Kowloon-Canton Railway Corporation

Infobox Company
name = Kowloon-Canton Railway Corporation
九廣鐵路公司

type = Government-owned
genre =
foundation = Hong Kong, December 1982
founder =
location_city = Fo Tan
location_country = Hong Kong
locations = Hong Kong
area_served = Hong Kong
key_people =
industry = Holding
products =
services =
revenue =
operating_income =
net_income =
owner =
num_employees =
parent =
divisions =
subsid =
slogan = The way ahead
homepage = http://www.kcrc.com
footnotes =
intl = yesThe Kowloon-Canton Railway Corporation (KCRC; Traditional Chinese: 九廣鐵路公司) was established in 1982 under the Kowloon-Canton Railway Corporation Ordinance for the purposes of operating the Kowloon-Canton Railway (KCR), and to construct and operate other new railways. On 2 December 2007, the MTR Corporation Limited, another railway operator in Hong Kong, took over the operation of the KCR network under a 50-year service concession agreement, which can be extended. Under the service concession, KCRC retains ownership of the KCR network with the MTR Corporation Limited making annual payments to KCRC for the right to operate the network. The KCRC is wholly owned by the Hong Kong Government and its activities are governed by the KCRC Ordinance as amended in 2007 by the Rail Merger Ordinance to enable the service concession agreement to be entered into with the MTR Corporation Limited.

History

From 1910 to 1982, the KCR network was operated as a department of the Hong Kong Government. The Kowloon-Canton Railway Corporation was created in December 1982 after the government decided to corporatise its railway department. Until 2007, the KCRC owned and operated a network of heavy rail, light rail and feeder bus routes within Kowloon and the New Territories. It was also a land developer by utilising its property development rights atop and around railway stations and depots. In December 2007, it ceased railway operations and became simply the holder of railway assets. While it continues to own the rail network, the network is operated by the MTR Corporation Limited under a 50-year service concession.

Origins of the corporation

The events leading to the present day KCRC go back over one hundred years. During the 19th century, the western colonial powers competed with each other to establish and maintain commercial and political spheres of influence in China. Hong Kong held a vital position in protecting British trading interests in South China. The idea of connecting Hong Kong and China with a railway was first proposed to prominent Hong Kong businessmen in March 1864 by a British railway engineer, Sir Rowland MacDonald Stephenson, who had considerable experience of developing railways in India. The minutes of the committee of the Chamber of Commerce meeting in Hong Kong, where a letter setting out his ideas was considered on 7 March 1864, state that “the opinions of the Chamber in respect to his suggestions should be recorded in the form of a letter, to the effect that the Committee deem it essential for the advancement of the project that short lines of railway should at first only be tried, and that it is not advisable at present to interfere with any water communications which are already established and can generally be worked more cheaply than railway traffic.”

The main reason for this decision, which effectively killed MacDonald Stephenson’s idea, was that many of the businessmen concerned had a personal interest in protecting their investments in the established shipping companies that enjoyed a monopoly on carriage of passengers and goods into and out of China.

It took a further 30 years before the idea of building a railway from Hong Kong to China was again given serious consideration. In the last decade of the 19th century increasing diplomatic and trade activity by France in Kwangtung (now Guangdong) Province and the granting of a concession to Belgian interests to construct a railway from Peking (now Beijing) to Hankow (later extended to Canton (now Guangzhou)), led to British diplomatic and commercial concerns about protecting Hong Kong as the major trading port for South China.

The British Government extracted a number of railway concessions from the Chinese Government for the British & Chinese Corporation, a joint venture formed in 1898 between the trading company of Jardine Matheson & Co and the Hong Kong and Shanghai Bank. These concessions included the right to construct and operate a railway from Kowloon to Canton that would link to the Peking-Hankow-Canton line.

While the British & Chinese Corporation undertook a preliminary survey of the proposed route of the line in 1899, the financial uncertainties created by the Boxer Rebellion in China (1899-1901) and the Boer War (1899-1902) in South Africa made it difficult for the Corporation to raise funds for the project. However, by the beginning of the 20th century, the Hong Kong Government under the leadership of the colony’s governor, Sir Henry Blake, decided that urgent action was required.

Discussions between the Colonial Office in London, the Hong Kong Government and the British & Chinese Corporation, led to an agreement in late 1904 that the Hong Kong Government would undertake the financing, construction and operation of the section of the line within Hong Kong. The remaining section to Canton would be financed through a loan raised by the British & Chinese Corporation on behalf of the Chinese Government, which would operate the section after its construction by the Corporation.Settling the detailed financing arrangements for the British and Chinese sections of proved to be complicated, because the funding of the British Section (as it became known) depended on the raising of the loan for the Chinese Section. The arrangements were finally ratified by the Hong Kong Government’s passage of the Railway Loans Ordinance in 1905, clearing the way for construction of the British Section. It took until 1907, however, for the loan agreement for the Chinese Section to be concluded, with the financing being provided by way of a bond issue floated in London in April of the same year.

