The Peak (Hong Kong) - - Letter From Jakarta The B Rief -

he view from MTR Chair­man Fred­er­ick Ma's of­fice is telling. From the 33rd floor of the IFC build­ing it looks across Vic­to­ria Har­bour on to the mas­sive con­struc­tion site of the West Kowloon High Speed Rail Ter­mi­nus and the West Kowloon Cul­tural District. For Ma, it is a reg­u­lar re­minder of one MTR'S roles in one of the piv­otal in­fra­struc­ture projects in Hong Kong's re­cent his­tory. It is, no doubt, also a con­stant re­minder of the headaches that come with his very par­tic­u­lar role in Hong Kong.

Point­ing out the ironic na­ture of the view to him, as we sit down for a chat, he of­fers one of his good-na­tured but know­ing chuck­les. “Oh yes, it's quite a view.”

The MTR Cor­po­ra­tion (MTRC) is, in Ma's reck­on­ing, one of the Hong Kong gov­ern­ment's best fi­nan­cial bets. On the face of it, he has a point. The Hong Kong gov­ern­ment owns 76 per cent of the cor­po­ra­tion, with the rest held by a mix of in­sti­tu­tional and re­tail in­vestors.

On March 16, Moody's is­sued a switch in out­look from sta­ble to neg­a­tive for the MTR Cor­po­ra­tion, sug­gest­ing that the tight link­ages be­tween Hong Kong and main­land China would mean no up­ward po­ten­tial for MTRC. On the day of that pre­dic­tion, MTRC was trad­ing at about HK$34 per share. As of midSeptem­ber, it was trad­ing at about $42 per share. Had the money-los­ing Manda­tory Prov­i­dent Funds been some­how in­vested in MTRC, per­haps they may not have lost so much money. It's a point not lost on Ma.

Over­all, rev­enue from MTR'S Hong Kong trans­port op­er­a­tions was up 4.3 per cent, year on year, from 2014 to 2015. From 2012 to now, MTRC shares have rock­eted from HK$20 per share.

The num­bers be­hind MTR'S per­for­mance are also re­mark­able, and oft re­peated. There is the fig­ure that 99.9 per cent of all MTR trains in Hong Kong are on time. The vast ma­jor­ity of any de­lays that do oc­cur are un­der two min­utes. Ma re­cites a fig­ure to put that into per­spec­tive: “One train would go around the world 12 times be­fore there would be a five minute de­lay.”

There are more num­bers that Ma has at the ready. Some 12 years ago, the MTR Cor­po­ra­tion was run­ning 2,600 train trips per day. Today, it is 8,000. Then, there's the sub­ject of fares: ac­cord­ing to Ma, the MTR fare rates are cur­rently among the world's low­est. “But peo­ple still com­plain,” Ma says em­phat­i­cally.

Adding new sta­tions can also be a tremen­dous headache, thanks in no part to Hong Kong's built in­fra­struc­ture, which al­most lit­er­ally piles up in the nar­row cor­ri­dors and spa­ces avail­able. Build­ing a new MTR sta­tion in Hong Kong thus only gets tougher and tougher, ac­cord­ing to Ma, who adds that build­ing a new sta­tion re­quires the MTRC to reach out to nu­mer­ous district coun­cils and the com­mu­nity in which those sta­tions are built.

The MTR'S prow­ess at run­ning its net­work – ef­fec­tively the ar­ter­ies and veins of Hong Kong – is

crit­i­cal to the city's day to day func­tion­ing. In­deed, prop­erty mar­kets can move on the in­tro­duc­tion – or planned in­tro­duc­tion – of MTR sta­tions. This is made ap­par­ent with a visit to the bustling streets of Kennedy Town, com­plete with new bars, restau­rants and high-rises – all es­tab­lished largely in con­junc­tion with the open­ing of the district's new sta­tion. The evo­lu­tion of Aberdeen and Wong Chuk Hang into the more fash­ion­able “Is­land South” is in­du­bitably due to the up­com­ing open­ing of the Is­land South line.

