Public Transport: Uniquely Singapore, F1 or F9?
Posted by theonlinecitizen on September 11th, 2007
In light of the just-announced increase in transport fares (again), theonlinecitizen has decided to publish this series of letters which our writer Leong Sze Hian had sent to the press over the last few years.
This is to allow the public to see for themselves if the problems/questions regarding our transport system have been addressed and if such almost-annual increase in transport fares is justified.
Read also our earlier article: Fare hike for public transport in October?
September 2007: More Congestion = More Revenue?
According to Christopher Tan, the editor of Torque Magazine (Sep 2006), "Each year, motorists collectively cough up over $ 3 billion in taxes, duties and levies . (not including) electronic road-pricing (ERP) and parking charges. Yet, annual transport related expenditure is sometimes only a quarter of the transport taxes collected".
So, why do we still have to raise public transport fares, practically every year, to keep making record profits ?
[AND WHERE DO THE REST OF THE OTHER 3/4 OR $2 BILLION GO????]
The Land Transport Authority may need to try to think about creative new ways to address our transport problems.
In a way, there may be little incentive, because worsening traffic jams, may mean even more revenue, as ERP is raised, almost relentlessly.
Despite ever increasing ERP rates, traffic woes seem to continue to worsen, like on the Central Expressway (CTE).
Perhaps we could consider some measures along the lines of penalties and fines for public transport operators who do not meet standards, like arriving within 10 minute intervals during peak hours. How about penalising LTA, if traffic jams worsen, by transferring some of their revenue to subsidise public transport fares ?
Now, that may really get them cracking - to try to think out of the box !
The Ministry of Transport has said that "SBS Transit earned $32 million but has $500 million of assets, so its return on assets (ROA) was 6.5 per cent; SMRT earned $100 million but has $1.1 billion of assets yielding a return of 9.1 per cent. These returns are healthy but not excessive, compared to companies with similar industry structures and risk profiles".
The ROA should not be the only, or a very appropriate measure, because in the case of the Singapore transport operators, a fair share of the assets were built-up from the retained earnings of ever increasing profits over the years.
Thus, in a sense, it was a self-perpetuating system under which the people of Singapore, in a way, paid for the bulk of the accumulated assets.
Other measures, like the transport operators' ever increasing profits and dividend yield relative to other listed companies, could also be used in determining whether "returns are healthy but not excessive".
TRANSPORT VOUCHERS: According to the PTC, "among commuters who have to make a transfer (1 in 4 commuters), most require one transfer, say from a bus to the MRT or to another trunk bus. The majority of such journeys will see a fare increase of 3 to 4 cents".
If one makes two such journeys a day, the increase per year is $21.90 to $29.20. If the average commuter affected by the fare hikes pays five cents more a day, assuming 2 bus/MRT transfer trips a day, the increase per year is $ 18.25. This is based on a conservative assumption that one only makes two trips a day, that is, travelling from home to only one destination, without going anywhere else.
The present system of giving $20 transport vouchers is flawed because the amount is only enough to offset one year's fare increase. What about the fare increases of the previous years? The needy whose incomes are declining should be given transport vouchers as a matter of course and not only when fares go up.
In 2005, the $4 million Public Transport Fund set up and funded by SMRT, SBS, Comcare Fund, the 5 CDCs, SLF and NTUC, received more than 92,000 applications for 80,000 vouchers worth $50 each. The funding organisations pitched in with the $600,000 needed to pay for the extra vouchers.
The total of $4.6 million divided by $20 means that about 230,000 people received about $20 each to help pay for the transport fares increase in 2005.
Even if we assume that all the about 104,900 households in the 0 to 10th decile with no income from work are retirees and others who can afford the fares increase, we are still missing about 147,640. Does this mean that they did not apply for transport vouchers?
January 2003 TAXI FARES more or less?:
The Land Transport Authority (LTA) has announced that taxi operators will have to pay a new monthly licence fee of $25 per vehicle. With almost 19,000 cabs here, that's $470,000 a month.
It was reported in the media that LTA charges SBS Transit and Tibs only $10,400 a year to monitor service levels of buses.
Why does it cost 540 times more to monitor taxis? Is it possible for the LTA to give a more detailed breakdown of how it costs $5.6 million a year to monitor taxis?
Also, what is the annual surplus (profits) of the LTA? May I suggest that some of the surplus be used to reduce the new $25 `taxi monitoring fee'?
The LTA said `the fee is less than $1 a day a taxi, so we don't think it will affect fares'.
If the LTA is wrong, and fares are increased, I would like to suggest that the new fee be adjusted to offset any fare increase, so that the consumer does not end up having to pay more.
