----- --- --------- Fofecast Actual Forecast Actual Forecast Actual Passenaer-km Saemaeul 718 893 704 2,721 -0.4 25.0 Express 12,846 13,032 17,480 18,859 6.4 7.7 Ordinary 4,412 3,115 4,240 1,448 -0.8 -14.2 Commuter n.a. 337 n.a. 167 n.s. -13.1 Subtal 17,976 17,378 22,424 23,ft-5 4.5 5.9 SMESRS 7t600 6,185 10,600 10,3b 6.9 10.9 Toatl 25,676 23,563 33,024 33,582 5.2 7.3 Ton-km 12,932 12,813 14,250 14,494 2.0 2.5 Source: KNR, Statistical Yearbook, 1986-1991. Table 8: Total Passengers on Kyongbu Line by Section' (1984-1991) (Million Passengers) Sew J C:eor--nn Daejon- - Donaeg. Y~ -Vear C | : gheonan . Oajo.n Dongdaegu 13usan Tal- 1984 17.053 14.210 9.268 9.313 49.844 1985 18.347 15.250 9.481 9.247 52.325 1986 19.473 16.354 10.146 9.800 55.773 1987 20.604 17.483 11.028 10.538 69.653 1988 21.744 18.531 11.964 11.471 63.710 1989 23.845 20.039 12.780 11.880 68.544 1990 26.673 21.953 13.410 12.424 74.460 1991 29.017 23.454 14'.482 12.913 79.866 Average Annual Growthi (%J 7% 7.9% 6% 5.4% Source: KNR, Statistical Yearbook, 1986-1991. The total passenger excludes Seoul-Suwon portion of Kyongbu Urne. - 29 A - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table & Total Passengers on Kyongbu Line by Section1 (1984-1991) (Million Passengers) Ie n: a=:. i'.. SCheonan. Daejot 1 Dogddaeg. [. |'' ur:: ;;. onan :j : DaeJozn : ongdagu |: Busr To.:: 1984 17.053 14.210 9.268 9.313 49.844 1985 18347 15.250 9.481 9.247 52.325 1986 19.473 16.354 10.146 9.800 55.773 1987 20.604 17.483 11.028 10.538 69.653 1988 21.744 18.531 11.9W4 11.471 63.710 1989 23.845 20.039 1z780 11.8B0 68.544 1990 28.673 21.953 13.410 12.424 74.460 1991 29.017 23.4M4 14.482 12.913 79.866 Aveug Anmn rot %) 7% 7.9% &9 5.4% Source: KNR, Stasc Yearbook, 1986.1991. ' The total passenger excludes Seoul-Suwon portion d Kyongbu Une. - 30 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 9: Kyongbu Line Passenger Traffic by Train Type8 (1984-1991) (Million Passengers) " = - - - -- -- ----- ---- S 4th Class.. . -- 1 St Class. 2nd Class | 3rd Class Ordinary & Yar - Saemaeul Mugunghwa Tongil Others TotaC 1984 1.683 10.388 25.760 19.214 57-040 1985 1.901 13.284 26.305 17.004 58.494 1986 2.441 17.455 26.h90 14.695 60.481 1987 3.771 20.904 25.808 13.039 63.522 1988 4.888 23.929 26.118 11.883 66.818 1989 5.518 26.851 28.347 10.355 71.071 1990 6.296 31.007 31.321 8.700 76.824 1991 7.322 34.695 33.925 7.548 83.490 Average Annual Growth 1%) 24% 19% 4% -13% Passengers included brom Seoul-Seowon. Source: KNR, Statistical Yearbook, 1986-1991. Table 10: Kyongbu Line Freight Traffic by Sections (1984-91) (Million Tons) I ~~~~~~~TotmlTons m -. . . -.::.-- . A. . - . Tb - l -. -- ----- - nah - aepon - Oogdeg˘u- Bsrtin I 1984 4.004 4.443 3.570 2.961 14.9- 1985 4.017 4.429 3.253 2.959 14.6- 1986 3.718 4.221 3.516 2.958 14.40- 1987 3.766 4.215 3.630 3.217 14.82- 1988 3.883 4.408 3.447 3.160 14.858 1989 3.768 4.487 3.249 3.146 14.850 1990 4.183 4.838 3.843 3.501 16.365 1991 4.268 5.082 4.245 3.897 17.482 Average Annual Growth (%) 1% 2% 3% 4% 3% Source: KNR, Statistical Yearbook of Railroad, 1991. - 30 A - KOREA SEOUL-BUSAN CORRIDOR PROJECr Loan 2600-KO Table 10: Kyongbu Line Freight Traffic by Sections (1984-91) (Milli.n Tons) 1 ':::;'- ' : '' 1 : . ToTons ' ' ';' '' ..'