The decision by the operators of the Eastern Harbour Tunnel to raise tolls after the government's opposition was defeated in an arbitration hearing has focused attention on the so-called 'build, operate and transfer' (BOT) model of constructing big infrastructural projects.
A comparison of the laws governing the operations of various tunnels reveals that the government learned well before the current row that it needed to tighten the screws on BOT franchise holders.
The Eastern Harbour Crossing Ordinance, which was passed in 1986, says that the operator can reap reasonable but not excessive remuneration and that any differences between the operator and the government will be settled by arbitration.
Opinions differ as to whether these provisions are adequate to protect the public interest and whether the government is to blame for failing to crush the operator's case for raising tolls.
Francis Lui Ting-ming, an economics professor at the Hong Kong University of Science and Technology, says that the operator's argument for increasing charges because it failed to achieve a reasonable internal rate of return is weak, as its profits have been commensurate with the growth rate of the economy.
Significantly, two tunnels built in the 1990s have incorporated mechanisms to cap the operators' returns. Both the Tai Lam Tunnel and the Western Harbour Tunnel are required to deposit revenues beyond specific levels into toll stabilisation funds, whose balances are used to cushion against future toll increases.
How this arrangement will work out remains to be seen, as traffic through both has been lower than projections. Despite having the right to raise tolls without the government's consent, the Western Harbour Tunnel operator has not been able to increase charges as much as it could, as the government-owned Cross-Harbour Tunnel offers competition by charging low tolls.