There is a hot debate raging between the Hong Kong government and the MTR Corporation (MTRC) on the cost overruns of the construction and operating delay of the high-speed railway. Each party has tried hard to question the responsibilities of the other side, with the clear aim of not accepting responsibility itself. Yet the reality is that additional cost overruns and delays of the operation are inevitable.

From the perspective of the public, which party is to be responsible for all the problems in the high-speed rail project really is not the major issue. To the public, it is well understood that the government is the major shareholder of the MTRC. No matter whether the costs of the overruns are to be absorbed by the government or the railway operator, at the end of the day it is the taxpayer who is going to pay the bill. The fact is society will be the loser, and the public only sees the government and the MTRC shirk responsibility. This is the general perception, but for the government and the MTRC, the clarification of responsibility has a very different meaning.

From a legal perspective, the government and the MTRC are two individual entities. Under contractual provisions, who is to be responsible for the issues arising from the high-speed railway will also be responsible for the high damages and compensation which may occur. To the two legal entities, it is a matter of principle and there will be little room for compromise. Given the political climate these days, if one party easily assumes full responsibility, it will be the beginning of endless troubles.

The MTRC is a listed company. Because of its operational model, its role and position are often criticized. Its annual fare increase is done according to the fare adjustment mechanism. Though this practice is legal, there is a gap between the public's and the MTRC's expectations and this has attracted a lot of criticism. The unfavorable perception puts the railway operator at a disadvantage when dealing with the issue of high-speed rail cost overruns. When the MTRC stands firm on its "legitimate" rights, the situation is actually quite unfavorable to it. Unfortunately, as a listed company, it has no alternative but to defend its legal rights.

While it therefore seems that the MTRC cannot escape its responsibility for the cost overruns, we also need to differentiate subjective feelings and objective facts. The high-speed rail project is owned by the government. The MTRC is only an agent appointed by the government to construct and to operate the project. To be fair to the MTRC, we should only question whether it has fulfilled its role as an agent. As a normal practice, the principal and the agent will always work out the details of a project to define the scope and responsibilities of each party. If we have access to the details of this high-speed rail contract, we can make an objective assessment of whether the MTRC is doing its job or not. But the problem is the contract is kept confidential.

For the government, in the current political climate, the cost overrun issue can be a serious blow. If the Legislative Council is to block the approval of extra budget for this project, the consequences could be disastrous - particularly as it is not easy to estimate how much the actual cost will be. Given the current strained relationship between the legislative and administrative branches, getting LegCo to support applications for extra funding will not be easy. If the overruns are proved to be higher than the current estimates, the situation could get even worse. The government wants the MTRC to consider its long-term relationship with the government. This suggests that it wants the MTRC to bear more responsibility for the cost overruns, to ease the strain on the administration. However, the government and the MTRC are in very different positions, meaning this is likely to be wishful thinking on the government's part.

The issue of cost overruns for the high-speed railway is a complicated one. It is not possible, because the facts are unavailable, to tell which party is more responsible. There has already been simply too high a turnover of personnel during the whole construction period of the project. The cost overrun issue is another mess.

(HK Edition 07/09/2015 page10)