T H E A R T O F E Q UA N I M I T Y Ap­peal­ing to – or ap­peas­ing – the many stake­hold­ers in the MTR Cor­po­ra­tion is Ma's top job. And to that end he en­tered the po­si­tion at the be­gin­ning of a year amid the tough­est of sit­u­a­tions: The 26km-long Hong Kong sec­tion of the Guangzhou-hong Kong Ex­press Rail Link was over-bud­get and vastly delayed.

In April 2014, the an­nounce­ment was made that the project's orig­i­nal tar­get date of 2015 was im­pos­si­ble, due to con­struc­tion re­lated is­sues, and that over­all costs had risen to $84.4bil­liom, far above the orig­i­nal es­ti­mates of $65b. The ex­pected com­ple­tion date was pushed back to the third quar­ter of 2018, and Legco is­sued stern re­bukes to MTR. It was into this mael­strom that Ma stepped when he took the chair­man­ship over, back in Jan­uary.

Af­ter the de­lays and prob­lems with the project were re­vealed, Michael Tien, Legco mem­ber and for­mer KCRC chair­man said: “I re­ally can't imag­ine who will be will­ing to take over han­dling this hot potato. Any sen­si­ble per­son would know that he would be re­spon­si­ble for any fur­ther de­lays once he takes up the job.” It was a sur­pris­ing ad­mis­sion for Tien, who him­self had left KCRC in 2006 on un­even terms.

Ma says he took on the job out of a sense of af­fec­tion for the com­pany. It's a good thing he does feel that af­fec­tion, be­cause be­ing chair­man of the MTR means ex­tended pe­ri­ods in the spot­light be­ing grilled by un­for­giv­ing Legco mem­bers. At times such as this, Ma likes to para­phrase the jaded op­ti­mism of Win­ston Churchill: “The pes­simist sees op­por­tu­ni­ties as chal­lenges, and the op­ti­mist sees chal­lenges as op­por­tu­ni­ties.”

The ul­ti­mate deal with Legco saw the gov­ern­ment pro­vide the pro­jected fund­ing, in ex­change for two spe­cial cash pay­outs to share­hold­ers.

The deal over the West Kowloon sta­tion has the hall­marks of Ma's el­e­gant per­sonal style, and a man­ner of deal mak­ing that seems to square cir­cles. When the MTRC was first in talks to merge with KCRC in 2006, Ma, at the time Hong Kong's

Sec­re­tary for Fi­nan­cial Ser­vices and the Trea­sury, was able to neatly get around po­lit­i­cal con­cerns, while keep­ing true to the orig­i­nal point. The KCRC had been val­ued at $25bil­lion, but gov­ern­ment in­vest­ment was $66bil­lion. “If we had de­cided to sell KCRC, we would have been ac­cused of sell­ing as­sets on the cheap,” Ma re­calls.

In the end, KCRC be­came a rental com­pany, re­ceiv­ing $2bil­lion a year for use of its lines and equip­ment, along with an ini­tial pay­ment of $4b. “It was a po­lit­i­cal bomb. I came up with the for­mula for de­fus­ing that bomb.” It is this type of far reach­ing deal that suits Ma. “I took a lot of sat­is­fac­tion and per­sonal pride in en­gi­neer­ing this merger,” he says.

That the MTRC has gar­nered its deal with the gov­ern­ment and is con­tin­u­ing its drive to com­plete the high speed rail con­nec­tion to Shen­zhen and then Guangzhou is down, at least in part, to Ma's unique brand of per­sonal charm.

FU­TURE THREADS Should you find your­self on the Lon­don Tube or New York sub­way, you may spot Fred Ma, check­ing up on their re­spec­tive ser­vices, just to make sure his beloved MTR al­ways stays in front. At least, he says he does. In per­son, he cer­tainly en­joys com­par­ing the ser­vice stan­dards of the MTR to that of other in­tracity rail ser­vices. It's a topic he loves to bring up.

