Untitled - Civic Exchange

Chapter 3:
Road versus Rail - Financing Mass Transit in Hong Kong
Figure 3.5
Tokyo urban rail system (Japan)
Source:
Until recently, the government's policy was that rail infrastructure would be put in place only after
population levels were sufficient to allow system extensions to be quickly self-financing. Tseung Kwan O,
for example, had to wait a decade for rail service, even though it lies only 3 km from an existing rail line.
Even today, financing policy is modified only occasionally and on an ad hoc basis, as with the creation of
the West Rail System to accommodate anticipated major population increases in the Western New
Territories. In the case of the Northwest New Territories, mobility and air quality problems necessitated the
early provision of clean, rail-based mass transit. Had the traditional policy been applied and area residents
forced to wait until population levels had increased massively, there would likely have been traffic chaos
and very severe episodes of air pollution. Failure to prevent these kinds of outcomes could damage the
HKSAR's image internationally, in addition to jeopardizing the quality of life available to Hong Kong
people.
Bus-rail coordination
In contrast to the skeletal coverage of rail in Hong Kong, buses provide extensive coverage in less densely
populated areas. Further, bus fleets often compete directly with passenger rail, tending to raise costs for
both providers. 68 The government's requirement that rail providers recover both capital and operating costs
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While economists generally mistrust terms like wasteful competition (seeing them as "code words" for a hidden
agenda), under specific conditions competition can be inefficient because it tends to increase, rather than lower, the
overall costs of service. For example, inefficient bus-rail competition results in two basic problems. Consider a
long-haul passenger transport route where road transport alone cannot adequately meet demand, but rail service
could meet demand alone or with supplemental bus service. Here, the addition of large-scale direct bus
competition for an existing fixed rail route reduces rail load factors, while the rail option keeps bus load factors
low. This raises the average cost of service to both transport providers beyond what it would be if service by one
major provider was supplemented with service from another provider. When buses are subsidized (or crosssubsidized
through particular government policies), they may be able to operate on these routes at a modest profit,
even with low load factors. Meanwhile, the rail provider must continue to operate so long as it takes in any income
above its operating expenses so as to be able to repay the high fixed cost of railway construction
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