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When Infrastructure Investments Sour

Australia’s Macquarie is set to pull its capital out of a subway expansion over a fare dispute with local government.
Reported by Featured Author
(August 8, 2013) – A year-long dispute between Australia’s Macquarie Group and the Seoul municipality over subway fares has reached a head, according to the Yonhap News. 

The Macquarie Korea Infrastructure Fund (MKIF), a publically traded unit worth won 2.29 trillion ($2 billion), is set to defund its part in the expansion of section one of the Seoul subway’s line nine. 

This project represents 4.5% of MKIF’s portfolio in terms of capital commitment, according to the fund’s latest earnings statement, released July 30.

Last year, Macquarie’s Seoul Metro Line9 Corporation announced its plans to raise fares on the line by nearly 50%, from won 1,050 ($0.94) to 1550 ($1.39).

The firm faced stiff opposition from the municipal government.

“As Seoul Mayor, I made it clear that I would never accept such unilateral step,” said Park Won Soon in his online journal on August 7. “In response, Metro 9 said it would withdraw its surprise announcement [of the fare hike] and strive to reach an amicable agreement on the need for fare hike. Note, however, that the company contradicted itself by filing…[a] lawsuit.”  

The title of the mayor’s posting: “Good News.”

The 25.5 km (15.8 mile) subway section was completed in 2009, connecting the Kimpo Airport with residential districts, including Yeouido and Gangnam.