But in those cities you might also find your­self rid­ing a train owned by the MTRC. Over the past few years, the com­pany has been qui­etly turn­ing it­self into an in­ter­na­tional con­cern, though Ma keeps say­ing that MTRC'S birth cer­tifi­cate is in Hong Kong. That said, the com­pany owns sub­sidiaries and rail ser­vices in the UK, Swe­den and Aus­tralia, along with in­ter­ests in Shen­zhen, Bei­jing and Hangzhou. MTRC'S rev­enue from in­ter­na­tional sub­sidiaries and hold­ings were $12.5bil­lion in 2015, while rev­enue from Hong Kong trans­port op­er­a­tions was $16.9 bil­lion in 2015.

That may grow in fu­ture, though Ma main­tains that the MTRC re­mains firmly rooted in Hong Kong. He sees the One Belt, One Road ini­tia­tive as a par­tic­u­larly im­por­tant part of the fu­ture of Hong Kong, and po­ten­tially of the MTRC as well. As a man privy to so many dis­cus­sions re­lated to China's fu­ture, Ma is cer­tainly one to know. “It [One Belt,

One Road] cre­ates a lot of busi­ness op­por­tu­ni­ties for Hong Kong, in cap­i­tal mar­kets, in­fra­struc­ture, ports, air­ports - things that Hong Kong is re­ally good at.”

Dur­ing our in­ter­view, Ma cheer­fully an­nounces that he will be go­ing to Kaza­khstan the fol­low­ing week with Hong Kong's fi­nan­cial sec­re­tary, John Tsang, “to check things out – maybe to sell the ser­vices of the MTR”. It was in Kaza­khstan in 2013 that Chi­nese pres­i­dent, Xi Jin­ping, an­nounced the One Belt, One Road ini­tia­tive, and so this comes as no sur­prise. Many of the pro­posed rail and high­way routes link­ing China to Europe pass through Kaza­khstan, par­tic­u­larly the for­mer cap­i­tal Al­maty. Kaza­khstan's oil and gas re­serves are enor­mous, and China's push into the for­mer Soviet ter­ri­tory also in­cludes the huge agri­cul­tural spa­ces there.

Though Ma re­mains cau­tious on the sub­ject of in­ter­na­tional ex­pan­sion, re­peat­edly in­sist­ing that the MTR'S main loy­alty is to Hong Kong, that doesn't rule out new mar­kets al­to­gether. “Our birth cer­tifi­cate is Hong Kong, but our pass­port is global,” Ma likes to say. He adds that MTR'S board has set a limit to over­seas ex­pan­sion, and while he re­fuses to say what that is, he does say that, to date, MTR has in­vested about 34 bil­lion yuan into main­land China. “So far, ex­pan­sion over­seas hasn't taken away a lot of our re­sources. We use lo­cal peo­ple to run JVS, and we hire lo­cal peo­ple to run [our] op­er­a­tions. We

don't spread our­selves thin.”

One of the growth-ori­ented poli­cies that Ma has put in place is the new MTR Acad­emy – a scheme de­signed to help in­crease the pro­fes­sion­al­ism of ur­ban rail op­er­a­tors and man­agers. But while the scheme is cer­tainly set to be a ben­e­fit to the MTR, in that per­son­nel can be re­cruited from this acad­emy, it will also serve as an en­try point for the MTR in its deal­ings over­seas.

Ma fore­sees that the MTR Acad­emy will en­tice rail com­pa­nies, par­tic­u­larly in emerg­ing mar­kets along the One Belt, One Road cor­ri­dors (he uses Kaza­khstan as an ex­am­ple) to send man­agers and op­er­a­tors for train­ing. Those peo­ple will then go back with pos­i­tive views of the MTR. As con­tracts come up for bid, there will be an in­ter­na­tional pool of tal­ent in­clined to work with the MTR. “Net­work­ing,” Ma says, “is very im­por­tant.”

