RESTRICTED Report No. AS-133 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF KOREA (in four volumes) VOLUME IV TRANSPORTATION January 23, 1968 Asia Department CURRENCY EQUIVALENTS U.S. $1. 00 = Won 270 Won 1, 000 = U.S. $3. 70 Won 1, 000, 000 = U.S. $3, 703. 70 This Report is based on the findings of a Mission which visited Korea in September 1967. The Mission was composed of the folowing members: Cornelis J.A. Jansen Chief Shu-Chin Yang General Economist Guenter H. Reif General Economist M. Shafi Niaz (FAO) Agriculture W.F. Doucet (FAO) Fisheries Jacques M. Gruot (BCEOM) Transportation This Volume was prepared by Jacques M. Gruot) who was the director of the Bank-financed transportation survey in 1965/66. The present volume contains a revision of major conclusions of the survey in the light of subsequent developments.  TABLE OF CONTENTS Volume IV Tran ortation Page No. LIST OF ABBREVIATIONS I. GENERAL FINDINGS AND RECOMMENDATIONS ............. 1 A. Introduction .................................. 1 B. The Outlook for Traffic ....................... 3 C. Tariff and Financial Results ..... ...... 5 D. Investments in Transportation During the SFYP.. 6 E. Investments by Mode of Transportation ........ 7 F. Recommendations ............................... 9 II. RAILWAYS ....................................... . 13 A. KNR Passenger Transportation ............... 13 B. KNR Freight Transportation .................... 14 C. KNR Operating Results and Tariff Policy ....... 15 D. Passenger Stock Requirements .................. 16 E. Requirements of Freight Rolling Stock ......... 17 F. Requirements of Locomotives ..i................ 19 G. Railroad Investments ....................... 20 H. Need for Technical Assistance from Abroad 23 III. HIGHWAYS AND HIGHWAY TRANSPORTATION ............... 25 A. Highway Transportation ........................ 25 B. Motor Vehicle Fleet .......................... 27 C. Highway Expenditures .......................... 28 D. The MOC "Major Trunk Highway Construction Plan" and Need for Technical Assistance ............ 32 -2- Page No. IV. HARBORS AND SHIPPING ..... ,.... 35 A. Harbor Traffic ............................. 35 B. Harbor Investment and Dredging Programs ...... 37 C. Port Finances ................................. 41 D. Port Administration and Need for Technical Assistance ..................... .... 41 E. Ocean-Going Shipping ............ .. 42 F. Coastal Shipping . ........ ....... h V. CIVIL AVIATION ....... .................... 6 A. Air Traffic ................. .... . ... 46 B. Infrastructure Investment Programs .......... 46 C. Maintenance and Operation Expenses ........ 47 D. Korean Airlines (KAL) ....... .......7 ANNEX: COAL, CEMERT AND POL TRANSPORTATION A. Coal Transportation ......................... 1 B. Cement Transportation ........................ 2 C. Transportation of Petroleum, Oil and Lubricants (POL) ............... ........... STATISTICAL ANNEX (Tables 1 - 35) MAP LIST OF ABBREVIATIONS 1. Ae of the Korean Government EFB Economic Planning Board MOT Ministry of Transportation MOC Ministry of Construction MCI Ministry of Commerce and Industry MOF Ministry of Finance MAF Ministry of Agriculture and Forestry KNR Korean National Railroad KAL Korean Airlines BOK Bank of Korea 2. Planning Documents FFYP First Five.-Year Plan SFYP Second Five-Year Plan ORB Overall Resources Budget KTS Korea Transportation Survey  I. GENERAL FINDINGS AND RECOMIMENDATIONS A. Introduction 1. An integrated.transportation survey was carried.out in Korea from November 1965 to June 1966. It included the entire country and. all modes of transport. Its primary function was to recommend. a detailed transportation investment program for the Second. Five-Year Plan 1967-1971 (SFYP). According to the objectives established,for the progress of the economy during the SFYP by Korea's central planning agency, the Economic Planning Board(EPB), the survey was based.on the assumption of a GNP growth rate of 7%. The investment program recom- mended by the Korea Transportation Mission has been partly adopted by the Government. 2. In fact, the economy developed.in 1966 and 1967 much more rapidly than had besn Qxpected. A reassessment of the development of transport during the SFYP has become necessary. The primary function of this report is to review the traffic forecasts, the recommendations and the suggested.investment program made in the Korea Transportation Survey (KTS) report.!/ This report is based on the assumption of a GNP growth rate of 10.5% in 1967 and. 10% in the last three years of the SFYP. The assumption of a 10% GNP growth rate conforms to the present expectations of Korea's planners. An assessment of the feasi- bility of this rate is given in Volume I of this report. 3. One of the most striking features of land.transport in Korea is the disproportion between the roles played by the railroads and the highway transport system. At the end of 1966 the Korean National Rail- road network comprised more than 3,000 km of road.s, but there existed only 1,900 kcm of paved,public roads (including city streets). The total inventory of motor vehicles amounted. to only 50,000, i.e. one vehicle per 600 inhabitants. In the development phase which Korea has now entered., special attention should be given to road transport so as to achieve a balanced. utilization of both types of transportation con- sidered as mutually complementary. This was one of the main conclusions of the KTS. The subsequent acceleration of economic growth has further accentuated the need.for increased development of road transport. 4. Another feature is a generally insufficient capacity in the transportation sector resulting in the overcrowding of all types of inland transportation. The very high rate of economic growth in Korea in recent years has led.to bottlenecks in transportation. At least one example may'be found in the lack of transportation facilities for limestone transportation for use in agriculture. Complaints by the 1/ Although it has been attempted.to make this report self-sufficient, consultation of the KTS report may be useful. -2- business community about delays in shipping are general and appear founded in fact. The Mission was, however, not equipped to survey methodically the delay in the transportation of goods. 5. The fact that the share of the transportation sector in the national economy is still insufficient is also reflected by i) the low percentage of the value added of transportation in relation to GNP, and ii),the low percentage of the capital formation of transportation in relation to the total domestic fixed capital formation (Table 2). 6. Value added: The transportation share in GNP formation, although increasing steadily during the FFYP, was only 3.3% in 1966 This percentage generally ranges between 6% and 9% in other countries1- and although there is wide variation between countries due to different geographical dispersion of economic activity, a value under 5% almost always indicates underdevelopment in the transportation sector. The dispersion of activity factor not being particularly favorable in Korea, there is no doubt that the present relative contribution to GNP is below the optimum. Between 1961 and 1966 the value added of transportation, at 1965 constant prices, increased at an average rate of 15.3% per annum, which is comparable to the traffic increase rate.Z/ The situation, how- ever, was quite different for railroad and highway transportation. The value added of the former increased at an average rate of only 8.7% per annum, i.e. less than the related traffic increase which was about 11%. The value added of the latter increased by 22.1% per annum, which is more than the related traffic increase, taking into account the slow develop- ment of freight transportation. 7. This divergence is probably in part due to relative inflexibility of rates rather than to a change in the economic contribution of these transport modes. As far as railroads are concerned, an explanation can be partly found in the fact that, at constant prices, the fares decreased during the FFYP. But the low tariff level cannot account for the low percentage of value added of transportation, as the railroad tariffs allowed quite similar profits in each year of the considered period.2 The reason is to be found in the small traffic volume in relation to the requirements of the economic development of the country. 1/ The percentage tends to increase with per capita income. See H.B. Chenery, "Patterns of Industrial Growth", American Economic Review, September 1960. 2/ When adding the city passenger traffic to the intercity passenger traffic (Table 1), total passenger traffic figures are 9.94, and 21.12 billion pass-km in 1961 and 1966 respectively. Yearly increase rate is 16.3%,It is 13% for goods (Table 1), 1819 for harbor traffic. 3/ KNR lost money on freight, but the loss was made up for by profit on passengers. -3- 8. Capital formation: On an average, the share of capital forma- tion in the transportation sector! in relation to total capital forma- tion in the country was 16.64% during the FFYP, while a level between 20 and 25%,in developed as well as in developing countries,is more appropriate.Z/ This shows that past investments were insufficient to remove the existing bottlenecks. B. The Outlook for Traffic 9. The Mission's forecast with regard to the development of traffic during the remaining years of the SFYP is shown in Table 1. 10. (a) Pasengers: Traffic increased at an average rate of 14.1% per annum during the First Five-Year Plan (FFYP), which denotes an elasticity of 1.7 in relation to GNP. Owing to a faster increase in motor vehicle traffic, the share of the railroads in total passenger transportation dropped from 66% in 1961 to 55% in 1966. The same trends are likely to be observed in the future. Since it is normal for the elasticity of passenger traffic in relation to GNP to drop in the course of economic development, traffic may be expected to increase during the rest of the SFYP at the average rate of 15% per annum. The share of the railroads will drop to about h5 of total traffic in 1971. 1/ In this analysis, figures are drawn from the BOK National accounts. They differ from the EPB investment figures and from the investment expenses as provided by the services. 2/ See, for instance, examples provided by Jan Tinbergen in "The Design of Development": I. United States'(N of national wealth invested in railways, shipping and canals): 1880: 28.5 1890: 26.5 1900: 27.0 1912: 25.1 1922: 22.2 1939: 22 to 23 II. India 1951=56: 20 Mexico 1939-50: 27 III. Percentage, for 4 to 5 post-war years, of gross investments devoted to railways, shipping, air transportation, motor traffic and communications: Belgium : 24 Norway : 30 U.K. : 17 Netherlands: 23 France : 19 11. (b) Goods: Traffic increased at an average rate of 12.9% per annum during the FFYP, which denotes an elasticity of 1.5 in relation to GNP. The share of the railroads in total transportation of goods decreased slightly from 83% in 1961 to 80% in 1966, but only in relation to coastal transportation, and more especially of POL coastal transporta- tion. In fact, the increase in the rate of truck transportation was the lowest of all, which must be considered abnormal taking into account the artificially low level of highway freight traffic: reasons are to be found in the poor condition of highways and vehicles, and in the rates, which are much higher for highway than for railroad transportation. Considerable infrastructure development will be necessary to permit a healthy growth rate of trucking and a reduction in the very high cost of road transportation of goods. Another important point is the slow increase of total freight transport between 1965 and 1966: it was only 7.2% while GNP increased by 13.4%. This is a further indication of the bottlenecks which exist in the overall transportation system. 12. Goods traffic may be expected to grow during the SFYP at a high rate of 19% per annum. This tremendous growth is primarily due to the rapidly increasing demandlY for POL transportation. The part played by coastal transportation, not only for POL5 but also for coal and cement and other bulk commodities, will be more and more important. We have also assumed that action will be taken by the Government (highway invest- ment, approval of truck import or local assembly) to permit truck trans- portation to develop at a more rapid pace than the railroads. Under these conditions, the share of the railroads should have decreased to. 63% of total transportation by 1971 (compared to 28% for coasters and 9% for trucking). 13. (c) Harbor traffic: Traffic increased at an average rate of 18.2% per annum during the FFYP, and may be expected to increase at a rate of 29% during the SFYP. This acceleration is primarily due to the tremendous increase expected in POL traffic, for crude oil imports as well as for coastal transportation of finished products. It should be pointed out that the increase in harbor traffic will not hit all harbors to the same degree and that the increase in POL traffic will require relatively small investments in port facilities. By the end of the SFYP, coastal traffic in harbors should be equal to sea-going traffic, while POL handling should be equal to dry cargo handling. 14. (d) Air traffic: Growth rates of 20% and 23%, comparable to past trends, may be expected during the SFYP for international and domestic passenger traffic respectively. 1/ And to the fact that shifts from land to coastal transportation of POL involve a lengthening of the average transport distance. C. Tariffs and Financial Results 15. The share of railroads, both in passenger and goods transpor- tation, decreased during the FFYP, to the benefit of highway transporta- tion for passengers and coastal shipping for goods. This difference can be partly explained by differences in the structure of tariffs: 16. (a) Passengers: Bus and railroad fares are at approximately the same level. Basic bus fares are 1.33 won per passenger-kilometerl/ while the 1966 KNR average revenue was 1 w/pass-km. In fact, the KNR passenger fares range from 0.81 w/pass-km in third class to 1.62 w/pass-km in second class and 3.20 w/pass-km in first class, with additional charges for certain trains. Only third class is less expensive than bus, while offering less comfortable, and often less frequent and convenient, services. The bus companies and the passenger part of the railways appear to be profitable, although the profit rate is not high. KNR however, in view of rising costs, raised passenger fares by 50% in December 1967, while important changes in the bus fares are unlikely in the near future. Bus transportation will become even more compet-tive and as a consequence KNR traffic is likely to drop. This probable development was taken into account in the preparation of Table 1. 17. After the last fare increase which occurred in August 1967, the average revenue for air transportatior is approximately 12 w/pass-km, about twice as much as the first class sleeping car fares on the Seoul-Pu. San run. Operation of domestic lines was regularly losing money in the past. The Mission was unable to judge whether the rate increase is sufficient to provide a reasonable rate of return to Korean Air Lines (KAL); this also depends to an important extent on improvement of the quality of management of KAL. 18. (b) Goods: On an average, trucking rates are much higher than railroad rates; in 1966 the average rate was 1.20 w/tkm for the railroads, 10.5 w/tkm for truck transportation. It must be noted that KNR loses money on freight (at least 30% of related income in 1966) while truck transportation is profitable (10.5% of income in 1966). KNR has raised rates by 30%, while substantial changes in the truck rates are unlikely in the near future. Truck transportation will not become much more competitive until the condition of the highway network is fundamentally improved. 19. Comparison of coastal shipping and railroad rates is difficult as the former vary widely according to the distance, size of vessel, and-- commodity transported. It may be stated, however, that coastal transpor- tation becomes competitive for bulk transportation when the size of the 1/ The 1966 bus average revenue was 1.50 w/pass-km, inclusive of city transportation. - 6 - vessel reaches a certain level. 1/ It does not seem that coastal shipping lost money in the past years. The present rate-setting system, however, needs revision in order to reflect more closely the cost of transportation. 20. It is understandable that, owing to the high truck rates, trans- port shifts made necessary by the lack of railway capacity primarily affect coastal shipping. In the future, one fundamental aim of Korean transportation policy should be to drastically cut the cost of truck transportation by improving the condition of highways and increasing the capacity of trucks. Improvement of harbors and of loading and unloading facilities, and increases in the size of vessels, could similarly lead to coastal rates for bulk transportation well below the KNR rates. D. Investments in Transportation During the SFYP 21. In this section an attempt is made to estimate the investment requirements for the transportation sector from the macro-economic point of view. According to the ORB, transportation investments in 1967 and 1968 would amount to won 31.4 and 43.3 billion (Table 3), i.e. won 27.2 and 35.9 billion at 1965 constant prices. When comparing these amounts to total capital formation in the same years, i.e. won 237.3 and 263.3 billion at 1965 constant prices, the share of the transportation sector appears to be 11.5% and 13.6% of the 1967 and 1968 total investments (in 1967 and 1968 respectively). These figures are even lower than the average ratio of transport investment to GNP during the FFYP. 2/ It should also be pointed out that 1967 investment is even lower than investment in 1966. These facts suggest that the planned investments are insufficient although the increase in 1968 over 1967 is substantial. 22. A rough evaluation of the total investments requi.red in the transportation sector during the SFYP may be derived from the considera- tions dealt with in the Introduction. According to the Mission forecast (see Table 1), total traffic in Korea may be expected to increase at an average rate of 179 or more per annum (15% for intercity passengers, 19% for goods). It is likely that the value added will increase by at least the same rate. 3/ Assuming the capital output ratio to be the same 1/ Between 2,000 and 3,000 DWT (tentative figures) according to a rough calculation made by the Korea Transportation Mission in 1965/66., It must be noted, however, that the programs of the responsible government agencies in the transportation field suggest that invest- ments would be actually higher (Table 3, note). 3/ The 1968 ORB foresees a growth rate of 17.2% between 1966 and1967, 16.8% between 1967 and 1968. -7- as during the FFYP1/ total capital formation in transportation during the SFYP should be at least: /T30.15 x (1.17) - 30.15)7 x 7.08 = won 255 billion (at 1965 constant prices) 23. One more approach may be used. The revised outlook for 1971 mentioned in the 1968 ORB foresees that total investments during the SFYP period will amount to won 1,430 billion vs. 980 in the original SFYP, i.e. a 45.9% increase. The same coefficient applied to the originally planned investments in transportation, won 150 billion, leads to a revised figure of won 219 billion. If we assume that a 20% share - of transportation in total investments is normal, transportation invest- ment during the period should be won 286 billion. As a conclusion, and considering that the investments listed by EPB in the ORB do not include all the investments actually made in the sector (private vehicles, heavy road maintenance equipment, dredgers) won 220 billion may be adopted as a minimum.k/ The realization of this program should require, for instance, that investments in transportation, as they are listed in the OR4 increase by 20% each year (at constant prices) from 1968 on, and reach 43, 52 and 62 billion won (at 1965 constant prices) in 1969, 1970 and 1971 respectively. Indications are provided below on what should be the trend in the distribution of investments per mode of transportation in relation with the investments planned for 1967 and 1968. E. Investments by Mode of Transportation 24. A breakdown of investments by mode of transportation is given in Table 3 for the years 1967 and 1968. The amounts are those used in the preparation of the ORB. Certain adjustments in these figures which the Mission thinks likely are given in the notes to the table. Our appraisal of the magnitude is given in the following paragraphs. 25. Railroads: The investments planned for 1967 and 1968 seen adequate as a whole. Attention is drawn, however, to the KNR under- estimation of future freight transport. This will lead to moie invest- ments than planned for the following years in rolling stock, marshalling yards, loading and unloading facilities, signalling and other fixed installations. The output of the rolling stock building workshops should be increased to match the demand to the extent possible. 1/ The incremental capital output ratio during the FFYP amounted to 7.08. This figure can be considered normal, or slightly on the low side, when compared with other countries. 