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Hong Kong: What lies behind the troubled construction of MTR's rail projects?

Cost overruns and delays have plagued Hong Kong metro operator MTR’s massive £12bn transport infrastructure programme, but what has caused the problems?

Last week it emerged that MTR’s highest profile project, the high speed link to mainland China is now running three years late and is £2.5bn over budget.

The project is part of a hugely ambitious programme of five major schemes commissioned by the Hong Kong authorities and their Chinese masters in 2008. They saw infrastructure spending as a way of insulating the Hong Kong economy from the global recession.

The five projects MTR is delivering are:

  • The HK$66.9bn (£5.5bn), 26km underground high speed railway line between Kowloon and the border with mainland China that forms part of the Guangzhou-Shenzhen-Hong Kong Express Rail Link
  • The £5bn, 17km Shatin to Central Link through eastern Kowloon and under Hong Kong harbour
  • The £1.3bn, 3km extension of the existing Island Line on Hong Kong Island, known as the West Island Line, a project which is now on site
  • The £1bn, 7km South Island Line (East), connecting Hong Kong island’s business and commercial district at Admiralty with the south coast
  • The 3km Kwun Tong Line Extension, a short but complex underground extension through densely populated Kowloon

Delivery was always going to be a challenge as the sudden injection of such a major programme of work was inevitably going to put huge pressure on contracting resources, labour and materials supplies.

And so it has proved. Last year MTR admitted that all five projects were running late and faced cost overruns. The most advanced project, the West Island Line eventually opened this year, a year late. In the meantime MTR chief executive Jay Walder has resigned and his projects director TC Chew has taken early retirement.

The problems the projects have run into were almost inevitable, especially when the latest issues are examined.

A report about delays and cost overruns on the high speed China link project was submitted by MTR to the Hong Kong legislative council last week. It showed that the pressure on labour resources that was anticipated at the project’s inception have had a serious impact on the project. Work in some areas has slowed because labour has been in short supply, and wage rates have soared –  in some cases doubling between 2008 and today.

Perhaps it could be argued that MTR’s executives should have flagged these issues up to the politicians more vociferously. But it is unclear how much pressure they were under to get the projects built.

Perhaps they felt they could rise to the challenges. Chew is an experienced and highly competent senior engineer with experience working for Singapore’s Land Transport Authority, London Underground and train manufacturer Bombardier.

Before contracts were awarded he had worked hard to mitigate anticipated problems arising from pressure on resources.

The massive 11ha Kowloon terminus was divided up into relatively small packages so that it could appeal to a wider range of bidders. Chew also went on a global tour to whip up contractor interest before inviting bids. But he was battling against competition from other markets, notably Malaysia and Singapore, where huge infrastructure programmes were also underway. He worked hard to improve employment conditions for site personnel, as a way of attracting workers to his projects.   

But the problems remained. Dividing the terminus into smaller packages appeared to make the site more congested, with contractors competing for limited space and competing for use of a single entry and exit point for deliveries and excavated materials. The labour market remains overheated, and in the end MTR is being forced to swallow some expensive delays, as it battles to get the projects finished by the end of the decade.

  • Andy Bolton has written extensively about MTR projects in Hong Kong for NCE

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