How did the MTR lose its way?

Regina Ip says in hindsight, the 2010 Octopus data scandal marked the start of a string of missteps and PR disasters at what was once one of Asia's finest companies

PUBLISHED : Sunday, 08 June, 2014, 5:30am
UPDATED : Sunday, 08 June, 2014, 7:55am

Not that long ago, the MTR Corporation was hailed as one of Asia's best managed companies. In 2009, it won three awards given by the magazine FinanceAsia, including "Best Managed Company". In 2010, it won five awards by the same magazine, including "Best Investor Relations", "Best CEO" and "Best CFO".

In the summer of 2010, the MTR Corp's reputation took a big hit when it was disclosed that Octopus Cards Limited, a wholly owned subsidiary of Octopus Holdings, which is a subsidiary of MTR Corp, had been illegally selling the personal data of its customers and had made more than HK$44 million over 4½ years. The public outcry over the company's infringement of personal data privacy led to the resignation of its chief executive and enactment of legislative amendments to make it a criminal offence for data collectors to sell their clients' personal data for direct marketing without their permission.

The furore over Octopus Cards' illegal sale of personal data was a wake-up call for the MTR Corp management and the government, its majority shareholder, to beware the risks of abuse arising from complacency, greed, the relentless pursuit of profits and overexpansion. Unfortunately, as subsequent events attest, the warnings went unheeded after the controversies died down.

Launched in 1997 as a re-usable, contactless, smart card for electronic ticketing, the Octopus card was one of the earliest stored-value cards introduced and inspired many others. The MTR Corp's ability to innovate, making use of radio-frequency identification technology, was fully recognised with an award for global information technology excellence which it won in 2006, and its pride of place at the Hong Kong pavilion at the Shanghai World Expo in 2010.

Yet the fact that the Octopus card, already 13 years old by the time it was showcased in Shanghai, was the only innovation Hong Kong could boast of is, in itself, a sad reflection of the lack of innovative products coming out of the city in the past decade.

In recent years, legislators and the media alike have stepped up criticism of the MTR Corp owing to its frequent system malfunctions leading to train delays, its fare adjustment mechanism which all but guaranteed annual fare increases despite hefty profits, and its meagre fare discounts. It was not until April last year that mounting public pressure caused the secretary for transport and housing, Anthony Cheung Bing-leung, to push through a revised mechanism incorporating a higher productivity factor that effectively reduced future fare increases by 0.5 per cent.

At long last, financial penalties were introduced for train delays exceeding 31 minutes.

Yet all past controversies about the MTR Corp were dwarfed when Cheung announced on April 15 that he had been informed by the company's chief executive Jay Walder that it would not be able to complete construction of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link in 2015 as planned.

There is nothing surprising with construction delays, especially delays in connection with large-scale projects. Yet, the way public disclosure of the delay was handled, despite the project's highly controversial history, immediately set off a maelstrom of public fury and condemnation.

The express rail project has been riddled with controversy from the start. It was announced in the 2007 policy address of then chief executive Donald Tsang Yam-kuen as one of "10 mega infrastructural projects" proposed for the city.

Since then, the tremendous cost of HK$70 billion involved in building a railway that is only 26km long, the choice of the location of the Hong Kong terminus, the plan to relocate village dwellers and indigenous inhabitants, and even the very need for the link itself, have been the subject of intense public questioning and debate.

It was, in fact, the first public works project to trigger a marathon filibuster in the Legislative Council's Finance Committee in late 2009. The project was not approved by the committee until January 2010, after a three-day siege of the Legco building by angry young people opposed to "convergence with mainland China" and "collusion between the government and property interests".

The project scored a first in sending strong signals to the authorities that all is not well in young people's perception of the relationship between mainland China and Hong Kong, and of Hong Kong's heavy reliance on infrastructural and property development to boost its economy.

Against this backdrop, it is surprising that the government and the MTR Corp chose to handle the public communication of a devastating delay in such a cavalier manner, despite the fact that a couple of local newspapers had in the past year hinted at major delays. Accusations of cover-ups and incompetence inevitably flew thick and fast.

Not surprisingly, several legislators have called for a statutory inquiry into the causes of the delay, invoking Legco's powers and privileges, and to pin down where the blame should lie.

The question is: would a statutory inquiry by legislators really cure emerging management and credibility problems at the MTR Corp?

Regina Ip Lau Suk-yee is a legislator and chair of the New People's Party