Under the new monitoring system, errant taxi operators could be fined up to $100,000 for each contravention. If fares are increased, is it possible for the LTA to use any fines received to reduce the $25 fee too, so that the impact on consumers is lightened?
In my opinion, there is also another issue. If, whenever the public complains about the poor service of an essential product or service, and the solution is for the relevant authority to charge a new fee to monitor the service in order to improve it, the costs of living and doing business in Singapore may continue to rise. Perhaps, Singaporeans should not complain too much if the result is having to pay more.
F5.March 2003 NORTH-EAST LINE pay more?:
Commuters will find out how much more they will have to pay for trips on the North-East MRT line (NEL) in a few weeks' time, when SBS Transit submits its proposals to the Public Transport Council.
In the Budget debate, MPs asked why it was not possible to have uniform fares across all lines, and the Transport Minister said: "The other MRT commuters, especially those who do not use the NEL, may object to having to pay more to cover the higher cost of the NEL."
Singaporeans living along the NEL have in a sense been at a disadvantage without the MRT for many years. They may now face further disadvantages in having to pay more.
If this principle is applied to future MRT extensions, then new MRT line users may have to keep paying relatively more, as it is likely that costs may be higher due to inflation, state of the art technology, etc.
I would like to suggest that a poll be conducted to find out from Singaporeans what they prefer. I think one of the benefits of getting more Singaporeans involved is to help dispel the notion that issues are decided without taking into account their feedback.
I think most Singaporeans may apply the principle of non sibi (not for oneself), if asked to choose in a poll. Perhaps, Singaporeans could be more involved in the decision-making process on such similar issues in the future.
F6.March 2005 NAMING MRT STATIONS?:
In Kuala Lumpur, the Monorail stations have names like Bukit Bintang Coca Cola and Titiwangsa Telecom because companies pay a lot of money, which I believe is in the millions, to have their names associated with a station.
I would like to suggest that we explore the possibility of having a similar scheme in Singapore to allow companies to bid on an annual or periodic basis for their names to be announced whenever a train stops at a station.
With tens of thousands of commuters seeing daily the station's name with the company's name, it may generate revenue which may be used as a cushion against future MRT fare increases, or may even reduce current fares.
I think the sky is the limit in view of the novelty and impact of the advertising value potential.
For example, I understand that a company is paying the Land Transport Authority (LTA) more than $200 million over 15 years or so for the right to build and manage the advertising panels at some bus and taxi shelters.
If some of this money is given back to bus operators, it may also act as a cushion against future bus fare increases, or even lead to a reduction in current fares. After all, in a sense, this money is derived from bus operations in Singapore.
F7.May 2005 RAISING FARES again?:
SBS Transit has reported net earnings of $13m, and its pre-tax profit was 3 per cent higher at $16.3 million for the first quarter ended March 31, compared to the corresponding quarter last year.
Rail losses in the first three months were merely $1.6 million, 67.3 per cent lower than in the same period last year, and if things continue to improve at the same rate, losses for the full year are expected to be less than half that of last year.
At this rate, the rail business could start turning a profit next year. Non-transport income rose by 8.8 per cent to $5.3 million, total assets rose by 2 per cent to $542.1 million, while total liabilities shrank by 2.7 per cent to $245.7 million, and net asset value per share is 99 cents, up from 94 cents previously.
In view of the above statistics indicating rising overall profits, declining rail operations losses, increasing non-transport income, higher assets and lower liabilities, and an increase in net asset value, how can SBS Transit apply for a fare increase from July 1?
By almost any financial measure, the fare-increase application should not stand on the merits of its application based on financial data prior to the release of its March 31 first-quarter results.
Why is it that the deadline for a fare increase application is just before the release of the first quarter results?
I would suggest that future fare increase deadlines be adjusted to ensure that the most current financial results are reported, and also that the Public Transport Council evaluates the current application using the latest results.
SBS Transit should be asked to re-submit its application to incorporate the latest results.
Putting aside the one-off effect of Sars in 2003, SBS Transit's net profit rose 158 per cent last year. SMRT's full-year net profit jumped 42 per cent to $127 million, compared with $89.5 million a year ago.
In 2002, when SMRT raised fares, its profit increased 27 per cent. In 2003, its profit increased 24 per cent.
If the new formula and criteria were applied in 2002, would the quantum of the last fare hike be justified? As profits seem to keep rising every year since the last fare increase, does it make you wonder whether the fare increase was justified in the first place?
F8.August 2006 PROFITS, PROFITS, PROFITS?:
SBS Transit's announcement that its first-half earnings rose 6 per cent to $26 million has comed just 10 days after its application to increase bus and MRT fares. Once again, its profits have increased, as was the case after the last two fare increases.
