Press Briefing on the Integration of Two Public Subway Corporations
Date December 10th, 2014 | Venue Briefing Room, Seoul City Hall
The first project of the “Innovation Together”, Cheongsachorong, suggested a long-term dedication to integrity in its action plans. The second, Taking off Armor, promised to clear away and reform a variety of hierarchical power dynamics. The third, Citizens’ Best Friend, was our determination to become citizens’ best friend through mutual innovation of government-funded/invested institutions of Seoul. The fourth, Personnel for Citizens, was an innovative human resources measure planned with my hope and determination in the belief that citizens’ affairs depend on sound personnel affairs.
As I announced on innovation in government-funded/invested institutions here last month, this announcement has been prepared with the faith that the institutions that provide services in everyday life should be changed to improve citizens’ everyday life. Today, I announce the fifth project of Innovation Together, “One Way Together”, and an innovation of the Seoul subway system. Its name refers to the fact that the two subway operators, which have come a long way with citizens over the last 40 years, will now go one way together.
Distinguished journalists, have you heard of the allegory of black kites? These birds are often cited to talk about innovation. When a black kite reaches 40, it breaks its own beak and pulls out all its toenails and feathers. After overcoming the pain, the bird generates a stronger beak and feathers, sometimes living until the age of 70. Seoul subway celebrates its 40th anniversary this year, and just like a black kite becomes a new bird, Seoul subway would like to renew itself through “Innovation Together, One Way Together”. Every day, 6.8 million citizens get on and off 270 trains of Seoul subway line 1-8. All year round, 3,571 trains run the 300km-long route.
However, the subway has different operators: Seoul Metro for line 1-4, Seoul Metropolitan Rapid Transit Corporation for 5-8. Since they are run separately, it is very difficult to maintain the two corporations. Debt has reached 4 trillion won, unpaid transportation increases every year, and purchases of the same equipment separately increase unnecessary expenses. If subway operators are suffering from financial burdens, they cannot provide safe and convenient services. Most importantly, the system must change in order to guarantee the safety of citizens.
The degree of safety offered by a subway line is the inevitable result of the subway’s facilities. If old facilities are not replaced and repaired, accidents inevitably follow. As time goes by, the scale of required repairs and replacements becomes larger and larger. To maintain the 40-year-old facilities, over 2 trillion won has been allotted. Investment in safety is critical to prevent subway accidents such as the rear-end accident in the Sangwangsimni station this year.
Citizens currently find the subway unsafe as well as inconvenient. A citizen who wants to transfer to line 7 at Suyu Station might miss the last train because the line 4 train arrives late. Because the train schedules are not integrated, it is difficult to control the transfer time. It is also not easy to improve transfer passages. As operators currently manage their own transfer stations only, the handicapped have more difficulties. We have many of these old problems to resolve. Now is the time for Seoul subway to change.
10 years ago, there was a sea change on the roads in Seoul. It has become much more convenient thanks to median bus lanes, the bus operation management system, and the new route system. The semi-public bus system and integrated transfer in the metropolitan area significantly improved the operational efficiency of bus companies. It should be noted, however, that more than a half of citizens using public transportation use the subway. It is the subway’s turn to change for the better over the coming 10 years.
There was a great deal of deliberation leading up to this announcement today. Since we organized T/F with experts in management consulting, accounting, labor, and transportation, we have had countless discussions. We gave special attention to the voices of those in labor-management relations. The integration project would have never worked out without the full support of labor unions. As the integration innovation based on an abundance of opinions, we will first strengthen global competitiveness through management innovation. Second, we will establish a participative model of labor-management relations with extensive participation of both management and labor. Third, we will create safer environments for the subway. Fourth, we will enhance user convenience.
We will become, domestically, a transportation system loved by all, and internationally, the world’s best subway operator. ‘One Way Together,’ the Seoul subway integration innovation plans, have standards and principles clearly different from the past. Normally, these integration projects include restructuring by layoffs. We will not do that. We will create a future-oriented organization through management reform. We will operate transparently and rationally based on trust. We will create an open organization in which all government institutions will participate along with both management and labor.
These have been days of endless contemplation. Many people have spoken of the difficulty of change. However, all of them have said that the Seoul subway system must change. And finally, here and now, I announce the integration of the two Seoul subway operators, something not possible until now.
For the short-term integration, we will refer to the case of Hong Kong. The integration of MTR and KCR was led by the government, addressing the issues of revenue increases and cost reductions at once, an issue of concern to both Seoul operators. In Hong Kong an increase in revenues reduced fares and improved its public nature. More surprisingly, sectors outside passenger transportation such as retail rental generated more synergy in revenue. I believe that our integration innovation can do so as well.
