[Op-Ed] Buffett’s Railroad Investment

In 1830, the world’s first railroad was built connecting Liverpool and Manchester in England. Europe enjoyed its biggest economic boom for five years after the railroad’s completion, and the boom continued for nearly three decades. The U.S. opened its first railroad route linking Baltimore and Ohio, and its boom lasted for 30 years, too. Railroads gave rise to the steel industry and were the catalyst of the Industrial Revolution. Cornelius Vanderbilt seized the opportunity to invest in the railroad industry, becoming one of America’s richest men. Railroads were perhaps the biggest contributor to America’s wealth.

American freight trains are quite long at 100 to 200 cars. Railroads still play a big role in freight transportation. The job of transporting passengers was taken over, however, by cars and airplanes. Can the railroad make a comeback in a country dominated by cars and airplanes? In April, U.S. President Barack Obama announced a plan to build high-speed railroads linking major U.S. cities and allocated eight billion U.S. dollars in budget. The U.S. will invest one billion dollars annually over the next five years. Obama said railroads will spare passengers the pain of overcrowded airports and traffic congestion.

Investment guru Warren Buffet recently announced his purchase of Burlington Northern Santa Fe Corp., the biggest railway company in the U.S. in sales, for 44 billion dollars. “It’s an all-in wager on the economic future of the United States,” he said after making the investment, adding the U.S. economy will prosper. He said the higher oil prices rise and the stronger environmental regulations become, the more profit railway companies will earn. His foresight is nothing short of amazing given that he has been investing in railway companies since 2007.

In Korea, the Land, Transport and Maritime Affairs Ministry said yesterday that it will complete the Honam high-speed railway linking Osong and Gwangju a year ahead of schedule, adding the speed of major railways has been raised to up to 250 kilometers per hour. Can Korea’s rail sector grow into a promising industry? Not if the biggest stumbling block -- the rail workers’ union -- remains unresolved. The union makes it a habit of going on illegal strike to block the government’s move to reform the public sector. True to form, the union went on strike again yesterday. The government should sternly respond to this to tackle the chronic deficit of the state-run rail company.

Editorial Writer Park Yeong-kyun (parkyk@donga.com)