Sub-Theme 1 | Return Bus Services to Citizens: Switching from a Private Operation System to a Semi-Public Operation System
The decline in the quality of bus services, decreasing demand, and chronic deficits were inevitable results of the private operation system. Bus companies’ tendency to prioritize profits over the convenience of passengers also fuelled the growing public dissatisfaction with and abandonment of bus services. In an effort to enhance the public nature of bus services while still maintaining the involvement of the private sector, Seoul Metropolitan Government introduced a
semi-public operation system.
As recently as the early 2000s, bus companies in Seoul, preoccupied with profitmaking, had insisted on providing bus services along a number of inefficient routes, including ones that were unnecessarily long and convoluted.
The diameter of the administrative area of Seoul Special City is about 30 kilometers, but the average distances travelled by buses in Seoul were 34.1 kilometers for standing-type buses and 57.7 kilometers for seat-type buses. Almost 29.9 percent of the standing-type buses and 71.2 percent of seat-type ones ran excessively long routes of 50 kilometers or more.
This practice favored only some users who lived or worked near the established bus routes, causing the quality of bus services to deteriorate over time. The frequent turns in the bus routes made run times excessively long and added to traffic congestion. Perceiving bus routes to be excessively lengthy and inconvenient, passengers in Seoul began avoiding bus services.
As of 2002, the average
redundancy of bus routes in Seoul was 10.8; more specifically, it was 10.7 for standing-type buses and 11.4 for seat-type ones. Such degrees of redundancy are considered to be quite high. In addition, the average redundancy with subway routes was 36.09 percent. In total, 60 bus routes (56 seat-type and four standing-type routes) overlapped with subway routes 60 percent or more of the time. Buses and subways were thus locked in unnecessary competition rather than forming a mutually complementary and beneficial structure, leading to a decline in the operating efficiency of the entire public transportation system.
The redundancy of bus routes may have offered greater convenience for some passengers, but excess redundancy of transportation services in limited areas ultimately alienates other regions from the benefit of public transportation, compromises the management competency of operating companies, and undermines the efficiency of the services.
As excessively long bus routes, competition with subways, and lack of effort to improve service quality led to a continuous drop in demand for buses and increasing difficulties for bus operating companies, Seoul considered introducing a
semi-public operation system
to replace the private one. Therefore, Seoul Metropolitan Government conducted an analysis of
the strengths and weaknesses of the
public,
private, and
semi-public bus operation systems in Korea and countries overseas, and settled upon the semi-public operation system as the model most suited to Seoul. Introducing such a system, however, required a channel through which Seoul City could engage in
continuous communication with the private sector. The
Citizens Committee for Bus Reform (CCBR) was thus assembled to coordinate the public-private communications needed and handle
tasks related to bus reform.
[Table 2. Types and Characteristics of Bus Operation Systems]
|
Category
|
Type
|
Characteristics
|
|
Private system
: Private companies own all assets and are responsible for all management processes
|
Purely private system
|
Under this system, private companies operate bus services using only their own assets and investments. This was the system in place in Korea until the end of the 1990s. This system is preferred either when there is little demand for public transportation or there is sufficient demand to guarantee steady revenue and profits for bus operating companies. As buses become a major mode of public transportation and governments begin to enforce tariff regulations, it becomes increasingly difficult for companies to shut down unprofitable bus routes. It also becomes impossible for bus companies to operate entirely independently.
|
|
Subsidized private system
|
In this system, governments subsidize part of private bus companies’ operating costs in order to ensure the stability of the supply of bus services for the general public.
|
|
Semi-public operation system
: Public-private partnership on bus services and management
|
Route management system
|
Here, the government (national or local) has the power to grant or deny licenses to operate certain bus types or routes. Bus companies may operate their services only by obtaining such licenses, which are valid only for fixed periods of time. In granting these licenses, however, governments often manage the revenue of bus services as well.
|
|
Revenue management system
|
The government collects and manages the revenue from bus services and settles the costs and profits afterward, compensating unprofitable bus routes/operating companies for their losses.
|
|
Commissioned management system
|
The government provides financial subsidies (e.g., for purchase of vehicles and compensation of losses) for bus operator cooperatives, corporations, or other private bus operating entities that are commissioned to operate bus services along designated routes. London is a major example of this system. In Japan, some local governments also commission private bus operating entities to operate unprofitable and unsubsidized routes.
|
|
Public operation system
: Public entities own and manage assets and services
|
Governmental system
|
Local governments may operate bus services and routes (e.g., Prefecture of Tokyo in Japan and the City of Gwacheon in Korea).
|
|
Public enterprise system
|
Governments (national and/or local) may set up an independent corporation responsible for the management and operation of public bus services (e.g., RATP of Paris, France).
|
Source: Lee and Jeon (2003). Bus Transportation Industry Policy Aims. KRITI
All members of the CCBR discussed various measures necessary for achieving the fundamental reform of the public transportation system in Seoul. They proposed and heard diverse means of enhancing citizens’ convenience and improving the management of bus companies.
