Governance challenges of state-owned enterprises : the case of railway services in Hong Kong

Abstract

The railway services have been organized taking the corporate form of state-owned enterprises (SOEs) in Hong Kong. With several structural reorganisations, the Mass Transit Railway Corporation Limited (MTRCL) is currently the monopolized service provider. Meanwhile, the Hong Kong Special Administrative Region (HKSAR) government has retained a majority ownership in parallel of its role as the regulator, and at the same time in tie of power from the market to finance the service. In recent years, the governance of MTRCL has met with various challenges in the context of the local political, socio-economic and public administrative circumstances. This dissertation address the distinctive corporate form of SOE in the railway services of Hong Kong allowing for state control and to benefit from the market dynamics, and to examine the reasons leading to the governance challenge for the MTRCL as an SOE. As the railway services are administered under a matrix public administrative structure, the monopolized operating environment of MTRCL and its partial privatisation ownership have put the MTRCL to emphasize on profits optimisation over other societal needs. As revealed from the level of adherence to international SOEs corporate governance guidelines, and the empirical cases of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) project and the Fare Adjustment Mechanism (FAM) policy, the governance structure has legitimately led to the challenges faced by the HKSAR government and the MTRCL. Consequently, there are various scenarios emerged for the HKSAR government as possibilities to enhance the governance of MTRCL as an SOE, including keeping the status-quo and the placement of the current governance framework side by side enhancing the performance management measures, to buy back the assets from the market for delisting of the MTRCL, or to complete sell-off in full divestment of the railway services. Above and beyond these scenarios in search of good governance, the performance management measures should be improved and the engagement with the civil society should be deepened.