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Rays of hope for Shinkansen bullet train in Taiwan?

TAIPEI, June 3 Kyodo

Whether European high-speed trains or Japanese Shinkansen bullet trains will run on Taiwan's future high-speed railway linking northern Taipei with Kaohsiung in the south has very much become an issue of cheap and ample money - or rather the lack of it.

It is no secret the Taiwan High-Speed Rail Corp. (THSRC), the private consortium of local companies that is to build and operate the railway until 2033, has problems securing funds from cash-strapped local investors in the wake of the regional financial crisis and last year's plunge in local stock prices.

Since its founding in May last year, THSRC has only attracted a total of 20 billion New Taiwan dollars (611 million U.S. dollars) in capital from its shareholders, which it hopes to increase to 50 billion N.T. dollars within the coming two years. Even that, however, would be still short of the 120 billion N.T. dollars that the consortium eventually needs to cover its share of the 400 plus billion N.T. dollar project.

Government guarantees for 280 billion N.T. dollars in financing by three state-affiliated banks -- Chiao Tung Bank, the International Commercial Banking Corp. and the Bank of Taiwan -- are still under negotiation.

With 210 billion N.T. dollars, the lion's share of those funds will come from postal savings and government pension funds, but the remainder has to come from elsewhere, including the banks.

For months THSRC has been insisting it is close to sealing a tripartite investment contract with the government and the banks, but as yet nothing has come of it.

The nagging financing problems surrounding the ambitious 340-kilometer high-speed railway have raised speculation THSRC, which promoted the European system when winning its bid for the mammoth build-operate-transfer (BOT) project, might have to turn to funding from Japan.

THSRC Chairwoman Nita Ing personally set the rumor mill spinning when making a four-day trip to Japan in mid-May, which included rides on the two latest Shinkansen models, the Nozomi 500 and 700 systems, and meetings with representatives of the Japanese industry group behind the "Taiwan Shinkansen," as well as government officials.

Japanese sources close to the talks told Kyodo News that Ing was told the Japanese government would consider providing soft loans through its Export-Import Bank of Japan, provided the Shinkansen system is chosen.

Taiwanese media took Ing's trip as a further indication a switch to the Japanese system is imminent. Support for the Japanese system is also coming from other quarters.

Liu Tai-ying, head of the China Development Corp., which led the Chung Hua High Speed Consortium that lost the bidding war for the railway project, and is affiliated with the ruling Nationalist Party (KMT), has been an outspoken Shinkansen advocate.

Liu, as the KMT's top financier, is an influential voice in the island's business community and has been showering THSRC with abrasive criticism questioning its capability to handle a project of such scale, calling investment in it "unsafe."

At the same time Liu has repeatedly said he would consider chipping in funds if THSRC drops its preference for the Eurotrain, which combines German Inter City Express (ICE) power cars made by Siemens and double-deck coaches of France's Train-a-Grande-Vitesse (TGV) built by Alstom.

Even Taiwan President Lee Teng-hui does not try to disguise his hope for Japanese involvement in the high-speed railway project.

In his new book "Taiwan's Viewpoint," he says that price, safety and political considerations are the three decisive factors in picking the train technology.

The Eurotrain is reportedly somewhat cheaper than the Shinkansen, but in the safety department it is burdened with still vivid memories of the serious ICE train crash at Eschede, Germany, in June last year.

As for the political background, Lee, a declared supporter of closer ties with Japan, was frank.

"'Political considerations' means that although the construction of the high-speed railway is a private sector investment, we also hope that the Japanese government would be able to offer clear support," Lee says in the book, which went on sale in mid-May.

Such open political support for the Japanese system might, however, backfire.

Already critics warn that too much political string-pulling does not bode well for the future of BOT projects in Taiwan.

"Taiwan cannot advance if major projects go only to well-connected people who are strong...Taiwan, like many other Asian economies, must break away from a tradition of allowing connections to mean privilege in public affairs," the Taiwan News daily editorialized June 1.

Pointing to the need for a good start for Taiwan's first major BOT project, the United Evening News decried the ongoing politicking in its editorial May 31.

"Liu Tai-ying is not only frequently dropping comments, he also seems to command considerable influence. Aren't these doubts obstacles in the development of the high-speed railway," the daily asked.

Also the Japanese government might come under fire for using its financial prowess to promote Japanese technology, an approach that is reminiscent of Tokyo's often criticized policy to make the disbursal of official development aid (ODA) conditional on the use of Japanese products and contractors.

The Taiwan Shinkansen group, led by Mitsubishi Corp., has been asked to hand in its negotiation proposal concurrently with the competing Siemens-Alstom group June 15, which is expected to be only the starting point for full-fledged sparring between the two systems.

According to THSRC officials, the final decision on train technology will not be made before the end of September, leaving a few more months of speculation and behind-the-scene maneuvering.
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Publication:Asian Economic News
Geographic Code:9TAIW
Date:Jun 7, 1999
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