As world cities go, Hong Kong probably stands out for its excellent public transportation system. Commuters are spoiled for choice with endless streams of buses, mini-buses, trams, ferries, taxis, the MTR and the KCR to take passengers where they want to go. Quality standards are also high in terms of reliability, cleanliness and comfort, security and affordability, all of which are offered at very reasonable fares. With everything going for it, where does our transport policy fall short?

For all its merits, the transportation system in Hong Kong is perhaps weakest in integration. Apart from the chip-embedded Octopus card, there is little integration among the different transport modes. While transport interchanges do exist, they fall short of the kind of strategic linkage that unifies the various network structures now serving the public. The lack of coordination between rail and bus, for example, has led to wasteful competition.

As Bill Barron noted in the co-authored treatise Sustainable Transport in Hong Kong -- Directions and Opportunities, "Under specific conditions competition can be inefficient because it tends to increase, rather than lower, the overall costs of service." In addition, congestion and pollution worsen.

A balancing act is therefore required in government policy. As Fred Brown, CEO of the MVA Group puts it, "If you want competition and you want integration you can't have your cake and eat it, so you've got to work to a balance. For example, people want a choice, but on the other hand they don't want too many buses. That is the biggest difficulty in implementing policy."

There used to be major quality differentials when comparing travel on the MTR with buses. However, buses have since narrowed the gap by introducing more air-conditioned vehicles. The result is that buses are wooing away passengers from the MTR. Passenger defection to buses also arose from the MTR quickly reaching saturation shortly after inception, according to Mr Barron. Long haul bus routes have since become fixtures on the mass transport landscape competing directly with the MTR. So although the government is trying to get more people off the roads on onto rail transport, the reality is that passenger numbers are falling for the MTR.

Mr Barron blames the financing approach adopted in the building of railways. "(The Third Comprehensive Transport Study (CTS-3)) includes the presumption that we can have a rail-led transport system in Hong Kong without any change in the way the rails are financed. The point is that Tseung Kwan O was the last new line under the old financing model. There is no where else in Hong Kong where you have half a million people within three kilometers of an existing rail line. And that was barely economical for the MTR. Where is the next Tseung Kwan O? Already people are complaining that Tseung Kwan O is too dense. So, if we want rail-led transport and much greater coverage of rails where else (in Hong Kong) under the old finance model can we do this?" Mr Barron asks.

"In Hong Kong, we insist the rail systems be self-financing and make them compete with the buses. We can get away with it because density is so high. Property may serve to bridge the gap in revenue shortfalls but are not as reliable as income from fares," he continued.

In terms of revenue, property only accounts for 10 percent of the MTR's total income. "It never amounted to the huge cash inflow that the public assumed it did just because it was visible and secondly, since 1997 even in Hong Kong property has gone down," he said.

Scaling up property development rights is therefore not a feasible option as this would mean increasing volatility of income while hurting private property developers. Instead government should provide direct subsidies to railways to ensure that set objectives can be achieved.

"Nowhere in the world do passenger fares pay the cost of railroads. Just like in very few places in the world people using the roads do not pay the full cost of the roads. Transport infrastructure, like education, public health and police services for example, have been long been viewed as areas of legitimate government intervention and support for the good of the whole society," Mr Barron says.

The salad days of financing for buses may also be drawing to a close.

"The financing of public transport is going to become more difficult in as much the nineties were the heydays. The bus companies were making money because they were converting to air-conditioning. In the eighties they (bus companies) had gone to one-man operations which made them more viable but the bus industry has not got anymore productivity gains in it," Mr Brown says.

Compounding the sector's woes is the likelihood that traffic will worsen with the building of fewer roads as compared to the late nineties, which witnessed a boom because of the Western Harbor Crossing and Route 3.

Whichever direction transport financing takes, it is important that related policy on public transport is clearly understood.

"If it is a self-financing service provided in the market-place, fine. If it is a public service, fine, but don't keep jumping around. If you do move to a new system, you will have to be consistent. If you went very strongly in the direction of integration you could create a subsidy situation. On the other hand, if you have this over-competition it may hurt some of the modes like the railways, which you don't want to hurt. Your finances conflict with your economics. That's why you have to move in the middle ground but if you keep changing course then the investors don't like it," Mr Brown says.

However, making transport a public service means the government is going to get involved, including in the running of operations. As governments internationally are trying to get out of providing services and as our budget deficit continues to swell, one possible option is for government to provide the infrastructure while an independent operator provides the service. In this manner, integration can be achieved and operations are kept on a commercial basis with operators brought in through such methods as a revenue risk and contract bidding.

Another huge gap in Hong Kong's existing transport policy relates to cross boundary traffic.

"We have some infrastructure plans but there is no strategy at the moment whether for road, bus, freight, and people moving across the boundary and that is threatening the economy and environment," Mr Brown says.

Transport is one of the two key conduits (the other being telecommunications) in closer relations with the Pearl River Delta. Between 1997 through to 2001, cross border traffic has been growing at a thumping rate of 15 percent per annum. This has come down since to 10 percent as our trade relationship has stabilized, but that growth is going to continue as Hong Kong becomes even more integrated with the PRD region and as more Mainlanders are allowed to come here more freely.

Today, about 300,000 people cross the border daily and, according to Mr Brown, this could very easily reach 1 million in the next 10 to 15 years. Without an articulated strategy in place, however, we are being held back from realizing our true potential as an economic hub.

"There is no strategy with where the transport hub should be for cross border travel. Should it be rail and distribution in Hong Kong? Or should we have all the buses coming into one place?" asks Mr Brown.

With increased motorisation in Guangdong Province, the environmental implications are huge. A joint policy with the Pearl River Delta on the environment is vital. In Shenzhen, there are about 3,000 vehicles on the road, and vehicle ownership is spiraling.

"It's a big threat because of the big growth. You always have problem because nothing stands still," he said. The cross-border effect also means there are the issues of the flow of private cars both ways and increase in car ownership. "These are not being addressed. When something like this huge bridge across the delta is talked about, nobody is talking about what vehicles can use it. At the moment, cars can hardly use it because there are only a few thousand licenses," Mr Brown says.

In the course of rethinking Hong Kong's transport policy there may also be the need to review cross-department coordination. With so many government agencies holding partial responsibility for certain aspects of transport and related issues, implementation becomes difficult even when the overall strategy is flawless because it is unclear which government agency is in charge. The ad hoc basis of such approaches and the involvement of a multitude of government offices mean that matters become very complicated and time-consuming.

"For an investor paying millions of dollars in interest per day, that could be rather costly," says Mr Brown.