Hong Kong MTR

Time for a merger?

PUBLISHED : Tuesday, 26 February, 2002, 12:00am
UPDATED : Tuesday, 26 February, 2002, 12:00am


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Yesterday's decision by the KCRC to shelve its planned fare increases was widely expected, but it still leaves many questions about the management of the corporation unanswered - questions that also apply to the MTRC.

Both were due to raise fares last September but had their plans scuttled after Chief Executive Tung Chee-hwa made a public appeal for the two railways to consider the public's plight during an economic downturn.

Such high-profile political intervention would seem to go against the two railways' mandate to run their operations on a prudent commercial basis. Presumably, the two companies should be allowed to pursue maximum profits. This is particularly so for the MTRC, which is a listed company, though still majority owned by the Government. With a huge construction bill to pay for the West Rail, the KCRC also seems justified in seeking fare increases.

Yet for public transport operators, the profit imperative cannot mean a blanket mandate to raise fares, especially because many commuters have no alternative but to use their services. That is why the law provides that any fare adjustment has to be approved by the Executive Council.

Although the two railways have since shelved their fare increases, the question remains as to why they should have found it necessary to raise fares in the original instance when the deflationary spiral has been exerting downward pressure on prices. Is that because they have become behemoths constrained by rigid staffing and cost structures similar to government departments, even though they are supposed to be run like private companies?

Granted that the two railways want to remain good employers, cutting staff salaries, the largest cost component, would be the last thing they would like to do. It did not help that civil servants even managed to be awarded a salary increase last year.

For the KCRC, revelations that it had paid a contractor $100 million more to complete a West Rail contract and spent tens of millions on staff perks have tarnished its public image and further undermined its case to raise fares.

These considerations aside, a pertinent question that has been raised before but is still worth revisiting is whether the two railways should be merged for the benefit of the travelling public. Critics have long noted that it was wrong for the Government to have given the KCRC the task of building the West Rail, as it has no previous experience of building a heavy rail network. What has transpired would seem to lend credence to the view that the job should have gone to the MTRC, which was formed to build and operate its network from scratch.

As a compact city, there is no need for Hong Kong to have two railway operators whose separate networks put together is no bigger than the London Underground's.