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Jake's View
PUBLISHED : Sunday, 31 March, 2013, 12:00am
UPDATED : Sunday, 31 March, 2013, 2:08am

MTR must escape illogical fare policy

The government aims to cut the MTR's proposed 3.2 per cent increase by half, according to a lawmaker briefed on negotiations between the two sides on new tariffs.

SCMP, March 27

It's not good practice for a columnist to run the same chart twice within two weeks and, if I do it now, it's not because I'm naturally lazy (although I am) but because the point of this one needs emphasis.

What the chart tells you is that fare levels on the Mass Transit Railway are almost exactly where they were 10 years ago, while the overall consumer price index is up 25 per cent over that period.

You can now travel from one end of the MTR system, the Chai Wan terminus of the Island Line, all the way to the furthest other end, the Tuen Mun terminus of the West Rail line, for less than it would cost you to travel a single stop on the London Underground.

Yet here once again we have our legislators talking of denying the MTR a fare increase determined under a fare-setting mechanism that they themselves approved. Their objection is apparently that they now don't like the level of profits this would give the MTR and, on the part of at least one ignoramus, that the MTR's services are allegedly deteriorating.

Let's not bother trying to find the reasoning behind these arguments. I would be very surprised if there were any. It is not required of legislators in financial matters, as few if any of them understand what they're talking about in finance.

Let's approach it from a different angle. Our government listed the MTR on the stock market in 1999 out of the belief that this would make it a more efficient operator. So, at least, they said at the time. In actual fact they did it because privatisation had been the fashion in Britain 10 years earlier and Hong Kong had finally caught up with the trend.

They misunderstood it anyway, of course. The point of privatisation in Britain had been to free the government of the burden of a loser railway system by putting it in hands that could (and did) make it work properly again. Our bureaucrats never contemplated giving up control.

They also misunderstood the pricing of investments. They thought at first that they could get at least book value for the system and only discovered after committing themselves to the listing that their low-fare policy would only give them a fraction of that valuation.

The solution was a huge land bribe that made up the difference and also made MTRC stand for Modern Town Redevelopment Corporation. The most obvious example of this is that soaring fortress circle of unrestricted development directly behind the West Kowloon Reclamation.

The MTR has never really fitted well with the stock market. The listing has frequently hindered the government's transport policies, most notably in the MTR's acquisition of the Kowloon-Canton Railway.

This one was much delayed and then done through a hugely awkward structure in order to avoid recognising a big loss on acquisition. I still suspect that there was some dubious but officially sanctioned market-rigging to get the minorities to approve it.

And now the MTR continues to risk lawsuit by minority shareholders who thought they had a firm deal on fare levels only to see it threatened by populist politics again.

But there is one good way out of this conundrum for our government - delist the stock. Buy out the remaining minorities and take 100 per cent control once more.

The MTR should never have been listed in the first place. Let's undo this mistake.