. ..,. '' .,..____, ______, __ _______._______ _ __-___ _ .:'~o Dodogt ' :: l 1984 4.004 4.443 3.570 2.61 14.9- 1965 4.017 4.429 9253 2.59 14.6- 1986 3.718 4.221 3.516 2.958 14.40. 1987 3.765 4215 3.630 3.217 14.82- 1968 3.883 4.408 3.447 3.160 14.698 1989 3.768 4.487 a249 3.14S 14.6O 1990 4.183 4.638 &843 3.501 16.365 1991 4256 5.082 4245 3897 17.482 Gowth (%) 1% 2S 3% 4% 3% Souvo: KNI Sttsoal Yearbook of Rallroad, 1991. - 31 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 11: Comparison of SAR and Final Project Cost (US$ million) I | Appraisal Estimate final Cost Comporet --r----- -------------- - . Actual as % Local Foreign Total Local Foreign Total of Appraisal Signalling 17.0 43.6 60.6 21.7 26.1 47.8 78.9% Control Center Interlockinge Automatic Block System Automatic Trans Stp. Level Crossings Hot Box Detectors Train Info System Miscellaneous Power Supply 3.0 4.4 6.4 6.0 3.3 8.3 129.7% Substations Distribution Station Equipment Scade System Communications 8.9 9.5 18.4 3.2 3.2 6.4 34.8% Carrier System Cable System Dispatchers Phone Equipment Rooms 4.4 ... 4.4 = 6.5 0 6.5 147.7% Supervision 3.8 3.8 n.a. - - Coaches 51.1 51.1 n.a. - _ Materials. etc. 10.0 - 10.0 3.1 0.7 3.8 38.0% Base Cost 98.3 56.4 154.7 40.6 33.3 73.8 47.7% Physical Contingencies 4.9 0.6 5.5 - .. _ Price Contingencies 8.1 10.0 18.1 - Total Project Cost t11.3 67.0 178.3 40.5 33.3 73.8 41.9% KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 12: Procurement of Bank Financed Items (As of December 31, 1991) : Ns - - : ___. <* . . 1___. .____ Totas USS ef Tosot tR~~~~~.00, 04' ': a--;iK ."...... .X* ss;:......p :.. -:. :....Am 1. S4nall ng Equlpment . ... . > . . . 5 5 ..I.. .I, _ ... ,- aofd Im_a-s 33.6 . _ . - __ t) Computer. CTC 08127186 861635-F3 4261I,344 7,636,696 Gold Star 09129186 03/31188 121s186 6.999.116 93 Equipment W4,073.181,000 Instrument Co. t12131t88 884568-F3 81,042,345 3.571,496 Gold Star Industrial 12131J88 04J30/90 06/14/89 2.004,594 56 W1.775.642,926 System CD., Ltd. 2)1 Commnation 08127J86 861536-F3 W1,172457,600 1,290,997 Daewoo Teolcom. Co. 09129/86 09/15/87 10/31/86 11t/4187 1,290,997 10 (P1.2) 002r22189 890332-F3 WI68.943,002 241,689 Daewoo Telecom. Co. 02r22189 03/31/90 07t26r89 0411/90 241,690 100 3) inteocnpgs 06t30r86 860877-F3 W4,694,408,952 5,592,188 Gold Star T.E. Co. 06/23/86 03/31/88 07119/88 02110/88 5.592,188 100 t Automatic DockI (Pill 12r31188 88456683 W2,157.945,941 3,170,362 Gold Star idustral 12/31/88 04130/90 06/14/89 061-90 3,170,352 100 System Co.. Ltd. 4) Cabeas 06103/89 860878-F3 W2,737,342870 3,225,077 Kukie Wire Co. 06/23/86 12130/87 - -- 3,225,077 100 (PMI) *06t08U89 890983-F3 W1,038,077,800 1,613,842 Shin Seong Ind'I Co. 06t21189 08/31189 07t26/89 08/22190 1.513,842 100 *10t31t90 903621-F3 W194,190,800 270,951 Shin Seont hdl Co. 11/19t90 03/08/91 12/28/90 01t11191 270,951 100 ^1031/90 903622-F3 W141,344,400 197,381 Gold Star