Anthony Bayani Rodriguez

Writer | Researcher | Professor

LESSONS FROM THE HONG KONG MASS TRANSIT RAILWAY:  THE CRUCIAL ROLE OF MASS TRANSIT SYSTEMS IN URBAN AREAS

Anthony Bayani Rodriguez, PhD

This report provides a survey of the historical development, infrastructural features, and operative policies surrounding Hong Kong’s contemporary mass transit system.  It begins with a summary of the history of modern mass transit systems in the United States and United Kingdom, as a comparative backdrop for understanding the relative success of the Hong Kong model.  It concludes with some projections on the current and foreseeable future challenges of the Hong Kong system.

This report provides a survey of the historical development, infrastructural features, and operative policies surrounding Hong Kong’s contemporary mass transit system.  It begins with a summary of the history of modern mass transit systems in the United States and United Kingdom, as a comparative backdrop for understanding the relative success of the Hong Kong model.  It concludes with some projections on the current and foreseeable future challenges of the Hong Kong system.

The development of mass transit systems in the 19th and 20th centuries has been determined by three key mutually determining factors: 1) the establishment of industrial/commercial urban centers as a government economic strategy, 2) the systemic need to provide working populations with easy access to these commercial centers from residential areas, and, 3) the subsequent pressure to innovate transportation technology to streamline this circulatory flow of human labor, and capital. Beyond the specific social and political factors that underlie the historical development of the contemporary US and UK mass transit models, what is clear in these models is the consistency by which the engineering, infrastructure, and public policy surrounding the operation of mass transit systems are directly linked to state and responses to the pressures of global economy. Based on the history of paradigmatic mass transit systems in the modern world, it is generally evident that state-sanctioned strategies for national economic growth, lead to the development of land for industrial/commercial use, and, consequently, to the development of systems of mass transportation that can provide the human (labor) capacity need to support industrial/commercial expansion.

The New York City model is exemplary of the impact that shifts in government policies have had on the infrastructure of mass transit in the United States. The single most important piece of legislation that has impacted the mass transit systems of the U.S.’s largest urban centers is the 1964 Urban Mass Transportation Act. Since the creation of the Metropolitan Transportation Authority in 1968, New York City’s mass transit system has grown from a three subway lines into a twenty-six line system operating on over 800 miles of track, and serving serving nearly five million passengers every day. The subway runs 24 hours a day, seven days a week, and is now known as one of the busiest and extensive public transit networks in the world. 

London’s public mass transit system, known as “the Underground,” is the outgrowth of a pioneering public works project that led to the world’s first underground railway system, created in 1863. The history of mass transit in London is particularly important because it is demonstrative of the reality that capital cities are often the most densely populated urban centres in a country, and are therefore prime sites for experiments and paradigmatic breakthroughs in mass transit systems. The implementation of development plans by leading government parties saw the expansion of the Underground from five railways, fourteen tramways, and sixty bus operations in the 1940s, to a system in 2016 composed of eleven lines covering 402 kilometers, serving 270 stations, and serving upwards of 4.8 million passengers per day.

            The New York and London systems are pertinent comparisons to Hong Kong's Mass Transit Railway Network.  With respect to New York City’s MTA and London’s Underground, Hong Kong’s Kowloon-Canton Railway (KCRC) and Mass Transit Railway (MTR) constitute a relatively new system that has nonetheless demonstrated remarkable and unprecedented achievements in overall efficiency, quality, and profitability. In December of 2007, the MTR Corporation took over operation the operations of the KCR network under a 50-year service concession agreement. Opened in 1979, the MTR manages the subway and bus systems on Hong Kong Island and has become a model for mass transit systems in China, major Asian urban centers, and throughout the world. The figure that has most impressed urban economists and policy experts is the Hong Kong system’s “farebox recovery ratio”, which measures the fraction of operating expenses paid by passenger fares. Hong Kong boasts a ratio of 185 percent, the highest in the world.  Singapore’s system comes closest at 125 percent, while New York is way behind with a paltry 76.1 percent.