jake.vanderkamp@scmp.com

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HK-Explorer
New York City looses money on Subway systems. This then comes our of taxes or more often the city taking on debt. The US model of government subsidy has proven wrong. US and Europe have subsidized so much that the governments are bankrupt. Who cares how cheap a subway journey is to work if you have no job because of massive unemployment.
From what I see their subway is not nearly as nice or efficient as Hong Kong. When you enter
NY city subway no nice customer service, no subway maps as all covered in graffiti, no doors protecting kids from the tracks, dingy and does not give the safe feeling of HK. HK subways are super safe.
hK MTR has done a great job. nY is not even close.
johnyuan
New York City’s subway is the oldest design in the world; second only to London’s. Most of its stations look old and bare especially compare to Hong Kong’s. Hong Kong’s MTR in the beginning had a real intelligent design by color coding the stations. Unfortunately the stations have taken a commercialized turn. Walls and columns all fully plastered with ads. They are visually noisy and unbearable – an environment consistent with what one emerges out from underground. The ads are making money for the MTRC. Passengers might all think it is alright since incomes from ads are keeping fares from increasing. I think the passengers actually are paying for the ads – at the end the consumers always pay. Let the government take full control of the MTR and the stations and let the people demands how it should serve you. May be then Hong Kong will regain its reputation for its intelligent and attractive subway stations.
captam
@" No one should need to take a bus from NT to central. It should only be MTR."
Rubbish!
When you are over 70 years of age and becoming infirm , I hope you are forced to stand up for 45 minutes in a packed sardine can without a seat.
You will then, perhaps, understand why is is necessary to still have buses offering an almost guaranteed seat.
Why should only rich car owners enjoy the comfort of a seat in airconditioned comfort making use of highways paid for on the backs of Hong Kong's low paid?
I take it your are a selfish petrol head and own a car?
johnyuan
The MTR system in its very beginning already had an illogical policy. As a mass transit, it also involved with residential property development. The marriage of the two has only been convenient to raise capital for developing new lines. Clever but bore injustice with consequences. The buyers of those residences over the air-rights of the railway were paying both a living unit as well as the complete new lines that they are living over which would connect them to work. The further away the more you pay for your fare to work. The larger consequence is that such housing set the benchmark in pricing for the rest in Hong Kong. And it is high since new lines must be included. I in fact pointed that out in my letter to SCMP before MTRC went public. I suspect the government might want to erase the effects of the self-carrying cost of mass transit. Unfortunately, going public is another wrong way. Mass transit should be a government obligation of which a yearly accounting balance sheet should show no profits. It is its efficiency and affordability of its service to the public that must count. Just take a look at the subway system in New York City. It is the largest in the world – length and ridership but charge one fare for local or express ride even for over an hour ride from Bronx to Wall Street. The city runs the system. If it is subsidizing the operation so be it because getting people to work and home is more important than making a profit for the mayor office.
HK-Explorer
Ah, you live in central. Most Kowloon MTR stations are not full of advertisements a d are color coded. Go to Kowloon bay station. Beautiful newly done red / theme with beautiful pillars, new foors, half height station doors and in the concourse all new windows ( with out embedded wires) so you can see out nicer.
I agree central station is gaudy with all the videos and advertisements but that is the exception.
HK has pretty much redone most of the green line. It is very nice and not crowded like the blue line. (New trains also with more space).
HK-Explorer
MTR is fine to stay public as at least shareholders get to see numbers which makes the transparent to the people of Hong Kong.
MTR is a world leader and needs to keep the current network above international standards. They also need a massive expansion with at least 4 more lines. Hong Kong due to size and density is so uniquely positioned to make MTR the only form of daily transportation. They should put stations in every town. Busses should only be used to feed people to stations. No one should need to take a bus from NT to central. It should only be MTR.
To achieve this MTR needs to charge a reasonable price for transportation. Right now it is too low.
johnyuan
Don’t let the international reputation enjoyed by Hong Kong’s MTR to sway you in your argument and acting competitively. There is no international standard in underground rail system design. Staying above it as you claimed is just being vain and unhelful. Now, I, as a passenger, I would first to ask my MTR must be efficient and affordable – well being a captive user it is fundamental. Secondly, I will ask for safety and a healthy environment. I want police patrol it to provide security as well as prohibiting people spitting, defecating, blasting music and eating in the trains and platforms. Well, since I am an architect I would love to include aesthetic input as it will be a bonus above the basics. When the above are all met, it really doesn’t matter who owns the MTR.
johnyuan
When the above are all met, it really doesn’t matter who owns the MTR. But not likely – a profit must be made in private hands. By the way, for those who think Hong Kong is unique for its self-paid construction, Hong Kong has no choice. It builds its MTR without a government bond (unlikely there would be subscribers). It must be paid for right away. It is unfair when the system will last for centuries. And you may wonder why we are living in shoebox-size housing. You must; otherwise you can’t have a place to live and a job to travel to. All in all the many underground railway transportation elsewhere operate at government subsidize is for good reason and never see it by the public as a bankrupted business.
johnyuan
MTRC’s majority shareholder is Hong Kong government – you and I.You as a citizen has the right to see the numbers from the government. It is neither a public or private entity. It is confusing when policy must be set. The rule should be that the passenger’s right should always take the front seat. Here, when a call for a fare increase make sure the money is to benefit for a better service including adjusting any low pay to its staffs. If it is only to offset the fuel cost, you should know who the benefactors are – the owners of the electrical power plants in Hong Kong. There, MTRC is really helpless.
impala
Jake, really... I don't know if it is the laziness you mentioned tongue-in-cheek in the first paragraph of this column, but recently I am beginning to wonder if you still do any homework at all for these publications.

You want to delist the MTR Corp by the government buying back the 24% that it doesn't own. Presumably, by owning 100% instead of 76%, it would make decision making easier for both parties. There are many objections to your line of thinking; let me list a few of the more obvious ones:
(1) It would cost north of HKD 50bn of taxpayer's money. That is >7k per head of the population, and about 3~4 times the total amount of fares paid annually in HK for the MTR.
(2) I don't see any benefits worth 4 years of all our collective HK MTR fares in 100% ownership versus 76% ownership.
(3) It would do nothing to solve the alleged problem that seems to worry you most: the government's strict policy of limiting fare rises.
(4) You overestimate the importance of the Hong Kong rail network for MTR Corp's business, and thereby for its shareholders. The HK MTR contributes about 40% of revenues. The other 60% comes from overseas rail subsidiaries, station retail business and property management.
(5) Anyone who is a minority shareholder in any SOE runs the risk of differing in view with the majority shareholder, ie the government. If one doesn't want to deal with the inevitable social/political motives your majority investor has, then don't buy the shares.
Byebye
MTR, Buses, Trains ought to belong to Government, serving people on the move; they should not be profit generating. Taxi is a different issue. Time to undo the listing, lets fight for it, dear fellow Hongkongers.
keresearch
All statutory bodies publish accounts - listed or unlisted dumbo. Read them before you comment on public policy matters.
 
 
 
 
 

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