2/ The Korea Transportation Mission had suggested won 201 billion. This figure included a 10 provision for contingencies, a provision for surveys and supervision, and investments which are not considered as transportation investment by EPB. -8- 26. Highwas: It is par bicularly in this field that investments are insufficient. Only 120 km of highways will be paved in 1968, while the development of traffic would require an annual paving of at least 500 km per year as was proposed in the KTS. The recommendation of the KTS on road paving, although adopted in the SFYP, is apparently not yet being implemented. Only 40 km of national highways will be improved in 1968 which is also extremely low in comparison with requirements. It is feared that accumulated delays in highway investment will do definite damage to the country's economic development in the coming years. This consideration should be kept in mind when planning the investment programs for the coming years. 27. Motor vehicles: The investments planned in the ORB for 1967 and 1968 are insufficient when taking into account the past trend of the fleet expansion as well as the requirements of transportation demand. It is likely, however, that-actual investments, which are mostly of a private nature, will be higher than planned. The supply of motor vehicles will increase with the proposed establishment of new assembling plants with a total output capacity of 29,000 vehicles per annum. However it seems likely that unit prices will increase. 28. Harbors: The investments planned for 1967 and 1968 seem adequate as far as harbors are concerned. But the construction of the second dock in In Cheon will require in the coming years much more money than originally contemplated. The Mission has reservations regarding the present plans concerning In Cheon which are discussed in paragraph Il. In Pu San,larger investments than envisaged by the Korean authorities may become necessary for harbor extension before the end of the Plan. Investments should be made in all ports to mechanize bulk cargo handling. Amounts proposed for dredging are far too low. The planned program of imports of dredgers may allow an improvement in the situation in the coming years. 29. Shipping: While the planned increase in coastal vessels is fully justified, the proposed investment for sea-going vessels seems far too high. In the opinion of the Mission, the present policy of rapid increase of the sea-going fleet may well be uneconomical, and unfeasible from the manpower point of view, and should be re-examined. 30. Airports: The investments planned for 1967 and 1968 are insufficient to make up for the past shortage and match the traffic increase. Substantial increases in the appropriations are needed in the coming years. The Mission questions the need for a second runway at Kimpo Airport. 31. Aircraft: Increase of the fleet for domestic lines should have high priority. The purchase of a second DC9 for international flights, and the project to buy other long-range jets, seem as unwarranted as the sea-going fleet increase. -9- F. Recommendations 32. General Poliy: It is of great importance for policy-makers to realize that in the development phase which Korea has entered, the transportation sector will be a key factor in determining the rate of economic progress. At present there is already insufficient capacity resulting in overcrowding of all modes of transportation. Costs of highway goods transportation are abnormally high. The situation will become worse unless investment is stepped up drastically. Investments in the transportation field have been insufficient in the past and are still deemed insufficient for the years 1967 and 1968. The share of the transportation investments in the overall investments of the nation should be substantially increased in tae future. Special emphasis should be given to highway investments, in particular for paving and improving of existing highways, in order to remove the existing bottlenecks and cut transportation costs. -In the maintenance fie1d, appropriations are far below requirements for all modes of transport and should be increased. 33. Administration: In order to increase management and operating efficiency, changes should be made in the present legal status and general organization of the agencies responsible for transportation in Korea. Recommendations had been made to that purpose by the Korea Transportation Mission. The Government generally agreed with taese recormendations, and projects of reforms have been drafted in certain cases by the Ministries concerned. However, no action has been taken to implement these reforms. It should be understood that the already recommended structural reforms constitute a prerequisite to sound management of the transportation agencies and to the right utilization of the important investments which are to be made in every field during the coing years. 34. KN is established as a separate administrative ectity in the- Ministry of Transportation with its own budget and accountIng. However, for all important matters the proposals of the KFR General Manager must be approved by the Minister of Transportation, the National Assembly, the Prime Minister or the President. The Management of YNR should be granted greater autonomy and be allowed to use commercial methods, particularly as regards the handling of funds, the organization of personnel and the power to make decisions. 35. Port organization is characterized by a division of responsibility among various authorities. The Ministry of Construction is responsible for harbor construction and maintenance, and dredging; the Ministry of Transportation for harbor operation, construction and maintenance of aids to navigation, and shipping; and the Ministry of Finance for collecting taxes and duties and licensing the stevedoring and lighterage companies. The present financial system does not reflect the actual results of port - 10 - management. The absence of unified command deprives the government officials of the stimulus of responsibility and achievement. Marine statistics are of insufficient quality to help to ensure efficient opera- tion and planning. The present organization should be replaced by a Port Authority, responsible for the operation, maintenance and construction of harbors, should be given considerable autonomy, and should utilize an accounting system of the same standard as operated in industrial undertakings. 36. Highway administration is also characterized by a division of responsibility among various authorities. The Ministry of Construction is responsible for construction of national highways; the Ministry of Transportation for highway transportation regulations; the Provincial Governments for maintenance of all highways. In the MOC organization, highway services only consist in a section of the Public Works Bureau, which has neither the authority nor the competence to formulate and implement a true highway policy. There is no coordination of planning and action between Ministries and Provinces, between maintenance and construction, and between the Ministries themselves. All highway matters should be handled by a.separate Government Agency for Public Roads, granted with sufficient powers and carrying full responsibility for highway planning, constr-uction and maintenance. 37. The Civil Aviation Bureau is a very small organization within the Ministry of Transportation which has never had the necessary means to properly maintain, operate and develop the network of air facilities. CAB should be allowed to expand and become an administration of a size in accordance with its responsibilities, and with sufficient means to deal with the problems arising from an explosive traffic increase. 38. In general the data-processing system is deficient in every transportation agency. New statistical procedures should be established in each agency, and exchange of information between agencies should be bettered. 39. Coordination problems have not been studied so far in Korea and the economic aspects of the transportation problems have been generally overlooked. All studies involving coordination problems should be carried out by a special office of coordination responsible for all research in the field of transportation and for the formulation of the transportation policy of the Government. 4o. Railroads: Traffic is likely to increase at a faster pace than expected by KNR, which will require more investments than originally planned in rolling stock procurement and improvement of station and line capacity. The rolling stock building workshops should.be equipped with a view to substituting to a larger extent local construction for imports for passenger coaches and freight cars. Specific surveys, a list of which - 11 - is provided below, should be carried out with technical assistance from abroad. 41. Highways: The paving and improving programs should be drastically accelerated. An economic approach, more sophisticated than the system presently used,should be systematically applied to determine the priorities and characteristics of improvements to be carried out. 42. Harbors: The second dock in In Cheon should be constructed as soon as the designs are ready. The i.ssion is not in a position to give an opinion on the most economic type of closure to adopt. The solution, newly ccntemplated, of closing the inner harbor, should be carefully re-examined before a final decision is made. Other improve- ments should also be made in In Cheon harbor. An extension of Pu San harbor may be necessary before the end of the SFYP, and a feasibility and technical survey should be carried out without delay. Improvements in small harbors and in loading and unloading facilities should be studied..in relation to the development of coastal traffic with a view to determining the optimum characteristics of coasters. Import of dredges should be expedited as the volumes dredged aMually are still insufficient. 43. Airports: The existing runway in Empo airport is sufficient to handle traffic up to 1971 but it should be extended to 10,000 ft. A detailed engineering survey should determine the best location for a second runway - or a new airport. Construction of a second runway or new airport will not be necessary until the beginning of the third five-year plan. 44. Shipping: The present policy of rapidly expanding the sea-going vessel fleet should be re-examined. It is recommended that a detailed survey be made to analyze the financial condition of merchant shipping as well as the potential net contribution of shipping to Korea's foreign exchange receipts. A special study of oil shiping should be conducted before a decision is made about the purchase of crude oil tankers. As far as coastal shipping is concerned, local construction should cover the needs in new vessels, and no more imports should be necessary. 45. Aircraft: The economic feasibility of extending the fleet for international services requires to be studied further. However, there is no doubt about the need for procuring additional aircraft for domestic lines. ,6, Needs for external assistance: Technical assistance from abroad is desirable in the following fields. Each of these subjects has been mentioned in some detail in the respective section of the report. -Railroads: establishment of a new framework for statistical date collection; determination of traffic costing; feasibility of railcar utilization; improvement of coal handling facilities; redesign - 12 - of rolling stock and increase of the construction output capacity; review of marshalling yard location and operation; feasibility of line electrification. - Highways: establishment of a Government Agency for Public Roads; feasibility and preliminary engineering studies of some major highways; training the Korean administrators in the economic analysis of highway transportation. - Harbors: establishment of a harbor authority; reorganization of the present data collecting system. - Coordination: establishment of a Coordination Office for the coordination of all transportation planning. - 13 - II. RAITAYS A. KNR Passenger Transportation 47. The number of passenger-kilometers carried by TR increased by 25.3% between 1965 and 1966. The Economic Uinisters Conference decided an September 1, 1967, to raise the passenger fares by 50%, and the fares were so raised in December 1967. It is 1cely that this measure, will result in a slight traffic decrease, , since this is what happened after fare increases in the past (1957 and 196 ). 48. Results for the first 8 months of 1967 (6.79 billion pass-km against 5.60 in 1966, i.e. a 21.1% increase) suggest that the 1967 traffic will exceed 10 billion pass-km. The KNR had forecast a volume of 9.83 billion pass-km which is probably too low. For the calculation of traffic after 1967, K11 did not take into account the effect of the proposed fare increase. This effect, however, can only be guessed because there is no good approximation available of the traffic-fare level elasticity. 1/ The KER passenger transport volume over the 1955-1966 period can be represented by the following equation: x = 1.338 - 0.3046 x, - 2.98 (R = 0,928) x = log of xhe annual traffic volume in billion pass-km. xl = log of GNP at 1965 constant prices in billion won. x2 = log of the pass-km average revenue at 1960 constant prices in hundredths of won. The elasticity of traffic response to changes in GNP is 1.338, which is a normal level for a developing country. The partial correlation is 0,918, which is significant. The traffic-fare level elasticity is -0.3046, which is unusually low. But the partial correlation is 0.158, which is not significant at all and we will therefore not use this result. A year by year analysis is more helpful. It shows that the traffic-fare level elasticity i) increased regularly since 1955 and ii) is more sensitive to fare increase than to fare decrease. The 1965 traffic decrease suggests in fact a 1965 traffic-fare level elasticity as high as -1.0. - 14 - 49. The Hission made tentative traffic projections up to 1971. The projections suggest that the traffic forecasts of KNR are too high for 1968, 1969 and 1970, but may be roughly correct in 1971. The KTS forecast is mentioned for comparison. The Mission calculation is based on the following assumption: traffic-revenue elasticity: 1.34 traffic-fare level elasticity: -0, (fare increase) 11 i .ni -0,)4 (fare decrease) GNP increase: 10ei% (1967), 10% (1968), 10 and, as an alternative, 7% (1969, 1970 and 1971) passenger fare increase: 50% on January 1, 1968 consumer price index increase: 10% (1967), 7% (1968) Traffic Projections KNR -(KTS) High - (a drforecasts 1967 10.24 9.83 (9.69) 106859.(1967)65 104(9), 1969 10,87 (1.949 11.36 (1122) 1970 12033 on ua47 12.26 (y1,8) B. KNR Freight Transportation 50. W~hile the IMR commercial freight traffic, expressed in tkm., had steadily increased in the past, with an average yearly growith rate of 15% over the 1955-1965 period, it increased only by 7.4% between 1965 and 1966, in spite of a 13.4% GNP increase. This slackening seems primarily due to the fact that the increase in the capacity offered could not meet the demand increase In particular, trans- portation of fertilizer and limestone dropped in a spectacular way, Limestone consumption for agricultural purposes dropped from 450.,000 to 17T4,000 tons, According to KNR and to the (inistry of Agriculture, the car shortage is largely responsible for this decrease. Die to the increases in the freight car stock in 1966 and 1967, and some improve- ments in efficiency, the situation will improve in 1967. Results for the first eight months are in line with the M~R forecast of a 20.2% increase (total freight) as compared with 1966. All the'bottlenecks have not been overcome, h ee,adtedmand for the transport of limestone and other commodities still cannot be met. 51. Freight transportation projections up to 1971, based on the new SFP targets, appear in table . Total traffic will increase from 515 billion tk in 1966 to 99 billion ti in 1971., against 8 6 billion te forecast in the msS. Differences are primarily due to large in- creases in the transportation volume of coal, cement and POL, in spite of a noticeable shift towards coastal transportation Partly due to - 15 - this shift, the elasticity of the commercial freight traffic in relation to GNP will drop to only 1,15 between 1967 and 1971, as compared to almost 2 in the past. However, the KNR forecasts, which do not take into account the most recent targets established for coal and cement production, seem definitely too low. 0. KNR Operating Results and Tariff Policy 52. The KNR income statements from 1962 to 1966 are provided in table 5 together with the 1967 forecasts. Up to 1965, the financial situation was reasonably favorable and showed a profit even if it was low when compared to the value of the assets (the operating profit was less than 1% of assets in 1965 on the basis of replacement cost of assets). Profit was nil, however, in 1966, and 1967 will show a deficit. The fluctuations of the operating ratio and the recent further deteriora- tion are the result of the tariff policy of the Government. The last tariff adjustment occurred on January 1, 1965, with an increase of 15% in freight rates and 35% in passenger fares. The preceding rate increase had occurred cn January 1, 1964, with a 155 increase in both rates and fares. The IR request to increase freight rates by 20% as of July 1, 1966, was not agreed upon by the Government. The aconomic 1inisters Conference, however, decided on September 1, 1967, to raise freight rates by 30% and passenger rates by 50,Z, and this has been done. 53, As a result of the insufficient adjustments made in the past, the pass-km and tkm average revenues at constant prices (table 6) con- tinuously decreased from 1962 to 1967 (with the exception of the year 1965 for the passenger revenues), and the overall operating ratio increased continuously from 1963, The situation is quite different, however, for passenger and freight traffic. According to calculations made by KNR the former is making a profit, while the latter shows a large deficit. It is worth noting, moreover, that the lack of balance in the passenger and freight operating results, considered individually, shows a definite tendency to widen: while the passenger operating ratio decreased from 0.89 to 0.72 from 1962 to 1966, the freight operating ratio increased from 1.09 to 1.29. The last figure shows the sharp financial deterioration of freight transportation. 54. The KNR basic salaries were increased by 23% on April 1, 1967, and worker allowances by 30o on July 1, 1967. A 300 increase of basic salaries is contemplated for April 1, 1968. Other substantial increases in costs have occurred since the beginning of 1967. Even with the recent tariff increases, freight transportation revenues do not yet cover the cost, while passenger traffic continues to subsidize freight tariff to a greater extent than before, - 16 - 54a. It should be noted in this respect that the 1957 and 1965 fare increases resulted in a substantial decrease of passenger traffic, while freight traffic seemed quite insensitive to fluctuations in the rate level. The Government appears to be concerned by the impact of freight rate increases on the progress of the economy, and does not seem to consider the development of passenger traffic as essential to that progress. Tariff adjustment should occur, however, as soon as possible, not only to correct the present imbalance, but also to allow KNR to achieve a reasonable return on traffic as a whole. It is recommended, moreover, that, to the extent possible, tariff levels reflect the costs for both passenger and freight transportation. D. Passenger Stock Requirements 55. In 1966, the average fleet throughout the year totalled 1,507 units (railcars and passenger coaches), and passenger trans- portation amounted to 8,665 million pass-kra, i.e. 5,750,000 pass-km per unit. In 1964, 1,314 vehicles had transported 7,353 million pass-km, i.e. 5,596,000 pass-km per unit. These figures indicate on the whole satisfactory improvement in the utilization of passenger rolling stock. The Korea Transportation Mission had assumed in 1966 that, due to the improvement of equipment maintenance, and to the more intensive utilization resulting from heavier traffic and speed increases; the average run per vehicle, which was 258 km per day in 1964, would come to 330 km in 1971 (+2 g): On the other hand, it was felt desirable to reduce train congestion 1/ by increasing by 15% the number of vehicle-km per pass-km. With these assumptions, the average fleet needed in 1971 to transport 13 billion pass-km was found to be 2,075 vehicles, (2,150 vehicles by the end of 1971) i.e. 6,265,000 pass-km per unit. 56. The increase in passenger stock forecast by KNR (table 7) is in accordance with the 2,150 vehicle target for the end of the SFYP. This can be considered satisfactory even if the 1971 traffic is higher than expected and nears 14 billion pass-km instead of the 13 billion originally projected, in 4-hich case there would be a decrease in the load factor of 73%Z Two points should be noted however: 1/ The average number of pass-km per coach-km is about 65, which is very near the number of seats available. Congestion is therefore very high at peak days and peak hours. Definite occupancy records show figures as high as 1.5, 2, and even 2.4 passengers per seat in some trains. - 17 - i) The procurement program, as set out in table 7, foresees an increase of the railcar fleet in 1969, 1970 and 1971, which corresponds to the recommendations of the Korea Transportation Mission and approximately maintains in the future the 1964 proportion between railcar-km and total passenger vehiclenkm. As an alternative solution, KNR is now contemplating not to increase the railcar fleet and to keep it on its present level of 161 units. In such a case, the passenger coach fleet would have to be increased correspondingly. While it may seem advantageous to meet the traffic development by increasing the unit capacity of the trains, the greater flexibility offered by railcars in organizing passenger services should not be overlooked. A specific investigation should be made before any final decision is taken, ii) KNR originally planned to meet the passenger coach require- ments through local construction and to build 720 coaches during the SFYP. This figure has dropped to 442 so that 230 coaches should be imported in 1968. It is not clear whether this shortcoming is due to insufficient local construction capacity, or to a lack of domestic funds as compared to the possibility of obtaining loans. Measures should be taken to develop local construction of passenger coaches as well as of freight cars. E. Requirements of Freight Rolling Stock 57. In 1966, the average fleet throughout the year totalled 11,020 cars and total freight transportation amounted to 5,49 million tkm, i.e. 494,000 tkm per car. In 1964, 10,764 cars transported 4,522 million tkm, i.e. 420,000 tkm per car. At the beginning of 1967, the fleet was 11,454 units. Between 1967 and the end of 1971, KNR intends to withdraw 2,789 units, of which 487 will be rebuilt, so that the remaining fleet in 1971 will be 11,454 - 2,302 = 9,152 units. These cars will be primarily assigned to transportation of general cargo. They can be expected to transport 9,152 x 500,000 = 4,576 million tkm. 58. In line with our forecast of 1971 freight traffic (see section B), new freight cars should be procured by KNR for the transportation of 9,865 - 4,576 = 5,289 million tkm of bulk commodities. It may be expected that about half will be transported by consolidated trains and that, due to turnround improvement and carload increase, the yearly output per new car will be 700,000 tkm by ordinary train and 880,000 tkm by consolidated train, 1/ With these hypotheses, the total 1971 requirement will be 9,152 + 2,644 + 2,645 = 15,934 (1971 average) 0.70 - =0. 