The Mass Transit Railway Corporation (MTRC) is an exceptional organization. It is a Hong Kong Stock Exchange listed company and constituent stock of the Hang Seng Index. Yet, it is also considered a government company. Before the MTRC was listed it was a company established by the government to provide underground railway services. The MTRC has operated according to commercial principles since the company's inception. The MTRC does not have the image of a "State-owned enterprise". On the contrary, the Kowloon-Canton Railway (KCR) was operated like a government department. Indeed, the KCR was a part of the government before its merger with the MTRC. Since the merger, the MTRC has become the sole provider of railway services in Hong Kong.

This simple background outlines the MTRC's role in the construction and operation of railways in Hong Kong. Nevertheless, the monopoly of the MTRC in Hong Kong's railway businesses is not without its problems. It marks the beginning of an endless debate over the roles and responsibilities of the company. In recent years, the operations of the MTRC have been easy targets for criticism and attack. The recent departure of the company's CEO does not mean the end of its problems, but rather the start of a new chapter.

It is unfair to say that the MTRC is not operating efficiently. Many of its problems stem from the fact that the government is its largest shareholder. The MTRC was established like a "State-owned enterprise". However this image has been affected by the listing of the company. Many people mistakenly believe that the government is able to influence MTRC operations - it is not, despite the fact that it controls a 75 percent holding in the company.

The Link Real Estate Investment Trust (the Link REIT) on the other hand, is an entirely different matter: The government holds no shares in the Link REIT. Although there has been much criticism of the Link REIT's operations, the public is less critical of the government's influence on its decisions. But the government's controlling stake in the MTRC makes it an easy target for complaints about its lack of involvement in MTRC activities.

The true reason is that since the MTRC was floated, the government has adopted the role of dormant investor. This was a strategic move designed to ease market concern about undue government intervention in MTRC operations. However this also limits the influence the government holds over MTRC operations and can lead to problems. It is unsurprising to see public discontent leveled, sometimes unfairly, at the government.

But to say the MTRC is not performing well is wrong.

Yes, certain lines may have experienced a series of service interruptions recently. And further delays in the opening of new lines have not helped things. But new statistics show the MTRC is still operating impressively.

Compared with its earlier service record, there has been no significant decline in quality. The MTRC wants greater transparency in its operations and even describes this as a decline in service quality. But analyzing these statistics is not the same as watching angry passengers blaming the rail operator on TV. The saying "perception is reality" explains a great deal in this regard.

Those who have traveled on underground railways overseas are full of praise for the MTRC's service. This may explain why the MTRC has become the victim of its own success. As it turns out, the MTRC has put itself in a vulnerable position in that its high standards of excellence now leave practically no room for error. People are quick to criticize it when something goes wrong. Criticisms tend to be overtly harsh simply because of the government's majority holding in the company.

We cannot compare old statistics with more recent figures. The world has changed. When Hong Kong's underground railways were constructed some 30 years ago, passenger numbers were small. Also, Hong Kong learned much from the experience of big cities like London, New York and Tokyo and the way they operated their underground railways. Therefore, the MTRC avoided many mistakes made overseas and was able to provide a superior service.

As time passes, underground railways age. MTRC hardware is fixed - despite constant software upgrades. Hardware constraints naturally limit the effectiveness of software upgrades. Frequently, even with superior software upgrades, limitations of the space available at stations and platforms have adversely affected the benefits of software upgrades. So there are limits to further improvements to MTRC operations. Its problems are often hardware concerns. They do not result from a lack of effort on the part of MTRC management.

However, with an organization such as the MTRC, managers need to understand that the public has different demands and views. They cannot run the company based primarily on the views of professional engineers. So, it is essential that the MTRC communicates more effectively with its various stakeholders.

The author is dean of the School of Business at Hang Seng Management College.

(HK Edition 08/07/2014 page9)