The Strange Animal of Public Transport in Singapore

As a side-note to my previous post, I will give a really brief summary of public transport issues in Singapore. Public transport systems in Singapore are run by 2 private-owned companies: SBS and SMRT, with the Government as a kind of concerned mother behind them trying to make sure they fix their toys and don’t rip-off their customers. Now, a public system run by private companies seem to be a contradiction, since public interests and private interests simply do not gel, but the Government is one confident mother, and as she puts it:

As commercial enterprises, the public transport operators (PTOs) are incentivised to operate as efficiently as possible and increase productivity to keep their costs low, and these productivity savings are shared with commuters. This is done by controlling public transport fares through a price cap formula.

The formula requires the PTOs to share productivity savings with commuters, and hence results in lower fare increases. The system safeguards the interests of commuters and ensures that fares are kept affordable. In fact, public transport fares have only increased marginally in the past years. As a share of household spending, the average household has been spending significantly less on public transport fares – 3.6% in 2011, compared to 5.0% in 2005, indicating that our public transport fares continue to remain very affordable for the general public (click here).

Some have argued that nationalising our public transport system will translate to lower public transport fares. In terms of public transport affordability, Singapore’s fares are actually more affordable than fares in other cities like London, New York and Tokyo, which have nationalised parts of their public transport systems.

Source here

In short, Mother believes that instead of doing it herself, if she pays SBS and SMRT well to manage the public transport systems, they will do it better since they are motivated to make profits. This spells good news for Mother, SBS and SMRT. But it’s the average Singaporean consumer who gets screwed.

As private companies, SBS and SMRT are profit-maximising firms, and they do a good job of it, with them being even more profitable than the celebrated Singapore Airlines (SIA), as analysed here. Profits are essentially Total Revenue – Total Cost, so SBS and SMRT have essentially been doing a good job of raising revenue through fare hikes (consumers get screwed) and cutting costs through skiving on maintenance, sources here and here, causing the train disruptions affecting hundreds of thousands, some during rush hour (consumers get screwed as well).

Of course, SBS and SMRT raise revenues through adverts and caught off-guard at the poor maintenance of the aging transport system that it trusted SBS and SMRT to carry out pertinently, and in an astonishing move defying logic, offered $1.1billion to them to improve their services, instead of asking them to use their exorbitant profits to do it themselves, as all private companies should. This issue is covered extensively by Alex Au here and here. Meanwhile quite amusingly, Young PAP published this on their website:

Mr Tharman addressed the concerns over the Government’s S$1.1b investment on buses, saying it is a subsidy for public transport commuters, not operators.

The money is meant to step up bus service levels beyond what is currently required of transport operators. Without the Government stepping in, raising service levels would only have been achievable if fares are raised significantly, said Mr Tharman.

He said: “If operators were to achieve service level improvements on their own, fares would have to go up 12 to 13 per cent.”

He added that the Government would be monitoring operators’ losses on new buses, and funding will be reduced accordingly if losses are lower than expected.

Source here

Apparently the $1.1 billion handout is for us commuters because SBS and SMRT cannot do it alone. This raises the question of why they are even allowed to be privately-run if they cannot manage themselves. If SBS and SMRT come running back to Mother every time they need help, do they deserve to open their own businesses? Furthermore, $1.1 billion is an enormous sum of money that seems overly generous for simply “raising service levels”, an extremely vague wording that could simply mean buying better quality light bulbs, or using branded floor cleaners on buses. It simply screams unaccountability for the taxpayers that Mother is using their funds to subsidize private firms for.

Surely the logical thing would be for Mother to simply acquire the 2 errant companies and use the profits to subsidize fares for the commuters, raising public welfare and actually making public transport more attractive, taking the stress off our crowded roads. But Mother has this argument to offer:

Some have argued that nationalising our public transport system will translate to lower public transport fares. In terms of public transport affordability, Singapore’s fares are actually more affordable than fares in other cities like London, New York and Tokyo, which have nationalised parts of their public transport systems.

Source: Same as above

Which is not an argument at all, but a mere distraction. The fact that London, New York and Tokyo have more expensive fares cannot be put down to them being nationalised. They are huge global cities with a burgeoning population, with networks that are far more comprehensive than Singapore’s measly 4 lines. This raises costs far beyond that which SBS and SMRT have to contend with, even if SBS and SMRT were actually spending the proper amount of money on maintenance and not cutting corners.

So what we have here is Mother trying to side-step the issue of the benefits of nationalising SBS and SMRT, and simply offer a lame-duck distraction. As the uncle at the AngMoKio kopitiam who ate a piece of spoiled duck said: “Ptui! Disgusting.”

Oh well, that’s Singapore’s public transport system for you.

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