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“Taiwan’s High-Speed Rail: A Public-Private Partnership Hits a Speed Bump” – Case number 1910.0, John
F. Kennedy School of Government.

What should the Taiwan government do about the request of THSRC to be bailed out? How?

Background of the Taiwan High-Speed Rail Project

The following report reflects on the timeline and implementation of the high-speed project of the railroad in Taiwan. The project was started in the year 1980 and continued up to the year 2009(Garrido et al. 2017). Large stages of analysis of steps are involved in understanding the potentiality of the given problem like cost-benefit analysis, proper financial planning and lastly analyzing the feasibility of the project. In the beginning, the project was considered to be step up as a privately run infrastructure but later the project was taken as public-private. After completing the operation, the organization was responsible for any kind of construction and operation behavior (Stalker, 2017). It has ultimately reduced the rate of leadership and global depression. The private section of the Ministry of Transport and communication of Taiwan look for a request that corporation is unable to repay the loans. It ultimately gives the railroad for the given government to easily operate. The final account should be taken into account behind the final response of above-stated response.       

In the coming pages of the essay, an idea has been provided regarding the request of THSRC. After that, more detail analysis of requirements of FEP has been provided. The whole process or method of developing PDRI has been discussed. Various concepts and roles of front-end project manager have been discussed in details. An evaluation has been done regarding the quality of FEP activities in the project has been demonstrated by making of FEP framework. In the last section of the report, a proper difference has been provided regarding project success and project management success.

Taiwan High-Speed Rail Project is expected to be 15 billion dollars’ project. It is considered to be largest and most challenging infrastructure type of projects in the world till now (Hsu et al. 2015). It is expected to be scheduled by the year 2005. The 345 km rail system has been designed for trains which travel at the rate of maximum speed of 350 km/hr. Any kind of lack of natural resources has made Taiwan independent on the given foreign investment. The construction industry institute focus in developing a tool which is used in front-end planning (FEP). This particular tool which is known as project definition rating index (PDRI). PDRI is much focused to be used in various kinds of industrial projects (Chou, Lu and Chang, 2014). PDRI tool has been designed for understanding the measures the degree and scope of the project. It helps in understanding the scope definition of a project and helps in understanding the strength and weakness of the overall project cycle. 

Analysis of the Taiwan High-Speed Rail Project

In the 1980s, the economy of Taiwan is much focused on the development of fast and proper living standards of the locals which has helped in the development of a strategy of the given country (Li, Schmöcker and Fujii, 2015). Ultimately, economic development has ultimately come with a demand for transport between Taipei and other cities associated with it. The given project was proposed a proper outline which has been given by Taiwan High Rail Cooperation (THSRC). This particular cooperation won the right for construction and focus on operating in proper handling over the given government. The project come up with massive investment for a value of 10 billion dollars but it does not lead to a successful outcome for the given country. There are many reasons for the failure of this particular project. This HSR project is known to be one biggest privately managed and transport project in the year of 2007.

In the year 1994, the Taiwan government passed a law which requires the involvement of both private capital infrastructure projects which is also being applied to THIS project. Thereafter in the year of 1995, provision engineering officials of High Rail Speed (POHSR) was changed into the Bureau of High-Speed Rail. It was started to tender THSR which is used for building operation transfer scheme in the year 1996 (Pan, Lin and Chen, 2015). In the given bidding method, Taiwan High Rail Consortium (THSRC) focus to run against the Chunghwa High-Speed Rail Consortium (CHRSC). THSRC was founded by five domestic organizations and aims in submitting much cheaper things by promising to pay around 3.1 billion dollars. It expected to build the line with zero net cost for the government and was preferred bidder in the year 1997. The group can be renamed and formally established as THSRC (Taiwan High-Speed Rail Corporation) in 1998. THRSC and the government of Taiwan signed a proper agreement in the year of 1998.

