Why Hong Kong needs a more independent MTR board to prevent shoddy railway works

Mike Rowse questions if the MTR, which is majority-owned by the government, was too beholden to political concerns to properly prioritise its heavy workload, with five major rail projects on its hands

PUBLISHED : Sunday, 17 June, 2018, 2:03pm
UPDATED : Sunday, 17 June, 2018, 7:37pm

One reason the latest scandals over railway construction in Hong Kong came as such a shock is that they are eerily reminiscent of another era which most of us probably thought we had put behind us.

Back in the early 1970s, corner cutting in the construction industry – and the corruption that facilitated it – was rampant.

As soon as the Independent Commission Against Corruption was set up in 1974, the stories came tumbling out: how public projects could be deliberately “over-engineered” to provide an extra safety cushion, so that skimping on materials and workmanship standards would not endanger the finished product too much, and would also provide a margin to cover corrupt payments to works inspectors. Contractors made their profits, site supervisory staff got their bribes, the only victims were the taxpayers, who paid over the odds for the roads and other public facilities being constructed.

Similar problems afflicted the private sector.

Judging from the recent reports of shenanigans in building works at To Kwa Wan and Hung Hom stations, ultra-lax supervision is back in vogue. The only question is whether this is being facilitated by corruption or “merely” lackadaisical supervision and management.

It says something about the seriousness of the situation that, given the choice, we would probably prefer the latter.

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One particularly disturbing aspect of the recent revelations is the claim that cheating was going on in the training and certification of the MTR Corporation’s site supervisory staff.

When corporate culture has reached such a nadir, the time has come for radical remedial action. Failure to root out such practices imperils the very existence of the organisation.

Responsibility for the present state of affairs must rest with the corporation’s boss. But exactly who is that? Is it the senior management, led by chief executive officer Lincoln Leong Kwok-kuen? Certainly, as the person in charge of daily operations, he cannot escape a share of the blame. But Leong reports to a board of directors chaired by former minister Frederick Ma Si-hang. To what extent should they be accountable?

Above the company itself, there is yet another layer of management. The government, after all, is the majority shareholder with 75 per cent of the equity, and controls appointments to the board of directors. Two ministers and two serving civil servants are on the board. Should we be looking at secretaries and chief executives?

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Actually, if we stand back from the current mess and look at the situation from a macro perspective, one probable contributory cause of the recent problems is requiring the corporation to undertake five major construction projects all at the same time.

Each of the four internal projects – the Island Line western extension, South Island line, the Whampoa extension, and the Sha Tin-Central Link – had its justification, but they surely deserved different priority in strictly transport terms. However, it would have been difficult for the government to explain to the residents affected why their line had lower priority than the others.

That probably explains why our leaders did not rank them, passing the buck neatly to the MTR Corp with instructions to implement them all at the same time. When this situation was overlaid with the political imperative to undertake the high-speed rail link so as to plug into the national network, the management buckled under the strain. Supervisory resources were spread too thin, with the consequences we see before us today.

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What next? The government is naturally giving priority to the safety issue and has set up a commission of inquiry under a senior judge to get to the bottom of what happened and make sure proper remedial action is taken. It is hard to quarrel with this approach.

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If the terms of reference were set too broadly, the inquiry would take too long. Yet, if they are set too narrowly – restricting the scope to just the Hung Hom station, as has been mooted – then the equally serious alleged flaws at the To Kwa Wan station would not be covered. And it is difficult to see how any inquiry would not spread into the whole question of MTR supervision.

In the longer term, it is important to get to grips with the chain of command issue. The government should be seeking to gradually reduce its shareholding so that it no longer has majority control.

 

Perhaps a start could be made by disposing of a further 20 per cent of the shares within the term of the current chief executive. A further 20 per cent could go in the next term. Then we could move towards a board much less susceptible to government strong-arming, and a management that reported to a more independent board.

In disposing of these 20 per cent tranches, could we also bring the public closer to the corporation? Sell half of the shares each time on the open market, with the other half being allocated free of charge to registered voters? Then, when there is a future modest fare rise, we won’t just hear from the free-lunch brigade. Their voices will be matched by the 3.8 million shareholders wanting to know about their dividends.

The debate that follows would be much more even-handed.

Mike Rowse is the CEO of Treloar Enterprises. [email protected]