MTR Fare Hikes: The Inside Track

According to the operating agreement between the Hong Kong government and the MTR Corporation (MTRC) in August 2007, the Fare Adjustment Mechanism (FAM) shall be reviewed every five years. The FAM was introduced after the “rail merger” in 2007, to replace the fare autonomy MTRC hitherto enjoyed. The first review of the FAM was conducted in April 2013 and sought to review the original fare adjustment formula by introducing a “Profit Sharing Mechanism” and a “Service Performance Arrangement”.

In an interview with China Daily, Simon Lee, Assistant Dean (Undergraduate Studies) and Senior Lecturer of School of Accountancy at The Chinese University of Hong Kong Business School criticizes the FAM as being ineffective, as fares only increase but not decrease under the formula, adding that the HK$721.5 million utilized to offset fare hikes was nothing compared to the billions of dollars of profit that MTRC has made from 2013 to 2016.

“The dividend the government received from MTRC resembles a transportation tax levied on ordinary Hong Kong residents. The administration should consider giving up at least 50 percent of the dividend it received from MTRC and use the money to offset fare hikes,” Lee adds.

A long-term approach to this issue would be to revamp the whole corporate structure of MTRC, through taking the company private and turning it into a fully government-owned company again. After that, the property segment of the company should be spun off so that the government wholly owns the company, with transportation business as the main focus, Lee suggested.

“After the proposed overhaul, the administration will have the final say over fare hikes. This is in contrast to the current situation, whereas fare hike decisions have to be balanced between public affordability and shareholder interests,” Lee states… Read More (PDF)

Please click on the image below to read the story published in China Daily.

Source: China Daily
Date published: 24 June, 2016

Photo: The Standard