Scale of property income presents challenge to privatisation ambitions

The Mass Transit Railway Corp has a $60 billion headache. Last October, the Government announced a plan to privatise the world's most heavily used, and arguably efficient, people-carrier. Its problem is that the sum touted by senior officials looks awfully high.

Few of the 3.5 million daily passengers on Hong Kong's almost eerily reliable underground train service have much to complain about. Trains are punctual, clean and frequent. Stations bristle with banking and shopping services while a clever cashless payment system deducts fares, cheap enough to make commuters in other leading cities green with envy.

So good is the MTRC that it has a fast-growing consultancy business dispensing advice to overseas railway operators. Bankrolled by property development profits since its creation in 1979, it has blended public and private sector skills, while avoiding politically motivated under-investment that blights rail networks in cities such as London and New York.

So why does it have a problem? Surely, as senior officials claim, international investors will fall over themselves to get a slice of such a well-run operation. After all, the corporation has years of exposure in the international debt markets and plenty of very happy bond-holders.

The answer lies in its extremely detailed accounts showing a company at present earning a 1.5 per cent return on equity in its core railway operations. That is the kind of return you expect from high-growth Internet companies.

The difference is they promise global domination (just maybe) in a new industrial economy, while the MTRC is a mature business facing intense competition.