1/ cf. Korea Transportation Survey, Volume IV - page 125. Yearly output has been slightly diminished to allow for the KNR decision to order 50 t cars instead of 60 t cars as had been suggested. - 18 - which corresponds to an average increase of 90 cars per annum from 1967 on, and to a fleet of 16,410 units by the end of 1971. The yearly output per car would then be 619,000 tkm on an average in 1971. 59. Based on traffic in 1971 of 9,280 tkn, the KER forecast (i.e. 15,500 cars by the end of 1971, or 15,166 cars as 1971 average, see Table 8) corresponds to a quite comparable yearly output per car (612,000 tkm on an average in 1971). But the forecast is definitely too low when the revised targets for economic growth up to 1971 (mentioned in the ORB 1968) are considered. Whereas the changes in stock forecast for 1967 and 1968 are correct, they should be revised for the last three years of the SFYP and increased by 520, 220 and 170 units in 1969, '1970 and 1971 respectivoly. The result would be an average increase in stock during each of the years 1969, 1970, 1971 of 840 units. 60. An indicative evaluation based on the traffic forecasts per main commodities leads to the following,total fleet composition by the end of 1971: Box cars : 6,200 Gondolas : 3,800 Hopper cars : 3,000 Tank cars : 1,700 Others : 1,710 16, 10 61. Comparison with the KNR forecasts shows that the suggested in- crease in car stock should primarily concern the hopper car fleet (in 1971, transportation of coal, ores and limestone will amount to more than 4,000 million tkm). A detailed breakdown of the year by year requirements could be done only after a more complete technical appraisal of the increase in traffic and KNR operations is carried out. However, some indications are provided below as to the growth of the fleet in 1968 and 1969. 62. In 1968, KMR intends to add to the fleet 600 50 t hopper cars and 500 50 t tank cars, all imported, while local construction will exactly balance the scrapping of old cars. In 1969, KNR intends to import 700 special cars. But scrapping in 1969 would outweigh local construction so that the stock increase would amount to only 320 units. The above recom- mended average annual increase in stock of 840 units could be attained by importing more units and/or by increasing the output capacity of the con- struction workshops. As to the 700 special cars, the following remarks can be made: - Heavy flat cars: 5O. With only 47 heavy flat cars of 50 to 70 t capacity, KNR cannot meet at present the heavy commodity trans- portation demand in relation to the industrial build-up of the country. The proposed addition of 50 cars of 70 to 100 t capacity seems justified. - 19 - - Flat cars: 150. This corresponds to a normal fleet increase. - Refrigerators: 100. KOR cannot meet at present the marine products and fruit and vegetable transportation demand. Traffic is expected to grow from 144 million tkm in 1966 to 213 million in 1971. The proposed addition of 100 cars seems justified. - Livestock-cars: 100. Livestock traffic amounted to 19 million tkm in 1966 and was transported by ordinary cars. The proposed import of special livestock cars does not seem fully justified. -Ore hopper cars: 300. The proposed addition of. 300 new cars to the hopper car fleet is probably insufficient to meet increasing ore transportation requirements. F. Requirements of Locomotives 63. Table 9 provides the increase in the locomotive stock as forecast by KNR. With the.import of 48 and 79 diesel locomotives in 1966 and 1967 respectively in connection with the second and third AID loans, traction will be fully dieselized and the last steam locomotives will be scrapped in 1968. Further imports up to the end of the SFYP will consist of 41 mainline and 10 switching locomotives., These forecasts are roughLy con- sistent with tho KTS recommendations to import 37 mainline and 10 switch- ing locomotives for a slightly lower traffic. 64. The revised transportation forecasts, however, lead to a 1971 freight traffic of 9,865 tkm, while the KTS recommendations were based on a traffic of 8,640 million tkm. Additional motive power will be required to transport 1,225 million net tkm, equivalent to 1,225,x 1.8 = 2,205 million gross tkm. With the assumption of an average yearly output of 200 million gross tkm per locomotive (KIS Volume IV - page 120), 11 more main- line locomoti:es will be required in 1971 (7 when,compared to the KNR fore- casts). Imports should rise to 9, 24 and 25 locootives in 1969, 1970 and 1971 respectively. 65. In addition to the diesel stock, KNR is now contemplating the import of electric locomotives to be put into service in 1971 because of the electrification of a part of the network and particularly the Jung Ang line up to Yeong Ju and the Ham Baeg line. If electrification is justified in 1971 (the subject is recommended for further study), the diesel stock should be reduced accordingly. - 20 - G. Railroad Investments 66. Table 10 provides the railroad investment forecasts for 1967 and 1968 as they appear in the related ORB, together with the invest- ments which had been recommended by the Korea Transportation Mission for the corresponding years. In order to allow comparison, the ORB items have been rearranged by the Mission so as to match the KTS breakdown. A factor which makes comparison difficult is that the investment program in the ORB are drawn up in current prices, while the KTS is in 1965/66 prices. Since the foreign exchange rate has been stable during this period, this does not affect the foreign exchange component of the proposed investment which is approximately one-third of the total. The increase in domestic prices in the investment program over the KTS prices is approxi- mated by the Mission at 10% in 1967 and 20% in 1968. 67. New line construction. Out of a program of 20 new lines initially contemplated by KNR, it had been recommended by the KTS i) to construct only 5 lines, ii) not to construct 13 identified lines, and iii) to defer any decision concerning the Seoul and Pu San circular until feasibility surveys were made. Projects to construct 15 lines have been dropped. How- ever, 2 new lines have been added to the list, which the Mission was unable to study but which appear to have substantial justification. Finally 7 lines are, or will be, under construction in 1967 and 1968. (a) Gyeong Jeon line (80.5 km), begun during the FFYP and half complete, to connect the eastern and western parts of the south coast; (b) Jeong Seon line (24 km), and (c) Mun Gyeong line (12 km), both located in the coal-mining district; (d) Jang Hang line (16 kin), to provide a connection between Jang Hang and Gun San and shorten the distance between Bi In and the south; (e) Bi In line (21 km), to serve the new Bi In industrial area; (f) Bug Pyeong line (new: 12.9 km), from Bug Pyeong to Sam Wha, to serve a cement factory under construction. (g) Steel mill line (new: 11 kma), to serve the Po Hang steel plant. 68. It is likely that the won 420 million provision made in the 1967 ORB for other line construction will not be spent. - 21 - 69. Station and line capacity. Provisions made in the 1967 and 1968 ORB- concern the extension of marshalling yards, in particular in Je Cheon; improvement of loading and unloading facilities at many stations and in particular in Ri Mon Dong near Seoul; enlargement of station yards; lengthening of train meeting tracks; double tracking of the Jung Ang line between Je Cheon and Bong Yang; improvement and ex- tension of station and other facilities in Seoul, Pu San, Dae Gu, Na San, etc.; and the modernization and extension of signalling facilities, 70. The investment proposed in the ORB, for.these purposes amounts to won 5.3 billion in 1967 and 1968, i.e. almost twice as much as had been proposed by KTS. The heavy increase in traffic justifies this large investment to increase the station and line capacity. The Korea Trans- portation Mission, however, was of the opinion that the I'R's projects were too modest and did not allow for the application of more sophisticated techniques. The KTS recommended therefore that comprehensive surveysbe made related to i) the marshalling yards location, lay-out, equipment and operations and ii) the coal handling problems. These surveys should be undertaken as soon as possible as any delay in providing sufficient marshalling facilities and loading and unloading facilities would result in serious bottlenecks. However, since the partial survey made by Sofrerail, the conclusion of which was not accepted by the Government, no comprehensive survey of these matters appears to have been undertaken. 71. Way and structure renewal and improvement. The KNR track renewal program consists of i) laying 300,000 concrete ties per year, corresponding to about 170 km of track and ii) replacing 37 kg/m rails by 50 kg/m rails on the lines where increasing traffic should be run by more powerful and heavy locomotives. This program, which had been agreed to by the Korea Transportation Mission, corresponds to annual expenditures of 900 and 750 million won respectively (at 1965 prices). The rail weightening program is'starting in 1968 and investments forecast for that year appears adequate. Rehabilitation of bridges foreseen in both years is related to the A and B bridges on the Han River. 72. Rolling stock procurement. The 1967 and 1968 ORB procurement pro- grams do not correspond to the KNR freight stock, passenger stcck and loco- motive procurement programs which are set out in Tables 7, 8 and 9. One of the reasons for this is a change in the KNR budget after the formulation - 22 - of the ORB. Calculations based on the actual requirements suggest that investments s4ould reach won 6.5 and 10.4 billion in 1967 and 1968 re- spectively. 1/ This is much more than provided in the ORB. However, it will not be necessary to change the KNR budget because the additional expenditure will be covered by foreign loans. Increases in relation to the KTS assumptions derive from (i) increases in unit prices, (ii) increases in the number of units and (iii) substitution, to a certain extent, of imports for local construction. 73. Rolling stock maintenance and construction facilities. In- creases in rolling stock require modernization and extensions of maintenance workshops and renewal of a part of the shop machine tools which are generally worn out and obsolete. The output capacity of the construction workshops should be increased in order to substitute to the extent possible local construction for import of freight cars and passenger coaches. As the fleet is expected to increase more quickly than had been forecast by the Korea Transportation Mission, yearly investments should rise accordingly. The 1967 and 1968 ORB provisions seem too conservative. Moreover, no provision is made for the purchase of spare parts, in particular of spare parts for the diesel locomotives. 74. On the whole, and with the reservations made in the brief analysis above, the investments forecast for 1967 and 1968 are adequate. 1/ This calculation is made by the Mission. It is exclusive of the 79 locomotives imported in 1967 instead of 1966 (as had been assumed in KTS). Unit prices are based on the KTS unit prices with 10 and 20o increases in the local currency costs for 1967 and 1968. 1 9 6 7 1 9 6 8 No. of Unit Total No. of Unit Total units prices cost unit prices cost (OCO w) (million w) _ (000 w) (million w) Passenger coaches import - 230 9,700 2,230 Freight cars import 945 4,660 4,400 1,100 4,840 5,320 building 653 3,260 2,130 700 3,$20 2,460 rebuilding -O 600 30 Total 1,598 6,530 2,080 10,040 - 23 - It must be pointed out that the 1968 investments, taking into account the new estimates for the procurement of rolling stock, are 50% higher than had been forecast by KTS. Similar increases may be expected for the next years. Finally, owing to the traffic increase and to the necessity of improving the present operating conditions, the need for comprehensive and detailed surveys should be emphasized. No provision is made in this respect in the ORB. A list of the fields where con- sulting services should be sought during the coming year is provided in Section H. H. Need for Technical Assistance from Abroad 75. Among the surveys which had been recomended by the Korea Transportation Mission in the field of railway transportation, the following may require external consulting services. 76. Statistics: Very detailed statistics are kept, but they are impaired by numerous discrepancies. A general review of all statistical work currently performed should be conducted and a new statistical plan established. In particular, statistics should allow the determination of individual traffic costs. Statistical compilation should be centra- lized and feasibility of replacing manual work by data-processing equipment should be studied. 77. Traffic costing: The rate structure should be amended to reflect transportation costs more accurately. For that purpose, the actual cost of each category of freight and passenger traffic should be determined. Detailed and accurate data are necessary, moreover, to carry out feasibility surveys on traffic operation and investment programs. 78. Railcar utilization: The future policy of KNR as to the distribution of passenger transportation by trains and railcars is not clear (see Section D). Based on the comparison of costs in both cases, a feasibility survey should determine the most economic share of railcars in passenger transportation. 79. Coal traffic: The handling of the rapidly increasing coal traffic poses numerous problems in the Seoul area. A study should determine the right solution. This study should comprise not only the rail aspects of coal handling, but also other aspects such as storage, truck-loading and distribution problems. - 24 - 80. Rolling stock: The availability of rolling stock should be increased by means of better preventive maintenance and repair programs. The output capacity of existing construction and rebuilding facilities should be increased in order to substitute local construction for imports whenever this is economic. Finally, new and rebuilt rolling stock should be redesigned with a view to increasing the pay-load, reducing the gross weight pay-load ratio and lowering annual maintenance costs. 81. Marshalling yards: As already pointed out, the location, lay- out, equipment and operation of the marshalling yards should be reviewed in the light of expected traffic requirements. 82. Electrification: KNR contemplates the electrification of part of the network before the end of the SFYP. According to its forecasts of the increase in the locomotive stock, 58 electric locomotives would be put into operation in 1970. The first two lines to be electrified would be the Jung Ang line from Cheong .Ryang Ri to Yeong Ju (217.5 km) and the Ham Baeg line from Je Cheon to Ham Baeg (92 kI). Both lines carry heavy coal traffic. Funds to initiate the construction in 1968 amounted to 310 million won. These expenditures were not approved by the Government. Tentative study had led the Korea Transportation Mission to the conclusion that electrification on these two lines might be economically justified during the third five-year plan beginning 1972 in view of the traffic anticipated for 1976. The Hission had consequently recommended undertaking a detailed feasibility survey during the SFYP. Owing to changes in the coal and cement production targets, the traffic expected for 1976 on both lines will be reached in 1970 or 1971. The recommended feasibility survey should thus be initiated as soon as possible; actual electrification outlays should be deferred until the result of the survey is known. - 25 - III. HIGHMAYS AND HIGHWAY TRANSPORTATION A. Highway Transportation 1. Passenger Transport Volume 83. The number of pass-km transported by bus, microbus and taxi has steadily increased with an average yearly growth rate of 17% over the 1955-1965 period. It increased by 4U between 1965 and 1966 (52% for city transportation and 36% for intercity transportation, Table 11). This last jump was made possible by the quick increase in the bus fleet which occurred in 1966 (34%). Results for the first six months of 1967 suggest, however, a slowing down in this progress. 84. The per capita income elasticity was established in the KTS between 3.5 and 4.0 according to the period considered in the past (KTS Volume II, page 160). When these coefficients are applied to the SFYP period with a GNP growth rate of about 10S, an annual growth rate for the number of pass-km is more than 25I. hile it is dubious that such a growth rate could be sustained for a long tine, it appears sensible to assume that the increase during the SFYP period will not be less than 20 percent per year.-l A similar growth rate may be assumed for private car transportation.2/ 2. Freight Transport Volume 85. The development of truck transportation in Korea was much less rapid than of highway passenger transportation (Table 12). Freight transport volume only doubled between 1957 and 1966 while it was 4.7 times higher for passengers. Development between 1965 and 1966 shows a slight annual increase of only 2% in tons and 12% in tkm.3/ However, the 1/ KTS assumed growth rates of 17% for bus, 135% for microbus and taxi transportation. 2/ No data were available for private car transportation. KTS assuied a 16% growth rate. Liberalization of imports and development of the assembly industry (cars increased by 36% in 1966) justify the assumption of even higher growth rate. 3/ To the extent the NOT statistics may be relied upon. Between 196h and 1965, the volume of transport increased by 28a in tons, but decreased by 2% in tkm. The corresponding changes in the average transport distance are difficult to believe. The continuous increase of the income per tkm suggests that the number of tkm transported in 1965 and 1966 was actually higher. - 26 - statistics on trucking are not very reliable and contain many contradictions, so these findings cannot be considered accurate. 86. The elasticity of freight transportation on the highways to GNP changes was established at about 1.2 in the past (KTS Volume II, page 148). IWhen this coefficient is applied to the SFYP period with a GNP growth rate of 10%, a growth rate of total t1m of 12% is found. Past series cannot be fully relied on, however, to forecast future development, as important changes are expected in the behavior of highway transportation with the improvement of highways and the increase of the truck pay-loads7i' which will result in a decrease in transoort cost. In developing countries the elasticity is often around 2.0 and in Korea, where highway freight transportation is starting almost from scratch, a rise in the GNP elasticity seems almost certain. Somewhat arbitrarily it is therefore assumed that 15 to 205 growth rate of highway freight traffic is more likely.2/ 3. Tariffs and Financial Results 87. Tariffs for all forms of highway transportation are set by MDT. They have undergone only very small changes during the past ten years, in spite of a general price increase of about 300 percent. However, they were set at a high level in the mid-fifties. A slight increase in the rates occurred in 1961. In Januazy 1966, intercity passenger basic fares rose by 20%, area truck rates remained unchanged, and route truck rates were lowered by 24' (Table 13). In spite of this tariff rigidity, the present fares and rates seem to allow, on the whole, highway transportation enterprises to operate without losses. This suggests that some improvements have been occurring in the management of these enterprises and in the conditions of operation (Table 14). 88. Passenger transportation. A breakdown provided by MOT for the years 1965, 1966 and 1967 shows that the profit-income ratio for intercity bus transportation was 5.6% in 1965, 9.2% in 1966 and 9.4% in the first six months of 1967. City bus firms actually suffereA losses inl965 and 1967. 