Critics foresee long-term deficits for the 26km railway, which is already vastly overbudget and years behind schedule
CANNIX.YAU@SCMP.COM
UPDATED : Monday, 13 June, 2016, 12:00am
Work is progressing on construction of the rail link’s West Kowloon terminus. Photo: Sam Tsang
The MTR Corp has been urged to steer clear of taking on the operation of the troubled HK$84.4 billion express rail link to Guangzhou, with an economist warning the controversial project is a political time-bomb and a critic calling it a “fiscal abyss”.
Alarm bells were sounded after the rail operator said it would “critically look at” the scheme and consider factors such as the financial implications and public opposition, according to sources close to its top management.
An MTR Corp spokesman told the Post it hoped to “commence discussions on operation arrangements within this year” with the government so as to meet the delayed target for its launch in the third quarter of 2018.
The government has not yet approached the MTR Corp but the spokesman admitted that it expected to be invited to undertake the operation “under the concession approach” based on mutual understanding. “We will work in tandem with the government’s timetable,” he said.
“A business model would need to be established if MTR is to take on the operations of the XRL,” the spokesman said.
One option would be for it to accept a management fee for running the rail link on behalf of the government, rather than taking on the more complex role of operator and having to accept the financial implications that go with it. Critics warn the company would be severely burdened as the line will not make a profit.
It is understood that the biggest fear for the MTR Corp is whether the government’s plan to push for the controversial co-location of checkpoints at its West Kowloon terminus will trigger further delays.
The arrangement, which critics say violates the Basic Law, would mean mainland officers being stationed at the West Kowloon terminus and enforcing laws in Hong Kong.
Lawmaker Kenneth Leung says a co-location plan at the West Kowloon is too hot a political issue to introduce before the chief executive election in 2017. Photo: Jonathan Wong
This would require the Legislative Council’s approval because it involves enactment of local legislation, and it may entail delaying filibusters and a judicial review.
Lawmaker Kenneth Leung, who represents the accountancy sector, envisaged the co-location plan causing further delays.
“The government would not dare introduce the proposal before the chief executive election. When can we expect to see it in motion? The year 2020?” he mocked.
A government request for an extra HK$19.6 billion in funding was finally passed in March amid much uproar and claims of Legco procedures being violated. The extra money was on top of the HK$65 billion secured several years ago.
Critics foresee long-term deficits for the 26km railway, which will link Hong Kong to Guangzhou and Shenzhen, and say massive government subsidies are inevitable.
However, taking into account additional non-fare income such as advertising and rental from kiosks, the government is upbeat that it “can be sustained without subsidy”. The high-speed rail link was therefore concluded to be “operationally viable”.
Under the concession approach, the government expected to receive service concession payments from the MTR Corp after the rail link came into operation, estimated to be about HK$28.1 billion for 50 years.
There is absolutely no incentive for MTR to undertake the railway’s operation unless there are massive subsidies from the government
ECONOMIST ANDY KWAN CHEUK-CHIU
However, economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, said the railway was bound to suffer losses as the government’s estimates were too optimistic.
“This is definitely a political time-bomb,” he warned. “There is absolutely no incentive for MTR to undertake the railway’s operation unless there are massive subsidies from the government. This burden will drag down its business and profits as a listed company.”
Kwan suggested that the best viable option was for the company to just accept a management fee for running the rail link as manager for the government, so it could steer clear of political controversies over government subsides, financial performances and the co-location arrangement.
“Under this business model, whether the rail link suffers losses or makes profits and whether there is co-location, will have nothing to do with MTR,” he said.
Quentin Cheng Hin-kei, spokesman for the Public Transport Research Team, also questioned who would be willing to take over the huge liability and bear the brunt of public outrage, contending that the original estimates were based on wrong assumptions.
“The rail link will create a fiscal abyss. I really can’t see any financially viable option to keep it running,” he said, adding that his group was against any form of government subsidies as this would involve public money subsidising a private conglomerate.
A Transport and Housing Bureau spokesperson said it would discuss the issue of service concession, as well as the operating and financial arrangement of the rail link with the relevant mainland authorities at an appropriate time.
http://m.scmp.com/news/hong-kong/economy/article/1973655/mtr-corp-warned-it-faces-fiscal-abyss-if-it-takes-operation
