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Following is a question by the Hon Alan Leong and a reply by the Secretary for Transport and Housing, Ms Eva Cheng, at the Legislative Council meeting today (January 23):
Question:
Although the Government had urged the franchisee operating the Western Harbour Crossing (WHC) to take into account public affordability and acceptability in setting the tolls, the franchisee still decided to increase, with effect from the 6th of this month, the tolls under the guise of reduction in concessions. Moreover, in 1997 and 2004, the franchisee operating the Eastern Harbour Crossing (EHC) twice submitted the toll increase case to arbitration after the Government had rejected its applications on grounds of insufficient justifications. EHC subsequently increased the tolls based on the outcomes of the arbitrations. In this connection, will the Government inform this Council whether:
(a) it has assessed if the aforesaid situation indicates that the existing legislation and agreements pertaining to WHC and EHC have failed to make the franchisees to take into account factors such as the economic situation of Hong Kong and public interests in setting the tolls; if the assessment result is in the affirmative, whether it has formulated improvement measures; if it has, of their implementation schedules; if the assessment result is in the negative, of the justifications; and
(b) it will draw up measures to set the tolls of the three road harbour crossings at appropriate levels (such as conducting short-term experiments with public funds to examine the impact of introducing standard tolls at the three tunnels on traffic flow), so as to relieve the traffic pressure on the Cross Harbour Tunnel at Hung Hom and enhance the overall efficiency of cross harbour traffic; if it will, of the specific details and implementation dates of such measures; if not, the reasons for that?
Reply:
Madam President,
I wish to first explain the Government's policy and principles in constructing and operating tunnels. Based on the "small government, big market" principle, Government should encourage private participation and optimise the use of public resources, and, where feasible, adopt appropriate modes of public-private-partnership which include the Build-Operate-Transfer (BOT) mode usually adopted in the past. Under a public-private-partnership mode, the investor should be given the opportunity to make a reasonable return within the franchise period, although the investor should also be prepared to bear certain commercial risks.
On the two parts of the question, my reply is as follows:
(a) Concerning EHC, in order to cope with the increasing amount of cross harbour traffic, in 1984, the then Government decided that the next harbour crossing in Hong Kong should be a four lane road tunnel between Cha Kwo Ling in East Kowloon and Tai Koo Shing on the Island, to be known as the Eastern Harbour Crossing. It was to be financed, constructed and operated by the private sector on terms similar to those of the prevailing Cross-Harbour Tunnel.
The Eastern Harbour Crossing Ordinance (Cap. 215) was made in 1986. The Ordinance provides that the tolls may be varied by agreement between the Chief Executive in Council and the tunnel company. If an agreement cannot be reached, either party may submit the question of the variation of tolls for arbitration. The Ordinance has not set out the criteria for determining toll adjustments. It only stipulates that if the matter is submitted for arbitration, the arbitrators shall be guided by the need to ensure that the carrying out by the tunnel company of its obligations, or the exercise of its rights, under the Ordinance is reasonably but not excessively remunerative to the tunnel company, having regard to, inter alia, any material change in the economic conditions of Hong Kong since the enactment of the Ordinance or, as the case may be, since tolls were last determined.
As regards WHC, during the planning stage, WHC was intended to be a vital link between Hong Kong Island, West Kowloon, the new airport at Chek Lap Kok and the northwest New Territories when Route 3 was fully completed. It would also provide much needed relief for the other two road harbour crossings, and would help meet long-term traffic demands.
The Western Harbour Crossing Ordinance (Cap. 436) was made in 1993. The Ordinance stipulates that the franchisee may effect anticipated toll increases on six specified dates. However, if the franchisee's actual net revenue in any year falls short of the minimum estimated net revenue for that year specified in Schedule 5 to the Ordinance, the franchisee may advance an anticipated toll increase or create an additional toll increase if all the anticipated toll increases have been effected. The maximum levels of increase in respect of different categories of vehicles are specified in Schedule 2 to the Ordinance.