Cable Co., Ltd. 11/19/90 12130/90 12/28/90 12128/90 197,381 100 *10131/90 903620-P3 W132,340,400 181,863 Oaewon Cable Co. 11119/90 03/06/91 03/07/91 03/07)91 181,863 100 5) Automatic Train StoP 08/27/86 86153R-F3 W2,289,64S,663 2818,211 Oiental Precion Co. 09/29/86 06/30/87 10/15/86 08/17/87 2.818.211 tOO *03110/89 890406-FS W493,S12,670 741,643 Oriental Machinr Co. 03110t89 04130/90 05118t89 04/28r30 741.643 100 Cotacts for the CTC Project for Dongdaeu - Pusan Section. Iu : Cigo :ntrtol Towt U i o- Contratt ;mun (.18 .Ilin . at. .W1K- .n Ct.C . . ,al. a: 'ttr .is .aen ,Ath. .,,,.,."'a : n.t 6) mlacelsnb 07110186 861107- W316,836,430 360,109 KonjIn Macbelry Co. 07118186 08118186 08108t86 09110/86 360,109 100 UV) 861115+3 and others 07/21186 861217- W39,000,000 44,609 Gold Star Telecon. 08/051/8 08120t86 08/26/86 08t26/80 44,609 tOO 861218-F anld othms 07/31/86 861309 W186,188,000 214.226 Daokwang Kunep 08t12/86 11110180 09t17/86 11/20Q86 214,226 100 881310Q3 and others 08/16/86 861423- W6,199.300 7,090 Sdna Ebectric Co. 09130/86 09/30/86 09/22186 09125t86 7,090 100 861424F3 and othes. 08/3"/0 861851- W95,891628 108,716 Shinseong industrial Co. 09/9/806 11/30/86 09/13/86 03/0687 108,716 too 801424-F3 and others 03104187 870968 W247,881,695 303.282 D Myong Eectric Co. 06118187 06/30/87 07/04t87 11/04/87 303.282 100 870970-F3 05113/87 871021-F3 W36,200.000 37,829 Gold Star hdustial Co. 06/22/87 06/30187 10lWlW87 10101087 37,829 100 05114187 87104143 W3,600.000 4,361 Doe Young Co. 05/27/87 06/30/87 07/101/7 07/10/87 4,361 100 05/20187 871088- W48,244.000 57,626 Hanyang 0/01/87 07/31/87 07110187 09/09/87 57,626 100 8710908D3 06/30/87 871186- W220,395,000 270,786 Dongil 06/05/87 07/31/87 06/181t7 10/16187 270,786 100 87116`43 06/4/87 871218-f3 W12,775,887 15,883 Hani Cement 06115187 07/31/87 08tO3t87 08105/87 15,883 100 08/27/87 871428-F3 W49,850,000 62,064 Yean Kyong Co. 07/08/87 08/31/87 09/0U87 09/05/87 62,064 100 05/27188 8812?4t3 W237,200,000 331,655 GOdd Star hId. 05/27/88 08127/88 10/06/88 10/06188 331,656 100 System, Co. 07104/88 881598-F3 W110,796,000 154,830 Kukje lectric 07/04188 11/05/88 10/04/86 1010418 164,830 100 WIre Co. Conra for the CTC Proje for Dongdaeu - Pusan Secton. CD IIF; * Io r_ = Page 3 of 3 A~~ 4 s-X*1 ~~0 - -- 1 "''1 § ff u; ;d I S~~ - Ii E 4 1k-:. . - d- } 2~~ §E g KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 13: Implementation Schedule 1 Preliminary design . Detailed design and specifIcation i requalflkatlon of bidders h Bidding document preparation (OSROK1 1 Cal forbids I Evaluation and signature of contract 1 ApprWisal * Negotiations t.n * Board - 10. kInpementation: Suweon-Cheonan 11. Impementation: Cheonan-Daeson 12. Implementation: Daelon-Dong Daegu 13. Implementation: Dong Daegu-Busan : - 36 - KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 14: Overseas Training -.fs f tru -D . .l__en _Maik C . CTC 33 239 143,811 Highepeed RaD 33 St 140,629 Computer 5 10 21,977 Preparationfor 61 114 151,767 Restructuring of KNR l Computer operation 16 32 3,616 Roling stock maintenance 8 16 43,200 Totd E, 15 492 i45,000 37 - Page 1 of 2 KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 15: Progress of Management Improvement Plan i. Reduction of Operating Frequencv of Bidulgi Train '~~~~~~~ =l r= - -_ _ _ L __ ___ .