Overall, the Hong Kong system demonstrates that transit-oriented development can reduce automobile dependency, improve the sustainability of transportation, and, create opportunities for long-term revenue for private and public transit service developers in densely populated cities.iFrom 1980 to 2016, Hong Kong saw its population rise from 5 million to nearly 7.4 million in 2016; a 148% increase in 36 years. Since the mid-1980s economic restructuring in Hong Kong has therefore prompted the development of urban planning strategies to deal with increasing cross-border traffic.ii A Territorial Development Strategy was adopted in 1984 as a comprehensive long-term development strategy. The central idea behind the TDS was to create synergy between land use and transport development in order to spurn economic development, and improve living and working conditions for Hong Kong's growing population of commuting workers.iii

            In 1999, the government of Hong Kong published “Hong Kong Moving Ahead,” a revised set of transport strategies towards service rationalization and consolidation over the next two decades. The chief points of the plan include better synthesis of transport and land use policy and planning, and further advancement of the railway as the backbone of public transportation in Hong Kong. A highlighted goal in the initiative was to increase the proportion of rail-based public transport from 33 per cent in 1997 to 40-50 per cent by 2016.ivHong Kong's total land area is 1,104 square kilometers, and, due to the city's hilly landscape and massive archipelago of surrounding islands, the land available to develop is relatively small. Consequently, over the past three decades Hong Kong's government has “reclaimed” land for the purposes of development, and sold it to the MTR Corporation for a “pre-railway” price. The MTR subsequently constructs railways, develops the surrounding land, and has intern increased the property value as a result of the railway. This “rail-plus-property” model reflected by Hong Kong's conjoined transit and land use development policies is fueled by the idea that the construction, maintenance, and strategic expansion of railway systems can work synergistically to also add value to commercial and residential areas with commuter traffic. This “value capture" method of land development is part of Hong Kong's so far immensely successful plan to support a privately-owned public service infrastructure.v

            Due to the scarcity of usable land, the Hong Kong government’s development strategies have centered on finding innovative ways to use land resources effectively for public infrastructure. Usable land scarcity is the key reason for rapid increases in the prices of land and property in Hong Kong, with the average price private residential properties witnessing a four-fold increase since the early 1990s. Hong Kong's real estate market has therefore served as a pillars for its economic growth over the past three decades. The high rate of development of the existing central business districts through land reclamation, and the construction of high-density residential estates around railway stations has effectively created the ticket-purchasing passengers required to fund the operation of rail transit services and recover investments in railways.vi At the same time, the rapid growth of Hong Kong's rail transit network along side influx of immigrants to the city since the 1980s has served the purpose of offering a convenient method of transit for the city's commuters. Ultimately, the high urban density created by Hong Kong’s land development strategies since the 1980s, has proven to be a key synergistic factor for Hong Kong's integrated rail-and-property projects.vii

In new railway developments, such as Hong Kong’s system, there are three key concerns of public interest. 1) immediate construction costs of a railway are often higher than road construction, 2) the direct correlation between construction of new railways an increased value surrounding land and property due to accessibility to public transportation, requires that private/public railway management companies work in conjunction with city government and urban planning organizations, and 3), the spread of social consciousness regarding both environmental sustainability and the importance of public health, requires that railway development projects proactively address concerns about the disruption and even destruction of urban and natural environments.viii

The fundamental tension in managing a privately-owned “public enterprise” like Hong Kong's MTR, is precisely because it is ‘public’ and ‘enterprise’ at the same time. Public enterprises such as Hong Kong's MTRC are expected to achieve “multiple and conflicting objectives of economic and operational efficiency, serve social and governmental policy objectives, and be publicly accountable.”ix As a critical public service for a high-density urban center, a corporate venture centered on railway and land development is inextricably linked to major public interests, and subject to a range of social, economic, political and commercial concerns.x In order to achieve operational efficiency and pursue maximal revenue, public enterprises like the MTR require some degree of managerial autonomy from government regulation. Yet, a real cause for concern is that unchecked managerial autonomy can lead to a lack of democratic accountability to the public. For public enterprises like the MTR, the protection of public interests is an important matter for both long-term financial growth, and perhaps more importantly, for supporting long-term democratic stability in the city.