A public-private partnership has ultimately enhanced the importance in construction project and its operation of a high-speed railway network around the world. By understanding the measures of Taiwan high rail speed which aims in providing a connection between island nation between north and south can be considered to be a success (Chou et al. 2017). Between the year 2006, the number of passenger miles traveling by train in Taiwan has increased a lot. The frequency of various passengers on domestic’s air has been reduced by 53 percent. By the year 2009, the high value of ridership on some of the densely populated routes can easily different organization to easily build the line which can start from turning an operational profit. However, Taiwanese taxpayers need to pay the much higher price rather than its success is anticipated. In the initial stage, the private organization needs to pay for the entire cost for construction of given line. Rather than Taiwan taxpayers need to be just a part of the entire project. In the year of 1998, Taiwan High-Speed Rail Corporation (THSRC) has been awarded as the 35-year of concession which is used for building and operate Taiwan High-Speed Rail. It is being promised to easily build a system without any kind of government funding. But later on in the year 1990, the organization started to run difficult after the financial crisis of Asia (Sun and Lin, 2018).  Along with this, the organization has asked to take out loans with a high rate of interest which is used for paying for the project. Similar to the homeowner, the advertisement rate of mortgage comes up with a high speed of rate. The high rate of interest has forced the organization to be financial unsustainability with more than three-fifths of the total income of the organization. It is mainly required to pay off the debt after that. In the year 2009, the organization was still paying high interest of 8 percent for some of its loans. Apart from this, the organization was forced to reduce the value of assets for being much faster which mainly comes up for traditional assets in the form of ownership. It can easily add to the financial loss to the organization which can result in financial loss for the organization. It has ultimately lead to a loss of 2.18 billion dollars for the organization.

PDRI as a Front-End Planning Tool

As a result of financial for the organization, the shareholders of THSRC singed a reluctance which aims in investing in further in the given project (Geng, Bao and Liang, 2015). It has ultimately lead to a large number of difficulty to THSRC in providing security to banks and kinds of financial institute. The lack of financial support has led to issues with the finishing off some of the project. The given network was opened to the public in the year of 2007 and several key stations were considered to be incomplete in nature. For running the operating system, the government of Taiwan aimed at refinancing the loans of THSRC (Yeh et al. 2014). The government provided hundreds of million dollars to the given network. Even by the original method was to build an operational plan for transfer which ultimately stipulating the THSRC to easily building a system without any kind of capital from the government. So, government body has decided to not to make over the given company. It is expressing to take no kind of interest in growth of the current 40 percent share or any kind of investment for the money to be bailed out.

To resolve the issue of loans in the interest of THRSC of the rate of interest has allowed it to focus solvent. So, THSRC has come up with a new kind of chairman which has been backed by the government (Li and Schmöcker, 2017). It allows the government to play more supervisory in the role of the given organization. The Taiwan rail corporation put some of the challenges. Firstly, it checks the high dependency on private capital. Similar to many homeowners which saddle with a high rate of debt of interest at the time of subprime mortgage. The THSRC focus on a certain number of things which was ultimately being unable to restore the financial health’s. Even in some of the situation, high service rail service began to turn into some of the operational profit. It was mainly due to the earlier legacy of high interest which has resulted due to bank borrowing (Albalate, Bel and Fageda, 2015). Financial projects are known to be public from the beginning has been proven to be starting has been to be very much cheaper in nature and with more stability. Apart from this, there should be a reduction in crushing the debt with the load encountered by THSRC (Ho et al. 2016). Along with this, is aimed at reducing the burden of the total bailout for Taiwan government. It ultimately refinanced the debt of the whole organization.

The Concept of Public-Private Partnership in Large Infrastructure Projects

Secondly, Taiwan provided an example to provide an idea regarding the dangerous effects of lock-in. Government of Taiwan provided the THSRC is to look for bankrupt and its operational activity of high-speed railway activity for its ceasing. The whole activity took place when the organization ran into financial trouble (Chang, 2015). While carrying the activity created proper abandonment of some of the critical public assets. The whole project has left the government with a little amount of choice but to easily prop up with a failure of business plan for private operators along with funds from the public.

The public-private partnership is considered to be a useful tool for different government bodies like Taiwan. It ultimately helps in understanding the importance of large infrastructure projects in reducing cost and increasing the reliability (Wu et al. 2016). PPP can be designed in such a way that it can impose a huge risk on both government and taxpayers, wasting of money and lastly creating initiatives which run counter to the interest of the public. The first thing which should be taken into consideration that the government should have an idea of what they can get from it. Taiwan government should enter into PPP (public-private partnership) only when they can have a clear idea regarding the benefits of achieve. PPP comes with a positive and negative side for any government body like Taiwan. PPP should provide some kind of partnership for any kind of project to easily work for reducing costs along with reducing the risk involved in the private sector (Zhen, Cao and Tang, 2018). Apart from this, PPP aims in improving quality and timeline for delivery of a project of major infrastructure. PPP undertaking can also aim in providing some other kind of instance like

  • Ability to easily evade labor or any other kind of regulation which can aim in pertain government-sponsored project (Rao, Lee and Lee, 2017). Instead of keeping the whole project which is under the total responsibility of any private sector.