Seoul Metropolitan Government reviewed the redundancy and competition of bus routes and services in five zones of the city, excluding the downtown areas, and encouraged existing bus companies to come together and launch a consortium for the operation of trunk buses. In order to join the consortium and gain operational control over bus routes, however, bus companies had to participate in a bidding process, the purpose of which was to promote competition as a means of ensuring the fairness and management efficiency of bus routes. The CCBR also proposed the establishment of a center for clearing revenue and expenses so as to ensure the transparency of revenue management and subsidies and guarantee the management of key data, including records on bus runs and services provided. The CCBR also proposed measures for ensuring the welfare and management of trunk bus operators and rewarding well-performing companies with financial incentives and disciplining poorly performing ones with penalties. The CCBR also pointed out that the Passenger Vehicle Transport Business Act would need to be amended, along with local bylaws, as part of the adoption of a semi-public operation system.
The three guiding principles of the new semi-public operation system were: public control, public infrastructure, and private management. The principle of public control gave Seoul City a wide range of rights and authorities, including deciding and coordinating bus routes in response to demand and evaluating the state of bus operations, quality of bus services, and fulfillment of contract terms and conditions. The principle of public infrastructure entailed two obligations on the part of the city government, namely: the provision of all required facilities, including the bus garages, exclusive median bus lanes, the Bus Management System, and bus priority signal system; and a fiscal support program that addressed the total cost and guaranteed an appropriate level of profits for bus operating companies. Finally, the principle of private management implied that new and existing bus companies would form consortia, provide responsible services for the public, and manage expenses and personnel.
The CCBR continued to organize and lead the discourse on bus reform until the final agreement with Seoul Metropolitan Government was reached on February 4, 2004. This agreement specified the terms for the route bidding system, guaranteed profits, and the delegation of the right to coordinate bus routes to Seoul City.
[Terms of agreement]
- Mandatory bidding on 10 major trunk routes
- Policy guarantee of appropriate levels of profits
- Compensation for losses due to surplus vehicles
- Policy support for debt reduction
- Guaranteed business licenses for 57 existing businesses
- Assurance that Seoul City and the SBC would consult with each other on matters regarding the implementation of the agreement, and that the CCBR would be consulted as an arbitrator in the event of any disagreement.
The introduction of the semi-public operation system has ushered in important changes. Most notably, it has
helped solve a number of chronic problems, including the excessive concentration of bus services in certain areas, alienation of other areas, and the excessive and diverse nature of bus fares. The new system, however, significantly limits the management autonomy of bus operating companies, making it difficult for these companies to introduce new profitmaking service models. In effect, the new system forces these companies to confine their focus solely on cost minimization. Nevertheless, the system has been benchmarked by other metropolitan cities in Korea, which have also adopted joint management and service systems based on partnerships between local governments and bus operating companies, with a view to
enhancing the efficiency and profitability of their bus routes.
[Table 3. Outcome of Public Transportation System Reform in Seoul]
| Aspect |
Unit/measure |
Progress |
| Speed |
Operating speed(km/h) |
16.7 → 22.0 |
| Service availability |
Operating rate(%) |
82.5 ⟶ 96.4 |
| Safety |
Number of accidents |
659 ⟶ 493 |
| Punctuality |
Bus service intervals |
0.69 → 0.56 |
| Affordability of fares |
Unit fare per distance (KRW) |
620 ⟶ 592 |
| Transparency of revenue |
Ratio of card fare transactions (%) |
77.4 ⟶ 88.9 |
| Encouragement of public transportation |
Modal shares of buses(%) |
61.2 ⟶ 62.3 |
| Air quality |
Fine dust ((PM10) Carbon monoxide(CO) |
69 ⟶ 61 0.7 ⟶ 0.6 |
| Cost reduction |
Travel cost savings |
KRW 225.1 billion |
Sources: Seoul Metropolitan Government (2006). Covenient Public Transportation, Happy Citizens of Seoul
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