Hong Kong MTR

More questions for MTR after latest delay

As West Rail Line adds to firm's woes, analysts question role of corporation and its regulator and major shareholder: the government

PUBLISHED : Friday, 30 May, 2014, 4:10am
UPDATED : Friday, 30 May, 2014, 4:10am

Hong Kong's monopoly rail operator is finding itself with an unwelcome reputation for delays.

The MTR Corporation, majority-owned by the government, suffered another dose of bad news yesterday when it was forced to reveal that its West Island Line may not fully open this year as scheduled. That means all five of its building projects are likely to be late.

The delays have been announced one after another in the last month, triggering a management reshuffle, putting the brakes on the locomotive that was supposed to power the company's growth and sparking more questions than answers on the future of the city's railways.

While not disputing the fact that a chronic labour shortage in the construction industry and unpredictable weather have been big factors, as the MTR claims, analysts are concerned about how much the delays will add to the cost of the work … and who will pay. They say the rash of postponements also exposes conflicts in the government's dual role as controlling shareholder and regulator.

"It's a rail monopoly, a blue-chip company and [acts as a] a half-government entity in granting land for development," Eric Wong, chairman of property developer Bricks & Mortar Management, said of the MTR. "Its roles are conflicting."

Founded in 1979 to run the city's burgeoning mass-transit network, the MTR floated on the stock exchange in 2000 and merged with its smaller counterpart KCR in 2007 to become the city's monopoly rail operator. Some 5.25 million journeys are made on its network every day, and it reported a HK$8.6 billion profit from its core rail and property operations last year.

The government retains 76.5 per cent of the company's shares.

Five years ago, the rail network looked set for a huge leap forward with five projects that would add 56km to the rail network, an increase of 25 per cent to a total of 274km.

But news of the delays has led to concerns that the unprecedented expansion was too ambitious, and accusations - including from lawmaker and former KCR boss Michael Tien Puk-sun - that the MTR was keeping the public in the dark on the delays, a claim management denied.

Yesterday's revelation that problems at the new Sai Ying Pun station would mean the 3km West Island Line may not open in full this year followed the news that work was well behind schedule on an extension to the Kwun Tong Line, due to be finished next year. Work on the South Island Line, also due to open next year, has likewise fallen behind.

The 17km Sha Tin to Central link, slated to open in part in 2018 and in full in 2020, is also expected to be late. The most high-profile delay, and the first to be announced, was to the 26km high-speed line to Shenzhen and Guangzhou, which will be pushed back two years to 2017.

Albert Lai Kwong-tak, chairman of think-tank Professional Commons, attributed the delays to the government and the MTR's ambitions.

"The MTR has bitten off more than it can chew," he said. "The government underestimated the capacity of infrastructure projects Hong Kong can carry at one time."

An MTR spokeswoman said the corporation did not think its plans were too ambitious, adding that each project was handled by a dedicated team.

Lee Chi-ming, chairman of the Institution of Civil Engineers, said the schedule for completion was too tight and the city lacked the human resources to cope with such robust demand. He called for greater transparency from the MTR.

Lai said budget overruns were inevitable, especially on the HK$67 billion cross-border route. He said it would be up to the MTR and the government to sort out the liabilities.

"By default, the project owner, which is the government, should bear the overrun costs," he said. "But we won't know how much extra will be incurred until the projects are completed."

The MTR spokeswoman said it was too early to conclude the projects would go over budget.