___ ___=__.__: Year '85 '86 '87 '88 '89 '90 '91 '92 Daily Operating Frequency 476 471 463 435 385 365 274 274 Reduction t14 5 8 28 S0 20 91 0 *~ =_ - - r _ I [a.; 2Numbr of Closedand Downgraded Stations Actual Classification T - __ __ __ __ __ __ __ __ __'85 '86 '87 '88 I '89 '90 '9t --- 1 9-----10 ----- t | Station _ 6 3 Simple Station _ Downg, ,ded Station 7 3 2 21 2 4 1 Total 7 4 2 2 8 7 1 From Station to Simple Station iii. Ab6fiihuiint-of Unprofitabline__n Casification Section Length (km) No. of Station Abolished Date Ansong Line Chonan-Ansong 28.4 6 January 1. 1989 Jlnsam Line Kaevang*Samchonpo 29.1 3 January 20, 1990 Total 57.5 9 IV. Conversion of KNR to Public Corporation December 30, 1989: The Railway Corporation Law was enacted. September 26, 1990: The Corporation Establishment Affairs Bureau was opened. August .1992: The government policy for implementing the conversion of KNR into a Public corporation was reported to the President. - 38 - Page 2 of 2 V. Construction of the Modem Station Building Under Joint Venture Project With Private Companies l Construction Work Station Scale Starting Date Completion Date Seoul July 31t 1987 March 11 1 989 Above ground: 3 stories Underground : 2 stories Area: 25,129m2 Tonginchon June 16, 1987 April 10. 1989 Above ground: 5 stories Underground: 3 stories Area: 22,622m2 Youngdeungpo September 1, 1987 May 4. 1991 Above ground: 8 stories lOpen to passenger Underground: 5 stories services only in Area: 94,338m2 July 21, 1990) Pupyong July 22. 1992 1995 Above ground: 8 stories Underground: 3 stories Area: 46,900m2 Puchon 1992 1995 Above groundr: 8 stories Underground: 2 stories l! ___________________ Area: 61,170m2 Chongryangri 1993 1996 Above ground: 12 stories Underground : 3 stories Area: 128, 760m Taegu 1993 1997 Above ground: 12 stories Underground : 5 stories Area: 126,000mr Taejeon 1993 1997 Above ground: 9 stories Underground : 3 storIes ___________________ _ Area: 95.860m2 Wangsibri 1993 1998 Above ground: 6 stories Underground : 3 stories Area: 71,980m2 Vt. Status-of Increased Tarfff Rate (Unit. gO Passenger Date Freight Remark Saemaul Mugunghwa Tongil Bidulgi (Average) December 31. 1990 15 8 a1 12.3 _~~~~~~ _~ 9.8 July27, 1992 17.7 12 8 a 7 9.8 VIl. Rental Car Service April 10, 1986: KNR began rental car services to passengers. September 30, 1992: Rental car service in place at 35 stations. Rental cars are owned by private companies. KOREA SEOUL-SUSAN CORRIDOR PROJECT Loan 2600-KO Table 16: Income Statement For the Twelve Months Ended December 31 (Won millions) Accont | 1984 | 19S 1986 |1981 1088 | 1989 | 1990 | 1991 1992 Operatinq Revenue Passenger 272,150 294.474 321,167 349,706 380,897 424,872 478,277 582,974 639.221 Baggage 13,206 13,154 13,656 13,973 15,270 17,356 19,480 23,613 41,723 Freight 217,810 230,813 244,892 249,713 262,445 256,769 257,755 