1/ Pay-load is presently limited to 5 t. The Korea Transportation ission had recommended abandoning the total vehicle weight and cargo maximum load regulations and adopting load-by-axle weight regulations (KTS V. II). This recommendation is still under consideration by the Government. It should be mentioned in this respect that orders have been given already to import 8 t pay-load trucks. 2/ KTS assumed a 1L% growth rate, which implied a GNP elasticity of 2. - 27 - 89. Freight transportation, The profit-income ratio increased steadily from. in 1961to more than 10" in 1967, A breakdon provided by NDT for the years 1965, 1966 and 1967 does not show significant differences between the area and route profit-income ratios.!/ The continuous increase of income per t1m over the 1961-1966 period cannot be easily explained considering the increase in cost during those years. It is likely that the statistics are incorrect. B. Motor Vehicle Fleet 90. Altogether 50,160 civil motor vehicles were registered in Korea at the end of December 1966, The composition of the fleet by category and user was as follTs. Passenger car 9,476 Government 9,1 Taxi and microbus 10,852 Private 29% Bus 8,062 Business 62% Truck 19,32 Small car 1,322 Special car 1,016 50,160 91. After a rapid increase between the end of the Korean wTar in 1953 and 1957, the fleet remained nearly constant at a level of about 30,000 vehicles, up to 1962. From 1962 to 1965, the yearly growth rate was approximately 10%. ./ It was 24% between 1965 and 1966 (Table 15). The first six months of 1967 show that the number of vehicles involved in business transportation increased by 16.01 for passenger transportation and 11.8% for freight transportation between December 1966 and June 1967. 92. New vehicles come from three different sources: the UN arr surplus sales, imports, and production by assembly plants. Imports have long been heavily restricted due to general scarcity of foreign exchange. This policy has resulted in a reduction in the growth rate of highway transport. Some liberalization, however, came about in 1966 with the import of 2,200 vehicles and higher imports in 1967, Moreover, assembly plants have come into being which are building vehicles from imported or locally produced parts. Local production jumped from 2,000 or less vehicles per annum (1,560 in 1965) to more than 6,000 in 1966 (mostly buses and taxis). Projects to build two large-scale assembly plants with annual outputs of 14,400 and 1-.,600 vehicles each were recently approved. 1/ Area trucks are engaged in city and intercity transportation, route trucks in intercity only. In 1966, area trucks transported 96.5% of total tonnage (in t), provided 84.9% of total income. 2/ For the whole fleet. Private passenger cars increased by 29.4%, buses by 10,37, trucks by 2.1% per annum. - 28 - 93. With the liberalization of imports, the increase of local car assembly and the rapid development of highway transportation, the vehicle fleet will go on increasing steadily and rapidly. On the basis of rough calculations and assumptions it seems reasonable to assume that about 10,000 vehicles on an average should be added to the fleet during each year of the STYP (Table 16). With the final assumptions that 20,000 vehicles in service in 1966 will have to be replaced, new vehicles to be purchased over the 1967-1971 period total 70,000, i.e. 14,000 per year on an average (or 50,000, i.e. 10,000 per year on an average, excluding private passenger cars).!/ This is more than double the increase estimated in the SFYP. It is important for the Government to take account of the implications for foreign exchange requirements. The 1967 and 1968 ORBs foresee that investment in business transportation vehicles will amount to won 4,994 million in 1967 for 4,120 units, and to won 5,096 million in 1968 for 4,090 units (see breakdown in Table 16, footnote 2). It is likely that actual investments will be much higher. C. Highway cpenditures 94. Table 17 provides 1966, 1967 and 1968 highway expenditures as actually spent in 1966, appropriated in the 1967 budget, and forecast in the 1968 draft budget. These consist of expenditures for highway investment and maintenance. The figures do not include, however, the construction funds provided under the form of "Joint highway projects" (which are mostly located near the Demilitarized Zone betweenNorth and South Korea) by the ROK and US Armies. They also do not include the expenditures made by cities.2/ IThen comparing the yearly expenditures to the overall recommendations made by the Korea Transportation Mission, it should be kept in mind that prices of highway construction increased by 30," approximately between 1965 and 1967, according to estimates provided by 11OC. Construction prices are expected to increase further by 40 to 45% between 1965 and 1968. 1/ KTS (V. 32) estimated at 46,000 (or 36,000 excluding private passenger cars) the number of new vehicles to be purchased over the 1967-1971 period. 2/ It is not clear which areas are precisely included in the category "cities", but at least the expenditure made in the Seoul and Pu San special cities are not included. Expenditures for highways in cities are included in the ORBs under the "Iunicipal Public Works" heading. The 1967 overall Dhnicipal public works investments, according to the 1967 ORB, only amount to won 396 million and are obviously under- estimated. The amount jumps to 5,637 million won in the 1968 ORB, almost half of which is dedicated to "Street arrangement". - 29 - 95. In spite of the price increases, highway appropriations seem to show a definitely rising trend. From a won 647 million-/ yearly average during the first four years of the FFYP, funds allocated for national and provincial highways together amounted to won 1.6 billion in 1966,and would reach won 4.9 and 7.3 billion in 1967 and 1968 respectively. Funds allocated to MOC for highways almost.doubled between 1966 and 1967, and are to double again between 1967 and 1968. A more detailed analysis shows, however, that highway expenditures are still insufficient, both for investments and maintenance. 1. Highway Investments 96. BriJge constriction. A total length of about 50 km2/ of bridges remained to be built or rebuilt at the end of the FFYP. This includes bridge connections which were seriously demaged or destroyed during the Korean ar and a number of new bridges mostly of obivous high priority. According to the bridge construction program, half of them would have to be built during the SFYP, but actual construction seems to be lagging behind this target. /The 1968 ORB foresees for the Baikjae, Kangwha and Keojae bridges a total expenditure of uon 842 million (out of an estimated construction cost of won 1,670 million), a part of which was- already listed in the EOC 1967 budget; this suggests that a part of the 1967 appropriations will not be spent in actuality.7 Finally, it is likely that the bridge construction appropriations partly includei as in the past, pure maintenance expenditures. The present bridge coh- atruction program appears adequate for 'the needs of the existing highway system, but.new highway construction might of course require .additional bridges. 97. Road avingg. At the end of 1965, the public highway network had a total length of 31,936 km. The length of paved highways, however, was only 1,627 km with the following breakdown: Paved highways (1965) National highways : 1,042 km Provincial or %)ecial city highways : 98 City streets and Gun roads : 487 Total 1,627 km 1/ Exclusive of purchase of heavy equipment. 2/ Exclusive of the second Nag Dong River and the Gun San so-called "toll bridges" which total 4,200 in. - 30 - 98. During the first four years of the FFYP, road paving amounted to only 125 km per year on an average. One of the most important recommendations of the Korea Transportation Mission was that a consi- erable increase be made in the allocation of paving funds. The Mission proposed a road paving program of 3,300 km of road paving during the SFYP (city streets excluded), i.e. a yearly average of 660 km._/ Half of this program was justified by the necessity of increasing the capacity of existing gravel roads, which are now heavily congested. The other half was just justified not because of current congestion but because of the expected increase in traffic. / These recommendations were accepted by the Government and included in the SFYP but in spite of this it seems that the actual length of road paving in 1966 and the planned paving in 1967 and 1968 is even less than before. In 1968, only 120 km would be paved. The MOC has a sub-program for road paving amounting to won 2,800 million and concerning 7 major highwaysl/ with a total length of 448 km. The allocation for the implementation of this sub-program is far too small: the yearly expenditures amount to only-wt 117,, 164 and 192 million in 1966, 1967 aAd 1968 respectively. 99. Major highways. This item is related to new expressway construction. Out of the won 1,587 million appropriation of the 1968 budget, won 1,500 million are allocated to the Seoul-In Cheon highway. This highway has high priority and its construction was recommended by the KTS. However, the total cost of the highway has been raised considerably by MOC and now amount to won 3,840 million 1/ The reduced program conterplated as an alternative by the Mission (1,650 km of road paving, i.e. 330 km yearly) should be abandoned due to the acceleration of the economic development. 2/ It was found that the minimum level of traffic volume necessary to justify a road paving project was about 200 vehicles per day. This traffic level will be reached on all the considered highways before the end of the SFYP. 3/ Breakdown of sub-program (source: MOC): Kwang Ju - Mog Po 84 km won 900 million Dae Jeon - Choo Pyung Ryong 76 102 Dae Jeon - Non San 40 127 Dae Gu - Chungcheong Bug Do 56 280 Je Ju - Ouhye 90 320 Jeon Ju - Gun San 49 541 Chung Ju - Cheong Ju 53 530 Total 448 2,800 - 31 - (for 32 kn)./ The remainder of the 1968 allocation, won 87 million, is to be used for survey and design of the Seoul-Su Weon and Sam Cheog-Mug Ho highways. It is dubious, however, that it will be possible to spend won 1,500 million in 1968 on the Seoul-In Cheon highway, since no detailed survey has as yet been made. 100. Road bettermentand improvement (other than paving). The total length of roads to be improved in 1968 amounts to 790 km. Most of these are local roads. Only 40 km of the national highways are to be improved in 1968. This is plainly insufficient. Moreover, it is likely that a part of the improvement to be carried out by the local Governments consists more in delayed maintenance than in new investments. 2, Highway Maintenance 101. Highway maintenance works on all roads are carried out by the Provinces and Special cities. Up to 1965, the central Government allocated funds or subsidies to the local Governments for highway maintenance. This rule was changed in 1966, and local budgets had to carry all expenses for highway maintenance, including the national network. Budgeted funds spent on maintenance of national and provincial highways, exclusive of the "Volunteer labor maintenance movement," amounted to about won 230 million in 1964 qhd 1965, and won 354 million in 1266.2/ They amount to won 308 million in 1967. No substantial increase is expected to occur in 1968. The Korea Transportation Mission had estimated that maintenance funds should have reached a level of won 2,200 million in 1966 (inclusive of the work of the "Volunteer labor maintenance move- ment"), and be increased in the future according to the increase in traffic volume and length of paved network. Comparison of figures shows, however, that no improvement occurred in the Governmont's attitude as regards highmay maintenance. Assuming the effort of the "Volunteer movement" is worth won 800 million, the present budget is less than half the desirable sum to be spent, This is unsatisfactory; allocation of much larger sums for maintenance is needed. 1/ i.e. 120 million won per km. In 1966, the construction cost of the Kim Po-Incheon "toll road" was estimated at 600 million won for 22.6 km, i.e. 26 million won per km. The construction cost of the Seoul-Su Weon "toll road" was estimated at 48 million won per km. The difference cannot be explained by price increases only; obviously the standard of construction is very much higher than contemplated for the Seoul-Su Won and Kim Po - In Cheon highways. 2/ Only Jeonia Nam Do was responsible for the 1965-1966 increase. In the other eight provinces, the average increase was 8%, which means an actual decrease at constant prices. - 32 - 3. Heavy Equipment 102. Imports of heavy equipmont appear under a special heading in the Government investment programs. These imports are entrusted to the Equipment pool of MOC. Equipment is primarily used for the development of industrial estates, special rural areas and multi-purpose schemes. No part of it seems to be permanently assigned to highway construction or maintenance. For efficient highway construction and maintenance it would be desirable to make part of the pool exclusively available for these purposes. Earth moving and highway construction equipment was imported in 1966 under a Japiese loan for an amount of dollars 6.5 million (won 1,755 million).- Other imports, included in the 1967 program, are expected in 1968 under an AID loan for an amount of d ?Jlars 15.9 million (won 4,300 million + won 215 million local expenses) . On the other hand, according to the ORB, "imports of heavy construction equipment" would amount to only won 1,821 million in 1967 (478 million for land use equipment, the rest concerning marine equipment, parts and others), and would amount to only won 363 million in 1968. Since only part of these imports are to be used for highway maintenance, it seems clear that these amounts are too small. The Korea Transportation Mission had estimated that imports of equipment worth at least won 2,000 million were necessary during the SFYP for highway maintenance only. According to MOC, highway maintenance equipment is old and insufficient, and spare parts are lacking. It is apparent that new equipment is used for new works only and that highway maintenance is still considered of no importance. A detailed survey Ehould be made in' order to determine the equipment necessary for highway maintenance, and equipment should be permanently assigned to this exclusive purpose. D. The HOC "Major Trunk Highway Construction Plan" and Need for Technical Assistance 103. The two major recommendations made by the Korea Transportation Mission in the field of highways were: i) to drastically increase the total length of paved highways by improving and paving 3,300 km of roads, and to improve without paving at least 1,500 km of roads, during the SF'P; ii) to establish a "Government Agency for Public Roads" in order to ensure unified command and responsibility, particularly in view of the important investments proposed for the future. 1/ Includes 190 bulldozers, 30 graders, 60 dump trucks, 4 crushers, 4 asphalt mixing plants and other equipment. 2/ Includes 50 scrapers, 10 sheep foot rollers, 10 rollers, 10 crawler dozers, 6 shovels, 20 loaders and other equipment. - 33 - 103 a. The analysis of the 1967 and 1968 highway budgets shows that the expenditures planned by the Government are insufficient by far to meet the first requirement. Paving of national highways would amount to 68 and 112 km, and road improvement to 24 and .40 kn, in 1967 and 1968 respectively. Accumulated delays in the improvement of the present condition of the. highway network will be harmful for the development of the national economy. In order to remedy the situation, MOC has initiated discussions with US AI.and IDA with a view to obtaining financial and technical assistance to carry out the feasibility and preliminary engineering studies of six major highways: Seoul - In Cheon 40 km Seoul - Su Weon 40 Seoul - Gang Reung 263 Po Hang - Pu San - Kwang Ju, Theluding Bun Cheon - Yeo Su 463 Sam Cheog - Sok Cho 141 Dae Jeon - Mog Po 297 Total 1,244 km 104. The suggested highway connections are of obvious importance for the development of the country and the list established by MOC is fully approved here although it should be recognized that part of the existing highways may be fully satisfactory in their present condition for many years to come and would perhaps need only minor improvement. The following remarks are in order, however. (a) It is planned that the Seoul-In Cheon and Seoul-Su Weon roads be entirely new e.pressways, which would be justified by the development of traffic. On the other roads the existing layouts could perhaps be kept, to the extent possible, in order to reduce improvement and new construction costs. A comparison of the con- struction costs of the six highways, as tentatively established by MOC (Table 18), with the costs estimated by the Korea Transportation Mission, shows that MO has in mind roads of much higher standards than had been contemplated before. For the Seoul-In Cheon and Seoul-Su Weon expressways, the unit cost per km is estimated according to data provided by MOC at won 132 million and 113-. respectively, against 26 and won 48 million in KTS. The contemplated width of the Seoul-In 1/ In 1965, traffic exceeded 3,000 veh/day on the Seoul-In Cheon and parts of the Seoul-Su Weon oxisting highways (KTS V, 53). It could easily reach 10,000 veh/day before the end of the SFYP. 2/ In the 1968 OC budget, the same expressway is 32 km instead of h0, and its cost is estimated at won 3,840 million instead of won 5,280 million which corresponds to won 120 million per km. - 34 - Ohon expressway is 31 m against 22 m in KTS. For the other highways, the unit cost per km would range between won 28.5 million for Dae Jeon- Mlog Po to won 40 million for Sam Cheog-Sok Cho. It should be realized how much higher these outlays are than,the expenditures required for paving and improvement. In the KTS the cost of improving and paving an existing highway with a 7 m wide pavement was estimated at only about won 6 million per In and the cost of new road construction to range from won 12 million in flat terrain to won 22 million in mountainous area. It is clear that, anticipating foreign loans, MOC has drastically changed the scope of the work to be carried out, although perhaps previous estimates were unrealistically low and did not tak9 full account of all cost elements. (b) In spite of the high costs of the MOD estimations (won 49.9 billion), the total length involved amounts to only 1,244 km. On the other hand, 72% of the roads would not be completed before the end of the third five-year plan. This means that this program cannot replace the program of road paving and improvement, less ambitious but more extensive, which had been recommended in KTS. 105. In addition to the feasibility studies of some of the roads mentioned above, the proposed IDA sponsored survey would provide the Government with (i) a program for the establishment of a new organiza- tion which would be responsible for the administration, maintenance and construction of public highways and (ii) recommendations for the improvement of coordination in the administration and planning of all modes of transport. Both objectives correspond to recommendations made by the Korea Transportation hission. IV. HARBORS AND SHIPPING A. Harbor Traffic 106. The total amount of cargo handled in Korean harbors was 13 mil- lion tons in 1966. The Mission forecasts an increase to 46 million tons in 1971. This tremendous increase is due to (i) the development of im- ports, especially POL, and exports, caused by the general economic devel- opment, and (ii) the shift from land to coastal transportation for bulk commodities, especially POL, cement and coal. Detailed projections are provided in Tables 19, 20 and 21. Results are summarized as follows: 1971 71-66 (million t) 1966 1971 KTS ratio Import dry 5.10 9.35 (4.63) 1.83 Import POL 2.701/ 10.40 (4.69) 3.85 Export 1.66 3.65 (2.83) 2.20 Coastal dry (loaded) 1.84 4.84 (3.6) 2.63 Coastal POL (loaded) 0.8021 6.50 (2.80) 8.12 1/ ?igures corresnonds to actual tonu.ption (Sogrb: Korean Oil Cqrpora- tion). 2/ 230,000 t have been added as estimated military transport. 107. Increases in traffic will not affect all harbors in the same way. Changes in the distribution of traffic by commodities, and changes in the production pattern, will modify the present structure of harbor traffic in Korea. For example, with the development of the fertilizer industry in the southeast, imports of raw materials into Ul San and Jin Hae will be sub- stituted for imports of chemical fertilizers into Pu San and In Cheon. In general, the new industrial harbors such as Ul San, Jin Hae, Yeo Su (second oil refinery) and Bi In, will alleviate the burden of rapidly increasing imports into Pu San and In Cheon. 