New rail link to Guangzhou costly ride on one-track mind

PUBLISHED : Monday, 06 August, 2007, 12:00am
UPDATED : Monday, 06 August, 2007, 12:00am

He [Chief Executive Donald Tsang Yam-kuen] conceded that building a new track would cost more and push back completion of the project by one or more years. 'But I think it would bring more economic benefits,' he said.

SCMP, August 3

I'm big on the train. I prefer it to any other form of travel. I'm so big on it, in fact, that back in the 1970s I used to buy Amtrak rail passes whenever I had at least a week of holidays. They were heavily subsidised, almost free, and I once calculated that I put on more than 20,000 miles of rail travel in the United States that way.

On one of those trips coming up to Chicago, the train had to stop in Nashville. There was trouble up the line and Amtrak gave passengers their choice - a flight to Chicago or a night's accommodation with dinner in Nashville and back on board the train in the morning. Only a few people took the flight option. That's the allure of train travel for you.

I don't think it will be that way on the new high-speed rail link to Guangzhou, however. Now that our government has decided to build a direct dedicated track from Kowloon, passengers can be sped through in just 48 minutes. The alternative of sharing a corridor with West Rail would have made it a 60-minute journey.

Just think of that, 12 minutes saved, almost time enough for a single hole of golf. If you make five trips, you can save yourself one whole hour in total and there are only 24 hours in a day. Time is money, you know.

Did someone mention money just now? That's strange. There wasn't a single mention of the word in the official news release. Nor did I see 'yuan' or 'Hong Kong dollar'. Even our front-page story on Friday reported that Donald did not give a cost estimate.

All we had was a 'government source' saying the line would cost more than HK$25 billion.

Note immediately the element of inflation here. The last time this line was mooted, the estimated cost was HK$15 billion. You may also have noted the map we published, showing a straight line to the border right under the Kowloon hills. This would mean a tunnel almost the whole way if the map is right. Let's emphasise the 'more than' in that 'more than HK$25 billion'.

And if it isn't under the hills the whole way, does the HK$25 billion include the opportunity cost of land resumed for the railway? What could we get for this land if we put it to other uses? We can't pretend it has zero value, can we?

Ahem ... Oh yes we can.

Very well then, let's call the cost of this new white elephant HK$40 billion. This is likely to be nearer the truth.

I will now put on my analyst's guessing hat and hazard a guess here, one almost as far on the wild side as Donald was in committing himself to building an expensive rail line without any mention of cost or passenger numbers.

I will guess that if this new rail link's costs - both operating and capital at an appropriate rate of return - had to be paid from passenger fares alone, then to travel one way from Kowloon to the border would cost you more than HK$500, leave alone what you would be charged for the rest of the trip to Guangzhou.

Go ahead, Donald. Prove me wrong. Let's see the numbers on which this project is based. I say proper studies were never done and that we are going with this project purely because some mainland bureaucrats felt it would give them a warm glow of national pride. They ignored the cost and the cost is outrageous.

There is no economic benefit in this. Economic benefit lies in providing the largest number of people with the goods and services they most want at prices they are happy to pay.

Ask these people if they would be willing to pay HK$500 to knock 12 minutes of travelling time off a trip to the border and there would be no takers at all. Make it even HK$250, if you wish, because we're really only talking of the excess cost over using the West Rail Corridor. There would still be no takers.

This means the project is uneconomic.

We can, of course, hide this hard fact by charging only HK$20 for a ticket and crowing about the large numbers of people who then step on board.

For every HK$20 the railway takes out of one pocket, the taxman would still take HK$180 out of another pocket. It would be a cheat and, to make it worse, we would be cheating ourselves.

Bad as this would be, however, we could make it even worse by fooling ourselves that it was still worth the cost. We could do this by saying there was an economic benefit in all the construction jobs this project would create and in the further downstream benefits of spending by construction workers. It is what Donald is telling us and it is simply not true.

We would create just as much employment in other sectors if we spent the money on something else. Even if we had to spend it on construction, which we don't, we could do it to better purposes than knocking 12 minutes off a trip to Guangzhou.

There is a great irony here as well. Just when we are in the process of destroying the Central waterfront to accommodate more traffic to Central, we are making Kowloon a railway commuter hub, which will result in the financial industry moving to Kowloon. This will render the Central waterfront destruction unnecessary.

Hong Kong - Asia's World City - because the world will never have as much reason to laugh at how any other city in Asia is run.