Whether Kaza­khstan – or other One Belt, One Road in­vest­ment des­ti­na­tions – are on the mind of the MTR Chair­man, he is not ready to di­vulge. Mis­takes hap­pen, af­ter all, and for­eign in­vest­ments can be costly mis­takes. “We want to make sure we can walk be­fore we can run, par­tic­u­larly in this com­pany. We are 76 per cent owned by the gov­ern­ment, so we have rep­u­ta­tional risk as well as a fidu­ciary re­spon­si­bil­ity to our share­hold­ers.”

Of course, the MTR'S own ex­pan­sion plans in Hong Kong are far from fin­ished. The West Kowloon

High Speed Rail ter­mi­nus and line are due for com­ple­tion in 2018, and there are sev­eral lines and sta­tions to com­plete as part of the gov­ern­ment's prior rail­way plans. In 2014, the Hong Kong gov­ern­ment pro­duced its Rail Devel­op­ment Strat­egy, cov­er­ing up to 2031, up­dat­ing the pre­vi­ous strat­egy doc­u­ment from 2000. Seven new lines are man­dated for the MTR, and ac­cord­ing to Ma, the MTR is cur­rently study­ing three. “There's no short­age of rail­ways to be built in Hong Kong,” he says.

Cur­rently, the gov­ern­ment is con­sid­er­ing ex­pan­sion of hous­ing in ar­eas near the bor­der with Shen­zhen, as well as ex­pan­sion around Kowloon East, the long-awaited pro­posed new cen­tral busi­ness district for Hong Kong.

F I N D I N G T I M E TO S M I L E For his part, Ma now finds com­fort and joy play­ing with his first grand­child. “As grand­par­ents, we have all the joy, but not the re­spon­si­bil­ity,” Ma says with a smile. Cer­tainly, his re­spon­si­bil­i­ties are al­ready quite big. Ma held eight di­rec­tor­ships be­fore step­ping up to be MTR chair­man, ul­ti­mately drop­ping four of those to fo­cus more of his time on MTRC. He still re­tains a seat on the global ad­vi­sory board of the China In­vest­ment Cor­po­ra­tion, China's sov­er­eign wealth fund, along with Joseph Yam, the only other per­son from Hong Kong on the board.

He also re­tains a keen in­ter­est in young peo­ple, as ev­i­denced by the pro­fes­sor­ships he holds at three Hong Kong univer­si­ties, as well as be­ing the hon­orary pres­i­dent of the Hong Kong Spe­cial Schools Coun­cil, which aims to im­prove sup­port ser­vices for stu­dents with spe­cial ed­u­ca­tion needs.

In the end, Ma seems es­pe­cially at home with his beloved MTR. He just wishes that a few more of his mil­lions of cus­tomers would ap­pre­ci­ate the job that the com­pany does: “I get a lot of letters of com­plaint; sel­dom do I get a com­pli­ment.”

If you've ever taken the MTR in Hong Kong and liked the ser­vice, be sure to thank Fred Ma the next time you see him. He'll ap­pre­ci­ate it.

Fred­er­ick Ma and MTRC CEO Lin­coln Leung (cen­tre) with MTR staff at the MTR Gallery at Kowloon Sta­tion.

The Hin Keng to Ma Chai Hang Tun­nel is set to link MTR'S ser­vice be­tween Sha Tin and Cen­tral

FROM TOP Ma played a cru­cial role in the merger of MTRC and KCRC dur­ing his role as Hong Kong's Sec­re­tary for Fi­nan­cial Ser­vices and the Trea­sury; Ma dropped four of the eight di­rec­tor­ships he for­merly held be­fore join­ing MTRC to fo­cus on his role as chai

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