108. Precise projections of the expected traffic per harbor could not be made with the information available to the- Vission. Further information needed would be the location and output of future industries, and the break- down of the present traffic by commoditiea.2/ A few indications are provided 3/ The NOT statistics for harbor traffic need improvement on the follow- ing points: the category "others" should be replaced by a further breakdown; figures related to POL imports and certain other imports appear unreliable and should be improved; it should be made clear that military traffic is left out of account. - 36 - below on the evolution of traffic in the main Korean harbors with rela- tion to the 1966 traffic (Tables 23 and 24). Throughout this analysis, it should be kept in mind that coastal transportation is likely to revert to normal bulk transportation in the future. Further points of import- ance to the analysis of future harbor development are that: (i) POL hand- ling does not require substantial loading or unloading facilities in any port; (ii) to the extent possible, lumber should be handled overside in lighters or, better, afloat; (iii) coal, minerals and other bulk cargo (fertilizer, cement) should be handled through specialized equipment. In the following analysis only dry cargo traffic is considered, save when exceptions are mentioned. (a) Pu San is by far the most important harbor in Korea. It handled 4.6 million t dry cargo in 1966, i.e.45% of total dry cargo handled. Traffic may reach 6.8 million t in 1971. The increase would be due more to development of coastal transportation for bulk commodi- ties than to the increase of general cargo traffic. (b) In Cheon is the second largest harbor in Korea for general cargo. It handled 1.8 million t dry cargo in 1966. Its activities were characterized in the past by the preponderance of (i) imports over ex- ports, and (ii) sea-going over coastal traffic. Traffic could reach 4 mil- lion t in 1971. Increase would primarily be due to the development of import and export general cargo traffic. (c) Mug Ho loaded 1.3 million t of coal in 1966 (out of a total dry cargo traffic of 1.4 million t). Coal'traffic should reach 2.1 million t in 1971. In addition, about 2 million t of cement will have to be loaded, partly in Mug Ho, partly in the nearby harbor of Sam Cheog. (d) Ul San, site of the first oil refinery, unloaded 1,500,000 t of crude oil (out of a total 1,910,000 t unloaded in Ul San harbor) and loaded 470,000 t of POL products (out of a total of 490,000 t loaded in Ul San harbor) in 1966. Oil traffic is expected to more than double in 1968 when output capacity rises from 55,000 to 115,000 Bbl/day. Similar oil traffic will start in Yeo Su in 1969 (capacity 65,000 Bbl/day). 80% of all POL production is expected to be transported by coastal tankers in 1971. Fertilizer production started in Ul San and Jin Hae in 1967. Imports of raw materials amount to approximately 1,000,000 t, two thirds of which in Ul San, one third in Jin Hae. (e) Other harbors worth mentioning are Sok Cho (280,000 t of iron ore loaded in 1966) and Po Hang (site of the proposed steel mill, which would require unloading of 1,100,000 t of iron ore and 350,000 t of coke by 1971). 109. According to this analysis the share of Pu San in total dry cargo traffic would decrease between 1966 and 1971 from '46 to 30%, the share of In Cheon would remain.stable at 17%, the share of all other har- bors would increase from 37% to 53o. On the whole, dry cargo traffic would more than double over the period under consideration. - 37 - B. Harbor Investment.and Dredging Programs 1. In Cheon 110. The amount of commercial dry cargo handled in In Cheon harbor could reach,4 million t in 1971 (Harbor traffic, Table 24). Military cargo is assumed to remain stable at its present level of 600,000 t per year. All cargo will not be handled in the docks. Part of it (logs, cargo for northern habor, etc. ) will continue to be handled on the roads. Assuming that 20% of imported logs, 75% of commercial cargo and 50% of military cargo are handled alongside the quay, cargo passing through the docks 'ould-amount to 2,880,000 t, which would require 3,600 m of quays.1 111. The second dock, which IO originally planned to complete by 1970, would present a total quay length of 3,800 m. The first dock already offers 1,100 m of quays (730 m for 4,500 GT vessels + 370 m for 2,000 GT vessels) which is quite convenient for coastal traffic. With a 10%2/ yearly increase of traffic,further extensions would not be necessary before 1975. However, following the recorrmendations of a feasibility survey completed in July 1967, MOC is now contemplating closing off the entire inner harbor by a dam and building two locks through the reclaimed island of Wol li Do. The Mission did not have access to the survey, and is therefore not in a position to express an opinion on the merit of this latest proposal. But certainly a very careful comparison of the economics of both solutions is necessary before a decision is taken. Since by our analysis the second dock would be sufficient to accommodate traffic until 1975 and the dock could easily be enlarged after that, we are a Rrori somewhat doubtful about the new proposal. However the Mission has no doubt about the technical feasibility and economic justification of the construction of the second dock. A few remarks follow: (a) Chanvs in the scope of work, and increases in the estima- tion of unit prices- , have resulted in a substantial increase in the con- struction cost of the second dock, which is now estimated at Won 5.1 billion 1/ Assuming that each meter of quay handles 800 t/year. This must be considered a maximum. When tonnage per meter approaches this level, an extension is usually required. 2/ Yearly increase between 1966 and 1971 is estimated at 17.5%. This high figure is partly due, however, to traffic which would be diverted from Pu San. 3/ The construction cost of quay walls was estimated by MOC at Won 200,000 per meter in 1966, at Won 465,000 per meter in 1967. This last figure is much more likely. - 38 - plus $h.h millionlI (i.e. Won 6.3 billion). In addition, dredging is estimated at Won 1.2 billion by MOC. It is worth pointing out that no provision is made in the project for ground facilities (sheds, ware- houses, railroads, roads, water supply and lighting) nor for cargo hand- ling equipment, which had been estimated in KIS at Won 2.1 and Won 0.4 billion respectively. Total cost is now.Won 10 billion against won 6 billion in KTS. (b) It is doubtful that total construction could be completed by 1970, with the first stage completed in 1969,& It is even doubtful that the amounts provided in the1968 ORB, Won 1.4 billion (domestic expenditure only) could possibly be spent in 1968. (c) Pending the construction of the second dock, all other works have been practically stopped in In Cheon harbor. The construc- tion offloating jetties and the improvement of the present ground facil- ities in the landing stage area, as had been recommended by KTS, could improve, however, the present condition of operation at a reduced cost and should therefore continue. 2. Pu San 112. The amount of commercial dry cargo handled in Pu San harbor could reach 6.8 million t in 1971 (Harbor traffic, Table 24). Military cargo is assumed to remain stable at its present level of 200,000 t per year. Together with the central quay, the piers provide about 4,350 m of berthing space for sea-going vessels, which corresponds to an along- side handling capacity of 3,500,000 t per year. In 1967, pier #2 was rehabilitated and the fishery market was removed from pier #1 to the southern harbor. In 1968 a special coal pier will be constructed. The log basin is being removed to the outer harbor (private investment by Dong Myang Plywood). Even when considering that all coal and most of the logs are not handled at the sea-going quays, it is likely that Pu San harbor will reach saturation towards the end of the SFYP. It is therefore recommended: (a) to assign special piers and to provide mechanical equip- ment to handle bulk cargo, particularly cement and minerals; (b) to consider extending the harbor towards the north outer harbor. According to anticipated traffic development, it might become necessary to initiate the construction before the end of the SFYP period. 1/ Construction includes 3,800 m quay wall, 3,000,000 m3 excavation, 2 locks, enclosing dam, and construction equipment. Construction of 3,800 m quay wall, 2,600,00 m- excavation, 2 locks, sea vall, and construction equipment less dredger involved in excavation, had been estimated in KTS at Won 2,138 Million plus US$2,430 (i.e. 2,800 mil- lion w). 2/ Detailed design will not be completed before the end of 1967. - 39 - 3. Other harbors 113. With the only exception of Mug Ho (and the new industrial harbors), all other harbors in Korea were utilized at the beginning of the SFYP at less than 501o of their capacity and do not require substantial new structures or extensions. in general, investments in these harbors should be aimed at im- proving the loading and unloading facilities, particularly where bulk cargo through coastal transportation is concerned. kmprovement of handling facil- ities and, in special cases, of access conditions, should be studied in rela- tion to traffic requirements and the coastal fleet structure. 114. An appropriation of Won 210 million was made in the 1968 budget for the first stage of construction of a pier for 10,000 GT vessels in Mug Ho harbor, where coal traffic is expected to increase from 1.3 million t in 1966 to 2.5 million t in 1971, while cement traffic could reach or exceed 1 million t by 1971. 115. As far as special harbors are concerned, Jin Hae construction was concluded in 1967; Bi In has not yet started; investments in Ul San harbor are decreasing. The Mission is not in a position to give an opinion on the progress of works in U1 San in relation to the requirements. In Po Hang, only Won 200 million are provided for 1968. A special effort will have to be made in the coming years if the construction of the steel plant takes place. 4. Dredging 116. The annual rate of siltation in harbors is probably less than 1.4 million m3. But lack of dredging during and after the war have led to accumulation of mud and silt in the navigation channels and inner harbors of every port, particularly in In Cheon and Pu San. Total delayed mainten- ance was estimated at 28 million m3 at the beginning of 1967. In addition new harbor construction will require dredging amounting to 18 million m3. Taking into account new siltation, he total dredging required during the SFYP period amounts to 53 million m5 (Table 26). 117. Annual volume of dredging is still limited by the lack of dredges. 1/ Theoretical capacity at the beginning of 1967 was 1,776 m3/hour, or 4,200,000 m3/year ', but 37% consisted of old dredges which have to be scrapped. In 1/ Volume and cost of dredging for 1966, 1967 and 1968 are provided in Table 26 according to information provided by MOC. Figures in 1967 and 1968 ORBs are somewhat different. 2/ With 801a efficiency, 10 hour working day basis and 300 workable days per year. - 4O - September 1967, three 1,200 hp non-propelling suction dredges with a 420 m3/h output capacity (i.e. 3,000,000 m3/year altogether) were importedV for reclamation purposes with Japanese funds, but the Government decided to use them in harbor projects (1 in In Cheon, one in U1 San, one in Mug Po). In 1969 the Government expects to receive: (a) One 300 m3/h suction dredge and one 90 m /h grab dredge from the Australian Government through the Colombo Plan. (b) Three 20n1 suction dredges, one smaller suction dredge, one hopper dredge and one grab dredge, with a total 8.5 million m3 output capa- city through a USAID loan, Investment requirement amounts to $21.6 million + Won 919 million. 118. After these additions to the dredging fleet, total dredRing capa- city will exceed the requirements of harbors and a part of the fleet could be used for land reclamation. Annual dredging expenditures in harbors should reach Won 2 billion approximately (10 million m3 at 200 w/m ) towards the end of the SFYP period, i.e. twice as much as had been etiLaed in KTS. Priority should be given to Pu San, where silt accuaulation seriously hampers operations, and in In Cheon. 5. Conclusion 119. W-ith the few reservations made above (e.g. improvement of the ex'sting facilities in In Cheon harbor), investments planned for harbors in 1967 and 1968 appear adequate ('able 25). It must be clearly stated, however, that: (a) the construction of the second dock in In Cheon will, in the coming years, require much more money than originally contemplated; (b) traffic increase in Pu San may necessitate, before the end of the SFYP, large investments for harbor extension; (c) bulk cargo handling should be mechanized in all ports in order to reduce the need for additional piers. 120. Quantities to be dredged in 1967 and 1968 are insufficient. The limiting factor is the capacity of the existing dredging fleeb, so delivery of new dredges, planned for 1969, should not be delayed. Cost of dredging is expected to reach 2 billion won per year by the end of the SFYP. 1/ Cost of each dredge with ancillary equipment (1 tug boat, anchor barge and pipe):: $1,100,000. - 41 - 121. The budgeted appropriations for harbor maintenance are definitply too low. This subject is discussed in the following section. C. Port Finances 122. Port revenues are collected by (i) the Bureau of Customs of MOF (tonnage dues and charges for bonded warehouses) and (ii) the Marine Bureaus of MOT (income from facilities and services: light dues, wharf hire, barge hire, warehouse hire, open stacking area, piers, cranes, water). The level of harbor dues and charges is low when compared with other ports in Asia. Fees did not change in 1966 or 1967. A general increase of about 100% is contemplated for 1968. MOF revenues, which amounted to Won 74.5 million in 1965, probably reached Won 100 million in 1966. The MOT revenues reached Won 139.8 million in 1966. Total revenues were less than Won 250 million in 1966. This is a very small amount when compared with the total volume of harbor traffic. Clearly there is scope for increase in these revenues. 123. Port expenditures are split between (i) the Marine Bureaus of MOT, which are in charge of port operation and aids-to-navigation con- struction and maintenance, and (ii) the Harbor Section of MOC, which is in charge of harbor construction and maintenance, and dredging. MOT expenditures amounted to Won 238 million in 1966, an insignificant part of which was assigned to maintenance. The MOC expenditures for harbor construction and dredging amounted to Won 3,355 million in that year, while maintenance expenses other than dredging amounted to only Won 45 million (See Table 27). The latter are expected to be Won 62 million in 1968. Apart from the need to coordinate these activities under an independent Port Authority (see following section), the maintenance appropriations are far too low and port revenues should cover at least all operation and maintenance expenses,even after the latter have been raised to an adequate level. D. Port Administration and Need for Technical Assistance 124. The present organization of Korean Ports has certain weaknesses (i) Responsibility for port management is divided among numerous author- ities as three Ministers are involved in port operation. The absence of unified comaand deprives the leading government officials of the stimrulus of responsibility and achievement. (ii) The harbor dues system needs to be reorganized to reflect more accurately the cost of harbor services. (iii) Marine statistics-are*of sufficient quality and coverage to help ensure efficient operation and planning. These - 42 - considerations had led the Korea Transportation Mission to recommend adopting the Port Authority system. No steps apparently were taken as yet in this direction. It is felt that the Government should seek to obtain consulting services to work out: (a) a program for the establishment of a Port Authority which would be responsible for the operation, maintenance and construction of harbors in Korea; .(b) a program for the establishment of an accounting system of the same standard as operated in industrial undertakings; (c) a program for the reorganization of the present data col- lecting system. E. Ocean-Going Shipping 125. The ocean-going fleet, which had not increase significantly in the 1950's and during the first years of the FFYP, increased very quickly from 1965 on. Tonnage more than doubled between the end of 1965 and the end of August 1967 (Table 28). The fleet capacity increased approximately in the same proportion as the tonnage of imported and exported cargo handled in the harbors, so that the share of the national fleet in ocean transport remained more or less unchanged, at 20 to 25% for imports and 30 to 4016 for exports (Table 29). 126. When preparing the SFYP, the Government had estimated that Korean-flag vessels should carry 50o of imports and exports of general cargo, and all bulk imports, such as lumber, raw materials for the fertil- izer plants, coal and iron ore for the steel mill, crude oil for the refin- eries. The Korean Transportation Mission expressed the view that this expansion of the fleet was too rapid and could be dangerous for the profit- ability and efficiency of shipping. The Mission had recommended limiting the 1971 target to 50% of the general cargo trade with Japan, South-East Asia and USA, and 70% of lumber imports, while deferring any decision about the acquisition of crude oil tankers until a special study was made. With the hypotheses made at the time as to traffic development, this objective required a doubling of capacity during the SFYP by adding 35 vessels total- ing 160,000 GT at a cost of Us$60 million (Won 16 billion). 127. The Gove3r ent adopted this recommendation, as reflected in the 1967 and 1968 ORBs.;. However, action taken by the responsible Ministries 1/ Amount Required No. of GT Foreign Local Total Vessels (1,000) (1,000 $) (million w) (million w) SFYP 35 160 54,000 1,620 15,95o 1967 ORB 12 86 9,246 273 2,797 1968 ORB 6 41 13,985 898 4,716 Source: EPB -i 143 - is completely different. According to MDT, 49 vessels totalling 258,000 GT at a cost of US$ 53.7 million have already been ordered for delivery in 1967 and 1968. According to the same source, it is planned to order, for delivery in 1969, 16 vessels totalling 549,000 GT (including 7 crude-oil tankers with a 60,000 GT average capacity) at a cost of US$ 175 million (Table 30). This procurement program does not include the vessels to be built in Korean shipyards. According to MCI, total tonnage built in Korea would be 231,000 GT during the SFYP, most of which will be for sea- going transportation. It is also reported that by 1971 the Government would have imported 5 cargo vessels totalling 629,000 GT for US$ 147 million. First priority will be given to the importation of 30 vessels totalling 270,000 GT for US$ 64 million (10 freighters, 13 lumber carriers, 2 wheat carriers, 2 ore carriers and 3 tankers, .2 of which with a 33,003 GT capacity). It is not clear to what extent the report on the purchase of 55 vessels may overlap with the MOT information on the ordering of 16 ves- sels. It is quite clear, however, that the proposed expansion is very large and may lead to an addition of possibly as much as one million tons by 1971 to the present fleet of 300,000 tons. 128. A tentative analysis made by the Korea Transportation Mission showed that Korean shipping contributed considerably to the saving of foreign exchange and that the actual loss of foreign currency (on the national level) would have been three times greater in 1965 if all shipping had been done by foreign vessels. In addition, the financial situation of the Korean Shipping Corporation (KSC), the largest of all companies, was sound and there was a reasonable rate of profit. However, the situation may be different for other companies. Moreover the KSC financial forecast for 1967 shows a dangerous trend towards an increase in foreign currency expenditures (Table 31). 129. The Mission recommends that a detailed survey be made to analyze the financial condition of the operation of sea-going vessels as well as the contribution of shipping to Korea's foreign exchange account. The rate of return of the investments planned should be deter- miedseparately in terms of foreign currency and of total value. A special study of oil shipping should be conducted before a decision is made about the purchase of crude oil tankers. When judging the results of these analyses, it should be kept in mind that the possession of a large fleet is not an absolute requirement for the continued economic growth of the country, and that the capital to be invested, mostly in foreign currencies, might be used to greater advantage ih other sectors of the economy. It is probable that the shortage of competent crews would not permit a rapid increase in the size of the fleet. In this case priority should be given to the development of the coastal fleet. - 44 - F. Coastal. Shipping 130. Unlike sea-going navigation, coastal navigation is car'ried out exclusively by national vessels. Additions to the fleet to meet demand must be considered compulsory in those fields where coastal transporta- tion is the most economic mode of transportation. Although the coastal fleet provides cargo and passenger transportation between the mainland and the numerous islan s of Korea, and carries bulk cargo between the ports of the mainlandW, its share in the total domestic traffic volume is modest: 10.7% of total tkm and 1.h% of total pass-km in 1966. In 1966, coastal transportation consisted almost exclusively of coal and POL. It is likely that due to the special conditions and to the cost of sea transportation, general cargo coastal traffic will not increase very much in the future. However, rapid increases in the demand for bulk transportation, and decreases in the transportation cost result- ing from increases in ship capacities and improvement in harbors and loading and unloading facilities, will result in a tremendous growth of coastal bulk traffic during the SFYP (Harbor traffic, Table 20). 