310,923 310,844 Other 66.333 24.618 42,444 37,776 48,052 60,120 72,589 45,096 Total Opeang Revenue 569.499 563,959 622.169 651,168 706,664 759,117 828,101 862606 991.788 Other Income 22,973 37,302 25,260 30,243 46,385 77,909 51,613 66,009 51,299 Total Revenue 592.472 601,261 647,409 681,411 763,049 837.028 879,714 1,027,615 1,043,087 Ooeratnn Expenses Labor 212,209 223,014 243,895 266,302 301,842 365,188 432,146 527,836 609,226 . AdmninistratIon 115,658 101,902 105,427 114,247 119,761 126,009 131.966 145.046 (424,697 Asset Related 258,378 268,920 280.629 284,099 297,327 288.847 294,668 326,616 ( Tlotal Opratng Expenses 686,245 693,836 629.961 664,648 718,930 780,044 868,770 999,498 1.033.923 Non-Operating Expenses 3 897 1,996 1,524 1,247 1,123 1,753 1,309 1,972 (89.707 Other Expenses 14,155 15,768 22.771 19,190 35,842 57,687 21,780 27,689 f Tota Otde Expeses 18.052 17,7B4 24,295 20.437 36,965 69,340 23.089 29,661 89,707 Net Ircone (Loss) (118251 (10,339) (6,837) 13,674) (2,840) 12,358) 12,145) (1,6441 (80,543) Source: KNR (1993) KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 17: Balance Sheet As of December 31 (Won millions) Account I 1984- -' ĥ96 1961T197TTTT9T0 90j 19119 Current Assets Cash 15,053 10,430 14,568 13,740 13,332 23,989 80,371 130,820| 167,712 Accoins ReceivabAle- 22,268 22,729 26,638 27,534 31.050 34.007 36,700 38,278 34,735 net of allowance for doubtl accoums Inventory/Materials 36,034 41,198 38,273 37,407 38,548 37,283 40,756 46,827 48,220 Other 8,819 18.233 9,004 15,853 12,369 13,149 30,867 73,562 92,810 Total Current Assats 82,174 92,590 88.473 94.S34 95,299 108A28 188,694 289,287 343A477 Fixed Assets Land 676,493 857,070 890,147 921,301 949,273 932,475 1,331,896 1,394,900 1,394,900 Structures & Equipment 2,518,115 2,735,482 2,978,890 3,209,804 3,446,959 3,618,008 3,936.296 4,384,662 4,199,734 o Less Accumulated Depreciation (662,355) 1728,592) 1804,008) (853,934) (945.713) (1,023,813) (1,111,244) (1,194,3001 (1.267.847) Net Axed Assets 2.630.263 2.883.960 3.065.029 3,277,171 3,450,519 3,526,670 4,156,948 4,585,282 4.326.787 Work in Process 0 1,212 8,328 18,046 21,760 25.558 29.062 34,472 970,890 Deferred Assets 13,831 94,067 138,085 181,604 128,647 66,636 84,122 80.897 63,614 Total Asses 2,626,258 3,051,829 3,297,91S 3,571,35S 3,696,215 3,727,192 4,458.826 4.989,918 6,704.768 Source: KNR 11993) ,~~~~~~~~~~~~~ KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table I8: Uabilities and Equities As of December 31 (Won millions) | ; iAccount i984 jP 1986 | 10X86 . ^| I s} ;i 1 199 1991 | 19[t92 Cuwrent UabilWes Accounts Payable 37,826 59,299 565,129 65,706 73,132 67,211 53,928 78,910 (435.395 Accrued tnterest & 12,010 9,083 8,204 8,918 7.809 8,633 6,276 5,930 ( Interest Payable Current Portin of 97.616 84,028 62,847 74,911 81,118 76,637 87,444 95,059 95,059 Long Term Debt Deposits & Other 46,398 65,068 86,201 130,756 131.990 62,017 245,632 419,766 400.000 Totd Curent LIabbUtes 193.750 217.458 211.381 280,291 294.049 214.298 393,180 599,655 930,464 Long Term Debt 892,886 1,020,489 1,161,563 1,252,997 