Caught between shareholders, the public, the government and other stakeholders, Frederick Ma is caught between a rock, a hard place, a sharp stick, a hot plate and more.
MTR Corporation Chairman Frederick Ma Si-hang (馬時亨) is in an unenviable position. As the new leader of one of the world’s leading publicly traded rail builders and operators, he must keep the company on an even keel while pleasing its many minority shareholders as well as its principal shareholder, the Hong Kong government.
The government is already steaming over the roughly two-year delay and HK$19.42 billion cost overrun of the always-controversial high-speed rail (HSR) to Guangzhou, the reins of which the corporation holds. That official anger may even have contributed to the departure of former CEO Jay Walder.
So what is a chairman to do when legislative filibustering threatens the timely approval of the special allocation that will keep the HSR running within its latest budget and timetable? Use alarmism to jump-start the process, of course!
Sound the Alarm!!
In a series of recent media engagements (English, Chinese) Ma claims that a delay through June could push construction costs up by many billions more – his greatest fear, so he says. This aside, he states that Hong Kong’s international reputation will suffer “a serious blow” if the project is halted, “as the city has never seen the abandonment of any major infrastructure projects”. To top it all off he predicts that a work stoppage will occur if the allocation does not pass by March, possibly leading to job losses for up to 7,000 construction industry workers.
Yet Ma’s situation is tragic, for while his activism may please some shareholders who wish to see their chairman “doing something”, none of his claims will gain him traction with legislators and the general public, the two groups that he must most urgently woo.
Public Sticker Shock
In fact, Ma’s high-profile worries over further cost overruns may even be counterproductive, for, despite the paucity of recent polling data on support for the HSR, what little we do know suggests that the public is highly price sensitive.
According to a January 2010 HKUPoP survey report, commissioned by the Justice and Peace Commission of the Hong Kong Catholic Diocese, while 50 percent of the population supported the rail’s construction at that time, support was closely related to respondents’ evaluation of the construction cost.
A Lingnan University survey commissioned by the Bauhinia Foundation, published in the same month, carried a much higher support rate – 69.1 percent. The 19.1 percent support discrepancy may be explained by a key difference in the question prompts. HKU’s prompt mentioned the sticker price. Lingnan’s did not.
Old data cannot reveal the population’s present-day mindset. But, at minimum, the link between perceived cost and public support has big implications for the MTR chairman. Simply put, the more Ma mentions dollar overruns, the greater negative impact he may have on public opinion. This will increase the incentive of pan-democrat legislators to filibuster.
The Reputation Angle
Likewise, Ma will gain no traction with his claim that Hong Kong’s reputation will be seriously impacted by a halt in HSR construction. After all, his target audience members know how to use search engines so can easily discover an inconvenient truth – on the global stage, priority projects grind to a halt all the time.
In 2015 alone, Sri Lanka halted construction of a major Chinese port project, Panama stopped work on a hydroelectric dam, Hungary put a hold on a major highway project, Tanzania ceased work on what would have been East Africa’s largest port, and the US state of Illinois froze US$700 million in construction projects, from universities, to state parks, to prisons to Abraham Lincoln’s tomb. Those were simply a few recent examples from the first five pages of a Google search.
Granted, such work stoppages may be less common in Hong Kong, but why would legislators or the public fret when the city has such good company in both the developed and developing world?
Jobs, Jobs, Jobs
As for Ma’s job market prognostication, his claim that up to 7,000 workers will lose their jobs actually exposes a major contradiction in numbers-based advocacy. For years, construction industry representatives, MTR Corporation’s included, have been warning of a severe local shortage of labour.
For instance, a November 2012 Hong Kong Construction Association survey found a vacancy rate of 15 percent at active construction sites, numbers that the association’s president was still citing to the media over a year later.
The MTR Corporation has gladly played along. In November 2013, the company’s general manager for the HSR project pointed out a local manpower shortage to a LegCo subcommittee, and, in May 2014, a company spokesperson identified a 3,900-worker shortage on five local projects.
As of December 2015, the Construction Industry Council (CIC) still saw a labour shortfall. The body’s December 2015 Report of Manpower Forecasting for Construction Workers forecasts a shortage of 10,000 to 15,000 workers in 2016 and beyond. In this light, legislative delays that cause layoffs at some projects would appear to help solve a pressing problem of the construction industry.
This does not mean that laid-off workers would undergo no hardship. As construction workers are highly specialised, each labourer would require some time to find a new post. All the same, the industry’s past fixation on shortages doesn’t lend itself well to instilling a sense of crisis over present project redundancies.
The Painful Solution
Ultimately, Ma will fail to gain the support he desires from his listeners meaning he may soon have to sow the seeds of considerable pain for the MTR Corporation and its shareholders.
Pro-establishment New People’s Party Legislator Michael Tien Puk-sun (田北辰), Chairman of LegCo’s Panel on Transport, has already stated that LegCo’s agenda will not easily allow for a decision by the end of March. Tien has suggested a one-month emergency allocation of HK$233 million to keep the project’s lights on, but has branded any further support unlikely.
Until present, the corporation has bought off shareholders with the promise of a special HK$4.40 dividend per share, funded by the issuance of over HK$25 billion in debt. This “credit negative” deal may have temporarily placated minority shareholders, but it is not one that the MTR Corporation will be eager to repeat.
Therefore, as the new company chairman, Ma will continue to make urgent noises, all the while knowing that he may be powerless to avert his own high-speed train wreck. It is a most unenviable situation indeed.