Recent efforts to expand logistics and transportation linkages in the Pan Yellow Sea Zone

The China-Korea freight transport between key airports in the

Chapter 3• Establishing Logistics and Transportation Linkages 95

(1) Establishment of integrated transportation systems (incl. the Japan-Korea Joint Railway Freight Transportation)

Multi-modal integrated transportation systems in the Pan Yellow Sea Zone are not feasible from a short-term perspective for geopolitical reasons.

Recently, however, efforts to introduce a multi-modal transportation system have been made. Such system brings together land and waterway transportation systems and subsequently generates value-added to port use.

China, Japan, and Korea have recognized the efficiency of the

“Train-Ferry connection.” Thus, they have recently been promoting its application. In particular, the joint railway freight transportation plan between Busan and Fukuoka has been implemented since March 2007.

An MOU for the launch of the Train-Ferry System between China and Korea was signed in April 2007. Since then, pilot operation has been ongoing for the Incheon-Yantai route.

The Japan-Korea Joint Railway Freight Transportation (KORAIL-Heunga Shipping-JR Freight) operation has been ongoing between Busan and Fukuoka since 2007. It provides value-added container transport within 60 hours. It also offers much lower rates than the airway transportation system.

· Introducing the Train-Ferry System between China and Korea in the Incheon-Yantai or Pyeongtaek-Weihai will bring down route transportation cost related to loading and unloading by 40+%.

Source: Internal materials at Korea’s Ministry of Construction and Transportation and KORAIL, 2007

<Figure 3- 3> Status of Joint Rail Cargo Transportation Between Japan and Korea and Rail-Ferry System Between China and Korea

(2) Enhancement of the human exchange network through air shuttle services Efforts to enhance inter-regional linkages in airway transportation for the Pan Yellow Sea Zone have continued. An example of such efforts is the air shuttle service provided between key cities in the Northeast Asian Three.

The Air Shuttle Service was first introduced between the Gimpo (Seoul) and Haneda (Tokyo) airports in 2003. Its success as an inter-regional airway transportation system has frequently been discussed at the China-Japan-Korea Summit.

Seoul-Busan KORAIL, 8 hrs

Seoul

Busan

Customs & Transfer 9-16 hrs

Busan-Fukuoka (Hakata Port) Heunga Shipping, 12 hrs/

Fukuoka-Tokyo, JR, 20 hrs

Customs & Transfer 9 hrs Fukuoka

Kobe

Osaka Yokoh

Tokyo

Train-Ferry Service Route Dalian-Yantai (China)

Beijing

Tianjin

Jinan

Qingdao Yantai

Dalian

Weihai

Incheon Pyeongtaek

China-Korea Train-Ferry Project Under Discussion, Incheon-Yantai, Pyeongtaek-Weihai

Chapter 3• Establishing Logistics and Transportation Linkages 97

The air shuttle service comes with a very high time-to-cost value. This is because the domestic airports in downtown areas are used. It is considered the best passenger transport system to go hand in hand with the 1-Day Business Zone development efforts in the Northeast Asian Three.

The Gimpo-Haneda Air Shuttle has been successfully operated based on the improved accessibility to the airway transportation service. Another plus factor is the shorter transportation time resulting from the use of airports located in downtown areas. Since it was first provided in November 2003 with 8 trips a day, the service has expanded to 16 trips a day.

This was in response to the explosive demand increase, i.e., annual average rate of 52%.

The seat occupancy rate for all flights between the Gimpo and Haneda Airports reached 85% (near-full capacity). As such, the air shuttle service accounted for 37.5% (1.42 million persons/yr) of the Seoul-Tokyo Flight Market in 2006. Before the launch of the air shuttle service, the annual growth rate of demand for the Seoul-Tokyo airway passenger transport was 3.3%. After the service launch, however, this figure rose to 10.9%. Synergistic effects were also realized.

Source: Airportal (KCADA, 2005).

<Figure 3- 4> Comparison of the Number of Passengers Before and After the Introduction of the Gimpo-Haneda Line

China, Japan, and Korea have positively responded to the success of the Haneda Air Shuttle Service. In fact, they launched the Gimpo-Hongchao and Haneda-Gimpo-Hongchao Air Shuttle Service. The inclusion of Beijing for the service route is currently being considered.

(3) Direct connection of the China-Japan-Korea land transportation networks The construction of the Japan-Korea Undersea Tunnel has been considered even before the introduction of the abovementioned Train-Ferry and other total transportation systems. A discussion on the construction of the China-Korea Undersea Tunnel was recently started as well.

The construction of the Japan-Korea Undersea Tunnel has been planned and replanned as early as 20 years ago. Nonetheless, the huge project budget and economic and political issues have hindered the project from making any substantive progress.

The Japan-Korea Undersea Tunnel is supposed to connect Karatsu (Southern Fukuoka) and Tsushima of Japan and Busan, Korea through a 200km-long undersea tunnel. For the past 20 years, different routes and tunnel construction methods have been considered. Geological and topographical studies have also been conducted. In addition, more than KRW100 billion has been spent on project planning and related research works.

Note, however, that the study conducted by Japan showed that the project should be executed 200+m undersea for all three possible routes. Moreover, more than KRW200 trillion in costs would be incurred. The undersea tunnel connection could also give rise to disputes regarding the controversial socio-political issues between the two countries. All in all, the further promotion of the project is fraught with difficulties.

Nonetheless, the rapid increase in trade within the Pan Yellow Sea Zone has stimulated active discussion on the construction of the China-Korea Undersea Tunnel. This in turn reopened discussions on the construction of the Japan-Korea Undersea Tunnel.

The Weihai-Incheon (or Pyeongtaek) connection is the most feasible means of extending the China-Korea Undersea Tunnel to a total length of 374km. The latest plan involves a total budget of KRW109 trillion as well as more than 20 years’

project period.

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The Yongyeon (North Korea) - Shandong Undersea Tunnel is also proposed as an alternative. This is because the length can be reduced to around 160km.

The Northeast Asian economy particularly the Pan Yellow Sea Economic Zone is rapidly expanding. Thus, the implementation of the abovementioned plan is expected to bring about massive economic impact and inter-regional cooperation enhancement effects. Still, the astronomical cost seems to outweigh the substantive benefit for the China-Korea Undersea Tunnel. Such is still being discussed at the conceptual level.

These projects differ greatly from the France-UK Euro Tunnel (50.45km, 6-year construction period, KRW14 trillion) or the Morocco-Spain Gibralta Undersea Tunnel (38km, scheduled for completion in 2025, KRW17 trillion) both in terms of project difficulty and size. Note that the Morocco-Spain Gibralta Undersea Tunnel is currently under construction.

More careful study is needed from different perspectives.

The establishment of the China-Japan-Korea FTA can make the discussion on the direct connection of land transportation networks in Northeast Asia more relevant. The consequent growth in inter-regional trading volume will also be a factor. In this case, new light can be shed on the evaluation of the China-Korea and Japan-Korea Undersea Tunnel projects.

The undersea tunnel construction being discussed can be considered as a means of overcoming the geopolitical problem involving North Korea. Still, the conflicting opinions between China, Japan, and Korea have prevented the three countries from reaching any specific agreement.

3. Policy Direction for Invigorating Human and Commodity Flows