Opinion | Carrie Lam must take on the MTR corporate behemoth to protect Hong Kong public interest

A deal made four decades ago, letting the company delve into property development to finance its rail lines, has evolved over the years into a poor bargain for Hong Kong people. The government has the authority to correct that

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Chief Executive Carrie Lam attends the opening ceremony of the MTR’s high-speed railway to mainland China in September last year. Even though the MTR Corp is majority-owned by the government, and four senior officials and three retired senior officials sit on its board, officials have not been able to steer the corporation back to its original charter focused on providing public transport services for the overall benefit of the community. Photo: Edward Wong

Published: 9:30am, 5 May 2019Updated: 9:30am, 5 May 2019

Any investor with a modicum of common sense knows that it makes no sense to hoard cash. Inflation erodes the value of money, while stocks generally yield a higher rate of return than long-term government bonds. In Hong Kong, housewives know best where to put their money – the Hong Kong bourse or the local property market.

In comparison, Hong Kong officials, fearful of red ink in the government’s budget, have a habit of using land, the most valuable asset in the city, to finance infrastructural development. A prime example was the way the Hong Kong government gave the MTR Corporation rights to property development to finance the development of the first system of rapid transit rail lines in the urban areas in the 1970s.

Forty years later, the MTR Corp’s metro system has become one of the world’s most profitable and was ranked one of the world’s best by CNN in 2017. It has diversified into a sprawling corporate behemoth with businesses not only in public transport services in Hong Kong, but also in mainland China, Macau, the UK, Sweden and Australia, as well as in property development and management, advertising and stored value payment.

According to the corporation’s 2018 financial results, revenue generated by its recurrent businesses outside Hong Kong (HK$20.9 billion, or US$2.7 billion) accounted for 38.7 per cent of total revenue, but only 9.1 per cent of profits. Businesses in Sweden and Australia were heavily loss-making.

Of the three broad categories of revenue from its Hong Kong businesses totalling HK$31 billion, revenue generated by transport services, at HK$19.5 billion, and station commercial business, at HK$6.5 billion, accounted for the bulk of the turnover. The third category, property rental and management, generated HK$5 billion in revenue, or 16 per cent of the total. Small wonder that the MTR’s property management head once suggested in casual conversation that the corporation would not be averse to divesting its residential property management services. Such services generate limited revenue but regularly put MTR staff in tense situations with local residents.

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