131. A total tonnage of 130,000 DIWT (or 90,000 GT) will be necessary to meet the coastal traffic in 1971 (Table 32). Comparison with 1966 or 1967 is difficult as steel vessels of small capacity could be used for both sea-going or coastal transportation (Table 28, note). The following indications concerning bulk cargo show that the total increase of the bulk- cerrying coastal fleet by 1971 should exceed 90,000 DT. (a) Coal: The Dae Han Coal Corporation owns 3 colliers of 2,500 DWT and plans q import 2 colliers of 4,00 DWT. More ships, totalling 11,000 DWI- , will be needed by 1971. According to MOT, vessels presently engaged in sea-going navigation could be assigned to this traf- fic; (b) Cement: The Tong Yang Company owns 6 vessels totalling 6,300 DWT. Ssang Ryong Company expects to import a 5,000 DWT tanker. More ships, totalling 10,000 DWT, will be needed by 1971; (c) Ore: One 3,000 DWT -carrier will be needed by 1971; 1/ The wide dispersion of traffic renders any analysis difficult. Up to 1966, the MOT Statistical Yearbooks gave results for the 14 main Korean harbors. Traffic in these harbors, however, would represent only 72% of total traffic (Harbor traffic, Table 20, note). 2/ 18,000 DWT if the three 2,500 DW colliers are scrapped. (d) POL: In September 1967, 11 tankers, with a total 18,500 DWT capacty, had a capacity over 1,000 DWT, and 13 vessels, totalling 29,000 DT,7, had to be imported before the end of the year. At least 23,000 DWT will have to be procured in addition by 1971. 132. According to IDT1/, the import of coasters would stop with the delivery of 2 tankers in 1968. This decision seems fully justified as the capacity of local shipyards will be large enough to meet all present and future requirements (Table 30). 133. Tariffs for coastal traffic are decided by MOT. They are still based on circumstances prevailing shortly after the war and do not accura- tely reflect costs. New freight rates were under study in 1966 and were to come into force-before the end of that year. No change occurred, how- ever, in 1966'or.during the first nine months of 1967. According to NOT, increases of 30 to 50% for passenger fares, and 30% for freight rates, were to occur before the end of 1967. Changes in the structure of the rates will still be needed. 134. As the cost of transport decreases when the capacity of ves- sels increasesL, the size of vessels should be as large as possible, taking into account total traffic, its distribution by harbor, and the facilities offered in harbors. Reductions in transportation cost when vessel capacity increases must be balanced against complementary invest- ment and/or maintenance (dredging) expenses in the harbors served. A detailed survey should be made to determine the optimum size of all coasters to add to the fleet for bulk transportation, in relation to invest- ments and maintenance expenses in harbors. It is feared that recent pur- chases made in Japan were based on the availability of second-hand ships, rather than on precise requirements. 1/ As in the case for sea-going vessels, the provisions made in the 1967 and 1968 ORBs (6 coasters in 1967, 56 coasters - totalling 26, 720 OT, i.e. less than 500 GT per vessel - in 1968) are incon- sistent with the orders already made. 2/ Approximately according to the function U = KI-0. where U = unit transportation cost. T = vessel capacity K = constant - 46 - V. CIVIL AVIATION A. Air Traffic 13'. Air traffic developed between 1960 and 1965 at an average growth rate of 245 for both international and domestic services. The year 1966, however, was characterized by a jump of 70%, in international traffic and a decrease of 8% in domestic traffic. Results related to the first eight months of 1967 show increases of 2h3 for international traffic and 19% for domestic traffic (Table 33). 136. Due to the economic growth of the country, and in accordance with the world-wide trend, international traffic may be expected to go on in- creasing steadily in the future. 1/ The same should be the case for domestic traffic 2/ as air transport is necessary in Korea due to the mountainous character of the country, the poor condition of the roads and the low com- mercial speed of trains on most of the runs. The traffic decrease observed in 1966 is due to managerial defects and/or lack of capacity, and not to decrease in demand. 137. Most of the traffic was from the Seoul-Kimpo airport. In 1965, out of the 207,000 domestic passengers carried, 82% enplaned or deplaned in Seoul (59% in Pu San, 26,o in Je Ju); out of the 77,000 international passengers carried, 98% enplaned or deplaned in Seoul (25 in Pu San). B. Infrastructure Investment Programs 138. Owing to a drastic shortage of investment and maintenance funds in the past, many civil aviation facilities on the eight airfields opened to scheduled airlines (Seoul, Pu San, Je Ju, Dae Gu, Kwang Ju, Sam Cheog, Gang Reung, Po Hang) appear either insufficient or poor. 139. In Seoul international airport, the existing runway requires an extension from 3,000 to 10,000 feet. This will be sufficient to handle the 1971 traffic /provided a new passenger terminal and a cargo terminal are built, together with the construction or improvement of taxiway, aprons and other facilities. Similar works are necessary in practically all other air- fields. There is a special need to provide airports with safety equipment (navaids, corumnication systems, fire-fighting vehicles and ambulances), 1/ At an average annual growth rate higher than 16", as had been assumed in KTS. 2/ The average annual growth rate of 23/ assumed in KTS may be tentatively kept. 3/ It will be insufficient to handle the second generation of subsonic jets and SST. A second runway - or a new airport - will be needed during the third 5-year plan. A detailed engineering study will be necessary in the caning years. - 47 - as the ICAO standards are not being met. An AID loan is under way to meet this last requirement. Other investments had been recommended by the Korea Transportation ission to open a military airbase to civilian traffic (Dae Jeon) and construct new civil airports at Jeon Ju, Mog Po, Jin Ju. 140. Planned investments for 1967 and 1968 amount to won 363 and 977 million respectively (Table 34). Apart from safety investments which are made through a USAID loan, the investments are insufficienti/ to make up for the past shortage and match the traffic increase. It is not clear whether the Won 204 million 1968 appropriation for Kimpo airport is destined for the extension of the existing runway or for a first stage of construction of a second runway. As noted above, the extension is urgently required, while a second runway should be delayed up to the end of SFYP. C. Maintenance and Operation Expenses 141. Maintenance and operation expenses of the MOT Civil Aviation Bureau for infrastructure, gardening, buildings, heating, water, power, and communication and electronics amounted to Won 41 million in 1966 and are planned to be Won 43 million in 1967 and Won 60 million in 1968. They seem insufficient for adequate maintenance of infrastructure. D. Korean Airlines (KAL) 142. Fleet. KAL is the only important airline operating domestic and international scheduled lines. In 1967 its fleet consisted of: 2 DC-3 1 DC-4 4 F-27, two of which leased in 1967 1 L-1049 H, leased in 1966 1 DC-9-32, bought in July 1967 for US$5.5 million. 143. The first three aircraft serve domestic lines, the last two serve international lines, while the F-27 may be engaged in both services. Inter- national lines consist of the Seoul-Osaka and Pu San-Fukuoka runs. From June 1, 1967, KAL started operating the Seoul-Taipei-Hong Kong line with the L-1049 H. 144. Domestic Tariffs. At the beginning of 1966, one-way fares ranged from 5.7 wlm -o FPu San-Je Ju to 8.3 w/km on Seoul-Pu San and 10.5 w/km. on Seoul-Gang Reung. On an average, they were twice as much as the second 1/ KTS recommended to invest Won 1,050 and 2,011 million in 1967 and 1968, respectively. - 48 - class railway fares, which are themselves 25% higher than bus fares and 1001 higher than third-class railway fares. They were only 18% higher than the first-class sleeping car fares on the Secul-Pu San run. 145. While the bus and railway fares remained unchanged, air fares underwent a general increase of 95 on June 15, 1966, and a further increase on August 5, 1967 of 45% on an average (75% on Pu San-Je Ju). After this last increase, the average revenue per passenger-km is approximately 12 Won. 1/ It is worth noting that, in the past, fare increases had no effect on the traffic volume. The fact that demand for tickets often exceeds the number of seats indicates an unsatisfied demand even at the present range of fares. 146. Financial results. Financial results (Table 35) show an operat- ing profit (after depreciation, included in operating expenses) from 1964 to 1966, and a current net profit (after payment of interests) from 1963 to 1966. Results for 1967, however, are less satisfactory, as a loss, estimated at Won 92 million, is expected by the end of the year. A further analysis shows that in the past KAL regularly lost money on domestic flights and made money on international flights /(due to much higher fares, in spite of the higher expenses). It had been one of the recommendations of the Korea Transportation Mission to set the domestic rates so that domestic revenues cover the corresponding expenditures. 147. Management and long-range policy. The emphasis put by KAL on the development of international operations can partly explain the 1966 domestic traffic decrease. 3/ It seems in addition that many flights were cancelled due to poor management and lack of maintenance. In 1967 KAL faced new difficulties in developing its overseas routes when the DC-9 caught fire on September 1 and made an emergency landing at Osaka. 148. As to the development of the fleet 4/ KAL is planning to order: - 4 F-27 type aircraft for delivery in 1968 or 1969, - a second DC-9 for delivery in 1969, - 2 long-range jets for delivery in 1970 or 1971. 1/ It is 0% higher on international lines. f/ With a very low load factor on the Seoul-Hong Kong-Taipei line, however, the L-1049 H is losing money. It had already lost 22 million Won during the first six months of 1967. 3/ KAL transported 26,000 international passengers in 1966 vs. 11,000 in 1965 (+ 1,000), 208,000 domestic passengers in 1966 vs. 192,000 in 1965 (_ 16,000). / The 1967 ORB provided Won 1,501 million for the first DC-9 and Won 273 million for the first F-27. The latter was not ordered. The 1968 ORB provides Won 1,065 million for the second DC-9. No provision is made for additional aircraft on domestic routes. - 49 - 149. The Mission expresses the opinion that first priority should be given to the development of domestic lines, which appears to be vital for the Korean econony. To meet the traffic increase, the Korea Transportation Mission had estimated that 5 F-27 type aircraft should be added to the fleet during the SFYP, i.e. one aircraft per year. If, as expected, the 2 F-27 leased in 1967 are returned to their owner, the program'contemplated by KAL would be insufficient and should be reconsidered. 150. The extension of international airlines is not necessary for economic development. M1oreover, the profitability of the operation of one or more DC-9 has never been demonstrated. It is even more dubious that KAL will be in a position to operate long-range jets in an economic way by the end of SFTP. The Mission reconmends that an exhaustive financial and economic analysis be made of the feasibility of operating KAL services on international routes, and to defer contemplation of ordering long-range jets for the time being.  ANNEX: COAL, CE1ENT AND POL TRANSPORTATION A. Coal Transportation (1) The 1971 coal production target, which had been fixed at 13,760,000 t by the SFYP, was reassessed in 1967 at 17,000,000 t. How- ever, the 1971 KNR transport forecasts, from which the needs in rolling stock are derived, are still based upon the old figure and have to be revised. Nearly all coal is transported by railroad. Due to the stiff gradient pass which separates the northern and southern parts of the coal producing Sam Cheog District, most of the output of the important Dog QVe mine is carried to ig Ho where it is loaded into coasters to Pu San or Ma San or exported .directly to Japan. In 1966, transportation cost by coaster was 45, higher than by railroad. With the improvement of marine transportation conditions, however, coastal transportation costs should drop to a competitive level, and the total amount of coal loaded in Mag Ho should increase from 1,200,000 t in 1964 to 2,500,000 t in 1971. (2) With the completion in 1967 of a second coal pier, the port of Mug Ho has a coal loading capacity of about 2 million t. The port may accommodate vessels of 5,000 DWT,, and the storage and loading facilities are excellent. IMloreover, an amount of Won 210 million is appropriated in the 1968 budget for a first stage of construction of a pier for 10,000 GT vessels. The unloading facilities in Pu San, however, are very poor as lighters are still used. The construction of a special coal pier, for which a Won 132 million appropriation is made in the 1968 budget, will cut the total marine transportation cost by approximately 205. (3) The government-owned Dai Han Coal Corporation owns three 2,500 DUT colliers which carry 550,000 t annually, and has made an application to import two 4,000 JT colliers with a 600,000 t annual transport capacity. At present the remainder is transported by hired coasters of small capacity. It is obvious that the best transportation conditions are attained when specialized colliers are used with the maximu capacity compatible with the facilities of the harbors to be served. N1ew increases of the collier fleet should be contemplated after a feasibility survey has determined the optimum capacity of the colliers in relation to the improvements to be carried out in harbors. Total capacity needed for coastal transportation of 2 million tons will be approximately 26,000 DLT (18,000 GT). (4) According to the Dai Han Coal Corporation, the conditions of coal transportation by railroad noticeably improved between 1966 and 1967. In particular, a new stock yard with a 150,000 t capacity was put into operation in Su Saeg in the vicinity of Seoul. Hopper cars are now being used properly, and truck transportation is proceeding smoothly. However, the rolling stock capacity is not fully sufficient to meet the increase in demand, The situation will improve in 1968 with tho import of 600 hopper cars through an IDA loan. This problem is dealt with in greater da6til in. the chapter of railroads. - 2 - Coal Transportation (million t, billion tkm) 1964 1965 1966 1967 1968 1969 1970 1971 Production (t) 9.65 10.25 11.61 13 l 15 16 17 Loaded in Iig Hol (t) 1.2 1.4 1.3 1.8 2.0 2.5 (coastalU7 (.) (1.0) (1.2) (1.2) (1.6) (1.7) (1.8) (1.9) (2.0) (export).I (t) (0.2 (0.2) (0.1) (0.2) (0.3) (0.5) KNR Transportation-2/ (t) 8.23 .8.83 9.98 12.40 13.35 14.30 15.30 16.20 INR Transportation (tla) 1.74 1.85 2.07 2.60 2.72 2.85 2.97 3.10 Coastall/ (tkm) 0.35 0.2 0.2 6 0.59 0.63 0.66 0.70 1/ Sources: up to 1966, MOT; from 1967 on, estimate by Dae Han Coal Corporation. 7/ Up to 1966: KNR .results; from 1967 on, Mission's estimate. 5/ With an average transport distance of 350 kn. (Mug Ho - Pu San). B. Cement Transportation (5) The 1971 cement production capacity and domestic supply targets, which had been fixed at 5,580,000 t and 4,190,000 t respectivel by the SFYP, were reassessed in 1967, at 9,400,000 t for production capacity in 1971 and 7,600,000 t for domestic supply. The increase of production capacity is primarily due to new plants located southeast of Je Cheon, which does not affect the distribution pattern i.e., the average transport distance. However, Tong Yang Cement, located in Sam Cheog, and Ssang Ryong Cement, located in Bug Pyeong (i.e. both plants north of the KN-TR Yeong Dong line stiff gradient pass), are now planning to use coastal transportation to a greater extent. In spite of this, the KER 1971 transport forecasts are still on the low side and should be revised upward. (6) With the completion in May 1967 of the bxtension project, the annual production capacity of Tong Yang Cement in Sam Cheog rose from 370,000 to 1,000,000 t. Because of the shortage of INR cars, about one- third of the production is being transported by coasters. The company primarily uses the port of Sam Cheog, located at a distance of only 1,2 km, to which the plant is connected by a small gauge private railroad. It invested Won 70 million in 1967 in dredging and pier construction, so that 2,000 IT vessels can be accommodated in the harbor, against 300 DWT before. Six small cargo ships (total capacity: 6,300 DUT) and one 1,650 DWT oil- tanker were bought in 1967. Cement is transported in bags, and belt -3- conveyors and chutes are used for loaing. The port of Ihg Ho, at a distance of 24 km., is not used by the plant except for export. The company is building two grinding mills if Pu San and Yeo 'Sa. By the end of 1968, clinker instead of cement will be transported in bulk,by coasters. (7) The new Ssang Ryong Cement plant in Bug Pyeong (between San Cheog and 1.1ig Ho) will start operating in September 1968 with a 1,700,000 t capacity. At least 400,000 t will be transported' by coasters in the first year of operation. All cement will be loaded in the port of Tjhg Ho to ihich the plant is connected by a private line. The company will operate its own 5,000 DWT tanker ship for transportation of clinker and cement in bulk. (8) By 1971, both plants are expected to work at full capacity, with a 2,700,000 t annual production. (Ql'600,000 t would be trans- ported by KR, while 1,600,000 t would be shipped by coasters, and 500,000 t by sea-going vessels for export. Dae to,.the .physical. condi- tion of the railroad line, it is doubtful if the KNR share can be increased. At present, transportation by coaster is more expensive than by railroad, but KNR freight rates are beloi- cost, and improve- ments in the condition of sea transportation will cut the marine, transportation c6st. Total capacity needed for coastal transporta- tion of 1,600,000 t will be approximately 21,000 DT (14,500 GT). (9) In Sam Cheog, the government intends to improve the harbor facilities so that 5,000 UNIT vessels nay be accommodated in' 1971. In ag Ho, a 10,000 D7dT pier will be under construction in 1968. Unload- ing facilities should be improved in Pu San. In Yeo Su and Ilog Po, unloading alongside quay is frequently delayed as the only pier avail- able is used by passenger boats, Ioreover, in log Po, the floating pier is connected to the land by a long bridge which prevents mechanical handling. As in the case of coal transportation, a feasibility survey should be made to determine the number and optimum capacity of the coasters necessary, in relation to the improvements to be carried out in harbors. Cement Transportation (000t; million t1m) 1963 1964 1965 1966 1967 1968 1969 1970 1971 Production/ 778 1,242 1,614 1,880 2,630 3,454 5,364 6,934 8,564 importl/ 274 28 6 178 488 444 Export 22 55 25 - - 200 250 500 Domestic Consumption2/ 1,052 1,248 1,565 2,033 3,118 3,898 4,873 6,081 7,601 Surplus 291 603 463 Transportation Coastal (t)3/ 110 60 60 60 160 400 1,000 1,300 1,600 Coastal (tkm)Y/ - - - - 56 140 350 455 560 Export (t) - 22 55 25 - - 200 250 500 KNR (t) 5/ 827 1,129 1,517 1,675 2,400 3,000 3,800 4,700 6,000 KNR (tkm)S/ 272 324 412 477 690 820 1,000 1,240 1,580 1/ Sources: up to 1966, BOK; from 1967 on, NOT. 7/ 7ncTUdIng changes in stock. / From 1967 on, Tong Yang Cement and Mission's estimate. 1/ 1ith an average transport distance of 350 km (M1ag Ho - Pu San). u/ Up to 1966, iNR results; from 1967 on, Mission's estimate. Figures do not include imported cement. C. Transportation of Petroleum, Oil and Lubricants (POL) (10) The 1971 POL consumption target, which was fixed at about 4,100,000 t by the SFYP, was reassessed in 1967, at 9,300,000 tons. Production will cover demand in 1969, when the Yeo Su refinery is put into operation, but imports will be necessary again in 1970 and 1971 unless new production units are started. The distribution pattern will change in 1969, with Yeo Su as a new starting point, which, when a third refinery starts producing, may switch to In Cheon, Bi In or elsewhere. (11) The main fact concerning POL transportation is the increasingly important part to be played in the future by coastal tankers. When the Ul San refinery began producing in 1964, about 6o of the production was shipped by railroad. The KNR share was still 50 in 1967. According to the Korea Oil Corporation, it will not be more than 20% in 1971, in Ul San as well as Yeo Su, and 80% of the production will be transported by tankers. The Corporation rightly estimates that sea transportation is more economical than land transportation, and the utilization of larger tankers, with a capacity of about 5,000 DUT, will cut the cost still further. Terminals already exist in Pu San and Seoul. New term,inals will be completed in 1967 in In Cheon and Mog Po. The most economic transportation of POL from In Cheon to Seoul will be by truck. Oil handling in harbor is relatively simple and does not raise significant problems. Under these assumptions, the tonnage transported by KNR would not increase significantly after 1968 and would be limited to about 2 million t in 1971. (12) According to the 'MOT statistics, the tanker fleet at the begin- ning of 1967 consisted of 118 vessels with a total 17,900 GT (or 34,000 DI) capacity. In fact, in September 1967, only 11 vessels, with a total 18,500 DWT capacity, had a capacity over 1,000 DWT. In addition, 13 vessels totalling 20,000 DUT had to be imported before the and of the year 1967. A total deadweight tonnage of about 70,000 DUT will be needed in 1971 for the regular transportation of 6,500,000 t of POL products from the refineries to the main harbors, without considering the redistribution to small harbors and the transportation to islands. A detailed survey should be undertaken in order to determine the optimum characteristics of the new tankers to be purchased as well as the right timing of the successive fleet increases. POL Transportation (million t, million tkm) 1964 1965 1966 1967 1968 1969 1970 1971 Production capacity2L/ (1.4) (1.7)' (1.7) (2.7) (4.9) (7.8) (8.8) (8.8) Consumption Y 1.8 2.1 2.5 3.8 5.3 6.5 8.2 9.3 KNR Transportation (t)3/ 0.46 0.56 0.69 1.00 1.8 1.9 1.9 2.0 KMR Transportation (tkm) 2/ 1.3 184 238 340 540 570 600 600 Coastal Transportation (t)!i/ 0.29 0.54 0.57 1.8 2.5 3.7 4.4 6.5 Coastal Transportation (tkm)L/ 80 150 160 720 1,000 1,80 1,760 2,600 1/ Production capacity of the Ul San and, starting in March 1969, Yeo Su, refineries, assuming that: Production in t/year = production in bbl/day x 365 2/ Inclusive of military; exclusive of refinery fuel and losses. Source: 3/ Eclusive of military and 1TR service freight. Source: up to 1966, KNR. From 1967 on, Missionts estimate. 