Benefits of Express Rail Link go beyond simple cash returns

The Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) is a project that has direct bearing on the long-term development of Hong Kong and therefore deserves our support. The rationale is simple: Hong Kong needs further integration with the Chinese mainland for the sake of its economic development. Any initiative that can enhance integration between the two sides should be supported. Many critics oppose the XRL project merely because of their mistrust of the Hong Kong government and mainland authorities. The disagreements between supporters and opponents are actually ideological conflicts which cannot be resolved with normal logical thinking alone.

When we talk about the Hong Kong section of the XRL, many people believe it is a white elephant. For the 20-plus kilometer railway project, we need to foot a bill of HK$90 billion ($11.56 billion), which is quite expensive. When the project was first studied, the economic benefits were estimated at about HK$30 billion, with construction costs of HK$60 billion. After rising construction costs added a further HK$30 billion to the bill simple arithmetic tells us that the estimated economic benefits would have been totally offset by the increase in construction costs. It is not surprising that some people are suggesting we should abandon the project. However, such a view ignores one important point: The so-called economic benefits were estimated based on the situation at the time the forecast was made. The estimation was made some 10 years ago. The past 10 years have witnessed a tremendous transformation in the Pearl River Delta. The estimated economic benefits of the XRL have not been updated to take those new developments into consideration. Hence, the simple arithmetic operations on the costs and benefits of the project do not work out well. We simply cannot compare an apple of yesterday with an orange of tomorrow.

The XRL project faces two major objections. One is about cost overruns and the other is about the need for it. I would like to make reference to the construction of the Kowloon-Canton Railway (KCR) in exploring the need for construction of the XRL. The KCR was constructed 100 years ago with an initial budget of HK$5 million. At that time, the monthly rental of a whole business building in Central was around HK$500 per month. Hence, the KCR actually was a costly project at the time of construction. Needless to say, the project had cost overruns. At that time, the KCR construction also received criticism on the huge construction costs, subsequent cost overruns and the need for this railway. If fare revenue was the only factor to be considered, the KCR project should not have been implemented.

However, the then Hong Kong governor Frederick Lugard made it clear that the project was intended to preserve the predominance of Hong Kong. In other words, the colonial government at that time regarded the KCR as an infrastructure project with strategic significance. When we compare what happened 100 years ago with the KCR project and what is happening now with the XRL project, we can't help but lament: History repeats itself.

Since the XRL will integrate Hong Kong further with the mainland, it is clear that it will help preserve the predominance of Hong Kong, which the KCR was built for. The current debate over the XRL is actually a manifestation of the mistrust some people have harbored against the central and Hong Kong governments. Those who have such skepticism are trapped in a suspicious mindset. They always suspect there must be some hidden agenda behind every initiative put forward by the government. Such biased mindsets simply cannot be rectified with economic reasoning.

(HK Edition 04/27/2017 page8)