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1. Railway merger opposed by board, says Tien

2. KCRC opposes merger plan for rail firms

3. Rail-merger jobs pledge sought

4. Developer sues in row over Gold Coast plan

1. Railway merger opposed by board, says Tien
Keith Wallis, The Standard 30 October 2002

KCRC chairman Michael Tien yesterday publicly confirmed his company's opposition to government plans for a merger with the MTR Corp.

Speaking after meeting a group of Democratic Party legislators, he said a letter had been sent to the government giving the KCRC board's views.

These described the proposed merger as ``doing more harm than good'' to the KCRC.

The KCRC's view was directly opposite that of the MTRC, which had said it favoured merging the two rail firms.

Tien said that, in general terms, KCRC board members believed the disadvantages of a merger outweighed the benefits.

Outlining one specific issue, Tien said: ``Our financing costs are lower than that of the MTR Corp.''

Consequently, a KCRC-MTRC merger would result in higher borrowing costs for the KCRC to fund new projects.

He said the KCRC gets a ``reasonably fair deal'' from banks and other financial institutions.

Tien also said a merger would not resolve the issue of proper competition between the rail companies and bus operators.

Currently, bus operators have advantages because roads are built at taxpayers' expense and their diesel is tax-free.

By comparison, the rail companies have to raise their own cash to finance new lines.

Tien said the KCRC board had discussed the issue at the request of the government, which had solicited views from the two rail companies on the merger.

He believed that while a merger could lead to staff redundancies, there might be some benefit to the public.

Speculation has mounted in recent weeks that the KCRC is opposed to a merger of the two rail firms, but Tien's comments yesterday are the first to officially confirm its opposition.

Tien revealed few other details of the letter, but sources believed the KCRC was worried the merger would result in less fare revenue and that it could face pressure to raise fares to counter uncertain earnings from the MTR Corp's property portfolio and boost shareholder returns.

The Environment, Transport and Works Bureau is currently carrying out a feasibility study, due for completion in the next few days, into three possible merger options.

These cover a complete amalgamation, a partial merger at the operational level, or enhanced co-operation by unifying fares and journey transfer discounts.

In backing the merger plan, MTR Corp chairman Jack So had said the move would be in the best interests of both the public and staff.

While the merged company would have a net asset value of more than HK$110 billion, it would also be in a position to slash operating costs, ending duplication in the use of resources.

Speaking at a Legislative Council meeting two weeks ago, So said: ``Moreover, the merger will expand the network, linking up the stations so passengers would not need to leave one system first before entering another, for smoother traffic flow.''

2. KCRC opposes merger plan for rail firms
FELIX CHAN, SCMP 30 October 2002

The KCRC board threw plans to merge Hong Kong's two main rail companies into turmoil yesterday, with chairman Michael Tien Puk-sun saying the benefits would be outweighed by the drawbacks.

The KCRC's opposition to the merger comes as the government conducts a feasibility study into merging the Kowloon-Canton Railway Corporation (KCRC) with the Mass Transit Railway Corporation (MTRC). The study is expected to be completed next month.

Mr Tien's opposite number at the MTRC, Jack So Chak-kwong, has already spoken out in favour of the merger.

Mr Tien said yesterday the KCRC had submitted its views to the government and its board had concluded that ''the cons of the merger outweigh its pros''.

He said that as the two operators had different rail-development models, it would be difficult for a merged body to launch new projects.

''As we are more of a pure-transport model, whereas the MTR focuses more on real estate, it means our cost of capital-raising is relatively lower than the MTR's. Hence we can demand a lower rate of return on new projects,'' he said.

''If we merge, our capital outlays will become higher and we may have to adopt different views on our new projects.''

Mr Tien was referring to the Sha Tin to Central link and the Southern Kowloon link, awarded to the KCRC in the past six months. Construction of both lines is not expected to begin until 2004.

''We need to raise a lot of capital to build our railways. As railway-building is an expensive business, we need to set fares at a workable level or the company cannot continue its operation.''

But Mr So believes a merger would be good as it would reduce operating costs, increase efficiency and avoid the overlap of resources. He says such benefits would be passed on to passengers.

The Environment, Transport and Works Bureau would not comment on Mr Tien's remarks. It emphasised that there was no pre-conceived stance on the issue.

Last week, however, the bureau's head, Sara Liao Sau-tong, said a merger could pave the way for fare cuts. Both Dr Liao and the Secretary for Financial Services and Treasury, Frederick Ma Si-hang, are members of the board of directors at both the KCRC and MTRC.

Bill Barron, an associate professor at the University of Hong Kong's Centre of Urban Planning and Environmental Management, said a single rail operator would create better interchanges and seek new routes most beneficial to the rail system.

''With two operators, when there is an interchange to another rail operator, there is no incentive to consider the benefits of making that interchange as convenient as possible to encourage people to stay on the rail system rather than transfer to a bus. Nor is there much of an incentive to structure fares to keep them on the rail system,'' he said.