The importance attached to the project was reflected in a speech made to the Hong Kong Legislative Council by the colonial governor, Sir Frederick Lugard, in 1908:

“You will recall that in 1905 it was decided to build the railway by means of a loan. It was not a question of whether the undertaking would be an immediately remunerative concern; it was not a question of whether the railway should pay interest and sinking fund on the capital expended, or even if it would at once pay working expenses. It was a question of preserving the predominance of Hong Kong. It was a question of seeing that the final outlet of the main trunk railway should be at Kowloon, and at no other place.”

Two routes were suggested for the British Section, a western route of about 34 miles from the tip of Kowloon peninsula via Tsuen Wan to Castle Peak Bay and thence to Yuen Long and the border with China, and a more direct eastern route of about 21 miles requiring tunnelling through the Kowloon hills and thence to the border via Tide Cove (now Sha Tin area), Tai Po, Fanling and Sheung Shui. Following a detailed survey in 1905, the eastern route was proposed. Although the formal approval of the Colonial Office in London was not given until February 1906, the Governor, Sir Matthew Nathan, had anticipated a positive outcome and had already instructed the Public Works Department to start earthworks on the route from Tai Po Market to Fan Ling in December 1905.

The initial estimate for the project was HK$5,053,274, which included the cost of excavating a tunnel through the Kowloon hills at Beacon Hill and reclamation in Kowloon for a terminus. However, due to underestimating the problems to be overcome, changes in design, the fall of the value of the HK dollar to the pound sterling (much of the equipment had to be imported from Britain), difficulties in recruiting suitable labour coupled with a high mortality and sickness rate amongst the workers (malaria, beri beri and dysentery were endemic in Hong Kong at that time) and right-of-way land acquisition costs led to the final cost of the project to steadily rise over the construction period.

The most difficult part of the project was the construction of the Beacon Hill tunnel, which ended up costing about one quarter of the whole project. Together with the construction of a two-foot narrow gauge branch railway from Fan Ling to Sha Tau Kok (making use of the rails and rolling stock used in the construction of the main line and later closed in April 1928), the final cost was HK$12,296,929, making it one of the most expensive railways in the world and, as costs escalated, the subject of much concern in both Hong Kong and London.

Although the design called for the construction of only a single track of a standard gauge of 4 feet 8½ inches, an important decision made was to ensure that as far as possible the bridges, cuttings, embankments and tunnels, with the exception of the Beacon Hill tunnel, allowed for the laying of a future second track. This decision, although it might have seemed unnecessarily costly at the time, proved of benefit some 75 years later when the railway was finally double-tracked.

The railway was formally opened on 1 October 1910, but without a terminus. Some 39 acres of the harbour at the south of the Kowloon peninsula, between Signal Hill (Blackhead Point) and Hung Hom, had taken place using material excavated from the route and carried to the site by a two-foot gauge railway. However, the final decision to locate the terminus at the tip of Kowloon peninsula was not made until 1910, and the terminus only ready for services in 1914. The railway opened in 1910 with a number of temporary stations. Part of a godown (warehouse) next to the site of the present day Star Ferry pier in Tsim Sha Tsui was rented and converted into a passenger station with rails to it laid down Salisbury Road from Signal Hill. Temporary stations were erected at Hung Hom and Lo Wu, with permanent stations being built at Sha Tin and Tai Po (later called Tai Po Kau), and a flag station at Tai Po Market.

Traffic on the new railway was at first quiet as there was little demand for passenger and freight services by the inhabitants of the then undeveloped New Territories north of Beacon Hill. Only after the Chinese Section was completed and opened in 1911 did traffic start to build up as people took advantage of the fast journey time of only 3 hours 40 minutes from Kowloon to Canton.Little changed up until the Second World War, with the commercial success of the railway being closely linked to events in China. During the defence of Hong Kong in December 1941, various bridges and tunnels were deliberately blown up by the retreating British forces. After repairs had been made, the line was operated throughout the war by the Japanese using the services of the Chinese staff who had remained after the fall of the colony. During this period the railway gradually deteriorated through lack of adequate maintenance. Rolling stock and other equipment were also sent to China for use there by the Japanese.

After the British resumed control of Hong Kong in 1945, following the defeat of Japan, the railway was in a sorry state. Initially the task of restoring the railway to a working condition rested with the military. Twelve locomotives were urgently ordered from Britain (arriving in 1946-47) and efforts focussed on bringing the railway up to a workable condition. Civilian management of the railway was again resumed in 1946.

