All aboard the merger express
Bogged down by repeated accidents and train delays, the KCRC's West Rail has been a major disappointment. The fact that Michael Tien Puk-sun has replaced Yeung Kai-yin as chairman of the company can hardly restore its savaged public image.
West Rail carries far fewer passengers than planned and is heavily subsidised by the government - posing unfair competition to private transport operators. It has a long way to go before it can recover its initial investment.
The facts speak for themselves: Last year, the Kowloon-Canton Railway Corporation carried 475 million passengers with a net profit of just $419 million. In contrast, the MTR Corporation last year carried 841 million riders and netted $4.49 billion. The KCRC's current mode of management and operation can no longer be justified.
The government this year announced its intention to push for a KCRC merger with the MTR Corporation. Five million dollars was allocated to a working group, and officials were eager to have a decision by the middle of the year. MTR chairman Raymond Chien Kuo-fung submitted a report on the issue to the government in June.
Yet, a concrete action plan has yet to be devised. Rumours have circulated that the merger idea was aborted because of significant differences over the evaluation of the KCRC's assets.
Meanwhile, Mr Tien's repeated statements that there was no room for the KCRC to reduce its fares has further complicated the scene. His comments have made the proposed merger less palatable, especially for the Legislative Council.
Chief Executive Donald Tsang Yam-kuen said in his policy address that 'the two rail companies have entered into their final stage of discussion on their merger'. Given his emphasis on strong governance, Mr Tsang is unlikely to allow the proposed merger to drag on.
I am a staunch supporter of the merger. Hong Kong is so small that there is little room for two separate rail operators. The government owns the KCRC and is a major MTR Corporation shareholder. The two companies do not really compete with one another. Instead, their main rivals are the bus companies.
The merger could lead to better integration of, and connections between, the systems. This would generate more riders, making it easier to lower public transport fees.
An efficient, integrated rail system would help reduce air pollution. It could also minimise the need for new or expanded roads. Property values along the rail lines would increase. A merger would be the most effective way to change the bureaucratic culture of KCRC management.
The recent spate of mistakes and mishaps is not surprising. The KCRC, for example, adopted a new signalling system for West Rail without stringent tests: it later needed $60 million in improvements. Yet no one from the company has been held accountable.
The evaluation of the KCRC's assets is bound to be controversial. One way to do it may be for the MTR to lease the KCRC's facilities and take over its management. This would maintain the KCRC's book values, avoiding criticism that the government undersold its assets.
In the long run, the government should assess Hong Kong's transport, economic and environmental needs. Financial support should then be given to developing new rail lines accordingly.
The rail company could be given the right to develop properties along its lines, a model that has been effective in funding MTR projects. An alternative is for the government to foot part of the bill for the construction of new rail lines.
The proposed merger is the only realistic step to make the rail services more competitive in facing the challenges posed by other modes of transport.
The only way to meet the growing demands for reduced fares is to find more passengers.
Albert Cheng King-hon is a directly elected legislator