Chinese University economics professor Terence Chong Tai-leung said he noted Mr Tien's concerns about the prospects of having to pay higher interest on loans taken out for new projects. But he still felt a merger would make it more convenient to manage rail operations.

''However, as the MTR is a listed company and the KCR is a public one, the new merged body would still partly be in the hands of investors and it would need to produce a reasonable rate of return to satisfy its shareholders,'' Dr Chong said. ''It might not be easy to cut fares to meet public demand.''

The Democrats said that as the benefits to the public were still uncertain, the move could lead to a wave of lay-offs, and therefore it was not the right time for the authorities to consider a merger. felix.chan@scmp.com

3. Rail-merger jobs pledge sought
ANTOINE SO, SCMP 30 October 2002

Union leaders yesterday called on the government to guarantee workers' jobs if the SAR's two rail giants are merged.

They warned that the move could trigger widespread pay cuts and redundancies, and urged the administration and the companies to give an assurance that the careers of frontline workers would not be compromised.

The unions also hit out at what they said was a lack of consultation with them over the issue.

The general secretary of Hong Kong Confederation of Trade Unions, lawmaker Lee Cheuk-yan, spoke of his fears over possible cost-cutting as a result of the proposed merger between the Kowloon-Canton Railway Corporation (KCRC) and the Mass Transit Railway Corporation (MTRC).

He said the government must safeguard more than 12,000 jobs - 5,000 with the KCRC and about 7,000 with the MTRC.

"I am particularly worried that the merger will give rise to new lay-offs and more pay cuts. This is not going to be acceptable," Mr Lee said. "We want a guarantee in any merger proposals that no workers will be affected - that's our bottom line."

Last week, the Secretary for Environment, Transport and Works, Sarah Liao Sau-tung, told the Legco that while the merger could help reduce fares, she could not rule out the possibility of lay-offs.

In a study by the Democratic Party last week, it was estimated that the merger would cost at least 1,200 jobs as a result of restructuring.

However, Mr Lee accepted that an extension of both railway operations could provide for the redeployment of existing workers, and he urged a future single operator to drop the practice of contracting work out.

The chairman of the MTRC Staff Union, Chan Sin-wo, said the union executive committee would hold a special meeting to discuss the possible impact of a merger on workers.

He complained that in the past two months, since the merger proposal was raised, the union had not been consulted.

"We have been kept in the dark. Our members have expressed concerns that their jobs will be affected, but we have nothing to tell them," Mr Chan said.

He said the two rail companies, which have different operating systems, require different skills of their workers and restructuring should therefore not lead to too many changes among low-ranking staff.

"That's my personal thinking, but, of course, we want to know more about what they actually plan to do before the union can come up with a picture of the impact."

Legislator Leung Fu-wah, vice-chairman of the Hong Kong Federation of Trade Unions, said he thought a merger was more likely to lead to cost-cutting among higher-ranked staff.

"Yes, there definitely will be an impact on workers' jobs, but I tend to agree that both railways need different skills and training, so low-ranking workers should not be affected too much."

The government is carrying out a study of the possible merger, with the results due to be released by the end of next month.

4. Developer sues in row over Gold Coast plan
SOPHIA WONG, SCMP 30 October 2002

The Ng family, the major shareholder of Sino Land, is suing the government for more than HK$432 million after shelving a plan to build three residential towers at Hong Kong Gold Coast in Tuen Mun.

Baynard, a private company wholly owned by the family, is seeking the repayment of land premium for lease modification, as well as administration fees and interest costs.

The company said in a statement the government had permitted it to build three additional residential towers in phase two of Hong Kong Gold Coast in 1996. A year later, the government gave permission for it to build a hotel extension nearby.

Sources said the company had paid HK$400.71 million in lease modification for the three residential towers, and HK$32.63 million for the hotel extension.

However, the residential development plan was rejected by the Town Planning Board in 1999 amid fierce opposition from individual vendors at Hong Kong Gold Coast, who feared views from their units could be obstructed. The plan was frozen for years and the Ng family eventually retreated to avoid losses, given flat values had plunged more than 60 per cent compared with their peak in 1997, said a source.

Baynard had applied to build three 25-storey apartments with about 297,800 sq ft in total floor area. The land premium paid can be translated into an average land value of HK$1,345 per square foot.

Analysts said the developer could suffer losses if it proceeded with the development, given the secondary flat value in Tuen Mun had shrunk to below HK$2,000 per square foot.

A spokesman for Baynard declined to comment apart from confirming a halt to the development plan.

Baynard said in its statement that the residential development had met with strong opposition from certain individual owners at Hong Kong Gold Coast.

In a bid to resolve the dispute, Baynard halted work and met owners, government officials and Legislative Council members but no settlement could be reached, it said.