The post-war management faced many problems, including lack of records which had almost all been destroyed by the Japanese and had to be reconstructed from the memories of serving and previous staff; shortages of coal for the engines necessitating their conversion to burning fuel oil; currency exchange rate difficulties due to devaluation of the Chinese currency requiring agreement with the Chinese authorities to use the Hong Kong dollar as the basis for all transactions; worn out equipment and staff shortages. At the same time, there was a huge demand for passenger and freight services as people who had fled to China during the war moved back to Hong Kong, and because huge volumes of goods needed to be carried into China to help in post-war relief efforts there. From an immediate post-war figure of around 600,000, the population of Hong Kong rose to nearly 2 million by the end of 1947, with the influx reaching a rate of about 100,000 per month during this period.

Although freight demand to China gradually fell, the influx of people from China continued due to the civil war between the Communists and Nationalists. Through-train passenger services to China stopped on 14 October 1949, the day prior to the capture of Canton by the Communists. Passengers and goods then had to be transhipped at the border. Despite the inconvenience that this caused, the railway benefitted by Hong Kong becoming the centre of communications and trade with southern China, especially as much of the traffic that had hitherto gone by sea could no longer do so. Refugees fleeing the new communist government of China also often settled in squatter areas along the railway and this together with an increase in the British Army’s presence added to domestic travel demand in Hong Kong.

In 1951 agreement was reached with the Chinese authorities for goods wagons to again cross the border, but passenger services continued to terminate at the border at Lo Wu station. However, the Korean war (1950-1953) led to an embargo by western governments on certain goods being exported to China, and tough restrictions introduced by the Chinese government on the number of people allowed to cross the border, which together led to a severe decline in rail revenue.

The situation saw little improvement until 1955, and to reduce the operating costs of the steam locomotives a decision was taken in 1954 to gradually replace these with diesel locomotives. For the rest of the 1950s and 1960s, despite some short-term disturbances in 1967 resulting from a spill over into Hong Kong of the Cultural Revolution in China, both domestic and cross-border traffic continued to show steady overall growth.

One major decision taken during the late 1960s was to relocate the large railway workshops from Hung Hom to their present location at Ho Tung Lau in Sha Tin and to construct a new terminus at Hung Hom. This was necessary to permit construction of the first cross harbour road tunnel, replacing the previously reliance on ferries to cross the harbour from Kowloon to Hong Kong Island, and to overcome the constraints imposed on rail traffic growth by the first terminus at Tsim Sha Tsui. While the move to Ho Tung Lau took place in 1968, the Hung Hom Terminus complex was not completed and opened until November 1975, at which time the Tsim Sha Tsui Terminus was closed and shortly thereafter demolished except for the clock tower, which remains a landmark today.

So far improvements to the railway had been incremental in nature. In the 1970s it became clear that a radical rethink was needed if the railway was to cope with future demands. In 1972 the government set up a steering group to examine the need for future short-term and long-term improvements to the railway given the growth in freight and passenger traffic to China, coupled with the government’s plans to construct large new towns at Sha Tin, Tai Po, Sheung Shui and Fan Ling in the New Territories that would further increase domestic travel demand.

At that time the new towns were intended to be constructed to a “balanced design” concept under which employment opportunities as well as people would be relocated from substandard accommodation in the older urban areas, thereby minimising the additional demand on the transport network. As later became apparent, however, while people were moved in their hundreds of thousands to live in the New Territories, the major centres of employment and of leisure activities remained in the urban areas, leading to an even greater dependence on the railway to support a rapidly increasing daily commuter flow.

In 1974 a 10-year investment programme was started to provide for the complete double-tracking and electrification of the railway from Hong Hom to Lo Wu, requiring the building of a second Beacon Hill tunnel together with the construction or upgrading of stations and other facilities. This exercise was completed by the early 1980s and on 16 July 1983 the use of diesel-hauled trains ceased for domestic passenger services. Diesel locomotives continued to be used for through-train passenger services, which resumed in 1979 following implementation by Deng Xiao Ping of economic reforms in China, and for freight and track maintenance services.

One consequence of the electrification was that, whereas much of the old track in the New Territories had remained unfenced, with footpaths or roads alongside or across the track used by many villagers, the faster, quieter and more frequent electric services required the complete fencing off of the track from Lo Wu to Hung Hom, necessitating the construction of footbridges with both steps and sloping ramps at various village locations. As a former Assistant District Officer in Tai Po recalls, one of the claimed concerns of the villager elders at the time was to be able to carry coffins across the tracks to the nearest road as not all villages were served by an alternate road access.

