Bureaucrats betray their tunnel vision on toll issue

PUBLISHED : Friday, 25 April, 2008, 12:00am
UPDATED : Friday, 25 April, 2008, 12:00am

The [Transport and Housing] Bureau said it had been negotiating with the operators of the eastern and western tunnels to rationalise tolls to even out tunnel use. But it had to study whether connecting roads would be able to handle extra traffic induced by any toll cuts.

SCMP, April 24

There was a smart fellow once who said that bureaucrats who forget the past are condemned to repeat it. He may have said this of more than bureaucrats, of course, but it certainly applies best to them.

Have our lot forgotten that only three years ago they tried to stop the Eastern Harbour Tunnel from raising its tolls and had not the slightest success? Are they truly of the view that they can now induce this tunnel company to reduce its tolls? Are they absolutely set on making fools of themselves once more?

It's really quite simple. If you give the job of building vehicle tunnels to private entities under build, operate and transfer (BOT) schemes that allow them to generate their returns through tolls charged on tunnel use, then you must allow them to collect and keep those tolls for very long periods, in Hong Kong's case generally 30 years.

Anything less than that and private entities won't build these tunnels. In order to generate a reasonable investment return they would have to set tolls so high that people would rather swim than go by tunnel. These long terms mean, however, that BOT agreements must be detailed and rigorous.

Rigorous means that government is bound by them as much as the private entities are. In the case of the Eastern Harbour Tunnel's toll increase in 2005, the decision went to arbitration, as provided for in the BOT agreement, and the arbitrators sided with the company.

Now it is my view that the company on that occasion pulled the wool over the arbitrator's eyes on the question of what a reasonable investment return should be and that it was awarded far more than it should ever have had.

But my opinion of the matter is immaterial and so was, and is, the opinion of the bureaucrats. If they thought it robbery, they should have been on their guard for it when they drafted the ordinance that covers the company's operations. We are talking here of the rule of law. The law came down on the side of the company and the law hasn't changed. This means that if the bureaucrats want to even out tunnel use, they must either wait until 2016 when the company's franchise on the tunnel ends, and then reduce the tolls, or raise tolls now on the competing and heavily congested Cross-Harbour Tunnel, a 30-year BOT tunnel project that reverted to the government in 1999.

But they won't raise tolls on the Cross-Harbour Tunnel. The public outcry would be too great. Therefore they will just have to wait until 2016. And if, while waiting, they also wish to avoid making themselves look foolish again, they should remind themselves not to say foolish things about tolls.

Much the same goes for a government fracas with the Tate's Cairn Tunnel Company which has recently applied to raise tolls. This is to be discussed by the Legislative Council's transport panel today but Financial Secretary John Tsang Chun-wah has already given notice that he doesn't feel in the mood.

'I hope [public utilities] would consider the public's difficulties under the pressure of inflation and strike a proper balance between profit, shareholders' interests and their social responsibility,' he told Legco on Wednesday.

Very good point, Mr Tsang, but this is exactly what your predecessors already had in mind when they struck a 30-year BOT agreement with this company, which provides that during the franchise period the company is allowed to earn a reasonable but not excessive return through collection of tolls.

The facts are that, with only 10 of those 30 years left in its franchise, the company has never yet been able to pay a dividend, will only be able to pay off its accumulated losses this year and, as the chart shows, now suffers from declining patronage because of competition from new roads, tunnels and railways.

Forget talking of excessive. This tunnel has not even reached the reasonable return level although it has certainly fulfilled all its social responsibilities. It's about time that the balance swung to profit and shareholders' interests.

But do you think that the bureaucrats could ever be honest about this and admit as much to Legco?

Oh, sure they could, and the moon is made of blue cheese.