The Executive Council has approved the structure and terms for merging Hong Kong's two railways under a package proposal that will benefit the community and balance all stakeholders' interests, Secretary for the Environment, Transport and Works Sarah Liao said Tuesday.

In a media conference hours after Chief Executive Donald Tsang announced the news, Liao said the proposed pact, that would see the merger of the Kowloon-Canton Railway Corporation (KCR) with the Mass Transmit Railway Corporation Limited (MTR), will bring tremendous benefits to the community.

According to the proposal, there would be fare reductions upon the merger; a new fare-adjustment mechanism will allow fares to go down as well as up according to a transparent formula; fully integrated interchange links will be provided for the Shatin to Central link; both railways' front-line staff enjoy job security related to the merger; and interchange arrangements will be enhanced.

"The traveling public will get immediate benefits," Liao stressed. "There will be an overall fare reduction on the first day for 2.8 million daily passenger trips."

As Liao introduced, there will be a minimum of 10 percent fare reduction for all rail passengers traveling on journeys with fares at 12 HK dollars or above, benefiting about 340,000 daily passenger trips.

There will also be a minimum of 5 percent fare reduction for all rail passengers traveling on journeys with fares between 8.50 HK dollars and 11.90 HK dollars, benefiting about 1.16 million daily passenger trips, she explained, adding that from Tuesday, neither railway company will increase fares for 24 months.

The Secretary for Financial Services and the Treasury Frederick Ma explained the transaction structure at the press. Under the proposal, the KCR will grant a service concession to the MTR to use its assets to operate its rail system, for an initial 50-year period.

The MTR will retain its listing status, and will be the legal entity of the post-merger corporation. It will be responsible for daily operation and maintenance of the KCR system, and will pay all operating capital expenses during the period, Ma said.

As to job security, MTR Chairman Ch'ien said both the MTR and KCR will do their utmost to take care of their staff, adding that front-line staff will not be made redundant.

Initially staff will be retained on their original terms of service and employment, but eventually there would be a unified package of employment terms. Staff would be consulted, Ch'ien stressed.

As there will be more development opportunities after the merger, especially on the Mainland, they expect to have 1,300 job vacancies in the first few years. "The staff in the new corporation can be given training to adapt to new duties," he said.

There may be as many as 600 or 700 posts to be eliminated due to synergies, he added, but staff will be given retraining opportunities and everyone will be treated in a fair and equitable manner.

If the Legislative Council passes the merger bill, which is expected to be presented to lawmakers before the end of summer, the proposed deal will be presented to the MTR Corporation's minority shareholders for approval. The government has a 76.5 percent stake in the MTR and owns 100 percent of the KCR The entire process is expected to take a year to complete, Liao said.

Chief Executive Donald Tsang said the merger will create a world-class Hong Kong railway company and consolidate Hong Kong's status as an Asian world city.

"With the fast expanding railway networks in the Mainland, the rail merger is a timely move for Hong Kong, which will enhance our potential in connecting with the railway routes on the Mainland. This will generate additional economic benefit and opportunities for Hong Kong," Tsang said.

He hoped the general public, lawmakers, staff of the two railway corporations, and minority shareholders of the MTR Corporation would give support to the proposal as "it is a fair and balance package".

KCR Chairman Michael Tien also welcomed the merger proposal. He said the KCR would continue to communicate with its staff members and make every effort to gain their understanding and trust through a consultation process. The company will also work hand in hand with the MTR and the government to develop an implementation plan to ensure a smooth integration.

Source: Xinhua