During this 10-year period, thought had also been given by the government as to the future management of the railway. Hitherto the railway had been run as a department of the government, and was subject to the normal civil service rules and requirements. This made it difficult to take a commercial approach to operating what was increasingly becoming a major business in investment and revenue terms. Corporatisation of public services as a means to permit government-owned public utilities to operate more along the lines of private sector business was an approach that was beginning to gather interest at the time from several governments - the US and UK governments under Reagan and Thatcher being prime movers. The object of corporatisation was to allow the public service providers to make a commercial return on their assets, thus reducing the need for investment of public funds raised predominantly from taxes, while still remaining under government control.

On 24 December 1982, the KCRC Ordinance (Cap 372) was enacted and the KCR ceased to be a government department, although it remained wholly owned by the government. Under the Ordinance a managing board, comprising 10 members appointed by the governor (Chairman, Managing Director and not less than 4 nor more than 8 other members), became responsible for overseeing the day-to-day operations of the Corporation. The Corporation was required to "perform its functions with a view to achieving a rate of return on the assets employed in its undertaking, and in accordance with ordinary commercial criteria, is satisfactory."

An expanding network

The KCRC expanded its operations in 1984. It accepted an invitation from the government to build and operate a light rail network in northwestern New Territories. The Light Rail Transit (LRT, known later as the KCR Light Rail and currently simply as the Light Rail) came into service in September 1988. The KCRC started to participate in property development and management at around the same time. The first joint-venture property development, the Pierhead Garden apartment blocks, was completed in 1988. Profits generated from property and commercial services were useful to fund new railway projects, improvement works and other strategic initiatives.

The KCR West Rail (now the West Rail Line on the MTR network) was opened on December 20 2003, connecting the new towns of Yuen Long, Tin Shui Wai and Tuen Mun in northwestern New Territories with urban Kowloon. Two extensions were commissioned in 2004. The KCR East Rail was extended from Hung Hom Station to East Tsim Sha Tsui Station in between Tsim Sha Tsui and Tsim Sha Tsui East. The KCR Ma On Shan Rail (now the Ma On Shan Line on the MTR network) was opened to link Ma On Shan with the East Rail at Tai Wai Station. In August 2007, the Lok Ma Chau Spur Line came into service.

Public spat between chairman and acting CEO in 2006

On March 10 2006, with the signed support of all 5 operations directors and 19 managers, the Acting Chief Executive Officer Samuel Lai wrote to the Managing Board to complain the leadership style of the Chairman of the Board, Michael Tien. Around 80% of the staff has signed for support to Lai.

On the following day, Michael Tien met the Chief Executive of Hong Kong, Donald Tsang. In the afternoon of March 12 2006, Tien announced his resignation, with the effective date determined by Tsang. After further negotiation, Tien withdrew his resignation and Lai resigned. James Blake, the former Secretary for Works in the Hong Kong Government and a civil engineer, took over as the Chief Executive Officer (not acting) at age 71.

The spat was seen to have sped up the government's plan to merge the operations of the two railway networks in the territory. The merger was completed in December 2007, with the MTR Corporation Limited taking over the operation of the KCR network under a 50-year service concession.

Ceased to be a public transport operator

On December 2 2007, the KCRC ceased to be a public transport operator. The right to operate the rail and feeder bus network was granted to the MTR Corporation Limited under a service concession arrangement for an initial period of 50 years, which may be extended. Under a sale and purchase agreement, the MTRCL also purchased a number of KCRC properties and property management subsidiaries, and certain short-lived railway assets of KCRC such as stores and spares.

The costs of new railway lines on the KCR network currently under construction, e.g., the Kowloon Southern Link, will continue to be funded by the KCRC and will upon completion be operated by the MTRCL under the service concession. The MTRCL is paid a fee for project managing the construction of the project. The KCRC is also funding the purchase of 22 additional light rail vehicles, which will be needed to accommodate the increase in patronage expected on light light rail feeder routes to West Rail stations when the Kowloon Southern Link is completed in 2009.

Future plans

The Kowloon-Canton Railway Corporation, as well as the MTR Corporation Limited, had each made its proposal to plan, build, and operate a rail line between Sha Tin and Central. The Hong Kong Government announced on June 25 2002 that KCRC had won its bid to build and operate the Sha Tin to Central Link. This line was not included in the service concession under which the MTRCL operates the KCRC railway network. The service concession covers only the existing KCRC rail lines, and those under construction at the time of the merger.

According to the government's latest plan as explained to the Legislative Council in March 2008, the Shatin to Central Link will be built by the MTRCL, with the government financing the cost of and owning the line. The government has further indicated that it may vest the completed line in, or lease the line to, KCRC, which would then grant an additional service concession to the MTRCL to operate the line.

ee also

* MTR Corporation Limited
* Transportation in Hong Kong
* List of Hong Kong companies
* List of Chinese companies
* Guangshen railway
* Shenzhen Metro

External links

* [http://www.kcrc.com/ Official website of the Kowloon-Canton Railway Corporation]