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  • Jul 12, 2014
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PUBLISHED : Friday, 22 February, 2013, 12:00am
UPDATED : Friday, 22 February, 2013, 4:04am

KMB fare rise shows need to nationalise bus firms

Albert Cheng says the latest rise in KMB fares shows the only route towards fair, stable increases is to nationalise Hong Kong's bus system

BIO

Ir. Albert Cheng is the founder of Digital Broadcasting Corporation Hong Kong Limited, a current affairs commentator and columnist. He was formerly a direct elected Hong Kong SAR Legislative Councillor. Mr Cheng was voted by Time Magazine in 1997 as one of "the 25 most influential people in new Hong Kong" and selected by Business Week in 1998 as one of "the 50 stars of Asia".  
 

Hong Kong has always been known for its speed and efficiency, but not this government. So it was surprising to see that the Executive Council, led by Chief Executive Leung Chun-ying, had moved at lightning speed to approve a fare-increase application from Kowloon Motor Bus within three months.

This again showed how the government is willing to bend over backwards to please rich and powerful conglomerates.

This is KMB's third fare increase since 2008. Fares went up by an average of 4.5 per cent in June 2008, followed by 3.6 per cent in May 2011. This time, the bus company had asked for an 8.5 per cent hike on average, but was only granted a 4.9 per cent increase.

Still, it's the highest increase since 1998.

What has happened to the government policy of putting people first?

In the past, any fare increase would have to be processed and reviewed thoroughly, all of which would take at least six months to one year. But this application took less than three months to process, from the time of filing last November until final approval was given this week. The speed raises suspicion that the government and KMB had earlier made a deal.

This suspicion is only reinforced by the performance of the central characters. Secretary for Transport and Housing Anthony Cheung Bing-leung defended the decision by saying that the government had adjusted the rates and that the final approved increases were rather minimal. How absurd it is to see a government official defend a private company on fare increases.

Meanwhile, KMB corporate affairs director Vivien Chan Pik-kwan called the decision "extremely regrettable" because the fare rise would not meet the increased costs in salaries, fuel and tunnel tolls, and, therefore the company needed to urgently reorganise its bus routes to reduce costs.

I totally agree that KMB should reorganise and reduce some of its routes. I have repeatedly pointed out that there are many overlapping routes, which has not only increased operating costs but also created serious traffic congestion and roadside pollution. The reduction of bus routes and bus stops might cause inconvenience to some initially, but, in the long run, it could improve efficiency and save time.

The problem is the proposal to cut routes will almost certainly be killed once it gets to various district boards, which are mostly controlled by the Democratic Alliance for the Betterment and Progress of Hong Kong.

In one sense, the public objection is understandable because if commuters are to pay higher fares, they, of course, want more bus stops for their convenience. But if Leung really wants to serve the people, he needs to flex his political muscles and move DAB out of the way to allow KMB to streamline its bus routes.

KMB claims that the majority of its 400 routes are running at a loss because of railway development. If that's true, the problem is not about cost-effectiveness, but management incompetence.

Take the overnight bus services. At present, the company's overnight bus routes have low passenger numbers. For example, according to government figures submitted to the Legislative Council in 2008, the N270 route running between Sheung Shui and Sha Tin had an average usage rate of 17 per cent. So, to reduce costs and improve efficiency, KMB should consider using single-deck buses, which use considerably less fuel than the double-deckers.

Getting to the core of the problem, we will see that KMB is not really operating at a loss. It has divided up its businesses by separating its profit-making advertising business from the bus operation. Its RoadShow advertising has generated profits in the millions since its establishment.

Meanwhile, the government has supplied plots of land at below-market rates for the bus operator to build staff quarters and bus depots. Profits from these residential projects are also excluded from the bus operation portfolio.

Bus franchisees only pay profits tax to the government, but, at the same time, they enjoy many privileges such as an exemption from the diesel tax and the road infrastructure provided free of charge with public money. All these help to subsidise the operation of these private bus companies.

So why not nationalise all of them to bring true benefits to the public since they are already using public funds? Maybe the government can copy the MTR business model, under which the rail network is privately run, but with the government having a controlling share. This joint venture model helps to guarantee a stable fare structure.

The total market value of all the transport companies will amount to billions, but it's definitely within the government's financial means to acquire all of them.

Albert Cheng King-hon is a political commentator. taipan@albertcheng.hk

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@madams
a
moontiger
This article doesn't demonstrate the thinking of a traditional Taipan, but times change. Such an august man as Albert Cheng no doubt is aware that governments never operate a business without needing taxpayer funding, and he is certainly aware the price of fuel and everything else is rapidly increasing. Perhaps he owns shares in KMB and hopes to make a profit if the company is nationalized. No, he is above such shallow behaviour. He simply is a good communist and we must respect his views.
ianson
Not again! For all the fine arguments you might come up with for the benefits in theory of state ownership of public infrastructure assets and services there are dozens against. The reality is that civil servants are (with rare exceptions) stupid, timid, lazy and inefficient. Let them run our buses and all you'd get is a drain on government coffers, to be paid by the taxpayer, even larger than the unpleasant fare rise called for; a big step backwards for our economy as a whole.
anson
Albert,
1) the transport companies are trying to con us with fancy accounting, not just KMB but all that need Gov't approval for fare increases.
2) Never mind moving to single decker buses at night time, the problem is that the system is not truly open to free market forces - if there is a demand then someone will create supply for it. We now have, if there is not sufficient demand someone will gleefully include this loss making service in their accounts to create leverage to gain a fair increase across all routes.
We shouldn't be thinking about nationalization - look at all the failures in the world - we should be looking at creating a more demand led system. What we really need in HK is Competition Law. We have Gov't intervention because our beloved tycoons are prone to collusion in the absence of an effective regulatory environment.
 
 
 
 
 

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