The toll adjustment mechanisms for EHC and WHC were made in the past under different historical background, such as the prevailing social climate, economic condition, interest rate and investment opportunities. The discussion with the relevant franchisees had been very complex and difficult. In the case of WHC, there was a prevailing view in the market at the time that a mechanism in the legislation stipulating the reasonable return that the franchisee might achieve was a pre-requisite to attract private investment. The then Government therefore needed to quantify the reasonable return and stipulate it in the legislation. The relevant rate of reasonable return was drawn up having regard to the rate of return for similar projects in the Asia-Pacific region as gathered by the consultants.
We need to point out that these mechanisms are enshrined in the relevant legislation and form part of the agreements between the Government and the concerned franchisees, which should be respected and followed by both parties and can be changed only by mutual agreement.
(b) The Government agrees that the current traffic distribution among the three crossings is uneven, and there is room for improvement. We have always attached importance to resolving this problem. The uneven traffic distribution is mainly due to the differences in locations and toll levels of the three crossings. Various sectors of the community have put forward many suggestions on how to improve the distribution of traffic among the three road harbour crossings.
One of the suggestions is to establish a Tunnels and Bridges Authority. This is a suggestion for the Government to buy back the ownership of all BOT tunnels and bridges. A public authority i.e. the Tunnels and Bridges Authority (TBA) will then be entrusted with the coordination, operation and development of these facilities. It is also suggested that TBA may issue bonds or have its shares listed on the stock market to fund its operations and development of new facilities. Buying back BOT tunnels and bridges will involve enormous capital spending, and we have to consider it carefully, including the need to ensure that the price of buying out will be reasonable and acceptable to the public. Also, the investment community will expect the TBA to have the autonomy to set tolls if it were to issue bonds or get listed, the implications of which will also require careful consideration.
Another suggestion is to build a fourth road harbour crossing or expand the capacity of the Cross-Harbour Tunnel (CHT). Building the fourth crossing or expanding the capacity of CHT are long-term options. However, we need to examine various technical issues, as well as the land requirements for the ingress/egress and connecting roads. Accordingly, these options would not help alleviate the traffic problem in the short to medium term.
There is also a suggestion that the Government should buy out the franchises of WHC and EHC. This option would involve substantial funding from the public coffer. We have to consider its feasibility carefully based on the principle of "small government, big market", including the need to ensure that the price of buying out would be reasonable and acceptable to the public.
We also take note of the Honourable Alan Leong's idea of conducting short-term experiments, but this idea involves the use of public funds, forecast of traffic flow, means of measuring effectiveness, calculation of tunnel companies' expected revenue and other technical problems. The two tunnel companies' agreement is also essential for the implementation of this idea. We therefore need to consider it in detail.
Despite the difficulties facing each option, we are keeping an open-mind and will study them in earnest. We consider that no matter which option is to be adopted, it must be able to bring about overall benefit to the public, be fair to taxpayers and help to achieve reasonable distribution of traffic. We have also put forward to the Legislative Council Panel on Transport some options that may help improve the cross harbour traffic conditions. We have pointed out that extending the franchisees of EHC and WHC in exchange for toll reduction by the relevant franchisees was a more feasible option. That said, we certainly need to consider carefully the period for extension, in order to ensure that the package would be fair to the franchisees, the tunnel users, and the Government.
In the meantime, we need to consider whether the road network connecting the three crossings have sufficient capacity to absorb the increased traffic flow arising from a reduction of tunnel toll. This is because insufficient capacity of these connecting roads would undermine the objective of rationalisation of cross-harbour traffic flow by adjustment of tunnel tolls. In this connection, accelerating the construction of planned connecting roads, in particular the Central-Wanchai Bypass, is an important element in improving the distribution of traffic amongst the three crossings.
Ends/Wednesday, January 23, 2008
Issued at HKT 16:18
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