What now for Hong Kong’s over-budget Sha Tin-Central Link? And why the MTR’s numbers did not tell the full story

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What now for Hong Kong’s over-budget Sha Tin-Central Link? And why the MTR’s numbers did not tell the full story

After decades of planning, consultation, revisions and construction delays (and some building), there is finally light at the end of the expensively dug tunnel for Hong Kong’s Sha Tin-Central Link, as building work comes to completion.

Like a lot of other major infrastructure developments in Hong Kong, the project did not hit its projected completion date or hit its budget. In fact, it is now the most expensive rail project in the city’s history.

The MTR Corporation – which is building the line, paid for by the government – announced on Tuesday a budget overrun of HK$16.5 billion, bringing the total bill to HK$97.1 billion. That made it even more expensive than the Hong Kong section of the controversial high-speed rail project linking the city with Shenzhen and Guangzhou, which is set to cost HK$84.4 billion.

At HK$5.71 billion per kilometre, this makes the 17km link one of the costliest in the world for its size.

By comparison, Britain’s planned north-south high-speed line was expected to cost £403 million a mile, or HK$2.5 billion per km.

What happens now to the Sha Tin-Central Link?

The MTR Corp had never confirmed until Tuesday how much costs had deviated from its original estimate, but delays and design reconfigurations have plagued construction since work began in 2012.

The Transport and Housing Bureau said it “reserves comment” on the revised cost estimate, adding it would examine the corporation’s justifications before deciding whether to foot the bill.

To withdraw an additional HK$16.5 billion from public coffers – on top of the HK$79.8 billion already dished out for the project – the government must get approval from the Legislative Council’s Finance Committee.

Why have different figures been given for the total cost of the project?

When revealing the cost overrun on Tuesday, MTR Corp gave as a new total the cost for the main construction works of the project, which was HK$87.3 billion. But when taking everything into account the final price tag for the line so far is HK$97.1 billion, including the original approved total funding of HK$79.8 billion and extra funding for advance works of HK$848 million from June this year. That total also covers all expenses such as construction cost and various costs for advance works.

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What caused the HK$16.5 billion overrun?

MTR Corp blamed about 70 per cent of the cost overrun on things it termed “external factors”. Those things included handling archaeological finds at the site of the new Sung Wong Toi station, which caused an additional cost of HK$4.1 billion. The late or incomplete handover from the government of construction sites in Wan Chai, and government officials asking for additional work such as unbudgeted foundation works at Exhibition Centre station, also caused delays and extra cost, the company said.

And what about the other 30 per cent?

About 30 per cent of the overrun was caused by things including a labour shortage of about 10 per cent to 20 per cent in the construction sector, unfavourable ground conditions and changes in design works, according to the corporation. For example, at Hung Hom Station, the underground soil was looser than anticipated, meaning workers had to build stronger foundations than planned.

What are the political ramifications of all this?

With pro-government lawmakers dominating Legco’s Finance Committee, the extra funding is likely to get the green light. Their pan-democratic rivals, unhappy about the government’s role as the project’s gatekeeper, may delay the process by filibustering.

But opposition is not expected to be as strong as it was during a similar funding request for the high-speed rail link to the mainland, which descended into chaos in the conference room and sparked rowdy protests outside the venue.

One of the reasons is because the Sha Tin-Central Link is purely a local project, and does not trigger the nerves of those who fear greater integration with the mainland.

Chan Han-pan, a pro-establishment Legco member who chairs a railways subcommittee, said he expected there would be plenty of time to seek funding.

“Current [cash] reserves have not depleted yet … the request may be tabled in the next legislative year, but of course discussions should start early,” he said. The next legislative year begins in October 2018.

But this may not be the last tranche of extra cash needed. The MTR Corp has stopped short of saying the HK$16.5 billion would settle the bill once and for all, considering the project will run until at least 2021. This uncertainty could spark a heated debate in the months to come.

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