Canada’s Bombardier under fire in Korea

South Korean prosecutors are accusing Bombardier Inc., a major Canadian aerospace and transportation manufacturer of making gifts to local officials to help the firm win a valuable contract to construct an elevated light rail transit service in Yongin, one of Seoul’s satellite cities.

A special investigation unit claims that Bombardier offered gifts and trips to the civil servants who forecast passenger numbers for the transit service and also recommended Bombardier’s technology.

Prosecutors allege that between 2003 and 2005, Bombardier paid for three trips to Canada for 37 civil servants.

The trips included business class flights, luxury hotel accommodation, golf, and sightseeing trips. Additionally, 18 Yongin city councillors also travelled to Canada on “LRT field trips,” paid for by Bombardier.

The 18-kilometer rail system, the Yongin Everline, has now been in service since April 2013 and faces huge cost overruns.

From an original estimate of a little more than $1 billion when the project was first announced in the early 2000s, it could now cost $3.5 billion over 30 years to South Korean taxpayers.

Yongin, a city of nearly a million inhabitants, had chosen the technology proposed by a Bombardier-led consortium following the recommendation of South Korea’s transport Ministry.

The service was projected to carry nearly 183,000 passengers per day but currently carries no more than 20,000.

Bombardier categorically rejected the corruption allegations made following a special South Korean investigation in the public-private partnership between the consortium and the city of Yongin.

Bombardier assert that the trips to Canada they arranged were not pleasure trips but were necessary to demonstrate their technology and convince people that it worked.

The prosecutors also alleged that Bombardier created a $2-million slush fund used for lobbying civil servants and business partners on other projects in South Korea. Bombardier also deny this allegation.

Investigators have yet to press formal charges against Bombardier, saying that the deadline to do so had expired while Bombardier say this was due to the lack of proof.

Since forecasts of passenger numbers were crucial in justifying the project and its budget, attention is now focussed how the forecasts proved so completely wrong now that there is no prospect of reaching the passenger numbers originally predicted.

Whether or not the Korean prosecutors eventually file any charges against Bombardier, the company faces the risk of considerable reputational damage in South Korea from the revelations made so far about the project.