Restructuring needed to spare MTRC from conflicting roles

The Mass Transit Railway Corporation (MTRC) finally launched its South Island Line on Wednesday, about a year behind schedule. The MTR is the most significant part of our transportation system, carrying over 5 million passengers daily. Railway is regarded as the backbone of the public transportation system in the city. However, it is very disappointing that the MTRC's performance in recent years has been far from satisfactory. This can be seen in three main areas: Train services suffer frequent delays; all new railway lines are behind schedule and massively over budget; and passenger fares go up every year.

First of all, we are quite familiar with the scenario of train services being disrupted by a signaling fault, which happens mostly during rush hours. The minor failures might only delay passengers for a few minutes; the serious failures can force the train services to shut down completely for hours. There was a time when we thought we ought to travel by MTR when in a hurry as it was faster and more reliable than by bus. Nowadays, when I have an important meeting I will allow ample time for myself, just in case something happens with the MTR. To be fair, the MTRC is fully aware of this problem and is upgrading the signaling system to increase reliability and capacity. In the meantime, we have to endure even more signaling faults as a system undergoing upgrading is bound to experience more problems.

In addition to the South Island Line, the Express Rail Link is delayed for at least three years and over budget by tens of billions of dollars. The Kowloon segment and the cross-harbor segment of the Sha Tin to Central Link were originally scheduled to open in 2015 and 2018, respectively. But, according to the latest estimates, they could only be operational in 2019 and 2021, respectively, at the earliest. It is appalling that the amount of cost overrun is unknown as it is still being calculated. The MTRC has many excuses for the delays, such as the need to construct the Central-Wan Chai Bypass, the discovery of ancient artifacts at the work sites, and encountering hard soil. I believe one of the main reasons for delays is that there is not enough expertise within the MTRC. Many of its experienced management professionals have been sent to supervise its increasing number of overseas projects. Moreover, the MTRC was over-ambitious and began the construction of too many new lines simultaneously. A possible solution is to restructure the MTRC into two corporations - one focusing on local business and the other on external business. This will allow it to have a dedicated management team for its Hong Kong operations.

It should be noted that the MTRC's fare increases have tapered since the 2013 amendment to the fare adjustment mechanism. However, as the MTRC only adjusts its prices upward and offers very limited discounts, low-income residents are still burdened by high transport costs. Instead of using its surplus to provide real benefits to passengers, it has chosen to spend large sums of money to hire various celebrities and showbiz artists to promote those limited discount schemes and improve its public image.

The MTRC is in an awkward situation. Despite being 75.4 percent owned by the government, it is a public company and must maximize returns for its shareholders. On the other hand, there is mounting pressure from the public urging the railway operator to fulfill bigger and bigger corporate social responsibilities. The MTRC's role as a public company conflicts with its role as a provider of essential public services. Nonetheless, I believe that repurchasing all of its listed shares, which would cost billions of dollars, is a poor use of public funds and will only benefit institutional investors and a small number of individual investors. A potential solution to make the MTRC a more socially responsible company is to convert all the privately owned shares into preferred shares, which will give investors fixed-rate dividends but take away their voting rights, making it a wholly government-controlled corporation. This will allow the MTRC to take on more public responsibility without changing the existing management structure or employee benefits. Small individual investors could still purchase the shares of MTRC and receive stable dividends. To ensure fairness, the government should obviously abstain from voting on this proposal. If this new share structure were to be implemented, the current fare adjustment mechanism could be drastically improved.

These proposed changes are fairly substantial and would have a huge impact on the MTRC. Even if the government agreed with such changes, the MTRC's views are also very important. It would require a visionary and decisive government to conceive, consult on and implement big changes to improve the public transportation system of Hong Kong.