In the long term, the integrated operation will integrate all the transportation systems, including the metropolitan subway, light rail transit, and busses to provide 5 million residents in Seoul, Incheon, and Gyeonggi Province with integrated public transportation services. The RATP Group, the Autonomous Operator of Parisian Transports, manages all public transportation at once, including the bus system, and is flexible in responding to urban, environmental, and social changes. If Seoul subway integration is implemented, we will be able to obtain global the top competitiveness in scale and technology along with other world-class urban railway operators including the MTA of New York and the MTR of Hong Kong. To do this, human resources will be reorganized; integration of overlapped tasks such as management support and planning will allow the effective assigning of staff to safety and service areas, which have suffered from a lack of labor, without additional employment. Also, joint purchases of heavy equipment required for trains and maintenance is expected to reduce costs.
The global consulting firm McKinsey & Company predicted that this union will reduce costs by approximately 50 billion won, though that number is subject to change. Seoul Metro is the oldest subway operator in Korea and the Seoul Metropolitan Rapid Transit Corporation is the largest operator in Korea, with 162 km of routes.
The synergy of technology and experience of the two institutions integrated will be tremendous. With the two institutions integrated, the Seoul subway route will become 300 km of track, longer even than those in Paris and Hong Kong. The average number of users a day will be 6.8 million, surpassing those of Tokyo and New York, making an argument for it to be the best-run subway system in the world.
In addition, we will have more opportunities to join overseas urban railway operations, a goal we are focusing on at the moment. We will also have more opportunities to attract social capital, through projects such as complex transfer terminals and transfer station area development. Through aggressive development of new projects, our system will be a role model for public corporations, operating based on revenue in transportation and business.
Seoul subway has gone through several conflicts between labor and management. We would like to establish a new model of labor-management relations without conflict, where labor and management grow together. A participative labor-management relationship establishes reliable and transparent management to prevent conflicts between labor and management. The gap between the field and the office will be narrower, enabling more practical phenomenon analysis to prioritize investments.
We would therefore like to adopt a labor director system and a management council. The labor director system is a system to recommend directors from the labor union and assign them to the board, and the management council is a system to determine major issues related to management through consultation with the labor union. They are systems that guarantee both workers’ responsibilities and rights and improve transparency and mutual trust by giving workers opportunities to be involved in management. Volkswagen and Wolfsburg City in Germany overcame management crises in the mid-2000s and grew to global entities without one strike for about 10 years through management councils and labor director systems. Developed countries including the US, France, Germany, and Sweden have already adopted the participative relationships between labor and management and are achieving significant results. It is time to embark on innovation in labor-management relations and introduce a new model to Korea. The reason why Europe has so many leading enterprises lies in the labor-management relations existing in those countries. Participative labor-management relations will inspire public corporations as well as private enterprises, and domestic labor-management culture will take a significant step forward.
Next, the areas of safety and service will be enhanced. The control system problem was suggested as a factor of the accident in Sangwangsimni Station last May. Currently, the two corporations are operating control systems separately. When they are integrated, a single control center will be able to respond to emergency situations swiftly, uniformly, and systematically.
Additionally, a comprehensive management of aged facilities will enable investment in facilities in need according to the priority for more efficient maintenance. The two corporations will also share their own technologies to dramatically enhance safety. For example, Seoul Metropolitan Rapid Transit Corporation has a tunnel monitoring system wherein high-performance cameras attached to trains record videos of routes and structures to check sections with abnormalities. If these technologies are shared equally throughout the system, I believe that we will be able to have the world’s safest infrastructure.
Citizens will be able to experience quality services. Until now they have had to experience long waits to transfer from lines 1-4 to lines 5-8. Scheduling will be optimized according to transfer distances and the last train schedules for line 1-8, and a gradual construction of each line will enable comprehensive rearrangement of traffic lines for all the transfer stations.
Subway stations will have more systems to help citizens on trains. Human resources generated by reorganization will be assigned to departments related to safety and service to provide citizens with quality services after re-training. It will improve efficiency in the mid and long term without forceful layoffs.
What can you expect the new, integrated Seoul subway system to do? First, the new management system and operation system will develop the subway system. Second, development of real estate and station spheres will actively generate revenue. Third, we will have a stronger capacity to enter the overseas urban railway business. Fourth, the public corporations with chronic deficits will be stable corporations with independent balanced revenues. Fifth, the project will play a major role for them to be global no.1 public corporations in labor-management relations, which is democratic without conflicts.
The integration will be implemented mainly by the innovation promotion committee consisting of members of the city council and civic organizations, and experts in different areas. A tripartite commission will be established to listen to opinions of labor unions and form a consensus for each step of implementation. By June next year, we will have established specific action plans. By the end of this year, the legal system will be set to move towards the completion of integration by the end of next year. And we will successfully implement the integration to provide 16 affiliated institutions of Seoul, which are faced with innovation, with a benchmark for their own reform.
Alone, we only see what is right in front of our eyes. But together, we can see further to find a better way. We just announced integration. Labor unions, management, and the Seoul Government will all join together to make Seoul subway the best in the world, to be the no. 1 in safety and service for citizens.