The property developer that tries to run a railway system

October 19, 2018 17:30
Already reeling from a work-quality scandal, Hong Kong's MTR Corp has come in for fresh criticism this week following a major service disruption involving multiple rail lines. Photo: Bloomberg

The property development company that also runs a railway, previously known as the Mass Transit Railway but now rejoicing in the name of MTR Corporation never misses a chance to miss a chance.

A massive signaling failure on October 16 almost brought the system to a halt and disrupted traffic throughout Hong Kong. There have been other system failures but with less widespread effect.

In some ways however these operational issues are overshadowed by the debacle of the MTR’s major project construction failures, exemplified by the endless flow of problems and delays affecting the new Sha Tin to Central line.

The so-called hi-speed railway to Guangzhou also had its share of problems and cost overruns but it is essentially a political project and has little to do with real transportation needs, thus rendering it as essentially irrelevant to the rest of the MTR’s operations. Yet it sure has diverted the attention of the bosses and then there’s the embarrassing subject of its massive cost overrun and low usage but let’s not dwell on that right now.

More pressing for the general public is having a local service that works. Delays on mass transit systems are hardly unique to Hong Kong; indeed, by and large, the service is infinitely better than that provided in many other cities around the world. But then again it should be because unlike, for example, the more than a century old underground system in London, the MTR system is relatively new (some 40 years old) and enjoyed a higher level of technological development from day one.

Yet the advantages of a newer system in a high-density location where patronage is guaranteed are being squandered by a toxic combination of ideological prejudice and, as ever, politics.

Let’s start with the ideology. The Hong Kong government likes to pretend that it is operating one of the world's most free enterprise economies and so is rather coy about the fact that this ‘free economy’ contains a massive level of state intervention in the property market, where the government owns all the land, as well as in the state-run airport, and in the stock market where a government controlled fund is the largest single shareholder. And, until it was allegedly privatized, the state also ran the mass transit system.

In 2000 the government decided to offer a minority stake in the MTR to shareholders so it could be hailed for privatization efforts. However it retained a very high degree of control both over its management and operations. What emerged was a hideous hybrid structure combining the worst elements of official bureaucracy with some unsavory aspects of private enterprise.

The old model of operating a railway subsidized by property development was maintained. And the newly privatized corporation, unlike other private companies, enjoyed the unique privilege of exclusive rights to develop prime sites adjacent to stations. The interest in the property side of the business has grown because the MTRC now needs to meet shareholder’s thirst for profits.

Meanwhile the government continues to be in indirect control of the company’s management, putting its political allies on the board regardless of merit. The current chairman, the hapless Frederick Ma, is a case in point here.

Even where board members are appointed on merit rather than on the basis of political patronage it would be difficult to square the circle of a public utility hitched to a public company.

The consequences are there for all to see. On the one hand the management of the company manifests attitudes of arrogance and entitlement based on more or less guaranteed profitability and the monopoly enjoyed by the company, while on the other hand an attitude of indifference to the public permeates its operations.

When major projects are botched, come in late and incur significant cost overruns the MTRC thrashes around for others to blame but the bosses rarely shoulder responsibility. And when, at an operational level, problems arise it merely seeks to wriggle its way out. In the latest instance, ‘rogue’ computers were held to blame as if somehow the company has no means of controlling its computer system. In other words the people running the MTRC hardly inspire an impression of competence.

Given its present structure the MTRC can only head in one direction, which is not up.

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Hong Kong-based journalist, broadcaster and book author