XN000022-1975-02-28 — Page 2

-

FRIDAY, FEBRUARY 28, 1975

PUBLIC NEEDS ENSURED IN MTR CORPORATION BILL

INITIAL CAPITAL SET AT $2,000 MILLION

********

THE GOVERNMENT HAS TAKEN ANOTHER MAJOR STEP TOWARDS IMPLEMENTING THE MASS TRANSIT RAILWAY PLAN WITH ARRANGEMENTS MADE TO SET UP A MASS TRANSIT RAILWAY CORPORATION TO BUILD AND RUN THE RAILWAY TO BEST SERVE HONG KONG'S FUTURE PUBLIC TRANSPORT NEEDS.

A BILL, THE MASS TRANSIT RAILWAY CORPORATION BILL 1975, WHICH SETS OUT THE CONSTITUTION, POWERS AND FINANCIAL PROVISIONS OF THE CORPORATION, HAS BEEN DRAFTED AND IS PUBLISHED IN TODAY'S GOVERNMENT GAZETTE FOR PUBLIC INFORMATION. IT WILL BE INTRODUCED INTO THE LEGISLATIVE COUNCIL SHORTLY.

A GOVERNMENT SPOKESMAN SAID +AS THE RAILWAY WILL BE AT THE CORE OF HONG KONG'S PUBLIC TRANSPORT SYSTEM IN THE 1980'S THE MAIN OBJECT OF THE CORPORATION MUST BE TO ENSURE THAT IT WILL BE OPERATED IN SUCH A WAY AS BEST TO SERVE HONG KONG'S PUBLIC TRANSPORT REQUIREMENTS+,

HE NOTED THAT UNDER THE BILL THE CORPORATION WOULD BE REQUIRED TO +CONDUCT ITS BUSINESS ACCORDING TO PRUDENT COMMERCIAL PRINCIPLES+.

HOWEVER, TO GUARD AGAINST THIS BEING INTERPRETED AS MEANING THAT THE CORPORATION WOULD BE FREE TO MAXIMISE ITS RETURN ON INVESTMENT, FOR EXAMPLE, BY CHARGING VERY HIGH FARES AND CARRYING FEWER PASSENGERS, THE SPOKESMAN SAID THAT THE BILL WOULD REQUIRE THE CORPORATION TO TAKE COGNIZANCE OF THE REASONABLE NEEDS OF THE PUBLIC TRANSPORT SYSTEM IN HONG KONG.

UNDER THE BILL. THE GOVERNMENT WILL BE IN A POSITION TO EXERCISE A GREATER DEGREE OF CONTROL OVER THE CORPORATION THAN OVER OTHER PUBLIC UTILITIES.

FOR INSTANCE, AS THE MAJOR AND, INITIALLY, THE ONLY SHAREHOLDER, THE GOVERNMENT WOULD HAVE A LEGITIMATE RIGHT TO HAVE A MAJORITY ON THE BOARD OF THE CORPORATION THROUGH THE APPOINTMENT OF SENIOR PUBLIC OFFICERS.

UNDER THE BILL, MOREOVER, THE GOVERNOR IN COUNCIL MAY GIVE GENERAL DIRECTIONS TO THE CORPORATION IF HE THINKS IT IS IN THE PUBLIC INTEREST TO DO SO- BUT THERE IS ALSO PROVISION THAT GOVERNMENT MUST AUTOMATICALLY COMPENSATE THE CORPORATION FOR LOSS OF REVENUE OR PROFITABILITY WHICH ARISES AS A RESULT OF SUCH A DIRECTIVE, E.G. TO LOWER OR TO SUSPEND AN INCREASE IN ITS FARES.

OTHER MEANS THROUGH WHICH THE GOVERNMENT WILL BE ABLE TO EXERT CONTROL UNDER THE PROPOSED LEGISLATION WOULD INCLUDE:

/THE GOVERNOR