by Albert Cheng
EJ Insight » Hong KongToday, 11:18
Plagued by serious delays and enormous budget overruns, the Guangdong-Shenzhen-Hong Kong Express Rail Link might turn out to be the biggest public financial disaster this city has ever seen. Photo: HKEJ
MTR Corp. (00066.HK), a brand that once commanded respect and confidence from a lot of Hongkongers, has been engulfed by scandals in recent years.
Among them are the serious delays and catastrophic cost overruns of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, which have not only taken an irreversible toll on the credibility of the MTR but also caused heavy losses to the company’s small shareholders.
To protect their rights, I believe it’s time for the Securities and Futures Commission (SFC) to step in and launch an all-out investigation into the firm’s blunders to enforce accountability.
In fact as early as May 2013, Apple Daily already revealed there were serious delays in the project, which the MTR immediately denied.
Then, during an internal meeting on July 12, 2013, the top management of the MTR, including its chief executive and chief financial officer, were officially notified that the project was seriously behind schedule and that it was unlikely it could be completed this year.
However, it wasn’t until Nov. 21, 2013, a day before a Legislative Council meeting on the progress of the project, that Jay Walder, the MTR’s then chief executive, told Secretary for Transport and Housing Anthony Cheung Bing-leung for the first time that the rail line wouldn’t be able to enter service as scheduled.
To make matters worse, at the annual shareholders’ meeting of the MTR in March 2014, Raymond Chien Kuo-fung, the company’s outgoing chairman, told the shareholders that he wouldn’t know whether or not the express rail link would be completed on schedule until April that year.
Unless Chien was so ignorant and ill-informed that he didn’t even know there had been an internal meeting discussing the expected delays eight months earlier, his words would have constituted an act of fraud against his shareholders and potential investors.
Since the MTR Corp. is one of the biggest public companies in Hong Kong, the SFC is duty-bound to look into the matter, which involves enormous public interest, thoroughly and follow all the facts wherever they may lead to find out whether any foul play has been involved in the scandal.
The SFC should also find out whether anyone in the firm’s management should face criminal charges for deliberately misleading its shareholders, because what is at stake here is not only the interest of MTR shareholders but also our city’s hard-earned reputation as an international financial hub.
Apart from the serious delays, the high-speed rail project is now also threatened by what could amount to a staggering HK$20 billion (US$2.58 billion) in cost overruns, and it is very likely that the overspending on this project will keep growing.
The latest figures show that the cost of the project has already risen to HK$85.2 billion this year.
However, as the project is being plagued by further delays, it might end up costing more than HK$100 billion in total, making it the biggest and most expensive white elephant Hong Kong has ever seen.
Worse still, since the project is running out of money, rumour has it that some major contractors are considering bringing the construction work to a halt unilaterally until they make sure they will get paid on time.
Obsessed with getting re-elected, all Chief Executive Leung Chun-ying is doing right now is passing the buck to the MTR and putting all the blame for the disastrous delays and cost overruns of the project on the company.
However, since the Hong Kong government owns more than 70 percent of MTR Corp., it is very likely that we the taxpayers will have to foot the bill in the end.
In fact the MTR express rail link saga is a classic example of how poor government oversight and gross negligence of big company management can add up to a long-term disaster for taxpayers.
Now that the Leung administration and the MTR are trying to pass the buck to each other in order to escape responsibility for this public financial catastrophe, I believe Legco must intervene and launch an independent inquiry into the matter to identify the people responsible for this bungle and hold them accountable.
Our lawmakers always claim that they are the guardians of the public interest.
Now is the time for them to prove it.
This article appeared in the Hong Kong Economic Journal on Oct. 23.
Translation by Alan Lee
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