Hong Kong's 218-kilometer metropolitan railway network carries more than five million passengers daily, and 1.9 billion passengers in 2015 alone. Comparatively, the London Underground network stretches 402 kilometers and averages 1.3 billion passengers per year. Running about 20 hours and 8,000 train trips per day, MTR boasts a staggering 99.9% punctuality rate. As of 2015, the MTR boasts a total revenue of $41.7 billion dollars, over twenty-five thousand staff worldwide, and 18.5% of total revenue in Hong Kong in 2015. MTR turns out positive financial reports year after year, with profits coming both from transportation operations and outside investments.  By end June 2015, standard class adult single journey fare ranges from $4 to $58. The MTR also operates a 35.2 km Airport Express connecting the city centre with the Hong Kong International Airport and the AsiaWorld-Expo with adult single journey fares ranging from $5 to $100. The MTR and Airport Express networks comprise a total of 87 stations and carry an average of about 4.69 million passengers per day. Hong Kong's system carries over 90 percent of the area's 11 daily trips, and based on comparisons with London and Singapore, this exceptionally high rate of access is attributable to the implementation of land use policies that develop high-density areas in synergy with public transportation policies and regulation of privately operated public transit services.xiThe still expanding infrastructure of the MTR consists of 155 stations, including 87 railway stations and 68 light rail stops spread over nine main commuter lines which serve Hong Kong Island, Kowloon and the New Territories. In 2015, the MTR spent $15 million dollars to renovate its Super Operational Control Center (OCC). The Super OCC allows officials to monitor all of the train lines from a single room 24 hours a day, 365 days a year.

About 90 per cent of Hong Kong's population uses public transport every working day. The MTR achieved a 48.1 percent market share for franchised public transport boardings in Hong Kong 2014, and carried over 1.9 billion passengers. The MTR also owns Hong Kong's “touch and go” smartcard payment system, Octopus, which allows passengers to pay fares on MTR and other public transportation services, pay for parking, and purchase meals and retail goods, all with the swipe of their card. It is estimated that 99% of Hong Kong's adult population owns an Octopus card, which generated more than $12 million in net profit for the company in 2014.Total revenue from Hong Kong transport operations in 2015 was HK $16.9 million, an increase of 4.3% over 2014 with operating costs increasing by 5.0% to HK $9.7 million. Together, this resulted in a 3.2% increase in operating profit to HK$7,214 million, with an operating margin of 42.6%.xiiHong Kong's nearly three decade long policy of prioritizing mass public transit has ensured that the demand for rail transit services remains unsurpassed by private transportation. In terms of its historical performance, the transit policies at work in Hong Kong have produced a “win-win” situation that has thus far benefited the MTR Corporation, and the commuting public. Since the 1980s, the Hong Kong government has effectively collaborated with the private sector to create, maintain, and expand rail transit services based on a user-pay system and without direct government subsidies.xiiiFor further details on the MTR Corporation’s performance metrics, financial portfolio, profits and revenues, see Figure 4 and Figure 5. 

The MTR system boasts a number of exemplary features that have received praise among local commuters and tourists alike.  With an "on-time" rate of 99.9 percent, MTR passengers experience a delay of at least five minutes in only one out of 1,000 trips, or every 300,000km travelled.xx The efficiency of the MTR railway is due in major part to the significant investments made in its Super Operations Control Center (OCC), which is located inside the Tsing Yi MTR station. The Super OCC was completed two years ago after a $15 million dollar renovation project and is crucial for ensuring the systems safety and efficiency, and also coordinating rapid responses when crises do arise. The OCC also has a black "incident box" that starts a countdown once a problem occurs, and aims to resolve every issue within two minutes.xxi