4/ Exclusive of military. Average transport distance of 400 km from 1967 on.  STATISTICAL ANNEX Table 1. - Mission Forecast of Traffic Table 2. - Share of Transports in the National Economy Table 3. - Transportation Investments in 1967 and 1968 according to ORBs. Table 4. - KNR Freight Transportation Mission Estimates Table 5. - KNR Income Statements Table 6. - KNR Traffic Unit Average Revenue Development Table 7. - KNR Forecast of Passenger Rolling Stock Table 8. - KNR Forecast of Freight Car Rolling Stock Table 9. - Locomotive Stock Growth KNR Forecasts Table 10. - Railroad Investments Table 11. - Motor Vehicle Passenger Transportation Table 12. - Truck Transportation Table 13. - Highway Transportation Tariff Developments Table 14. - Highway Transportation Business Financial Results Table 15. - Civil Vehicle Fleet Growth, 1965-1966 Table 16. - Purchase of Motor Vehicles, 1967-1971 Table 17. - Highway Expenditures Table 18. - MOC Plan for Highway Construction and improvement (Surveys to be made with USAID and IDA assistance) STATISTICAL ANN1EX - Continued Table 19. - Mission Forecast of Cargo Handled in Harbors - Imports and Exports Table 20. - Mission Forecast of Cargo Handled in Harbors - Coastal Navigation Table 21. - Mission Forecast of Total Cargo Handled in Harbors Table 22. - Export Program by Commodity Table 23. - 1966 Harbor Traffic - Breakdown by Harbor Table 24. - Mission Forecast of 1971 Pu San and In Cheon Harbor Dry Cargo Traffic Table 2$. - Investments in Harbors Table 26. - Dredging Requirements and 1966-1968 Dredging Programs Table 27. - Port Finances Table 28. - Steel Cargo Vessel Fleet Development Table 29. - Share of National Fleet in Total Trade Table 30. - Official Vessel Procurement Program Table 31. - KSC Summary Income Statements Table 32. - 1971 Coastal Fleet Requirement Table 33. - Air Traffic Table 34'. - Airport and Navaid Investments Table 35. - KAL Income Statements Table 1 Mission Forecast of Traffic Aveae yearly increase rate ITS 1961 1964 1965 1966 1967 1968 1969 1970 1971 1961-1966 1967-1971 1964-1971 I. Inland Passengeai raffic (intercity) onpass-k) R *37 7.35 6.92 8.67 10.2 9.6 10.9 12.3 14.0 10.1% 10.1% 8.5% BUS 2.04 2.98 3.64 4.93 5.9 7.1 8.5 10.2 12.3 19.3% 20.0% 17.0% Micro and taxi 0.20 0.46 0.60 0.89 1.1 1.3 1.5 1.8 2.2 34.8% 20.0% 13.5% Charter bus 0.01 0.15 0.17 0.19 0.2 0.3 0.3 0.4 0.5 - 20.0% 17.0% Private car 0.32 0.50 0.60 0.72 0.9 1.0 1.2 1.5 1.8 17.6% 20.0% 16.0% Airplane 0.02 0.05 0.06 0.06 0.1 0.1 0.1 0.1 0.2 23.7% 23.0% 23.0% Water transport 0.14 0.21 0.20 0.22 0.2 0.3 0.3 0.3 0.4 9.5% 10.0% 21 Total LIUT9 - ~ F 166 3 41 1.%1.0 Annual increase rate 13.0% .2 8.6 'I 6%'18.6f .9F l5.72F l67al8.)1.1% 116.9% 11.80% II. Inland Goods Traffic (billion tkm) KNi 2.69 3.91 4.43 4.76 5.9 6.6 7.3 8.2 9.1 12.1% 13.8% 10.6% Truck 0.32 0.51 0.50 0.56 0.7 0.8 0.9 1.1 1.3 11.8% 17.5% 14.0% Coastal Shipping 0.24 0.48 0.63 0.64 1.4 1.8 2.6 3.0 4.0 21.4% 44.5% 18.1% (Dry) (0.22) (0.40) (0.48) (0.48) (0.7) (0.8) (1.1) (1.2) (1.4) 16.9% 24.5% 11.7% (POL) (0.02) (0.08) (0.15) (0.16) (0.7) (1.0) (1.5)(1.8) (2.6) 51.5% 74.5% 33.6% Total 3'7 In" T-M 37 6 U. U 17--3% TqE .7T7 Annual increase rate 14.6% 13.5% 7.2% 34.2% 15.0% 17.4W13.9% 17.i III. Harbor Traffic (minlion t loaded and unloaded) Import 2.45 4.16 5.17 6.77 10.95 13.05 14.45 16.70 19.75 22.5% 23.9% 9.9% Sxport 0.96 1.06 1.58 1.66 1.92 2.31 2.79 3.18 3.65 11.6% 17.1% 16.2% Coastal 2.23 3.51 Tol4.59 a 10.8 14.80 17.16 2.6 37.5% Total 76. T73 110a 3.02 21.57 - 7~ 3T.- W-M6162 86%l.4 Dry r" T1 9.30 rT T13T. 17 1 17.61 19.39 = 13.1% 17 n7 POL 0.27 1.55 2.00 2.94 7.70 10.70 114.4o 17.65 23.40 61.3% 51.4% 17.0% Annual increase rate 15.7% =9.4- 5.2T 65.7r-'1.4T-22.4r-15.3 24.7r- IV. Air Traffic (1,000 passengers) International 30.9 60.7 77.5 131.4 158 190 228 274 328 33.5% 20% 16.0% Domestic 61.5 174.9 207.5 191.6 236 290 356 438 539 25.5% 23% 23.0% Total W 7 7n 7 % r% 7r.T% Source: (See transport sectorial analyses in this report) Table 2 Share of Transports in the National Economy Billion won at 196 1960 1961 1962 1963 1964 1965 1966 GNP 589.07 613.61 634.97 693.03 750.31 805.85 913.82 Gross value added of Trans- portation Railroads 5.80 5.44 5.69 6.50 7.42 7.63 8.25 Motor Vehicles 5.34 5.49 6.41 7.97 9.35 12.21 14.90 Marines 2.10 1.92 1.90 2.12 2. 42 3.03 3.86 Others 1.63 1.85 2.11 2.15 2.39 2.68 3.13 Total 11.8T7 E.7 TO T 16.- 8g. 74 21.7 T 27.73 T C. 1 % (2.53) (2.40) (2.54) (2.70) (2.91) (3.18) (3.30) Domestic fixed capital formation 62.48 72.95 77.99 137.27 _114.41 118.48 207.38 Capital formation of trans- portation Railroads 4.85 9.83 Highways 2.12 4.77 Harbors 1.30 1.65 Others 9.74 21.76 Total 8 12.17 . 21.70 . 18.01 38.01 (14.1) (16.7) (21.1) (15.8) (12.9) (15.2) (18.4) Source: Bank of Korea, National Accounts. Incremental capital output ratio, derived from the dome't:c fix'od capital formation of transportation frm 1962 to 1966, divia.__d by the increase of gross value added during the same period (1966 value less 1961 value) = 7.08. Table 3 Transportation Investments in 1967 and 1968 according to ORBs (lillion TAon 1 9 6 7 1 9 6 8 Railroads New line construction 2,858 2,949 Station and line capacity 2,385 2,879 Way and structure renewal & improvenmt 965 2,065 Rolling stock procurement 6,331 8,368 Rolling stock maintenance and construction facilities 450 508 iscellaneous 209 544 Total 13,198 17,313 Highways Central Government Bridge construction 851 1,107 Road paving 629 513 Maj or highway 35 1,587 Industrial and tourist highways 180 213 Road betterment 197 320 Maintenance and others 165 260 Sub-total 2,0w T,000 Local Government 2,800 3,254 Total 4,857 7,254 Motor Vehicles 4,994 5,096 Harbors Major harbors 1,224 1,721 Small harbors 262 1,306 Fishing harbors - 125 Dredging 454 1,001 Others 74 5O Total 2,014 - 4,203 Shipping Sea-going vessels 2,797 4,716 Coastal vessels 1,243 2,594 Others 130 72 Total 4,171 7,382 Airports 364 977 Aircraft International flights 1,501 1,065 Domestic flights 273 - Total 1,774 1,065 TOTAL 31,372 43,290 (Storage) ( 254) ( 3.951) (Total Transportation and Storage) (31,626) (45,241) Source: ORB, Mission appraisal of these amounts: see following page. (Note to Table 3) 2.- Mission Appraisal of Probable Amount of Investment in 1967 and 1968 (for more details, see sectorial analyses) Railroads: It is likely that, in 1967, 420 million won for new line construction will not be spent. According to KNR rolling stock pro- curement program, actual rolling stock investments in 1967 and 1968 would be 6.5 and 10.4 billion won respectively. Highways: At least l0O of the so-called investments are in fact maintenance expenditures. Motor Vehicles: It is likely that actual investments will be much higher. Harbors: OC port construction and dredging figures are different (except 1968 dredging figures) and total 2,214 and 3,837 million won in 1967 and 1968 respectively. Investments in fishing harbors are not transportation investments. Shipping: Actual investments will be much higher as orders have already been made amounting to 7,050 and 9,130 million won, in 1967 and 1968 respectively, only for imported vessels. Local construction and major repairs should be added. Airports: No comment. Aircraft: The 273 million won provision for domestic flights will not be used in 1967. Tentative adjustments by the Mission based on the foregoing follow (million won): 1967 1968 Railways 12,950 19,350 Highways 4,350 6,500 Motor vehicles 9,000 10,000 Harbors 2,200 3,850 Shipping 7,500 10,500 Airports 360 980 Aircraft 1,500 1,065 Total 37,860 52,245 Table 4 KNR Freight Transportation Mission Estimates (million tkm) KTS 1964 1965 1966 1967 1968 1969 1970 1971 1971 Grain 289 295 318 350 357 364 372 380 (321) Fertilizer and limestone 250 338 207 250 300 400 490 560 (566) Coal 1,740 1,849 2,070 2,600 2,725 2,850 2,975 3,100 (2,450) Imported coal 28 25 7 25 25 30 30 35 (35) Ores 231 262 269 290 325 400 475 625 (625) Lumber 61 90 94 100 110 120 1ho 160 (159) Cement 324 412 476 690 820 1,000 1,240 1,580 (1,405) POL 143 184 238 340 540 570 600 600 (494) Others 841 973 1,076 1 240 1 415 1,615 1 840 2 105 (1,885 Total commercial 3,907 W7-J 97T5 5 B 6,617 77,77 t%76e 9,145 (7,940) KNR service freight 226 229 291 280 290 300 310 320 (300) Military freight 389 387 403 400 400 400 400 400 (400) Total ,722 7- 779 ;7 7,307 5,049 B7T2- -9 3(860 KNR forecasts 6,548 7,050 8,010 8,610 9,280 %...earlincrease Commercial 13.3 7.4 23.8 12.4 11.1 11.1 12.0 Total freight 11.5 8.0 20.5 11.3 10.2 10.2 11.2 KNR forecasts 20.2 7.7 13.6 7.5 7.8 Notes: 1. Grain: The new 1971 production target has not significantly changed, when compared with the SFYP original target. However, increases in the transportation volume in 1966 and 1967 denote changes in the distribution pattern (substitution of domestic production for imports). 2. Fertilizer and limestone: The KTS traffic target has been kept. A slight increase in the 1971 fertilizer production target is balanced by the introduction of some coastal transportation. Total transport includes 600,000 tons of limestone for agriculture and 175,000 tons for the Po Hang steel industry. 3. Ores and lumber': The KIS traffic target has been kept, although it is a pessimistic hypothesis, probably on the low side. 4. Coal, cement and POLU: See Annex. (continued on next page) (Table 4 continued) 5. Others: According to the KNR statistics, the"other commodities" are fruits and vegetables;.marine products; processed food; beverages and tobacco; metal; machinery; ceramics; textiles; straw; salt; livestock; miscellaneous; and other imports. The latter two items represent two- thirds of the total. The KTS 1971 traffic projections were based on the 1971/65 GNP increases as established in the SFYP. It was esti- mated that the "other commodities" traffic would increase at a 12.2% yearly growth rate between 1964 and 1971. The revised traffic pro- jections assume that i) the transportation of half of the "other commodities", mainly related to agricultural production, will increase at the same 12.2% growth rate, and ii) the transportation of the rest, mainly related to manufacturing production, will increase at a 15.8% yearly growth rate corresponding to a GNP growth rate of 10% in the remainder of the SFYP. Table 5 KMR Income Statements (m:lli on won) 1962 1963 1964 19651/ 1966 Operating revenues Passengers 3,752 4,257 5,317 6,573 8,384 11,274 Freight. 3,069 3,885 4,501 5,540 6,054 7,245 Other 220 247 548 983 1,265 - Total 7,072 8,389 10,366 13,096 T 5i 18,519 Operating expenses Before depreciation 4,770 5,632 7,710 9,560 12,698 15,957 Depreciation 1,974 1,899 2 050 2,027 2,226 3,223 Total 6,744 7T531 76 11,587 T=,92- 19,180 Operating income 298 858 606 1,509 779 -661 Non-operating income 78 -494 559 163 322 -60 Interest -6 -20 -350 -297 -375 -770 Net income 370 344 815 1,375 726 -1,491 Net operating ratio (after depreciation) 0.96 0.89 0.94 0.88 0.95 1.04 Evaluation of KNR Assets at Constant 1964 Prices Fixed assets 61,421 64,099 63,516 65,253 Current assets 5,047 7,002 10,269 12,885 Total assets 66,468 71,101 73,785 78,148 1/ Had depreciation been calculated on the basis of the replacement costs instead of the book values, the 1965 necessary depreciation annuity (equipment, tracks and structures) would have totalled 3,437 million won instead of 2,627 (2,027 as "depreciation" and 600 as actual track renewal expenditures), i.e. an increase of 800 million won (see KTS IV.13). The same remark applies for 1966. Net operating ratios jump to 0.95 in 1965 and 1.00 in 1966. 2/ KNR forecasts take into account actual increases in salaries and allowances and a 20% freight rate increase from July 1, 1967. In fact no rate changes had yet occurred on October 1, 1967. This means that freight revenue in 1967 will not amount to won 7,245 million but drop to won 6,586 million. The net operating ratio will probably jump to 1.07. Table 6 KNR Traffic Unit Average Revenue Development 1962 1963 1964 1965 1966 1967 1/ Passengers Revenue (million won) 3,752 4,257 5,317 6,573 8,384 Traffic (million pass-km) 5,869 6,676 7,353 6,917 8,665 Revenue at current prices (1/100 won per pass-kmf) 63.9 63.8 72.3 95.0 96.5 (96.5) Consumer price index (1960 = 100) 115.2 139.0 180.0 204.4 229.7 (252.7) Revenue at constant prices (1/100 won per pass-kIn) 55.5 45.9 40.2 46.5 h42.0 (38.2) Operating ratio 2/ 0.89 0.82 0.82 0.71 0.72 Freight Revenue (million won) 3,069 3,885 4,501 5,54o 6,054 Traffic (million tkm) 3,742 4,067 4,296 4,815 5,158 Revenue at current prices (1/100 won per tkm) 82.0 95.5 104.8 115.1 117.4 (117.4) Wholesale price index (1960 = 100) 123.8 149.3 201.1 221.2 238.0 (254.7) Revenue at constant prices (1/100 won per tkm) 66.2 63.8 52.1 52.0 '49.3 (46.1) Operating ratio 2/ 1.09 1.04 1.13 1.11 1.29 1/ Assuming that the consumer price index will increase by 10%, the wholesale price index by 7%, between 1966 and 1967 (Cf. ORB 1968). 2/ According to KNR calculations with revaluation of assets as from 1964/1965 (see Table 5). Table 7 KNR Forecast of Passem2r Rolling Stock 1966 1967 1968 1969 1970 1971 A. Stock on January 1 Railcars 83 163 161 161 181 213 Coaches (and trailers) 1 370 1,398 1 398 1,58 1,679 1,787 Total 1,Z! 1,561 15 1,719 TT= 2,000 B. Changes in stock during year Mported : Railcars 85-/ 20 32 45 : Coaches 230 Locally built: Coaches 50 149 148 145 Scrapped : Railcars -5 -2 : Coaches -22 -70 -70 -70 -70 Rebuilt : Coaches 42 30 30 Total -2 -40 C. Stock on December 31 Railcars 163 161 161 181 213 258 Coaches 1,398 1,398 1,558 1,679 1,787 1,892 Total 1-,7r 1,57 1,719 1,65 2,000 2,150 1/ First Japanese loan. Table 8 KNIR Forecast of Freght Rolling Stock 1966 1967 1968 1969 1970 1971 A. Stock on January 1 Box cars 3,833 4,199 4,701 4,601 5,542. 5,712 Gondolas 3,414 3,863 4,300 4,250 3,362 3,612 Hopper cars 1,494 1,471 1,471 2,071 2,082 2,082 Tank cars 793 952 1,172 1,622 1,769 1,769 Others 1,053 1/ 969 1,149 1,349 1 458 1,657 Total 15,87 1 11-77 12,793 13,893 121t,3 1,32 B. Changes in stock during *,ear Imported 565 2/ 965.3/ 1,100 4/ 700 5/ Locally built 472 653 700 00 900 950 Scrapped ( - ) -199 -259 -750 -780 -500 -500 Rebuilt 29 50 219 218 Total -T7 1,339 1,100 320 -61-9 C. Stock on December 31 11,454 12,793 13,893 14,213 14,832 15,500 1/ Breakdown of others: Flat cars 603 Refrigerators 184 Cabooses 266 Total 1,052 2/ Of which 536 through the first Japanese loan. 3/ Of which 795 through the second Japanese loan and 150 by the Korea Oil Corp. (KOCO). 1/ Of which 600 hopper cars and 450 tank cars through the second IDA credit. 3/ Of which: Heavy flat cars 50 Flat cars 150 Refrigerators 100 Livestock cars 100 Ore hopper cars 300 Total 700 Table 9 Locomotive Stock Growth KNR Forecasts 1966 1967 1968 1969 1970. 1971 A. Steam locomotives Stock on January 1 272 261 110 Scrapped during year -11 -151 -110 Stock on December 31 -61 10 0 B. Diesel locomotives Stock on January 1 125 173 252-/ 252 260 281 Import during year/ 48 79 - 8 21 22 Stock on December 31 173 22 2-2 260 21 303 Diesel locomotive utilization Passenger ) 81 81 84 .92 99 Freight ) 160 124 124 127 137 148 Switchingl/ 13 47 47 49 52 56 Total 173 252 252 260 281 303 C. Electric locomotives Stock on January 1 58 l/ BreakdoNn: Small diesel 811 -, 887 hp = 115 Medium diesel 1,329 hp = 47 Large diesel 1,775 hp = 29 1,826 bp = 61 Total 252 2/ Imports after 1968 consist of: 41 mainline locomotives type 2,000 - 2,400 hp. Present largest are 1,826 hp. 10 switching locomotives type 200 hp 3/ Switching locomotives in addition to the above mentioned 10 200 hp type are provided by the existing S-8 and 08 locomotives type 811 and 887 hp. Table 10 Railroad Investments (million wTY] 1967 1968 OR B K TS .0 R B K TS New line construction Gyeong Jean 80.5 km 1,625 1,015 813 908 Jeong Seon 24 km 460 626 800 496 Mun Gyeong 12 km 103 100 550 305 Jang Hang 16 km 308 100 315 Bi In 22 km 50 501 100 470 Bug Pyeong 12.9 km (New) 200 301 Steel mill line 11 km (New) 285 Others 420 Total 2 2,50 2 2,9 Station and line capacity Seoul area 64 470 337 471 Marshalling yards 200 ) 133 ) 316 ) 278 Loading and unloading facilities 269 ) ) ) Building improvement and enlargement 64 100 170 200 Signalling and track extension 760 748 806 331 Enlargement of station yards - Improvement of station facilities 1,028 - 1 250 - Total 2,385 1,451. 2,89 1,280 Way and structure renewal and improvement Track 830 1,637 1,757 1,637 Bridges 135 74 180 74 Equipment 18 128 35 Total 972 1,7295 1,746 Rolling stock procurement Locomotives - - Passenger stock 810 1,013 Freight stock 4,089 3,493 Total 6,33 1 7 Rolling stock maintenance and construction Spare parts 397 - 397 Sheds, workshops 450 448 508 448 Total 75 508 7 Miscellaneous Communications 28 65 225 65 Electric power and lighting 52 55 70 55 Office mechanization 13 13 Consultant services 160 160 Others 129 - 249 - Total 209 293 E 293 Total 13,198 11,767 17,313 11,165 ContinFencies - 1,177 - 1,117 GRAND TOTAL 13,198 12,944 17,313 12,282 kOf which foreign exchange) (-) (35.6%) (35.0%) (33,2%) Table 11 Motor Vehicle Passenger Transportation (Billion pass-km) 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 Intercity Transportation Bus 0.85 0.91 1.22 1.28 1.59 1.84 2.04 2.41 2.39 2.98 3.64 4.93 Microbus and Taxi 0.0 0.06 0.07 0.09 0.18 0.18 0.20 0.28 0.38 0.46 0.60 0.89 Chartered Bus 0.01 0.01 0.02 0.02 0.02 0.02 0.01 0.06 0.12 0.15 0.17 0.19 Total 0.90 0.98 1.31 1.39 1.79 2.04 2.25 2.75 2.89 3.59 4.41 6.01 City Transportation Bus 0.66 0.71 0.95 0.99 1.25 1.23 1.34 1.39 1.45 1.86 2.27 3.19 Microbus and Taxi 0.10 0.15 0.19 0.23 0.44 0.46 0.50 0.70 0.95 1.16 1.30 2.25 Total 0.76 0.86 1.14 1.12 1.69 1.69 1.84 2.09 2.40 3.02 3.57 5.44 Total 1.65 1.83 2.46 2.61 3.48 3M73 4.08 1,83 5,28 6.61 7.98 11 46 Based on data provided by MOT. For assumptions, see KTS II., 150 sq. Table 12 Truck Transportation (million t, -billion t1cm) 195 1956 1957 1958 1959 1960 1961 1962 1963 19661 1965 1966 Goods Transported (ton) 3.1 5.1 8.0 8.8 9.8 10.3 15.3 16.9 16.0 18.7 2L6.0 24.5 Tkm 0.11 0.18 0.28 0.31 0.34 0.36 0.32 0.38 9.42 0.51 o.50 o.56 Based on data provided by MOT. For assumptions, see KTS II., 70 sq. Table 13 Highway -Transportation Tarift Developoents (W per pass-km and tkm) 1960 1961 1966 Intercity passenger basic fare 0.8 ...1.10 1.33 Area truck basic rate 1/ 5.5 6.20 6.20 Route truck basic rate 20.0 23.00 18.50 1/ When there is no return freight, a 50% increase is allowed. Table 14 Highway Transportation Business Financial Results (Income and profit = million w) (Income/unit = w) Jan.June3 1960 1961 1962 1963 1964 1965 1966 1262 Bus (city and intercity) Income 2,207 2,758 4,j59 4,713 .5,726 7,363 12,237 7,758 Profit 108 111 262 255 100 185 855 377 Ratio (%) 5.0 4.0 6.2 5.5 1.7 2.5 6.9 4.9 Income/pass-km 0.72 0.82 1.09 1.23 1.18 1.24 1.51 Aicrobus Income 522 726 858 1,284 1,686 2,131 3,709 2,251 Profit 76 61 64 99 116 148 15 152 Ratio (%) 14.6 8.4 7.5 7.7 6.9 6.0 0.4 6.8 ?axi Income 787 1,105 1,072 2,019 2,506 3,552 7,1444 5,045 Profit 152 99 74 317 247 270 632 510 Ratio (%) 19.3 9.0 6.9 15.7 9.9 7.6 8.5 10.1 Truck Income 1,992 2,002 2,403 2,752 3,131 31973 51872 4,106 Profit 85 61 114 177 207 78 634 497 Ratio (%) 4.3 3.0 4.7 6.4 6.6 9.5 10.8 12.1 Income/tkm 5.5 6.2 6.3 6.6 6.1 7.9 10.5 Source: HDT. Table 15 Civil Vehicle Fleet Growth, 1965-1966 1965 1966 Increase % PaOsenger car Government 1,649 1,883 14.2 Private 5,580 7,593 36.1 Taxi 5,854 8,176 ) 19.9 Microbus 3,197 2,676 ) 16,280 20,328 24.9 Truck Goverment 1,659 2,020 21.8 Private 3,874 4,773 23.2 Business 10,482 12,639 20.6 16,015 19,432 21.3 .Bus Government 78 96 23.1 Private 239 291 21.2 Business 5,720 7,675 34.2 6,037 8,c62 33.6 Small car Government 219 116 Private 1,532 1,169 Business 634 37 (Motorcycles) (-1,071) - 1,314 1,322 - Special car Government 177 289 Private 447 599 Business 170 128 794 1,016 28.0 Total Government 3,782 4,404 Private 11,672 14,425 Business 26,057 31,331 (Motorcycles) (-1,071) - 40,440 50,160 24.0 Source: OT. Table 16 Purchase of Motor Vehicles, 1967 - 1971 Old cars To be Unit-/ Total Number Numberl/ not purchased cost cost 1966 1971 replaced 1967-1971 (thousand w) (millioxv passenger car 9,476 24,000 5,000 19,000 500 9,500 Taxi and microbus 10,852 25,000 7,000 18,000 600 10,800 Bus 8,062 18,000 4,000 14,000 1,300 18,200 Truck 19,432 28,000 13,000 15,000 1,600 24,000 Small and special 2 338 j5,O00 1,000 .4,000 300 1 200 Total O,1 100,000 30,000 70,000 63,700 1/ As in KTS (V. 30), the numbers of vehicles in 1971 are calculated for each category separately on the basis of the transport volume increase, assuming that the average yearly distance covered by all cars, and the average truck pay-load, will increase by respectively 15 and 20 percent between 1966 and 197'.. 