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Legislative Council elections 2016

Fuss over MTR and Link Reit shows it’s election time again

Mike Rowse says the headbangers are getting a hearing even though their complaints about transport and rents are illogical and irrelevant – meaning the next eight months are going to feel very long

PUBLISHED : Sunday, 17 July, 2016, 2:32pm
UPDATED : Sunday, 17 July, 2016, 7:23pm

When normally sensible people start to sing from the same hymn sheet as the usual headbangers, you know it can only mean one thing: election season is here again.

Take the issue of MTR fare adjustment. There is an agreed formula for this. It takes into account such matters as the changes in wage levels in the transport sector, electricity tariffs, and the cost of various essential supplies. Applying the formula this year supported a fare adjustment of just over 2 per cent (against a background of wage levels rising by an average of 4 per cent plus).

MTR fares to increase for sixth straight year - this time covering trains to Guangdong

Out came the usual chorus which objects to every fare increase on principle (what principle is that, by the way?), pointing out that the MTR Corporation had made a huge profit. This was true but irrelevant: most of the surplus had come from property development, with rail services achieving a very low return on investment. The shareholders – including the public purse as majority owner – deserved their share.

The government just batted this nonsense into the long grass, right? Well, no. It agreed the situation needed looking into, and pressed the corporation to bring forward its periodic review of the formula. Our underground railway is the envy of the world. Visitors marvel at the frequency and reliability of services here, the cleanliness of carriages and stations, and, above all, the low fares. It is essential that any review not imperil its high standards.

Hong Kong’s chief executive takes on Link Reit over rent concerns

The other area where common sense has recently taken a back seat is Link Reit rent levels. Some years back, the Housing Authority sold the commercial areas of the podiums under public housing estates and associated car parks. The funds raised were then used to provide more housing units. A win-win, right? Having paid full market value for the assets, the Link Reit management proceeded to run the properties in a normal way.

The government just batted this nonsense into the long grass, right? Well, no

It is important to realise that public housing rents are effectively zero. Rates due on the properties are paid centrally by the Housing Authority to the government, and the management charges are deemed to be included in the rent paid. Factoring these two items out separately, there is virtually nothing left to pay for occupation of the housing units themselves. I have no quarrel with that – the public housing programme has rid our hillsides of ugly and dangerous squatter areas, and provided ordinary people with a vastly improved living environment. But a curious sense of entitlement seems to have developed whereby those benefiting from very low housing rentals felt they were also eligible to enjoy cheap parking and below-market rents for shops and offices.

The absurdity of this can quickly be illustrated. Leaving aside the conundrum of why supposedly impoverished tenants need places to park their private cars in the first place, let us focus on something more straightforward like medical services. Public housing estates do not exist in a vacuum, they are part of their own local environment. If the going rate for a doctor’s consultation is (say) HK$300 in ordinary commercial premises in a given district, would the doctor whose clinic happens to be in the podium of a public rental estate nearby charge any less? It would be extraordinarily naive to think so. If he were charged a concessionary rent, he would no doubt charge the same fee, but pocket the cost savings himself. Notwithstanding the illogical premise, parties from all sides of the political spectrum have rushed to criticise Link management.

Elections for Legco, the Election Committee and chief executive are all coming up – it’s going to be a long eight months.

Mike Rowse is the CEO of Treloar Enterprises and an adjunct professor at the Chinese University of Hong Kong. mike@rowse.com.hk