  • Ability to any kind of shift in the cost of the project which is involved in infrastructure management. It requires an off-balance sheet which can be achieved by masking the three degrees of public investment in any kind of project (Lin et al. 2017). It will ultimately encourage the public sector to easily take an undertaking of the different project which will help to help in mastering or accumulation of debt which is hidden.

  • Ability to easily pass off the given potential decision has provided an idea regarding the unpopular decision is accountable for a private

When the government bodies take into the consideration of PPP, the public may deserve the right to any kind of scrutinize the arrangements.  But it can help the government to pursue them (Ho and Su, 2017). Understanding the reasons for PPP can help in ensuring the agreement serves for the given purpose. Understanding the project with the help of PPP can help in creating a certain number of risk for the public sector and can also aim in some kind of agree to have control over the project. To check whether that PPP project will provide added value or not. The government of Taiwan should look for comprehensive and proper analysis when it is compared to the cost of the project (Miraj et al. 2015). They should look for any kind of mechanism which is looked for saving. A major number of countries should look for a test known as the public sector comparator. The subject of PSC has been subjected to criticism which can provide the potential for all kind of changes for the business. The factor also takes into consideration and assumption for value for money over the passage of time (Lai, Wang and Huang, 2017). The potential of any kind of change of the test is considered to be big when the government of Taiwan is subjected to the PPP approach. At the time completing value for money test a prerequisite should be there for moving with a different project.

Financial Challenges of the Taiwan High-Speed Rail Project

Participation of private bodies in different government projects will provide large can advantages like minimizing cost, improving quality and mitigation of any kind of involved risk. PPP based projects can provide proper structure in such a way that it can attract competitive bids. Breaking the high rail projects into the given piece which enable the small piece to provide a variety of organization to complete it without any kind of drawback (Saat and Aguilar Serrano, 2015). Since at the time of doing it can easily result in additional interferences which requires coordination for different sectors.

Conclusion

From the above discussion, it can be easily concluded that this report is all about Taiwan High-Speed Rail (THSR). It is known to be a network of high-speed rail which runs in the western side of Taiwan. The project is approx 345 km in length and it runs from Taipei to Kaohsiung. In the year 1997, the plan of THSR was started. Later on, in the year 2000, the infrastructure of construction began. The total cost of the project was expected to be 18 billion dollars. This particular HSR project is considered to be the largest project which has been funded and managed by transportation project in the year of 2007. The network makes use of a rolling mechanism for equipment for electrical and mechanical which is being supplied by Japanese-based Taiwan Shinkansen Corporation. This particular project is also inclusive of signaling and train control equipment’s, communication system along with the earthquake warning system. The bullet train of Taiwan incorporated a huge amount of debt. The bailout resulted in improving performance and three more stations were added by the given route by the end of that year. Later on, in the year 2016, a new station was opened up in Taipei which helped in having economic access to some certain specific regions of the city. Two steps have been provided in the above pages of the essay, which will help THSRC to be bailed out in an easy way.

References

Albalate, D., Bel, G. and Fageda, X., 2015. Competition and cooperation between high-speed rail and air transportation services in Europe. Journal of Transport Geography, 42, pp.166-174.

Chang, K.H., 2015. Technological construction as identity formation: building Taiwan's high-speed rail during the 1990s state transformation. Engineering Studies, 7(1), pp.1-27.

Chou, J.S., Kim, C., Tsai, P.Y., Yeh, C.P. and Son, H., 2017. Longitudinal assessment of high-speed rail service delivery, satisfaction and operations: A study of Taiwan and Korea systems. KSCE Journal of Civil Engineering, 21(6), pp.2413-2428.

Lessons Learned from the Taiwan High-Speed Rail Project

Chou, P.F., Lu, C.S. and Chang, Y.H., 2014. Effects of service quality and customer satisfaction on customer loyalty in high-speed rail services in Taiwan. Transportmetrica A: Transport Science, 10(10), pp.917-945.

