Hong Kong MTR

Buy back all shares in Hong Kong’s MTR Corporation to improve management after scandals, government told

Pro-Beijing politician Jasper Tsang says full public ownership is the route to better governance as railway operator faces fallout from construction fiascos

PUBLISHED : Saturday, 15 September, 2018, 9:05pm
UPDATED : Saturday, 15 September, 2018, 11:32pm

A veteran pro-Beijing politician has called on the Hong Kong government to buy all the shares in the city’s railway operator, following a series of scandals and high-profile departures.

Jasper Tsang Yok-sing, a former president of the legislature, pitched the idea on Saturday as the think tank he heads, Hong Kong Vision, released a report on railway network development.

But a local transport concern group opposed the proposal, saying a buy-back would not guarantee better management of the MTR Corporation or the city’s railway services.

“It would take courage and determination from the government to do this. I think it is unlikely to adopt this proposal in the coming policy address,” Tsang said, referring to Hong Kong leader Carrie Lam Cheng Yuet-ngor’s annual speech in October.

“Even if the government is willing to buy back all the shares in the MTR, many doubt it will be able to better manage the railways,” Tsang added. “But I think it’s always good to initiate a debate.”

The report argued that the MTR’s monopoly status had put the government in an unfavourable position regarding overseeing management of the firm.

That sinking feeling: another weekend, another tale of woe for Hong Kong’s beleaguered MTR Corporation

“The MTR Corp has become a monopoly with profit as its overriding objective, and the Hong Kong government has little control over its governance,” the report said.

The MTR has been dogged by scandals surrounding substandard work on its HK$97.1 billion (US$12.37 billion) Sha Tin-Central link, the city’s most expensive railway project.

The scandals resulted in high-profile departures, including three general managers, as well as early retirement for CEO Lincoln Leong Kwok-kuen.

Hong Kong Vision research fellow Danny Shek said botched governance of the MTR had led to long delays on major projects, huge cost overruns and construction fiascos.

“As a listed company, the MTR Corp follows ‘prudent commercial principles’ to manage the company and fulfil shareholders’ interests. But this objective may not be in line with the interests of society,” Shek said.

How Hong Kong’s MTR Corp ‘lost its focus’ – former construction head says embattled rail giant should return to serving public interest

“We recommend the government buy back the shares to resume control of MTR Corp governance.”

Shek estimated a buy-back would cost the government, which currently holds a 75 per cent stake in the rail operator, about HK$100 billion. MTR Corp shares stood at HK$41.70 at market close on Friday.

“This is within the government’s financial capacity,” Shek said.

The think tank also recommended the government set up an authority to run the railways, with officials serving as board members giving management instructions in line with the public interest.

The body could improve construction efficiency and offer more affordable fares for commuters, the group said.

The buy-back proposal is similar to one advocated earlier by lawmaker Michael Tien Puk-sun, a former chairman of the Kowloon-Canton Railway Corporation before it merged with the MTR Corp in 2007. Tien believed such a move would ensure better scrutiny of railway projects.

MTR Corp admits subsidence at more than 130 locations along Hong Kong’s costliest rail line

But Quentin Cheng Hin-kei, a spokesman for concern group Public Transport Research Team, poured cold water on the idea, saying it would not mean better management.

“I really doubt the government’s ability to run the city’s railway services,” he said.

The best course of action, he believed, would be to introduce competition in the railway sector and encourage new players to provide railway management services.

“Actually, the botched governance of the MTR Corp has been caused by the government itself, as it has encouraged monopoly. If the government were willing to open the railway management market, I am sure investors would be attracted to provide such services in Hong Kong,” Cheng said. “The question is whether the government is willing to introduce competition for the MTR Corp.”