Hong Kong Delivers Transit on the Cheap

Moneybox
A blog about business and economics.
Nov. 12 2013 2:29 PM

Great Mass Transit Doesn't Have to Cost a Fortune

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If it's good enough for Gary Locke, it's good enough for me.

Photo by KIN CHEUNG/AFP/Getty Images

I'm back in the United States after visiting several Asian cities, most recently Hong Kong which has a very impressive rail transit system called the MTR. It's no surprise to learn that a city-state would take the effort to build itself a first-class rail system. But what is surprising is that somewhat contrary to the dominant discourse in American politics, creating great transit in Hong Kong doesn't mean lavishing the system with subsidies. Instead, a big key to their success seems to be cost-control.

MTR does things other than Hong Kong transportation operations (on which more later), but their Hong Kong transportation division spent 7.82 billion Hong Kong dollars in 2012 (see this). By contrast, the Washington Metrpolitan Area Transit Authority had $2.13 billion in 2012 operating expenses (Page 15). At the current exchange rate of 7.75 Hong Kong dollars per U.S. dollar, that means MTR is spending less than one-half of what WMATA spends. 

Now, of course there's nothing wrong, per se, with spending a lot of money on your city's transportation system in order to obtain better transportation. But if you compare the level of service MTR delivers to Hong Kong with what WMATA delivers for D.C., I think you'd find it hard to make the case that what we're getting is twice as good. MTR has excellent train frequencies, about the same number of train stations, and over five times as many riders as WMATA. The only downside is that MTR's operating hours are a bit more restrictive than WMATA's. Beyond that, they're spending less money and delivering a better service—a valuable reminder that cost effectiveness counts for something.

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I've heard it said by U.S.-based transit activists that the success of MTR in providing a high level of service without ongoing operating subsidies is attributable to the fact that the company is also a substantial real estate developer and landlord around rail stations. It's true that they do those things, but it's simply not the case that landlording is subsidizing the transportation operations—the transportation is profitable on its own terms. Conversely, I've heard it said by U.S.-based conservatives that the success of MTR is due to it being a private for-profit firm rather than a government agency. But while it's true that MTR is company listed on the Hang Seng Stock Exchange, it's also true that over 70 percent of the shares in the company are still held by the Hong Kong government.

Which is just to say (somewhat tautologically) that MTR is cost-effective because the Hong Kong government demands cost-effective transit. Conversely, I bet MTR isn't nearly as good a place to work as WMATA or other American transit agencies for rank-and-file employees. But whatever the case may be about this, whatever MTR is doing with its workforce isn't undermining its ability to hire enough people to run an effective transit system.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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