2/ Unit costs are nearly the same as in KTS in spite of the substantial price increase since the KTS was written (about 15 percent). They are consistent with the assumptions made by EPB for the calculation of the 1968 ORB. They are less, however, than the factory prices (less tax) computed by Asia Motors for the output of its projected assembly plant. It is difficult to judge who is right, but the Mission is inclined to think that ORB provisions are based on under-estimation of cost. 1 9 6 8 OR B ASIA 1WTOaS* Unit Total Factory price Number Cost Cost (thousand w) Taxi and microbus 600 528 317 Large bus 6,974 Bus 790 1,232 973 Middle bus 1,305 Truck 2,400 1,547 3,713 Large truck 4,095 Other 300 310 93 Middle truck 2,074 Total 9,090 - * A joint venture in cooperation with Savien and Renault Engineering. Table 17 Highway Expenditures (million won) 1966 1967 1968 . enditares u Draft Budget Work Amount Work Amount Work Amount A. Central Government (MOC) Bridge construction 2,656m 580 3,598m 851 1,900m 1,107 Road paving 86km 393 68km 629 112km 513 Major highway con- struction 2km 35 16km 1,587 Industrial road con- struction 3km 41 8km 144 13km 173 Tourist highway 7km 36 8km 40 Road betterment 21km 91 24km 197 hOkm 320 Highway maintenance 0 - 165 - 240 Preliminary survey and planning 20 Total 171O5 2,057 ,000 B. Local Government Bridge construction 978m Road paving 8km Improvement 750km Maintenance - 354 - 143 - Total 2t835 . Total expenditures 1,633 4,857 7,254 Sources: A: MOC B: 1966 and 1967: MOc; 1968: EPB C: EFB (1967 and 1968 ORBs) :'ighway SFYP/KTS proposals (heavy equinment and technical assistance excluded) (1965 price million won) Projects Work Amount Bridge construction 27,15 m -,700 Road paving 3,300 km 19,000 Road construction and improvement 1,500 km 4,500 Industrial roads 218 km 1,000 Toll roads 143 km 3,250 Toll bridges 4,200 m 1,850 Miscellaneous - 1,500 Sub-Total 35,800 Surveys, studies and supervision 4,200 Total 40,000 Allowance for contingencies 10% 4,000 Grand Total E4,iM Table 18 MOC Plan for Highway Construction and Improvement (Surveystobe made with USAID and IDA assistance) (million won) (Figures in parentheses are in $1,000) Estimated Construction Costs Unit Order of Local Forei Construction Schedale Cost Priority Section Legth Characteristics Fund Fun[ Total Engineering Construction Per Km Seoul- Expressway,2/ 4,224 1,056 5,280 1968 1968-1970 132.0 1 In Cheon 40 S- 120 Km/hr w=31 m (15,360) (3,840) (19,200) Seoul- Expressway,1/ 3,616 904 4,520 1968-1969 1969-1971 113.0 2 Su Weon 40 S=100-120 Km/hr, w =24 m (13,149) (3,287) (16,436) Seoul- Partial limited access,good 3 Gang 263 characteristics 6,744 1,686 8,430 1968-1969 1969-1971 32.1 Reung S=80-100 Km/hr, w=17-22 m (24,524) (6,131) (30,655) Po Hang- Pu San- Expressway and partial 4 Sun Cheon- 463 limited access, good 12,276 3,069 15,345 1968-1969 1970-1976 33.1 Yeo Su- characteristics, (44,640) (11,160) (55,800) Kwang Ju S =80-120 Km/hr, w=17-22 m Sam Cheog- Partial limited access, good 5 Sok Cho 141 characteristics, 4,512 1,128 5,640 1968-1969 1969-1976 40.0 S=100 Km/hr, w-22 m (16,407) (4,102) (20,509) Dae Jeon- Partial limited access, good 6 Mog Po 297 characteristics, 6,776 1,694 8,470 1968-1969 1969-1976 28.5 S =80-100 Km/hr, w=17-22 m (24,640) (6,160) (30,800) Total 1,244 38,148 9,537 47,685 38.3 (138,720) (34,680) (173,400) Purchase of heavy equipment 2,217 2,217 (8,o6l) (8,061) Grand Total 11,754 49,902 40.1 (42,741) (181,461) 1/ Including 8 km within cities. 2/ Including 6 km within cities. Table 19 Mission Forecast of Cargo Handled in Harbors - Imports and Exports (1,000 t)' Jan.Aug. 1965 1966 1967 1967 1968 1969 1970 1971 Imports Grain 637 558 (634)' 1,150 800 800 600 400 Fertilizer 1,125 829 (647) 1,350 1,850 2,000 2,150 2,200 Cement 12 190 (341) 500 450 0 0 0 Lumber 518 1,010 (761) 1,100 1,200 1,300 1,00 1,500 Coal 116 10 (68) 100 150 150 200 550 Minerals 0 0 (0) 0 0 0 0 850 Other Dry Cargo 1,860 2,404 (1,809) 2,650 2,900 3,200 3,500 3,80 Total Dry Cargo' 1,260 5,096 (4,260) 6,850 7,350 7,450 7,850 9,350 POL 906 1,676 (2,064) 4,100 5,700 7,000 8,850 10,400 Total 5,174 6,772 (6,324) 10,950 13,050 14,450 16,700 19,750 Exports Grain 8 58 (0) 0 50 55 55 60 Fertilizer 0 6 (0) 0 60 100 100 100 Cement 36 18 (26) 0 0 120 150 300 Lumber 35 36 (28) 200 220 245 270 300 Coal 218 153 (141) 200 100 100 100 100 Minerals 859 726 (197) 760 770 800 820 700 Marine Products 13 19 (9) 100 160 190 220 250 Other Cargo 408 647 (:15) 660 950 1,180 1,470 1,840 Total 1,577 1,663 (916) 1,920 2,310 2,790 3,185 3,650 Note: Cargo handled in the following harbors: In Cheon, Gun San, Jang Hang, Mog Po, Yeo Su, Ma San, Pa San, Ul San, Po Hang, Mug Ho, Je Hu, Chung Iu, San Chon Po, Sok Cho, except for the first 8 months of 1967, where the last 3 are excluded. Jin Hae is included in the list from 1967 on. For 1965, 1966 and I-VIII 1967, source MOT. Military cargo excluded, except for POL from 1967 on. -2- Projections for exports are based upon thr unofficial fLnistry of Commerce and Industry export-Target of $1 billion by 1971. Quantities have been calculated from the values, on the base of the 1966 unit prices, as they may be derived from the BOK statistics (Table 22). They may differ, but not widely, from the corresponding quantities to be found elsewhere in tbia.report. "Lumber" includes, from 1967 on, veneer sheets. "Other cargo" has been calculated assuming that its average unit price should re- main constant over the 1966-1971 period. With the hypotheses made, the 1970 figures correspond to a $800 million export program. Such a method could not be applied to the projections for imports as no breakdown was available. "Grain" projections have been provided by the 1inistry of Agriculture. "Fertilizer" includes chemical fertilizers and raw materials for fertilizers. The 1971 consumption, according to esti- mates provided by the Ministry of Agriculture (316,000 t nitrogen + 222,000t phosphorous + 148,000 t potash), corresponds to a total quantity of 2,100,000 t of chemical fertilizers. As raw materials are processed in the plants (1971 capacity: 1,400,000 t) without changes in weight; and as 100,000 t of locally produced fertilizers are to be exported in 1971,.total imports will be 2,200,000 t in 1971. The same calculation has been made for the preceding years. Figures for "lumber" are arbitrary. "Coal" con- sists of bituminous coal and coke, and includes in 1971 350,000 t of coke for the steel plant. "Minerals" only concerns iron ore for the steel plant. "Other dry cargo" is assumed to rise at a 100 growth rate per annum. "POL"I figures exceed by 8/ the consumption figures to take into account refinery consumption and losses. Table 20 Mission Forecast of Cargo Handled in 1arbors - Coastal Navigation (1,000 t) Jan.-Aug. 1965 1966 1967 1967 1968 1969 1970 1971 Unloaded Grain 90 86 49 90 90 90 100 100 Fertilizer 13 39 29 100 100 150 200 250 Cement 65 59 75 160 00 1,000 1,300 1,6c Lumber 21 21 18 25 25 30 30 30 Coal 1,046 1,116 926 1,600 1,700 1,800 1,900 2,000 Salt 54 55 31 55 55 60 60 60 Minerals 38 16 7 40 40 50 50 250 Fresh fishes 107 110 69 120 130 140 150 150 Other dry cargo 348 335 243 360 370 380 390 400 Total dry cargo 1,782 1,837 1,447 2,550 2,910 3,700 4,180 4,840 POL 489 569 470 1,800 2,500 3,70 4,CO0 6,500 Total 2,271 2,406 1,917 4,350 5,410 7,400 8,580 11,340 loaded Grain 33 29 21 Fertilizer 72 51 40 Cement 13 6 6 Lumber 5 9 10 Coal 1,217 1,168 950 Salt 23 14 7 Minerals 17 6 56 Fresh fishes 18 6 126 Other dry cargo 278 321 257 Total dry cargo 1,676 1,610 1,473 POL 606 574 542 Total 2,282 2,184 2,015 'Tote: Cargo handled in same harbors as in Table 19 but without exception for the first 8 months of 1967. According to MOT statistics related to this last period, total coastal cargo loaded and unloaded in Korean harbors, in- clusive of small mainland and off-shore harbors, amounted to 5,498,000 t vs. 3,932,000 in said harbors. Conelderation of these secondary harbors explains, to a certain extent, the differences which appear in the past (continued on next page) (Note on Table 20 continued) series between the amounts of cargo loaded and unloaded. For 1965, 1966 and I-VIII 1967, source MOT. Military cargo excluded. Projections for"18ementt, t1coal") "fertilizer", and "POLu coincide with projections by major suppliers such as Tong Yang Cement, Dae Han Coal Corporation, Jin Hae Chemical and Korean Oil Corporation (see specific analyses in annex). "Minerals" includes in 1971 iron ore transported from Sok Cho to Po Hang. Coastal transport of other commodities is assumed to remain low. The MOT projections for all harbors, inclusive of small mainland and off- shore harbors, amount to 4,568,000 t and 8,200,000 t for 1967 and 1968 respectively. Compared to the Mission's projections, they correspond to a traffic, lower in 1967, higher in 1968. Table 21 Mission Forecast of Total Cargo Handled in Harbors (1,000 tons) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 l*port 2,451 2,449 3,700 4,397 4,163 5,174 6,772 10,950 13,050 14,450 16,700 19,750 Coastal 971 1,158 1,490 1,527 1,599 2,271 2,406 4,350 5,410 7,400 8,580 11,340 Total 3,2 , ,2 761- TTO 9,17 15,300 18,460 21,850 25,280 31,f090 Dry 3,310 3,455 3,00 713 ,j51 1 ,690 65 T,-o 10,260 11,150 12,030 ,190 POL 112 153 184 210 1,130 1,395 2,317 5,900 8,200 10,700 13,250 16,900 Loaded Export 582 964 803 862 1,061 1,577 1,663 1,920 2,310 2,790 3,185 3,650 Coastal 895 1,073 1,593 1I69L 12912 2,282 2,184 4,350 5,410 7,400 8,580 11,340 Total 1,477 2,037 2,396 2,556 2,973 3,859 3,847 6,270 720 10,190 11765 14,990 Dry 1,414 1,915 2,186 2,377 2,549 3,253 3,219 4,470 5,220 6,490 7,365 8,490 POL 63 122 210 179 424 606 628 1,800 2,500 3,700 4,400 6,500 Total handled Sea-going 3,033 3,413 4,503 5,259 5,224 6,751 8,435 12,870 15,360 17,240 19,885 23,400 Coastal 1,866 2,231 3,083 3221 3,511 4,553 4,590 8,700 10,820 14,800 17,160 22,680 Total 4,899 5,645 7,585 8,479 8,734 11,304 13 025 21,570 26 180 32,040 37,045 46,080 Dry 4,724 5,370 7,191 8,090 7,180 9,303 10,080 13,870 15,480 17,640 19,395 22,680 POL 175 275 394 389 1,554 2,001 2,945 7,700 10,700 14,400 17,650 23,400 Source: 1960-1966: MOT data. Table 22 Emport Program by Commodity (Q = quantity in thousand ) (V - value in million US$) 1566 1967 1968 1969 1970 1971 V Q T V QV Q V QV Fish and fish prodacts (21) 58 (37) 100 (58.5) 160 (69) 190 (80.5) 220 (91) 250 Cereals (7) 60 (0) 0 (9) 50 (9.5) 55 (lo) 55 (105.) 60 Crude fertilizers and minerals (4) 243 (5.5) 340 (6.5) 390 (6.5) 400 (7) 420 (7.5) 450 Iron and other ores (21) 694 (23) 760 (23) 770 (24.5) 800 (25) 820 (21) 700 Coal (1.5) 162 (1) 100 (1) 100 (1) 100 (1) 100 (1) 100 Chanical fertilizers (0) 0 (0) 0 (6) 60 (9) 100 (9) 100 (9) 100 Veneer sheets (30) 152 (40) 200 (44) 220 (48) 245 (53) 270 (58) 300 Cement (0.5) 25 (0) 0 (0) Q (2.5) 120 .) 150 ... _.... Total (85) 1,374 (106.5) 1,500 (148) 1,750 CL70) 2,010 (188.5) 2,135 (204) 2,260 Others 1 289 (243.5 40 (32) (450) 780 (611.5) _.L.L L Grand Total (250) 1,663 (350) 1,920 (470) 2,310 (620) 2,790 (800) 3,185 (1,000) 3,650 Import ProgrWi (716) 6,772 (822) 10,905 (1,094) 13,050 (1,156) 14,450 (1,254) 16,700 (1,371) 19,750 Inport program is provided for sake of comparison only: source MCI for V; Q as in table 1. 2grcg: 1966 v and Q : BOK. 1967-1971 V : MCI. "$1 Billion Export Program". Table 23 1966 Harbor Traffic Breakdown by Harbor (1,000 tons) I N 0 UT Total Sea- Sea- going Coastal Total going Coastal Total In Cheon 1,486 246 1,732 151 31 182 1,914 Gun San 245 30 275 28 0 28 303 Jang Hang 93 2 95 0 0 0 95 Mog Po 84 120 204 24 53 77 281 Yeo SU 72 90 162 44 46 90 252 Ma San 100 233 333 36 21 57 390 Pu San 2,729 1,331 4,060 888 318 1,206 5,266 Ul San 1,892 16 1,908 57 429 486 2,39 Po Hang 41 87 128 6 21 27 155 Mug Ho 24 35 59 144 1,178 1,322 1,381 Je Ju 8 96 104 1 44 45 149 Chung Mu 1 28 29 5 9 lb 43 Sam Chon Po 1 23 24 3 2 5 29 Sok Cho 0 68 68 276 32 308 376 Total 6,776 2,4o5 9,181 1,663 2,184 3,847 13.028 Note: Military cargo excluded. Source: MOT data. Table 24 Mission Forecast of 1971 Pu San and In Cheon Harbor Dry Cargo Traffic (1,000 tons) Pu San In Cheon Others Total 1966 1971 1977 1-971 1966 1971 1966 1971 In Grain 268 0 296 44o 80 60 644 500 Fertilizer 187 250 199 300 484 1,900 870 2,450 Cement 159 850 32 50 59 700 250 1,600 Lumber 482 700 456 700 94 130 1,032 1,530 Coal 797 1,300 21 100 324 1,10 1,142 2,550 Minerals 9 0 0 0 8 1,100 17 1,100 Others 1,671 1,900 569 1,300 666 1,260 2,906 4,460 Total 3,573 5,000 1,573 2,890 1,715 6,300 6,86114,190 Out Grain 17 20 2 0 68 140 87 160 Fertilizer 19 20 2 0 36 330 57 350 Cement 13 0 7 0 4 1,900 24 1,900 Lumber 5 160 37 160 3 10 45 330 Coal 16 0 0 0 1,295 2,100 1,311 2,100 Minerals 371 400 71 100 290 450 732 950 Others 62 1,200 63 800 276 700 963 2,700 Total 1,065 1,800 182 1,060 1,972 5,630 3,219 8,490 Total L,638 6,800 150 3,68711,930 10,08022,680 Notes: 1966 Results from MOT data. 1971 projections correspond to the following assumptions: Grain: No more import into Pu San as Gyeongsang-Nam-Do production exceeds consumption. Fertilizer: About 1,400,000 t of raw materials are imported and 100,000 t of chemical fertilizer exported, at U1 San and Jin Hae; 800,000 t of other imports and 250,000 t coastal are distributed as in the past, with higher increase in Gyeonggi-Do. Cement: 1,600,000 t coastal transportation and 300,000 t export going out of Mug Ho and Sam Cheog. More than half of coastal transportation unloaded in Pu San. Lumber: No change in distribution of import. Export of plywood through In Cheon and Pu San. Coal: 2,000,000 t coastal and 100,000 t export going out of Mug Ho. (continued on next page) (Table 24 continued) Minerals: 850,0O0 t import and 250,000 t coastal transportation entering Po Hang. In addition to coastal transportation, 700,000 t export leaves harbors. Distribution similar to 1966. Others: It has been arbitrarily supposed that, owing to (i) the emphasis put on the economic development of the Seoul-In Cheon area, (ii) the diversion of harbor traffic from Pu San to In Cheon as a consequence of the major works planned in In Cheon, and (iii) the increasing importance of industrial and other harbors in Korea, the nother" distribution is considerably altered. In 1971 Pu San would handle about 50% more than In Cheon, which in turn would handle slightly more than all other harbors together.  Table 25 Investments in Harbors fm-ifl on - 7W Annual investments recommended in KTS 1966 1967 1968 (ajere 967-1968) %,ecial .Harbors In Cheon second dock 1,350 U1 San 1,269 485 166 Bi In 22 70 5 Jin Hae 661 31 Po Hang 200 Total 1,952 586 1,721 (1,89) Main Harbors In Cheon 70 161 (103) Mog Po 20 60 93 (94) Yeo Su 63 47 30 (142) Pu San 119 150 132 (140) Je Ju 30 48 95 (60) Po Hang 12 15 10 (14) Mug Ho. 30 116, 210 (375) Sam Cheog 22 50 30 Sok Cho. 23 21 Gun San 26 (25) Ma San 45 (11) Total 389 668 671 (964) Other Harbors 389 342 394 (250) Grand Total 2,730 1,596 2,786 (2,403) Source: MOC. Figures concern actual expenditures in 1966, approved budget in 1967, draft budget for 1968. Figures in 1967 and 1968 OR-Bs are-somewhat different (Table 27). Table 26 Dredging Requirements and 1966-1968 Dredginro a,s (7,000-M-31,) Delayed maintenance or investment Annual Dredging programa (1967-1971) siltation 166 1967 1965 Delayed maintenance In Cheon 7,392 600 418 626 - Jan Hang 1,624 58 37 38 33 Gun San 1,897 88 102 101 C Mog Po 1,629 80 79 249 6r0 Yeo Su 101 19 28 17 - Pu San l0,67 250 495 544 334 Po Hang 1,888 25 46 64 53 Je Ju 161 13 25 22 2) Mug Ho 285 27 85 47 3 Others 2,869 160 996 256 6_ Total 28,313 1,310 2,311 1,964 1,21' New harbors projects and extension Ul San 8,200 60 2,373 1,806 1,70% Jin Hae 500 1 - Bi In 4,680 - - In Cheon 4,500 - - 1,950.1 Total 17,880 61 2,373 12806 365 Grand Tota - 1 1,371 4,681 3,770 h,867 Cost (million W) 625 618 1,001 Unit cost (W/m3) 133 164 206 l/ Maintenance and the new project in In Cheon are grouped in "investment". 2/ Total requirement during SFYP period: Delayed maintenance 28.3 million.m3 Investment dredgings 17.9 million m3 Annual siltation 1,371 x 5 6.8 million m3 Total 53.0 million m3 Source: Requirements: KTS Programs: MOC Table 27 ,-Tort Finances (million w) 1965 1966 1967 1968 Revenues Collected by MOF 74.5 Collected by NOT 110.5 139.8 Total 185 Expenditures NOT (port operation and aids-to-navigation) 198 238 MOC: harbor construction 506 2,730 1,596 2,786 dredging 256 625 618 1,051 maintenance 25 45 42 62 Total 985 3,638 Source: HOT andMO0C. Dredging expenditures in 1968 include 50 million Won to be used by the newly established Dredging Corporationi, The 1967 and 1968 ORB figures are different for harbor construc- tion and dredging: ORB 1967 ORB 1968 Major and small harbors 1,486 3,027 Dredging 454 1,051 Table 28 Steel Cargo Vessel-Fleet Development (1,000 GT as of the end of the year) Aug. 31 1960 1961 1962 1963 1964 1965 1966 1967 Number 54 54 60 60 61 66 89 83 Tonnage 108 106 103 104 119 147 219 301 Source& MOT. Note: Unit tonnages vary widely. In 1965, 17 vessels had less than 500 GT capacity; 36 vessels, totalling 134,000 GT, had more than 1,000 GT capacity; 9 vessels, totalling 68,000 GT, had more than 5,000 GT capacity. While this fleet includes all sea-going vessels the smallest ones may be engaged in coastal as well as in sea-going trade.i/ In addition, in 1965 the total cargo vessel fleet comprised 548 wooden steam cargo vessels, totalling 26,000 GT, all of them with a less than 300 GT capacity. In 1965, 73% of the fleet (expressed in GT) was more than 15 years old. The fleet figures in the table do not include tankers. In 1965 the tanker fleet comprised 100 steel vessels with a total 13,000 GT capacity (one 5,200 GT tanker, all other tankers with a less than 800 GT capacity). In 1966, 4 tankers, totalling 4,500 GT, were added to the fleet for coastal navigaw tion. I. Data for 1967, however, would concern sea-going vessels only. Table 29 Share of National Fleet in Total Trade (1,000 t) 1960 1961 1962 1963 196h 1965 1966 Import Total 2,451 2,h9 3,700 4,397 4,163 5,174 6,772 Crude oil 725 830 1,496 Total less crude oil 2,451 2,449 3,700 4,397 3,438 4,344 5,276 National vessel 412 529 755 878 901 1,197 1,473 17 22 20 20 26 23 22 Export Total 582 964 803 862 1,061 1,577 1,663 National vessel 377 429 288 283 398 463 594 % 65 hh 36 33 38 29 36 Source: From MOT data. Table 30 Official Vessel Procurement Program 1 9 6 7 1 9 6 8 1 9 6 9 Gross Gross Gross No. tonnage Cost No. tonnage Cost No. tonnage Cost units (1,000 GT) (million US$) units (1,000 GT) (million US$) units (1,000 GT) (million US$) Sea-going (Imported) Freighters 26 126 21 103 31.7 9 128 Tankers 2 29 7 421 Total 2U _Z 1- M I ~17 9 7. Remarks All second-hand ships All new ships already Not yet ordered. already ordered. Down-payment ordered through~commercial is 10to 77U0,Tbalance is due loans from Japan with in 35 months. Foreign guarantee of the Government. currency is obtained through Terms of loans are 8 years BOK, and 5.5% interest. Coastal (Imported) Freighters 18 24 Tankers 15 20 2 7 2.1 Total 37 7 T 7 7 Tl Remarks All second-hand ships All new ships under construe- imported from Japan. tion in Japan. Local Construction ]:telships) 14 5o 62 Sources: Sea-going and coastal: MOT. No import foreseen after 1969. Local construction: MCI. 1970 and 1971 forecasts are 50,000 and 55,000 GT. Table 31 KSC Swnmary Income Statements (million W, 1,000 us$) 1962 1963 6 L965 1966 3,967 Total Results Expressed in Won Income 860 797 1,310 1,933 2,589 Expenses Operating expenses 1,016 1,338 1,848 Depreciation 63 108 210 General Management and interest 193 199 212 Total expenses 779 776 1,272 1,;7 2,270 Net profit (w) 81 21 38 287 293 Part of Results in Foreign Currency Income 2,610 1,932 2,281 2,866 3,771 3,625 Expenses 3,71h 3,183 2 997 3 362 4,616 -6,268 Net profit ($) --,i1 - i2T - 71- -496 - 8 -27,$ Assets Current assets 635 641 563 1,077 Fixed assets 368 2,740 1,886 1,221 Total assets (w) 1,003 3,382 2,450 2,298 (Exchange rate: 1 US$ = W) 130 130 255 270 270 Source: MOT. Table 32 1971 Coastal Fleet Requirement Traffic Traffic Tonnage required Tonnage on To be procured Procured or 1966 1971 1971 hand 1966 SFYP ordered in 1967 million million million million t tkm t tkm GT DWT DWT DWT DWT Coal 1.14 .oo 2.00 700 18,000 26,000 7,500 18,500 (8,000) Cement - - 1.60 560 14,500 21,000 0 21,000 (11,300) Ore - - 0.25 75 2,000 3,000 0 3,000 Other dry 0.58 60 0.99 100 5,000 7,500 - Total dry F-r -W(5 47.8 T 1145 T50 5750 - - POL 0.57 155 6.50 2 600 50,000 70,000 18,500 52,500 (29,000) Total 2.29 21-34 89,5 177,500 - - SOurce: Mission. Table 33 Air Traffic Jan.- August 1962 1963 1964 1965 1966 1967 Passengers - domestic (000) 47.9 94.0 174.9 207.7 191.6 (151.5) Passengers - international (000) 37.4 48.8 60.7 77.5 131.4 (108.9) Total' (000) 85.3 142.8 235.6 285.2 323.0 (26o.4) Annual increase rate - domestic 96% 85% 19% -8% Annual increase rate - international 31% 21f 28% 70% Annual increase rate - total 68% 65% 21% 13% Load factor - Domestic KAL 60.1 58.9 60.4 63.5 68.0 (60.0) KAL share in international 0% 0% 8% 14% 20% (18%) Number of flights - domestic 3,240 5,27 9,08 10,491 9,566 (6,776) Number of flights - international 921 912 1,448 1,881 2,327 (2,153) Annual increase rate - domestic 63% 80% 10% -9% Annual increase rate - international -1% 60% 30% 2.% Source: from 140T data. Table 34 Airport and Navaid Investments (million W) 1966 1967 1968 Kimpo 109.81/ 73 204 2/ Pu San 22 25 31 3/ Je Ju 75 Other existing airfields 56.9 44 New airfields 74 70 Aviation college 13 Safety equipment (AID loan) 191 540 Total 188.7 363 977 1/ Includes safety equipment. 2/ Taxiway and apron pavement. 3/ Terminal and runway pavement. 4/ 1968: terminal and taxiway and apron pavement in Gang Reung. 5/ Jeon Ju, Mog Po, So Ruk, Yeo Su. Sources: MOT and 1967 and 1968 ORBa. Table 35 KAL Income Statements (1,000 US$) 1963 1964 1965 1966 Operating revenue 896.6 2,052.0 2,264.5 4,052.7 Operating expenses 956.6 1,877.3 2,024.2 3,661.0 Operating result -59.9 174.7 240.3 391.6 Non-operating result 96.0 -140.8 -104.0 -126.3 Current net profit 3.1 33.9 136.3 2 Current assets 1,256.8 1,711.3 1,098.2 1,288.0 Fixed assets 2,537.9 1,899.2 2,662.7 3,337.3 Other 62.8 46.8 68.4 199.4 Total assets 3,957.5 3,829.3 7-27 Source: IOT.  2 m \F Z U) 0 F --------\-- cs9