XN000022-1982-12-08 — Page 10

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WEDNESDAY, DECEMBER 8, 1982

EFFECTIVE SERVICE IS FIRST KCR CORPORATION PRIORITY

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WHILE THE NEW KOWLOON-CANTON RAILWAY CORPORATION IS REQUIRED TO MAKE PROFITS, ITS FIRST PRIORITY IS TO PROVIDE AN EFFECTIVE SERVICE, THE SECRETARY FOR TRANSPORT, THE HON ALAN SCOTT, SAID IN THE LEGISLATIVE COUNCIL TODAY.

EXPLAINING THE VARIOUS CLAUSES OF THE KOWLOON-CANTON RAILWAY CORPORATION BILL 1982, MR SCOTT STATED THAT ALTHOUGH THE CORPORATION IS EXPECTED TO MAKE A SURPLUS, IT IS EFFECTIVELY PRECLUDED FROM MAXIMISING THE RETURN ON ASSETS BY CHARGING HIGHER FARES WHILE CARRYING FEWER PASSENGERS.

MR SCOTT EXPLAINED THAT AN IMPORTANT PROVISION OF THE BILL ENABLES THE GOVERNOR-IN-COUNCIL TO GIVE GENERAL AND SPECIFIC DIRECTIONS TO THE CORPORATION IN THE PUBLIC INTEREST.

BUT HE ADDED THAT IF ANY DIRECTION REQUIRES KCRC TO ACT CONTRARY TO PRUDENT COMMERCIAL PRINCIPLES, IT WILL BE ENTITLED TO REASONABLE COMPENSATION FROM THE GOVERNMENT.

THE BILL ALSO GIVES THE FINANCIAL SECRETARY DISCRETIONARY POWER TO DETERMINE A TARGET OF RETURN, IF HE CONSIDERS THAT THE CORPORATION IS NOT MEETING THE ORDINARY COMMERCIAL CRITERIA+

STIPULATED.

AFTER CONSULTATION WITH THE CORPORATION, THE FINANCIAL SECRETARY MAY ALSO DIRECT THAT ANY EXCESS PROFIT SHOULD BE PAID TO THE GOVERNMENT.

WHILE THE CORPORATION WILL BE WHOLLY GOVERNMENT-OWNED INITIALLY, MR SCOTT SAID THAT THE POSSIBILITY OF SELLING SHARES TO THE PUBLIC IN THE FUTURE WILL NOT BE PRECLUDED.

+UNTIL AND IF THAT OCCURS, ANY PROFITS DERIVED WILL BE RETURNABLE TO GOVERNMENT, HE ADDED.

THE CORPORATION'S INITIAL CAPITAL IS ESTIMATED AT $4.2 BILLION, COMPRISING MOSTLY THE TRANSFERRED ASSETS OF RAILWAY LAND, BUILDINGS AND STOCK AND THE COST OF THE MODERNISATION AND ÉLECTRIFICATION PROGRAMME.

THE BILL ALSO PROPOSES AN INTEREST BEARING DEBT TO THE GOVERNMENT OF $1 BILLION.

+THE PROPOSED $1 BILLION DEBT OUT OF THE ESTIMATED $4.2 BILLION TOTAL CAPITAL HAS THE EFFECT OF MAKING 1989 THE ESTIMATED FIRST YEAR OF PROFITABILITY, WITH THE LOAN CAPITAL BEING FULLY REPAID BY 1992, + MR SCOTT POINTED OUT.

THE TRANSFORMATION OF KCR INTO A STATUTORY CORPORATION WILL RESULT IN THE RETIREMENT OF SOME 1 500 CIVIL SERVANTS ON ABOLITION OF OFFICE TERMS.

+APPROPRIATE

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