I would suggest that the Public Transport Council (PTC) takes the above into consideration in deciding whether to approve its application.
F9.November 2006 FARE CAP only affect less than 1%?:
SMRT has said that "less than one per cent of passengers pays a fare of $1.90 or more. Therefore, having a fare cap would benefit only a small proportion of passengers, while transferring the cost to others."
"SMRT's reason for not having a fare cap as in other countries is somewhat illogical because the fact that less than one per cent pays more than $1.90 means that a fare cap would have very little impact on the other 99-plus per cent who may have to share transferring the cost to others".
It goes against the basic principle of public transport, which is the sharing of costs, so that a minority will not be penalised, since public transport is a necessity for those who cannot afford private transportation.
The main reason why there is normally a fare cap in other countries is to protect the small number of needy, who may be affected most if there is no fare cap.
If we ask the other 99-plus per cent of Singaporeans, I believe they would not mind sharing the cost for the benefit of the needy among the "less than one per cent". Why not conduct a poll of Singaporeans?
In the "Report of the Committee on the Fare Review Mechanism" last year, it noted that average fares in Singapore were lower than in New York, London, and Hong Kong . However, all these cities have fare caps and monthly passes, which Singapore does not have.
The monthly pass recently introduced by SBS Transit is only for travel on SBS buses, and the price is high relative to other cities of the developed countries.
Monthly passes in other cities are typically multi-modal or multi-operator, if there is more than one operator.
The reports also cited the Household Expenditure Survey (HES) 2003 data that the lowest 20 per cent and second quintile group of household income had average monthly household income of $1,279 and $2,651 respectively.
However, the Department of Statistics (DOS) puts the two statistics at $795 and $2,059. Why do the report's statistics differ from the DOS's?
How has this discrepancy impacted on the computations on the affordability of transport fares?
In quick succession this year, the government and its related bodies
announced price increases in bus fares, train fares, road tolls,
parking fees, and now hospital charges. The public has also been put
on notice that the Goods and Services Tax too will be raised next
year to 5%, from 3% currently.
The loudest protests were over the smallest increase of the lot ?bus
fares. This suggested that the criticisms weren't just about money.
More fundamental issues were involved, which I would like to explore
in this essay.
In case you didn't know, I should mention that despite the furore
from the public and stiff questions in Parliament, no rollback of any
of these price increases has resulted.
The immovability of the government has only reinforced the feeling in
ordinary citizens that they are powerless.This disconnection between
the government and the people is a major theme through the last few
decades of Singapore's political history. In the long term, it is
going to be a severe liability for Singapore, but I won't get into
Here, I will look at what the recent arguments reveal about our
Increases necessary to cover costs
Most price increases have been for specific services by quasi-
government organisations, e.g. the Urban Redevelopment Authority and
Jurong Town Corporation (for parking charges), the Land Transport
Authority (for electronic road pricing), or by companies protected by
government regulators (e.g. the bus operators).
The primary argument used has been that these organisations must pay
their own way. The quasi-government bodies, e.g. the URA or the
hospital corporations, may be non-profit, but the transport operators
have to make a profit for their shareholders too. Very often the
government's argument stops just about there. They take it as
inarguably right that these corporations must cover their costs
through sensible pricing.
What more needs to be said? But, to oblige, there is another
argument: Since the above is true, it is better to post small
increases frequently, than big hikes infrequently. Big price jumps
would be harder for people to digest. The fact that the government
thinks the second argument is meaningful already shows insensitivity
This argument about small frequent increases being better begs the
question ?better for whom? It's obvious that it's better for the
government, because small hikes rouse less opposition, and it's
easier to get people used to a small increase quickly, then proceed
to another increase.
For the people, many small hikes, or one big hike, add up to the same
thing. If anything, small frequent increases ease cost discomfort for
these organisations too easily, leaving little incentive to control
Our politicians and bureaucrats are confusing what's good for them
with what's good for the public! This is a serious symptom of
Why are their costs such?
Coming back to the argument that it is inarguably right for each
organisation to cover its costs, it begs the next question, why are
their costs such?
Indeed, this question was raised in the bus fare debate. Commuters
were quite aware of the spending on frills, e.g. fully-airconditioned
bus terminals (the energy consumption!) and expensive plasma screens
on buses and trains that show nothing worth paying attention to.
Meanwhile commuters are packed like sardines because the bus or train
frequency is too low, or they don't run on time.
The government said they benchmark the operators' costs against
international standards, but no details were revealed. The opacity of
the process is another symptom of political failure. The government
has a belief that they are more intelligent, and more often right,
than ordinary Singaporeans. They are reluctant to reveal details of
their decision-making process, because people might use the
information to challenge their supposed infallibility.