Garrido, L., Rangel, T., Baeza, M.D.L.Á. and Vassallo, J.M., 2017. Does EU support contribute to economically successful Public-Private Partnerships (PPPs)? A panel data analysis of road PPP projects in Spain. Journal of Public Policy, pp.1-23.

Geng, B., Bao, H. and Liang, Y., 2015. A study of the effect of a high-speed rail station on spatial variations in housing price based on the hedonic model. Habitat International, 49, pp.333-339.

Ho, T.W., Chen, T.C., Hsieh, C.C. and Chou, C.C., 2016. Design of multi-agent emergency dispatching model to strengthen resiliency of Taiwan high-speed rail system. Procedia Engineering, 145, pp.646-653.

Ho, W.C. and Su, J.M., 2017. A Market Potential Index to Design A Feeder Bus Route for the Miaoli Station of the Taiwan High Speed Rail (No. 17-01113).

Hsu, Y.T., Lin, W.R., Lai, Y.C.R. and Kao, T.C.T., 2015. Forecasting High-speed Rail Ridership Using Aggregate Data: A case Revisit of High speed Rail in Taiwan. In TRB 94th Annual Meeting Compendium of Papers.–2015.

Lai, Y.C.R., Wang, S.W. and Huang, K.L., 2017. Optimized Train-Set Rostering Plan for Taiwan High-Speed Rail. IEEE Transactions on Automation Science and Engineering, 14(1), pp.286-298.

Li, Y.T. and Schmöcker, J.D., 2017. Adaptation patterns to high speed rail usage in Taiwan and China. Transportation, 44(4), pp.807-830.

Li, Y.T., Schmöcker, J.D. and Fujii, S., 2015. Demand adaptation towards new transport modes: the case of high-speed rail in Taiwan. Transportmetrica B: Transport Dynamics, 3(1), pp.27-43.

Lin, Y.H., Ho, P.F., Chen, J.C., Yang, J.S., Chang, H.W. and Hsu, C.C., 2017, March. A New SDN-Based Architecture and Authentication Method for Taiwan High-Speed Rail. In Wireless Communications and Networking Conference (WCNC), 2017 IEEE (pp. 1-6). IEEE.

Miraj, P., Abdurachman, Y., Tobing, E. and Ivan, A., 2015. Developing conceptual design of high speed railways using value engineering method: creating optimum project benefits.

Pan, M.S., Lin, T.M. and Chen, W.T., 2015. An enhanced handover scheme for mobile relays in LTE-A high-speed rail networks. IEEE Transactions on Vehicular Technology, 64(2), pp.743-756.

Rao, S.H., Lee, Y.C. and Lee, Y.C., 2017. Value Drivers to Maximize Stakeholder Worth: The Case of Taiwan High Speed Rail Corporation Customizing. Asian Economic and Financial Review, 7(7), pp.677-684.

Saat, M.R. and Aguilar Serrano, J., 2015. Multicriteria high-speed rail route selection: application to Malaysia's high-speed rail corridor prioritization. Transportation Planning and Technology, 38(2), pp.200-213.

Stalker, N.K., 2017. Ikebana as Industry: Traditional Arts in the Era of High-Speed Growth. The Journal of Japanese Studies, 43(1), pp.1-29.

Sun, Y.Y. and Lin, Z.W., 2018. Move fast, travel slow: the influence of high-speed rail on tourism in Taiwan. Journal of Sustainable Tourism, 26(3), pp.433-450.

Wu, D.C., Ho, P.F., Chen, J.C., Yang, J.S. and Chang, H.W., 2016, May. Signal measurement and prediction of wimax basestations on taiwan high speed rail. In Consumer Electronics-Taiwan (ICCE-TW), 2016 IEEE International Conference on (pp. 1-2). IEEE.

Yeh, C.T., Liang, C.C., Yang, C.M., Wey, J.J., Tsui, P.Y., Wu, H.L., Yu, C.P. and Shyu, R.H., 2014. Comparison of immunostrips with mouse bioassay and bacterial culture in detecting botulinum toxins in bottles from suspected Taiwan high-speed rail bomber. Forensic Toxicology, 32(2), pp.258-265.

Zhen, F., Cao, J. and Tang, J., 2018. Exploring correlates of passenger satisfaction and service improvement priorities of the Shanghai-Nanjing High Speed Rail. Journal of Transport and Land Use, 11(1).

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