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    China Business
     Apr 10, 2009
Hong Kong trams change driver
By Olivia Chung

HONG KONG - A judder of concern rippled through Hong Kong's small band of conservationists this week when developer Wharf Holdings handed over 50% of its interest in the city's ancient electric tram system to French conglomerate Veolia Environnement along with the prospect of the entire operation changing hands at some future date.

The new partnership between Wharf and Veolia Transport sought to allay worry that their deal would derail the iconic 105-year-old transport link that joggles passengers along the 13-kilometer-plus strip between Kennedy Town and Shau Kei Wan on Hong Kong Island's harbor-framing northern coast. Its cheapness and convenience apart, Hong Kong trams offer with (Wharf-owned) Star ferries and the 120-year-old funicular Peak Tram a rare visible


link with Hong Kong's fast disappearing colonial past.

Veolia's Bruno Charrade, the designated managing director for Hong Kong Tramways, said the French outfit was fully aware that the tramway was part of Hong Kong's cultural heritage. "We are committed to protecting and preserving it," he said.

Frankie Yick, director of Wharf Transport Investments, a subsidiary of the Wharf Holdings, also made it clear that Veolia was far from a random or hurried choice as partner. A number of parties had approached Wharf over recent years interested in the tram operations, he said.

Veolia Transport "has shown great sincerity and commitment through more than two years of discussions and study before coming to the arrangement", Yick said. "It's not because the business is unprofitable that we want to sell it, nor that we can't manage it. We just wanted to bring in Veolia Transport's operational know-how, particularly in areas of customer service, safety, maintenance and training.'' Two senior management level staff from Veolia are to join the present workforce of 700.

Both parties said there will be no changes to the current daily services of Hong Kong Tramways or the tram fares - at a fixed HK$2 (US$0.26) full fare and half that for elderly and young passengers, the service offers the cheapest, if slowest, transport on the island.

That pledge should please the near quarter-million people who each day jump on and off the one or other of 161 double-deck tramcars. More than 82 million passengers were carried last year, while numerous party-goers use two antique trams set aside for mobile carousing. According to Wharf, the system last year generated annual revenue of HK$150 million from passenger rides and another HK$50 million from advertising.

Secretary for Transport and Housing Eva Cheng said the government has stressed to Wharf and Veolia that it will be vital to preserve the trams' tradition, including the system's look and design as they have become a unique piece of Hong Kong's cultural heritage.

"Tramways play a significant role in our public transport system and form part of Hong Kong's history and culture," she said. "The new and existing shareholders have assured [us that they] recognize its importance."

Given that stance, and the limited opportunity for expansion, Wharf's claim that it could benefit from Veolia know-how has a strange ring. The Hong Kong company has, after all, run the service, which includes a loop around the famous Happy Valley racecourse, for the past 34 years.

One project that might benefit from Veolia's world-wide experience in more modern transport developments is a possible spur line from Hong Kong's top-end business district, Central, towards the city's main exhibition and convention center.

"One further idea we are... developing is the creation of a tram loop along the new harbor waterfront between Central and Wanchai to showcase Hong Kong Tramways' unique heritage to Hong Kong residents and tourists," Charrade said.

That is small fry for Veolia, which runs 17 tram systems in cities across 10 countries including Berlin and St Etienne in France - both of which are systems of cultural value that have been in operation for over a century. In January, it announced a joint venture with French railway-operator RATP Developpement to expand in Asia, with China, South Korea and India the main targets, just after Veolia secured its first China contract in a deal to operate bus networks in six cities in Jiangsu and Anhui provinces.

"Operating the light rail system in Hong Kong will give us knowledge and expertise in mainland China. That's strategically why we chose to start in Hong Kong," said Charrade. There was a trend back towards tram systems - a more environmentally friendly mode of transport - and the mainland would need trams in the future, he said.

The "less than 100 million euros" (US$133 million) Veolia is paying Wharf for the Hong Kong Tramways stake is pocket change for the French company, whose networks carry more than 2.7 billion passengers per year, earning 6 billion euros in revenue in 2008.

But giving Veolia responsibility for the operation and management of the system will free up some resources for Wharf to focus on its main concern, property development, which has taken a hit in the economic downturn - the company last month reported a 52% plunge in profit to HK$6.25 billion.

Two office and retail developments, the fashionable Times Square on Hong Kong Island and Harbour City across the water in Kowloon, make up 46% of Wharf's assets. The company also owns Times Square complexes in mainland cities including Beijing, Shanghai, Dalian and Wuhan, and possibly shares growing anxiety of the risks posed by an excess of investment in office construction and overbuilding in the mainland (see today's Asia Times Online story, China's unreal estate, by Chan Akya).

Analysts greeted Wharf's result with little enthusiasm. "They donít have a bright spot they can count on for future growth," said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong, according to a Bloomberg report. "It's basically an unexciting property play."

Wharf does have other parts of its business it could sell off, such as its 74% owned pay-television outfit, I-Cable Communications Ltd, which posted a net loss of HK$111 million for last year.

Of more concern to preservationists and Hong Kong residents is Wharf's ownership of the city's other iconic transport system, the Star Ferry Company, whose 12 boats shuttle passengers across the ever-diminishing harbor between the Island and Kowloon (and once carried author Richard Mason's star-crossed fictional lovers Suzie Wong and Robert Lomax).

Wharf Transport director Frankie Yick said the company has no plans to sell the Star Ferry at the moment. Even so, billionaire Peter K C Woo, chairman of Wharf and its ultimate parent, Wheelock & Co, did not become the city's seventh-richest man on the base of sentimentality.

While Wharf's existence predates Hong Kong Tramways (construction started in 1904) by 18 years, its website gives little away about its near-century-long success story under British colonial rule. The company's most recent financial report skips immediately from its date of founding in 1886 to 2007 activity without a second glance backwards.

Veolia Environnement's chairman and chief executive Henri Proglio heads a company with an even longer past, in this case airbrushed by its neologistic name concocted amid a restructuring in 1999 to replace "Vivendi Water", which only a year earlier replaced the original company name, Compagnie Generale des Eaux, used since it was founded in 1853.

Alan Cheung, vice-chairman of the Hong Kong Collectors' Society, said he hoped Veolia will improve the tram system while preserving the local culture. The trams are a "Hong Kong treasure. If the new shareholder could operate the tram business as in the past, we tram-lovers will feel fine." One possible improvement for the often overwhelmingly humid 90-minute trip along the island's length would be the more extensive introduction of airconditioning - but that could end an 11-year moratorium on fare increases.

Veolia Environnement is no stranger to Hong Kong, the parent company having had a presence there for 15 years, dealing in waste treatment, landfill design and construction services, and now employing more than 660 people. That should give it some insight into local sentiment.

Yet this is a city whose concern for progress far outweighs concern for historic incongruities. Queen Victoria, who died shortly before the British government gave the final go-ahead for a Hong Kong tram network, would understand. Her statue, now shunted from its place at the city's bureaucratic and business nexus in Central to an obscure spot in the aptly named Victoria Park several tram stops away, is still close enough on a quiet evening to just hear the passing trams' warning "ding-ding" bell. Yet she might turn in her grave if she knew this week's deal could allow a French company to sound the system's death knell.

Olivia Chung is a senior Asia Times Online reporter.

(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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