1,178,220 1.164,710 1,250,611 1,372,806 1,693.658 Prvision for Pension Fund 18,178 20,381 19.841 20,147 90,101 57,018 47,751 38.774 30.388 8 . and Deferred Liabilities . _ L EouRv , 64.990 Rxed Captal 64,990 64,990 64,990 64,990 64,990 64,990 64,990 64,990 _ Capkal Surptus Revuation Surpus 1,448,011 1.646.685 1,734,746 1,797,468 1,852,617 1,852,617 2.311,867 2,311,867 (3,309,833 DOnated, Other Surpus 186,248 269,970 310.385 346,124 433,374 613,883 632,896 845,838 ( Earned Surplus Beagnnig Balance (165,980' 1177.805) (188,144) 4186,988) 1214,290) (237,9661 (240.324) (242,468) 1244.021) Het Inconme Loss) (11,825) ( 10,339) 16,837) 43.8741 (2,8461 (2,368) (2,1461 (11644) 180,534) Ending Balance (177.805) (188,144t 4194.981t 1190,662) (217,136) 1240.324) (242.469) (244.012) 1324,551) Tetal E7uity 1,523.,444 1.793,01 1,915,140 2,017,920 2,133,845 2,291,166 2.767.284 2.978.683 3.050,268 Tot Ubiite and EquIty 2,626.268 3,061.829 3,297.01 3,5713SS 3,696,216 3.727.192 4,458,826 4.919,918 5S,704768 Source: KNR (1993) -42 - Page 1 of 3 KOREA SEOUL-BUSAN CORRIDOR PROJECT Loan 2600-KO Table 19: Economic Evaluation (Won billion) A. Signaling Component CosTS BEN8FITS yaar - ---T - ~|---------------~~ ---T--- T------ NET . oinu. Mait. Total Seweoov Chwonanw Daen/ Oongdaegl BENEFITS I . | ~~~~~~Clowo Dasjon Dongdae I Pusan Total 1986 10.00 10.00 0.00 -10.00 1987 15.00 15.00 0.00 -15.00 less 15.00 1S.00 6.01 4.27 2.76 2.64 14.68 -0.32 1989 10.00 10.00 6.32 5.31 3.39 3.15 18.16 8.16 19S0 1.36 1.36 7.41 6.11 3.73 3.46 20.72 19.36 1991 1.36 1.36 8.71 7.04 4.34 3.87 23.96 22.60 1992 1.36 1.36 10.01 8.09 8.00 4.45 27.55 26.19 1993 1.36 1.36 11.51 9.31 5.75 5.12 31.69 30.33 1994 1.36 1.36 13.24 10.70 6.61 5.89 36.44 35.08 1995 1.36 1.36 21.33 17.24 7.60 6.78 52.94 51.58 1996 1.36 1.36 21.33 17.24 8.74 7.79 55.10 53.74 1997 1.36 1.36 21.33 17.24 10.05 8.96 57.58 56.22 1998 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 1999 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2000 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2001 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2002 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2003 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2004 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2005 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2006 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2007 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2008 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2009 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 2010 1.36 1.36 21.33 17.24 13.04 11.63 63.23 61.87 48.56% - 43 - Page 2 of 3 B. CTC Component COSTS BENEFITS | Year ------T- 1 S------- -- NET Canst. Mait. Total IweonI Cheooani Oaasn Dongdaegl I BENEFITS =n==tr.j;M=am[Cheonan Da*n Dongdaeg Pusan Total 1986 0.00 ot.90 1987 1.90 1.90 0.00 *1.90 1988 1.90 1.90 0.00 -1.90 1989 1.90 1.90 5.18 3.28 1990 1.90 1.90 1.88 1.53 0.93 0.86 5.99 4.09 1991 1.90 1.90 2.18 1.76 1.09 0.97 6.89 6.65 1992 0.34 0.34 2.50 2.02 1.25 1.11 7.92 7.58 1993 0.34 0.34 2.88 2.33 