Clarifying KMB's land deals

PUBLISHED : Tuesday, 26 February, 2013, 12:00am
UPDATED : Tuesday, 26 February, 2013, 3:57am


I refer to the article by Albert Cheng ("Government must stop private firms getting a free ride on public money", February 22) which contains misinformation and misunderstanding that need to be corrected.

The article wrongly states that the government has supplied plots of land at below-market rates for KMB to build staff quarters and bus depots.

The fact is the government has never supplied any land at below-market rates to KMB for any purpose nor has the government provided any subsidies in such form. The sites of former depots redeveloped by Transport International Holdings Limited, the holding company of KMB, were acquired through open tender or public auction at market prices.

Under the franchise terms, KMB's franchised operations are required to be financially separated from its own land to prevent increasing market value of land to impact total asset value in the franchise account. The spirit of this rule ensures land value appreciation would not be translated into fare increases.

It is important to note that KMB, as the only franchised bus operator that currently supplies its own land for bus operations, has not charged any land rental to its franchised bus operations. Therefore, the franchise also fairly stipulates that any profit or loss generated by the sale of the company's land shall not be booked into the bus operation accounts.

The article also wrongly described the relationship between Roadshow and KMB. Roadshow is one of KMB's several advertising agencies. Since KMB's advertising contracts in respect of KMB's platforms (including bus body, in-bus, bus shelter and bus TV) are commissioned through open tender, Roadshow won KMB's advertising contracts because it offered the highest bid at the tender.

Had KMB not chosen Roadshow, it would have accepted a lower bid from another advertising agency. Most importantly, all advertising income derived from KMB's various advertising platforms is duly booked into its franchise account, not "separated". These arrangements are fair, and transparent (major contract terms are published on the website of the Hong Kong Stock Exchange).

We believe we should redirect our energy positively in tackling reorganisation of the KMB route network. A major route reorganisation is a must (since the railway has expanded significantly), and it would benefit the public in the form of faster, better and greener bus services, a true win-win solution for the people of Hong Kong.

Evan Auyang, KMB deputy managing director