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1. Proposed sewerage works for Pak Shek Kok Development approved

2. MTRC board backs railway merger plan

3. MTRC board endorses merger proposal

1. Proposed sewerage works for Pak Shek Kok Development approved
Hong Kong Government, 8 November 2002

The Executive Council has authorised the construction of 1 500 metres of gravity sewers and other ancillary sewerage works under the Pak Shek Kok Development Work Package 2 Phase 2.

"The sewerage works are essential to serve various developments in the Pak Shek Kok Development Area such as the Science Park," a spokesman for the Environmental Protection Department said today (November 8).

"The works will also improve the provision of sewage services for Tai Po Area 12."

Details of the works were published in the Government Gazette on October 26, 2001 and November 2, 2001 while the approval for the scheme was gazetted today.

The works are scheduled to commence in mid-2003 for completion in end 2006 to tie in with the development programme of the Pak Shek Kok Development Area.

"The works will be carried out in conjunction with a related road scheme which has also been approved by the Executive Council," the spokesman added.

2. MTRC board backs railway merger plan
Matthew Lee, The Standard 8 November 2002

A proposed merger of Hong Kong's two rail companies received unanimous backing from the MTR Corporation's board yesterday, with chairman Jack So pledging to pass on the financial benefits to customers.

``The company is looking at the interests of the general public,'' So said. ``The merger proposal would be a good deal if it could benefit all parties.''

However, the Kowloon-Canton Railway Corporation, the other party in the proposed merger, is opposed to the deal.

A KCRC source was quoted as saying that the company would accept a conditional merger in which both firms would have authority over operations and management, while the government would fund infrastructure construction and maintenance.

So claimed the deal would save costs on railroad construction and operations, and reduce overlaps of such things as management structure and waste of resources.

``If the deal really saves money, we will return the benefits to passengers,'' he said. ``However, it is too early to tell how much we would save.''

So also believed the merger would improve the network and link up the stations so passengers would not need to leave one system first before entering another, ensuring smoother flow.

Another benefit would be financial.

``If the conditions and estimates of the merger satisfied all parties and were beneficial to shareholders, it would generate a good scenario for the sale of the second batch of MTRC shares, and increase treasury revenue, which would benefit Hong Kong as a whole,'' So said.

But he said there would be challenges and problems such as co-ordinating personnel and operational procedures of the two firms.

``The problems are not unsurmountable, but there will be challenges,'' he said.

KCRC chairman Michael Tien said last month that his board members believed the disadvantages of a merger outweighed the benefits and that the company opposed the move.

But So said ``I have heard that Tien himself supported it, only there were different views in the company'' and added that the government would make the final decision.

A recent report by Merrill Lynch estimated a merger could generate savings of up to HK$140 million.

3. MTRC board endorses merger proposal
DENISE TSANG, SCMP 8 November 2002

The board of MTR Corp (MTRC) has backed chairman Jack So Chak-kwong by throwing its weight behind a merger with counterpart Kowloon-Canton Railway Corp (KCRC).

"We talked about the merger this morning and the board agrees with my views," Mr So said after a three-hour board meeting yesterday.

He said directors saw benefits to passengers, MTRC shareholders and Hong Kong's future rail development from integrating the two rail service operators.

However, the merger process would face "challenges and difficulties", he warned. The KCRC opposes the plan.

Two senior government officials were among the MTRC directors who attended the meeting: Commissioner for Transport Robert Footman and the permanent secretary for the environment, transport and works Rita Lau Ng Wai-lan, an alternate for Secretary for the Environment, Transport and Works Sarah Liao Sau-tung.

Although the MTRC board includes government officials, a government spokesman said the administration remained neutral on the merger, which is the subject of a feasibility study.

"The feasibility study is still going on and is expected to be completed at the end of the year," she said.

Mr So said the possible merger would result in savings on existing and future rail projects and avoid overlapping and wastage of resources. Any savings could be passed on to passengers, he said.

Seamless train interchanges would increase convenience for passengers, he added.

"In addition, if the valuation meets the interests of all parties, the merger will be beneficial to our shareholders and the government's sale of the second tranche of [MTRC] shares."

Sources said another key issue - financing future rail projects - was discussed at the meeting, but no conclusion was reached.

The financing issue has been a problem for the government and MTRC as new MTR projects require government aid to achieve a return of 1 to 3 per cent above the firm's cost of capital, the return promised to investors on the MTRC's listing in 2000.

The existing financing model, which relies on property development rights, is no longer viable due to changing land and housing policies and the slide in property prices. The government's ballooning deficit also makes any cash subsidies difficult.

Secretary for Financial Services and the Treasury Frederick Ma Si-hang said on Wednesday that the government would consider funding future MTR projects through direct subsidies, building core infrastructure or sticking with the practice of offering the firm property development rights.

However, he ruled out a Singapore model in which the government would fund and build rail projects and MTRC operate and maintain them.

"There is no one-size-fits-all solution," Mr Ma said.

Talks have dragged on over government aid to the HK$10 billion South Island line linking Sheung Wan, Pokfulam, Aberdeen and Wan Chai, and the HK$10 billion West Island line between Sheung Wan and Kennedy Town.

In a recent article in the South China Morning Post, University of Hong Kong associate professor Bill Barron said the need for government subsidies (of whatever type) could be substantially reduced if inefficiencies associated with having two competing rail systems and little bus-rail co-ordination were eliminated.