XN000022-1994-06-22 — Page 23

WEDNESDAY, JUNE 22, 1994

IS

THE POSITION REACHED IN THE CASE OF THE LONDON UNDERGROUND ILLUSTRATIVE OF WHAT CAN GO WRONG. IN THE 1960S AND '70S THOSE IN BRITAIN IN CONTROL OF RAILWAY INVESTMENT AND PRICING STRATEGIES WERE UNDER STRONG SOCIAL PRESSURE TO MAINTAIN LOW FARES, AND ΤΟ IGNORE PRUDENT COMMERCIAL PRINCIPLES. THIS STORY CAN BE TOLD ABOUT SIMILAR RAILWAYS IN THE UNITED STATES AND ELSEWHERE.

BY THE LATE EIGHTIES, THE CONDITION OF THE LONDON UNDERGROUND DETERIORATED TO A POINT WHERE IT COULDN'T CONTINUE TO OPERATE SAFELY AND EFFICIENTLY WITHOUT MAJOR RENEWAL. BUT BY THAT TIME PASSENGERS COULD NOT AFFORD THE SORT OF MAJOR FARE INCREASES THAT WOULD HAVE BEEN REQUIRED TO MEET A MAJOR UPGRADING, AND PARTS OF THE SYSTEM HAD BECOME SO WORN OUT THAT THERE WAS LITTLE CHANCE OF ATTRACTING PRIVATE INVESTMENT TO FUND IMPROVEMENTS.

—

I AM NOT TRYING TO BOAST AT THE EXPENSE OF THE LONDON UNDERGROUND SYSTEM,

NOW UNDER AND I KNOW THAT VALIANT EFFORTS ARE WAY TO TRY TO UPGRADE IT

OF BUT WE HAVE TO BE AWARE OF THIS SORT DANGER, AND TO MAKE SURE WE DON'T FALL INTO THE SAME SORT OF TRAP AT A TIME WHEN WE ARE TRYING TO PAY MORE ATTENTION TO MEETING PUBLIC EXPECTATIONS OF MORE SERVICES AT A LOWER COST.

OF OUR MTR IS PROBABLY THE BEST IN THE WORLD. MOST OF THE REST THE WORLD SEEM TO THINK SO, ANYWAY. ONE OF ITS UNIQUE FEATURES IS THAT

OPERATES IT

A WITHOUT A SUBSIDY, AND IS CAPABLE OF PROVIDING

REAL

RETURN

THE TO

OWNER I.E. THE PEOPLE OF HONG KONG. NOT EVEN RAILWAY SYSTEMS IN TOKYO ACHIEVE THAT.

.

―

THE

ΤΟ

THE MTRC

INITIATIVE HAS, I UNDERSTAND, ALREADY TAKEN THE START EXPLAINING TO MEMBERS THE RATIONALE BEHIND THEIR POLICY OF SETTING A RATE OF RETURN OF 10 PER CENT OVER A 40-YEAR PERIOD. AS YOU WILL BE AWARE, THE CORPORATION HAS BEEN THROUGH A LONG PERIOD OF CAPITAL EXPANSION AND IS ONLY NOW CLEARING THE DEBT RAISED TO FUND PREVIOUS EXPANSION PHASES. NEW CAPITAL EXPANSION FOR THE AIRPORT AND RAILWAY AND RELIEF FOR THE NATHAN ROAD CORRIDOR WILL START SOON, WITH IT THE MTRC WILL HAVE TO RAISE NEW DEBT. NOT SURPRISINGLY WE HAVE

A OUT

FORMAL NOT SOUGHT A DIVIDEND FROM THEM AND WE HAVE NOT SET

GOVERNMENT DIVIDEND POLICY FOR THEM. INSTEAD, WITH THE SUPPORT OF THE

THE SHAREHOLDER, THE CORPORATION HAS SET OUT AT LEAST TO PRESERVE LEVEL

ON THEIR OF INTEREST THAT THE PUBLIC WOULD EXPECT TO RECEIVE CAPITAL INVESTED OVER SO MANY YEARS. THIS WILL ASSURE THAT THE VALUE OF OUR INVESTMENT IS PRESERVED IN REAL TERMS, AS WELL AS PROVIDING THE BOTH PAST AND MINIMUM LEVEL OF INTEREST COVER REQUIRED BY LENDERS FUTURE.

AS

THE CORPORATION WILL CONTINUE ITS EFFORTS TO PROVIDE MEMBERS WITH THE DETAILS UNDERLYING THIS POLICY.

—

CAPITAL EXPANSION SYSTEM

DIFFERENT

ME LET

MAKE THIS VERY CLEAR TO MEMBERS : THE GOVERNMENT'S OF THE OTHER POLICY WILL REMAIN THAT AS LONG AS THE MTRC - OR ANY

CORPORATIONS HAS IN HAND VIABLE AND CONCRETE STATUTORY

TO MEET FUTURE TRANSPORT NEEDS, OR TO TO MAINTAIN SERVICE SAFETY AND STANDARDS, THE GOVERNMENT ALWAYS REGARD THAT AS A PRIORITY CALL ON ANY FUNDS WHICH OTHERWISE BE PAID TO THE GOVERNMENT IN DIVIDENDS. THIS COMMITMENT IS

FROM WHAT I HAVE OFFERED TO THE LITTLE UNDER THE PROPOSED NEW FINANCIAL ARRANGEMENTS.

PLANS FOR

RENEW

THE WILL

MIGHT

HOUSING AUTHORITY

/WHAT I