HIGH-SPEED RAIL - RUNNING LATE, BUT ON TRACK

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003687 SIPDIS SIPDIS STATE FOR EAP/TC COMMERCE FOR 3132/USFCS/OIO/EAP/WZARIT TREASURY FOR OASIA/LMOGHTADER E.O. 12958: DECL: 10/30/2016 TAGS: ELTN ECON TW SUBJECT: HIGH-SPEED RAIL - RUNNING LATE, BUT ON TRACK REF: A. 05 TAIPEI 490 ¶B. 05 TAIPEI 3779 ¶C. 05 TAIPEI 4125 ¶D. TAIPEI 240 ¶E. TAIPEI 729 ¶F. TAIPEI 1283 ¶G. TAIPEI 1697 ¶H. TAIPEI 3414 Classified By: AIT Economic Section Chief Daniel K. Moore, Reason 1.4 d ¶1. Summary: Taiwan's high-speed rail will begin operations in December 2006. Its financial situation seems to have stabilized in the year since it obtained additional funding from the Taiwan authorities in September 2005. As it draws closer to operations, the high-speed rail appears to have left earlier political controversy behind. End summary. Final Delay - December 2006 Opening -------------- ¶2. (SBU) The Taiwan High-Speed Rail Corporation (THSRC) will not meet its target date to start operations in October of 2006. It now appears that the high-speed rail will begin regular service in mid-December. The October 2006 goal was set a year ago after an earlier postponement by one year (ref B). THSRC is working with the Ministry of Transportation and Communications (MOTC) to complete the necessary testing and certification. Both THSRC and MOTC believe that they can complete these processes by the end of November. THSRC plans a two-week promotional period before regular service begins during which it will offer trips to selected individuals and groups, including shareholders, business partners, and government leaders. It has scheduled a grand opening ceremony for December 7. ¶3. (C) Initially, THSRC will operate 19 trains per day in each direction. By the end of the first year of operations, it plans to run 88 trains per day. THSRC Vice President Arthur Chiang told AIT/T the firm projects passenger loads will reach 60 percent of capacity during the week and 80 percent of capacity on weekends for each 989 seat train. (Note: We calculate these projected passenger loads would mean more than 400 million passengers per year would ride the high speed rail. This far exceeds the 9.6 million passengers who rode Taiwan's domestic air routes last year and approaches the 531 million passengers who rode all of Taiwan's railways. End note.) Financial Stabilization -------------- ¶4. (C) THSRC's financial situation also appears to have stabilized in the year since it sought additional support from the Taiwan authorities in September 2005. (ref C) Allen Hu, a Section Chief at MOTC High-Speed Rail Bureau told AIT that MOTC believes further financial support from the Taiwan authorities will not be necessary. He reported that THSRC was in discussions with a foreign bank for a US$200 million loan and with a foreign entity interested in investing NT$20 billion (US$600 million) in the firm. He predicted that this additional funding would sustain the firm through the first six months of operations. ¶5. (C) THSRC's Chiang told us that THSRC believes it will start to earn a profit in 2008. He said the firm plans to list on the Taiwan stock exchange within the first few years of operation. However, he emphasized that the firm currently has no timetable for going public. Comment - End to Controversy -------------- ¶6. (C) After the announcement of the most recent delay, some opposition People First Party (PFP) legislators criticized MOTC's supervision of the project. However, political controversy surrounding the project, which peaked after the government provided additional financing last year, seems to have mostly evaporated -- especially compared to the furor that has surrounded MOTC's contract with Far Eastern Group to build an electronic toll TAIPEI 00003687 002 OF 002 collection (ETC) system for Taiwan's highways (ref E). As the high-speed rail nears operations it appears to be leaving its political difficulties behind. YOUNG