July 1979 witnessed the completion of the electrification of Taiwan's west coast trunk line railway between Keelung, to the northeast of Taipei, and Kaohsiung, Taiwan's second major city in terms of size and economic importance, in the south of the island. The amount of rail traffic steadily increased, and by the middle of the last decade congestion had already reached serious levels.
In 1987, Yu Kuo-hwa (俞國華), then the ROC premier, commissioned the Ministry of Transportation and Communications (MOTC) and the Taiwan Provincial Government to conduct research jointly into the feasibility of constructing a second, high-speed railway line down the west coast. The two agencies in turn instructed the MOTC's Institute of Transportation to research the project with the help of engineers chosen both locally and from overseas.
In 1990, the institute reported that a high-speed railway system (HSR) was viable, and the Cabinet approved it in principle. To handle matters pertaining to the planning and construction of the project, a Provisional Engineering Office of High-Speed Rail, later renamed the Bureau of Taiwan High-Speed Rail (BOTHSR) was set up. At that time, it was envisioned that the railway would be built by the central government and opened no later than the year 2000.
In 1993, however, the legislature vetoed the HSR's budget, the government found itself facing increasing financial burdens, and there was widespread concern about the lack of efficiency on the part of the state-run enterprises that would likely construct the HSR. The government accordingly decided to adopt the Build-Operate-Transfer (BOT) model instead, and the necessary enabling legislation was passed.
In August 1996, BOTHSR began its preparatory work, which included drafting specifications and related documents for potential BOT sponsors and determining what selection and evaluation processes to follow.
Those processes were ultimately divided into two phases. In Phase One, applicants were to be vetted for their experience and have their project finance plans examined to ensure that they would be able to complete the project. Phase Two would consist of detailed negotiations between the government and bidders who made it through the first phase.
The first phase got under way at the start of 1997. By the end of February, two applicants had passed the qualification review and were authorized to proceed to Phase Two. One applicant was the Taiwan High Speed Rail Consortium, recently renamed the Taiwan High Speed Rail Corporation (THSRC), which consisted of France's Alstom, Siemens of Germany, Taiwan's shipping giant the Evergreen Group, the Fubon Banking Group, the Pacific Group, the Continental Engineering Corp., and Teco Electronics. The other bidder was the China Development Consortium (CDC), which involved some twenty companies including the KMT's main investment arm, the China Development Corp., as well as the Tuntex Distinct Corp. and China Steel.
During Phase Two, which lasted from February to August 1997, emphasis was placed on the discussion and clarification of respective rights and obligations between the government on the one hand and the prospective investors on the other. In all, 404 queries were raised by the two qualified applicants over a six-month period. As a result of those discussions, BOTHSR issued a set of "Supplementary Documents of Instruction to Applicants," which was to serve as the basis for the two qualified applicants to draft their investment proposals.
The applicants submitted their final investment proposals by the end of August 1997. On September 25, 1997, THSRC was awarded the contract. One of the major reasons for THSRC's success was that its financing plan required the lowest level of government investment. It offered to build the project for NT$325.9 billion (US$9.4 billion), but it also offered to pay the government NT$105.7 billion (US$3 billion) out of future profits. The rival bidder quoted NT$273.4 billion (US$7.9 billion) to build the HSR, but wanted the government to contribute NT$149.5 billion (US$4.3 billion) in financing.
The 345-kilometer-long HSR is scheduled to be completed and to begin operations in the year 2003, with a maximum daily passenger capacity of 300,000. Trains will run at a top speed of 300 kph (186 mph), which will shorten travel time between Taipei and Kaohsiung from the current four and a half hours to an hour and a half. There will be a number of intermediate stations, although at present only eight have been announced: Taoyuan, Hsinchu, Miaoli, Taichung, Changhua, Yunlin, Chiayi, and Tainan.