Rail funding move is step in right direction
The long-awaited Sha Tin to Central Link will see the MTR Corporation return to its traditional role - rail operator. In the past, the government has given the corporation land to develop as payment for the building of new routes and maintaining operations. The rail giant has, therefore, doubled as a developer and reaped massive profits. This has prompted investors to consider it a proxy on the real estate market. It has also led critics to accuse the government - its majority shareholder - of favouritism. This time, however, the government will build the link for HK$37.4 billion and become its owner. The MTR Corp will, under the arrangement, lease the route, and operate it as a concession. It will make money primarily from fares and pay the government about HK$91.8 billion over 50 years.
This signals a fundamental departure from a long-standing government policy - or at least its significant relaxation. As one of 10 major infrastructure projects that Chief Executive Donald Tsang Yam-kuen promised, to boost the economy, building the link carries a degree of political urgency. Already, questions are being raised about whether the concession payments are fair compared to what the MTR Corp can potentially earn. But because there is no commercially viable development, the new link would probably never be built without the government stepping in. To be equitable, the government must now make sure the interests of MTR Corp's minority shareholders and those of taxpayers and commuters are taken care of in its calculations.
In the past, construction of new MTR routes had to be financially self-sustaining - hence the need for land grants. The problem with this policy has always been that rail routes long demanded by the public - such as the West Island and South Island lines - were put on the backburner because they were considered uneconomical. Now that it has been relaxed, both lines have been given the green light within the last six months. However, both projects commit the government to substantial capital injection.
There has always been a fundamental conflict in the MTR Corp's role. As a listed company, the MTR Corp is answerable to shareholders. But it also provides a vital public service. The MTR Corp has asked the government to grant it the right to develop a HK$7.8 billion site in Ho Man Tin as part of the new link's extension between Kwun Tong and Whampoa. How the government decides on the request will indicate what extent the old policy is still in place.
When the new link is projected to be completed in 2019 it will greatly reduce travel time and save commuters the inconvenience of having to switch at Kowloon Tong station. The government's willingness to depart from the traditional - and almost doctrinaire - funding model to kick-start a public project is positive, but it must make sure its financing is sound.