The MTR railway's cleanliness matches it reputation for efficiency. In October 2015, MTR was criticized by local environmentalist groups for the inaccessibility of recycling receptacles - although equipped with about 3,000 rubbish bins, surveys found only 160 sets of tri-coloured waste separation recycling bins. Notwithstanding, the MTR has received high praise by local commuters, tourists, and international travel for its “immaculately clean” concourses, along with the consistency and responsiveness of its cleaning team.xivThe MTR railway has a total maintenance workforce of 5,800. The operator employs 4,500 full-time staff, plus another 1,300 outsourced staff. They walk the 221km of track every three days and ride a vehicle that uses ultrasonic techniques to check for defects not visible to the human eye. The represents a scheduled prevention and maintenance regimen that is among the most frequent in the world.xvii After the last trains depart from stations at about 1 a.m., more than 1,000 workers spring into action to maintain the system.xviii In 2014, more than a third of MTRC's revenue was spent on maintenance, renovations, and service improvements on the rail network. Half of that amount was allocated towards daily cleaning and inspection, while the other half towards other maintenance expenses – including, replacing train components.xixThe MTR is as vigilant in managing its daily route schedules as it is in its daily maintenance schedules. Because of the high volume of traffic that flows through MTR's railway network, and the small amount of down time between routes, the Super OCC also coordinates engineering trains, delivers materials, and optimizes the use of space in a limited time.

Research has pointed to the long-term environmental sustainability benefits offered by mass transit railway projects, in comparison to urban planning models centered on automobile commuting.  According to its 2015 Sustainability Report, the MTR has implemented strategies that have recorded a 16.1 percent reduction of electricity intensity compared with the baseline from 2008.  It continues to implement new energy-saving campaigns and as part of its comprehensive response to climate change, reviews the climate impact of its business operations on an annual basis.xvAccording to MTR's Sustainability Report, the MTR Corporation consults extensively with local communities on the impacts of new lines, property developments and other major works. The objective of these dialogues with stakeholders is two-fold: 1) to actively mitigate inconvenience for local neighborhoods due to noise, dust, traffic disruption and other considerations, and 2) to design and execute expansion initiatives with the greatest possible benefit of local communities in mind.xvi

            Three potential problem areas which the Hong Kong mass transit system has addressed, include 1) monetizing Hong Kong’s urban density, 2) proactively addressing social advocacy to for corporations to mitigate climate change, and, 3) creating housing for commuting populations who might otherwise be displaced by railway development.  Part of the brilliance of the MTR's railway model is that it has capitalized on the monetary value of urban density – what economists call "agglomeration.”  As one of the world’s densest cities, Hong Kong's businesses depend on public transit to maintain a steady flow of customers from across the city. Among its many innovative methods of working with, rather than against, other shopping malls and large commercial spaces, the MTR implements various forms of exchange for transporting customers. In many instances, the MTR owns an entire shopping mall itself. Otherwise, it may receive a cut of a mall’s profit, sign a co-ownership agreement, or accepts a percentage of property development fees.xxii The MTR's vertically integrated"rail plus property" business model, has proven effective in controlling both the means of transit and the places passengers visit upon departure.xxiii  In terms of climate change, the MTR Corporation sustainability campaigns are consistent with the latest recommendations of leading environmental think tanks and climate scientists, and it publicly supports the UITP Declaration on Climate Leadership, which is an 11-point declaration outlining the impact of climate change, and the responsibility of commercial enterprises to act as “Climate Leaders.”  With regard to climate change, the MTR's organizing principle is that “adaptation and mitigation are complementary strategies for reducing and managing expected risks.”xxiv  Finally, with regard to the potential conflict of interest between railway construction and ensuring the availability of residential space for the commuting public, the MTR Corporation has an active Property Division, whose primary task is to lead housing development projects that provide quality and affordable housing to its extensive railway networks neighboring communities.  As of the end of 2015, the MTR's Property Division reports to own and manage 96,066 residential flats. MTR Properties has made major advances in responding to community housing needs, and since 2014 has began development on 10,000 new residential units.

The synergy of land and transport development shown by the relative successes of the Hong Kong MTR is a model for 21st century urban centers struggling to adapt to the the problems of rising urban density, and contemporary economic conditions. Not content with just being Hong Kong's overlord, however, the MTR Corporation also operates single subway lines in Shenzhen, Hangzhou, Beijing, two London Underground lines, and entire subway systems in Stockholm and Melbourne.  For these major global cities, as well as others who are beginning to follow suit, Hong Kong's MTR transit system represents an innovative business model for developing a public transit infrastructure that meets the commuting demands of the early 21st century's high-density urban centers.

