Delays, cost overruns jeopardize HK-Guangzhou rail link

2015-08-11 09:58Global Times Editor: Li Yan

In April 2014, MTR Corp (MTR), overseeing construction of the Hong Kong leg of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL), announced that the HK$65 billion ($8.38 billion) project would be delayed by several years and run massively over budget. MTR attributed the delay to unexpected construction conditions, tunnel excavation challenges, tight construction times, low "construction efficiency" and a labor shortage. Since the announcement, the Hong Kong authorities and MTR have been casting blame at each other over the delay and budget overrun, leaving taxpayers on the hook for the estimated HK$20.3 billion needed to complete the project. Because the Hong Kong legislature still needs to approve the funding, the project's future is now uncertain.

It was supposed to be done by now.

The 26-kilometer section of Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) in Hong Kong had been scheduled to be completed on August 4, 2015.

But in April 2014, MTR Corp (MTR), the company overseeing construction of the rail link, announced that the HK$65 billion ($8.38 billion) project would not only be delayed by several years, but also run massively over budget.

It took more than a year for MTR to draw up a new plan for the XRL. In late June, the company submitted it to the Hong Kong Special Administrative Region government.

The plan said that construction wouldn't be completed until the third quarter of 2018 and would cost an additional HK$20.3 billion. It cited complex construction conditions, low "construction efficiency," and a shortage of labor as the reasons for the delay and cost overrun.

The Hong Kong government is currently reviewing MTR's updated plan for the Hong Kong section, Su Wenjie, deputy general manager of the company's communications department, said in an e-mail sent to the Global Times on Friday.

The Hong Kong leg of the XRL is a prestige project for the city and its government, which is paying for it. The XRL will run 140 kilometers to Guangzhou, capital of South China's Guangdong Province, passing through the cities of Shenzhen and Dongguan, both in the same province.

When completed, it will allow a passenger in Hong Kong to travel to Guangzhou in just under 50 minutes, about half the time of a current train ride.

The Hong Kong SAR government expects the XRL will bear economic dividends and boost local tourism.

But the project's future is now in jeopardy as it requires the Legislative Council of the Hong Kong Special Administrative Region to approve the additional funding.

And that's no simple task, said Li Nansheng, a professor at the College of Civil Engineering at Tongji University.

"In Hong Kong, with its robust legal system, it is a big issue to spend taxpayers' money," he said. "The complex legal system may make it impossible to resolve the dispute in just two or three years."

A delay in funding is no small matter as it could result in further delays. "The subsequent construction work will be adversely affected if not enough extra money is injected," Li told the Global Times on Friday.

Reasons for the delay

Construction on the XRL Hong Kong section began in April 2010 after Hong Kong's Legislative Council approved the project in January that year.

Under the original timetable, the rail line was supposed to start transporting passengers by the end of 2015.

When MTR announced the project would be delayed, it surprised the public, the Shanghai-based news website reported on August 5.

The announcement was notable because it was the first time the company had mentioned anything about delays in the four years since it started, the report said.

Construction was 68.7 percent completed as of late March, with three sections of the project significantly behind schedule, according to a document MTR submitted to the Legislative Council in June. Overall construction costs were also running 31.23 percent above the original budget.

MTR attributed the delay to unexpected construction conditions, tunnel excavation challenges, tight construction times, low "construction efficiency" and a labor shortage, according to several documents it submitted to the Hong Kong government.

The company said that it had established an independent board of directors to review the project and unearth problems.

"There can be quite a few reasons for construction delays, such as geological conditions, environmental issues, construction management problems as well as other episodic factors," said Li, the Tongji University professor.

"The XRL Hong Kong section is not a special case," he said. On the Chinese mainland, many railway projects also suffer delays with cost overruns.

Li's opinion was echoed by Zhang Lingxiang, general manager of the Shanghai Metro's transportation management center.

"It is hard to absolutely confirm the completion date in the early stages of construction because so many unforeseen issues will emerge in the years it takes to finish a project," Zhang told the Global Times on Friday.

Zhang also questioned whether the original timetable and budget for the project were reasonable.

Although MTR has tried to highlight the technical challenges of the project, Li doesn't see them as the major problem.

"It's not so hard to build underground in Hong Kong due to the environment there and the advanced construction techniques we have nowadays," he said.

Issues of responsibility

Some experts see the construction model as the main reason for the delay. The Hong Kong government commissioned MTR in January 2010 to oversee construction of the project. Their agreement gives the government ownership of the project's asset, but the government has to cover the construction costs and bear the construction risks. MTR's role is only supervisory.

The problem with this model is that it makes it hard to nail down which party is accountable for the delay. Each can cast the blame on the other.

Both the Hong Kong local government and MTR have refused to take responsibility for the delays and cost overruns, according to media reports. The government said MTR is to blame because it is running the project and is responsible for keeping costs under control, according to the report from

However, the agreement stipulates that the government owns the project and must bear the risks of delays and other problems.

Regardless of which party is actually responsible for the delays, Hong Kong taxpayers are the ones footing the bill. After all, the government owns 76 percent of the company, reported, citing experts.

MTR needs the additional HK$20.3 billion to pay for the extended construction period, revise parts of the project and backup funding, according to a document the company submitted to the Legislative Council in June.

For its part, MTR has the same goal as the government, which is to complete the project as soon as possible, within budget, Su said.


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