Community & Education Hong Kong

MTR and gov’t pass the buck as Express Rail Link late and over-budget

Representatives from both MTR Corporation and the government fell under fire today as Legislative Council members met to discuss budget overruns and repeated delays to the MTR-managed high-speed rail link with Guangzhou.

Neither side admitted responsibility for mismanagement of the project, which Neo Democrat lawmaker Gary Fan Kwok-wai called “completely out of control.”

Fan blamed MTRC’s poor management as well as the government’s lack of supervision for the failings, suggesting that the government consider terminating the project as it was “pouring taxpayer money into this bottomless pit.” He also called for the resignation of Secretary of Transport and Housing Anthony Cheung Bing-leung.

HK-Guangzhou high-speed railway terminus

Digital model of the Hong Kong-Guangzhou high-speed railway terminus in West Kowloon. Photo: MTRC.

In the LegCo meeting document, the government expressed “grave concern about the further delay and cost overrun.” The government also said that they will determine the parties’ obligations regarding project cost overrun and “will reserve all the rights to pursue the warranties and obligations from MTRC.”

Cheung added that “the government cannot accept the continued price overrun of the high-speed rail project. The government also cannot accept that only taxpayers are to cover the loses incurred and ignore the responsibility of the project manager. [The government] also considers a need to cap the total entrustment fee [to MTRC].”

MTRC defended themselves, however, by providing the following reasons behind the delay and cost overrun:

  • Unexpected site conditions due to poor environmental conditions
  • Inconsistent performance of tunnel-boring machines
  • Industry-wide shortage of labour in Hong Kong
  • Delays in construction of the West Kowloon Terminus Building

MTRC CEO Lincoln Leung explained that the project’s latest estimate of over HK$85 billion was arrived at by a “ground up reevaluation of every single contract.” Leung also said around HK$45 billion of the original HK$65 billion estimate had been used.

Leung said the remaining HK$20 billion will be used within a year, although he did not reply as to when MTRC plans to apply to LegCo for the over-budget amount of HK$20 billion. Leung also did not specify whether the new estimate of HK$85.3 billion included potential claims by contractors.

Michael Tien, chair of the Legislative Council Panel on Transport, questioned the arrangements for having both Hong Kong and mainland Chinese immigration and customs operate at the West Kowloon Terminus.

Leung said that construction of the immigration and custom area will commence in the fourth quarter of 2015, giving the government six months to resolve the legal issues surrounding the co-habilitation of immigration and customs arrangement. However, the government has yet to solve this issue since the start of the project in 2010.

High-speed rail route.

High-speed rail route. Photo: Wikicommons.

The government report also noted that “as of [the] end [of] May 2015, the overall progress of the [high-speed rail] was 70.4 percent , indicating a delay of 5.8 percent when compared to the planned progress of 76.2 percent.” Compared to estimates at the end of March 2015, there was a further delay of 0.8 percent.

In response to legislators’ queries, Cheung said the department has no specific plans on its next step as the government still needs to assess the MTRC’s new estimates. Cheung said there is no particular schedule on when the assessment and discussion will end, nor is there an exact figure on the suggested price cap.

However, Cheung said the government will supply legislators with the contract between the government and MTRC during a closed door session of the special committee tasked with investigating the budget overrun and delay.

As to whether the government would sue MTRC, Cheung said that the Department of Justice is investigating the issue. Cheung also dismissed notions that the maximum fine that could be imposed by the government would be equal to the project management fee entrusted to MTRC – currently at HK$4,590 million.

In the House Committee meeting on the same day, pro-establishment legislators voted down a proposal to discuss granting the special committee investigating the budget overrun and delay of the express rail link further powers. The House Committee is responsible for setting the agenda of the LegCo council meeting.

Prior to the meeting, organiser of the pan-democratic camp, Alan Leong Kah-kit, expressed the pan-democrats’ support for the motion. However, pro-establishment legislators said that the existing special committee is already proceeding with the investigation, and there is no need for further privileges.

Due to procedural disputes between the pan-democrats and chairperson, the pan-democrats did not vote on whether or not to authorise the discussion on granting the special committee further powers in protest, resulting in 0 votes in favour of the motion.

Voting results

Voting results for discussing in the next council meeting granting the special committee investigating the budget overrun and delays further powers. Photo: Now TV.

MTRC submitted their new estimate for the price and launch date for the high-speed rail project earlier this week. The new estimated opening will be further delayed from the end of 2017 to the third quarter of 2018. The total construction cost has also risen by over 30 percent from the original estimate of HK$65 billion to HK$85.3 billion.

Professional Commons chairperson Albert Lai Kwong-tak suggested previously that the government should wrap up the project and convert the underground space for commercial use.

Legal issues surrounding the housing of immigration and customs facilities for both Hong Kong and mainland China at the West Kowloon Terminus are yet to be resolved. Some have voiced concern that this arrangement to allow mainland laws to be enforced in Hong Kong would violate Article 22 of the Basic Law.

Article 22 of the Basic Law stipulates: “No department of the Central People’s Government and no province, autonomous region, or municipality directly under the Central Government may interfere in the affairs which the Hong Kong Special Administrative Region administers on its own in accordance with this Law.”

The Hong Kong government currently has a share of around 76 percent in MTRC, making it the company’s largest shareholder.

The Legislative Council (Powers and Privileges) Ordinance grants the LegCo committee or council wide-ranging powers, including:

  • Witnesses to have immunity from legal proceedings for word spoken in the meeting.
  • Summoning witnesses and compelling witnesses to attend via issuing warrants.
  • Right to examine any record or document.

MTR and gov't pass the buck as Express Rail Link late and over-budget