ON FEBRUARY 24 the Hong Kong government instructed Hong Kong Mass Transit Railway Corp and Kowloon-Canton Railway Corp to start negotiations for a merger. The government said that the talks should be completed by August 31 and specified a number of key objectives.

’To ensure that the public can benefit from the merger exercise’, the government called for a comprehensive review of the fare structure ’with the objective of reducing fares’; in particular, common ticketing is needed for travel on MTR and KCR services. Job security for frontline staff is another requirement.

The government cited streamlining of the management structure as one way to reduce costs, and it is clear that savings could be achieved in administration and support. But as KCRC pointed out, ’there is little scope in the foreseeable future to combine the KCR and MTR systems ... as the power supply system, the signalling and rolling stock of the two networks are different’.

There are several significant issues to be tackled. MTRC is essentially a metro operator that has been partly privatised, with 24% of shares held by private investors and much of its income until now derived from property development. KCRC remains a public corporation, operating two suburban railways, a light rail network in Tuen Mun, plus freight and inter-city passenger services between Kowloon and Guangzhou. Reconciling the different interests will be tricky, but perhaps most difficult of all will be agreeing arrangements for funding new projects.

These include MTRC’s proposed South Island and West Island lines, where a study was commissioned last year to ascertain what benefits would arise from linking the two. Another contentious issue is the Sha Tin - Central line, where the alignment and the arrangements for interchange between the two operators remain unsettled - the government is looking for an ’early resolution of the interchange arrangements’.