Additional Commentary

There are some areas where the MTR has room for improvement.  One recent study involving 84 major cities across the globe, found Hong Kong's MTR to be “the most advanced urban mobility system in the world,” on the basis that the railway's prominence as a main mode of commuting has led Hong Kong to have one of the lowest number of registered vehicles per capita.xxvHong Kong does not fare well in the air-quality indicators. The annual average transport-related emission of nitrogen dioxide stood at 50mcg per cubic metre, and there was 50mcg per cubic metre of particulate PM10. Devising innovative solutions to address these areas will only allow the MTR Corporation to continue its historic and relatively unmatched success as a public enterprise. The MTR railway's expanding hold over Hong Kong's public transit system, along with its record of commitment to sustainability and climate change, suggest that the MTR Corporation is primed to contribute to initiatives to work with local government to reduce roadside pollution, subsidize the conversion of buses to electric technology, along with other schemes to control emissions.xxvi

 

Endnotes

 

IChen, Cynthia. “Rail-based transit-oriented development: Lessons from New York City and Hong Kong.” Landscape and Urban Planning. Vol. 97. Issue 3. 2011. 202-212.

iiGar-On Yeh, Anthony. “Economic Restructing and Land Use Planning in Hong Kong.” Land Use Policy. Vol. 14 No. 1. 1997. 25-39.

iiiIbid, 32-33.

ivComtois,Claude. Sustainable Railway Futures: Issues & Challenges. Routledge: London, 2016. 203.

vKembrey, Melanie. “Hong Kong metro system operators MTR spread 'value capture' message to Australia.”  The Syndey Morning Herald.  December 18, 2015.

viComtois, 204.

viiComtois, 204.

viiiYeung,Rikkie. Moving Millions: The Commerical Success and Political Controversies of Hong Kong’s Railways. Hong Kong University Press: Hong Kong, 2008. 9

ixIbid, 9.

xIbid, 9.

xiK.Lo, Hong and Siman Tang, David Z.W. Wang. “Managing the accessibility on mass public transit: The case of Hong Kong.” Journal of Transport and Land Use. Vol. 1. Issue 2.  Fall 2008. 23 – 49.

xii“Annual Financial Report 2015.” The MTR Corporation. January 1, 2016.  http://www.mtr.com.hk/en/corporate/

investor/2015frpt.html     

xiiiComtois, 203.

xivFaizon, Edward. “What are the world's best metro systems?” CNN Travel. January 9, 2013.  http://travel.cnn.com/

explorations/life/10-best-metro-systems-746919/

xv“Sustainability Report 2015.” The MTR Corporation. January 1, 2016. 16-17.

xvi“Annual Financial Report,” 98-99.

xviiKok, Lee Min. “Dubbed 'the best in class': 6 things about Hong Kong's MTR rail system.” The Straits Times.  October 29th, 2015.  http://www.straitstimes.com/asia/east-asia/dubbed-the-best-in-class-6-things-about-

hong-kongs-mtr-rail-system

xviiiWong, “The World's Most Envied Metro System.”          

xixIbid.

xxKok, “Dubbed 'the best in class'.”

xxiIbid

xxiiPadukone, Neil. “The Unique Genius of Hong Kong's Public Transportation System: The use of a clever financing system has enabled the territory to provide world-class service—without breaking the bank.” The Atlantic. September 10, 2013. http://www.theatlantic.com/china/archive/2013/09/the-unique-genius-of-hong- kongs-public-transportation-system/279528/

xxiiiIbid.

xxiv“Annual Report 2015,” 99.

xxvLee, Ada. “Hong Kong named 'Best City in the World for Commuters.”  South China Morning Post. April 2, 2014. http://www.scmp.com/news/hong-kong/article/1463043/hong-kong-best-city-world-commuters

xxviIbid.