1.44 1.28 9.11 8.77 1994 0.34 0.34 3.31 2.68 1.65 1.47 13.24 12.90 1995 0.34 0.34 5.33 4.31 1.90 1.69 13.77 13.43 1996 0.34 0.34 5.33 4.31 2.18 1.95 14.39 14.05 1997 0.34 0.34 5.33 4.31 2.51 2.24 15.81 15.47 1998 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 1999 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2001 0.34 0.34 5.33 4.31 3.26 2.91 18.81 15.47 2002 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2003 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2004 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2005 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2006 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2007 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2008 0.34 0.34 5.33 4.31 3.26 2.91 15.81 15.47 2009 0.34 0.34 5.33 4.31 3.26 2.91 16.81 15.47 2010 0.34 0.34 6.33 4.31 3.26 2.91 16.81 15.47 58.81% -44 - Page 3 of 3 C. Composite COkSTS BENEFITS yes - -------tr- - '------- --~--- ----'---- - NET Constr. Mawit. Tota Sewean/ Cheonar Daejon/ Drndaegi BENEFITS = lt i 16.90 Choonan sDaetn Dongdaeg Pusan Total 1986 10.00 10.00 0.00 0.00 0.00 0.00 0.00 -10.00 1987 f6.90 16.90 0.00 0.00 0.00 0.00 0.00 -16.90 1988 16.90 16.90 5.01 4.27 2.76 2.64 14.68 -2.22 1989 11.90 11.90 6.32 5.31 3.39 3.15 18.16 6.26 1990 1.90 1.36 3.26 9.28 7.64 4.66 4.32 25.90 22.64 M991 1.90 1.36 3.26 10.88 8.80 5.43 4.84 29.95 26.69 1992 1.70 1.70 12.51 10.11 6.25 5.57 34.44 32.74 1983 1.70 1.70 14.39 11.63 7.18 6.40 39.61 37.91 1994 1.70 1.70 16.55 13.38 8.26 7.36 45.55 43.85 1995 1.70 1.70 26.66 21.55 9.50 8.47 66.18 64.48 1996 1.70 1.70 26.66 21.55 10.92 9.74 68.87 67.17 1997 1.70 1.70 26.66 21.56 12.56 11.20 71.97 70.27 1998 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 1999 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2000 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2001 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2002 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2003 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2004 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2005 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2006 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2007 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2008 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2009 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 2010 1.70 1.70 26.66 21.55 16.30 14.53 79.04 77.34 49.8196 - 45 - BIBLIOGRAPXY 1. Staff Appraisal Report - Seoul/Busan Corridor Project (Loan No. 2600-KO). April 1985. Report No. 5570-KO. 2. Staff Appraisal Report - Railroad Systems Modernization Project (No Loan Number). April, 1992. Report No.10485-KO. 3. Project Completion Report - Coal and Cement Distribution Project (Loan 2267-KO). December, 1989. Report No.8265. 4. PPAR - Sixth and Seventh Railway Projects (Lns 1542 and 1836-KO); and Coal and Cement Distribution Project (Ln 2267-KO) June, 1992. Report No.10777. 5. Korea National Railroad: Review of Operational Efficiency. June, 1987. Report No. 6692-KO. 6. Supervision Reports. 7. Project Files.