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Bus System Reform in Korea Return Bus Services to Citizens: Switching from a Private Operation System to a Semi-Public Operation System

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Bus System Reform in Korea

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. 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. 

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.

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.

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