MTR Corp buy-back is the government’s best shot at solving Hong Kong’s transport problems
Albert Cheng says the MTR’s rail business should be taken into public ownership to put public interest over profit. While they’re at it, the government should also acquire the bus companies and cross-harbour tunnels to rationalise the entire transport system
The MTR Corporation has been embroiled in one scandal after another over the past few years. First, it was the delay and cost overruns of the express rail link project, followed by the spate of revelations about defective construction work at several stations on the Sha Tin to Central Link.
The scandals have eroded public trust in MTR management, resulting in a revamp. Project director Philco Wong Nai-keung resigned with immediate effect, along with three other general managers. CEO Lincoln Leong Kwok-kuen will retire earlier than expected, while chairman Frederick Ma Si-hang will also leave as soon as a new chief executive is in place.
As a listed company, the MTR Corp should also be concerned about investor confidence.
Lawmaker Michael Tien Puk-sun has called on the government, which is already the MTR’s majority shareholder with about 75 per cent of the shares, to take the rail operator into full public ownership. This way, the MTR need only consider the public interest, rather than making a profit in its daily operation. Of course, to prevent red tape and inefficiencies, the new statutory body should be managed by non-civil-servants and run according to market principles.
Other commentators have also offered their views. Economist Andy Kwan Cheuk-chiu supports buying out the MTR. He suggests splitting the company into railway and non-railway services. The non-rail services should be relisted to reflect their market value, while the railway services should be managed by the government.
Meanwhile, engineering professor Hung Wing-tat is against buying out the MTR. He believes incompetent management is the main cause of the company’s woes, and the best solution is to strengthen the supervision of its projects.
Both suggestions are fair and reasonable. However, neither strikes at the root of the problem. The MTR is the most important public transport in Hong Kong, and the government should take the opportunity to iron out some of its long-standing problems.
The company listed in 2000 and merged with the Kowloon-Canton Railway Corporation in 2007. To maximise profit for its shareholders, the MTR Corp is no longer just a public transport provider but also a developer and property management and advertising agency. Its business has also spread across mainland China.
The MTR today is one of the most profitable rail companies in the world. Last year, its total operating profit reached HK$21.1 billion, with its public transport business in Hong Kong, at HK$7.5 billion, accounting for only 35 per cent of the total.
Watch: MTR by the numbers
Despite its massive profits, however, the MTR has raised its fares every so often, despite a fare-setting mechanism that was supposed to allow for adjustments both upwards and downwards. Is the MTR drifting away from its role as a provider of public transport?
Given the current situation, privatising the MTR or taking it into full public ownership are both practical solutions.
To strike a balance between the public interest and shareholders’ benefit, the government can consider buying back part of the railway business.
It does not even need to use any funds to take the MTR into public ownership. It can distribute shares to the smaller shareholders in the form of 3:2 fully paid bonus shares. Upon acquisition, the government would still hold 50 per cent or more of the shares.
After the MTR is taken into full public ownership, it should be managed by the MTR team that now oversees the railway services. The new MTR company should also acquire all the bus companies and cross-harbour tunnels, taking over the entire transport system in Hong Kong. It can then set about rationalising travel routes and adjusting the fares of the different types of transport to ease problems such as congestion.
This is a win-win solution which will improve our environment, lower public transport fees, and enhance Hong Kong’s competitiveness. This is the only way to solve our transport problems at their root.
Albert Cheng King-hon is a political commentator. [email protected]