Trust us, they are wont to say, we know better than you. We benchmark
these organisations' costs before we approve their price increases.
Well, in an article in the Business Times on 17 September 2002,
columnist Lee Han Shih compared the staff costs of the Housing &
Development Board (the statutory board that builds public housing
here) with City Developments Ltd. CityDev is a publicly-listed
company that builds middle to upper class private condominiums, runs
shopping centres and manages hotels.
Lee Han Shih pointed out that last year, CityDev paid out $531
million in wages to 14,337 employees which also included numerous
foreigners in its worldwide hotel network. This averaged S$37,000 per
From the HDB's annual report for the financial year 2001/2002, we see
Total salaries: S$ 474 million
Staff strength: 8,092
$ per employee: S$ 58,600
HDB and its 3 subsidiaries
Total salaries: S$ 534 million
Staff strength: 9,727
$ per employee: S$ 54,900
Total salaries: S$ 456 million
Staff strength: 8,246
$ per employee: S$ 55,300
HDB and its 3 subsidiaries
Total salaries: S$ 514 million
Staff strength: 9,681
$ per employee: S$ 53,100
CityDev, the private developer that builds middle and upper class
homes and manages 4-star hotels, has a wage bill of $37,000 per
employee. HDB, the public-service provider, has a wage bill 58%
higher, at S$58,600 per employee.
And in the midst of a recession, with zero inflation, the per-
employee figure went up 6% from S$55,300 the previous year, to
One wonders what internal benchmarking the government does. And by
the way, the HDB has an unsold stock of about 17,000 flats, compared
to an annual building rate, until the recession hit, of 25,000 to
30,000 flats. That is, they have 7 to 9 months' inventory. They
aren't a fleet-flooted and efficient business either.
The evil of cost recovery
The government likes to justify financial independence for these
quasi-governmental corporations by referring to commercial practices.
But these corporations enjoy monopoly power to some extent.
The very mantra "cost recovery" is not commercial. Commercial
enterprises cut their cloth to suit the customer. They rely on price
signals to shape their products and internal operations. If
McDonald's feel they cannot get away with charging $9 for a super-
deluxe burger, well, they won't come up with a super-deluxe burger.
Our government bodies work in the exact reverse. They begin by
setting "service standards" whether for buses or TV programming, or
they decide what types and designs of flats to foist on the
population. Not forgetting fancy lift lobbies, and landscaped gardens
(that few ever use). Then they figure out how much these cost. Then
they recover the cost.
In a truly competitive environment, you can't simply charge what you
wish to recover your cost. You have to maximise your internal
efficiencies to live within the revenue the market allows you.
Excoriated about the heartless increase in bus fares, the Public
Transport Council grudgingly agreed to allow new competition on
selected bus routes. The public had argued that competition should
benefit the consumer. Singapore's largest operator of school buses
said they would consider getting into the public bus business.
The PTC then issued a set of "safety standards" that, among many
other stipulations, required the schoolbus operator to have buses
with doors a minimum 1.2 metres wide. This meant the schoolbus
operator could never use their existing fleet. They'd have to spend
millions buying new buses to get a public bus licence. Not
surprisingly, they gave up the idea, and with that, any hope of
Wouldn't there be some commuters quite happy with narrow-doored
vehicles and no airconditioning, so long as fares are kept low?
The standards that are set are the problem. They are the key to costs
. But is there any public debate about what service or product
standards we can live with? Is there any debate about the trade-off
between standards and costs? None. Opacity again. The public are
treated like they are too dimwitted to participate in such a debate.
Meanwhile, the incumbent bus operators decide we all need plasma TV
on every bus and train.
I am told that our public hospitals are directed by two boards:
medical boards and management boards. Medical boards decide on
approved treatment, and the new drugs and gizmos that are needed.
Management boards then scramble to find the cash to buy all these
fancy stuff. Which commercial business runs itself like that?
Ultimately a failure of our top-down political system
The fundamental problem is that we have a government that does not
trust the people, cannot bear the indignity of having to consult
commoners prior to policy formulation, and cannot accept the risk
that in any public debate they may be proven less infallible than God.
With a mindset like this, the political disconnect will never
disappear, never mind how many "Singapore 21" or "Remaking Singapore"
exercises they launch to get public feedback. Feedback is only as
useful as one's readiness to listen, and to engage with the public.
So ultimately, the cost increases are a symptom of a failure of our
political system, a failure that leads to people saying they don't
have any role left in this polity.
Meanwhile in August this year, Prime Minister Goh Chok Tong
challenged Singaporeans to consider whether they are "stayers"
1. Lee Han Shih in his article made a comparison with HDB's wage
bill. However he made some computational errors which HDB pointed out
in its reply. Despite the errors, the thrust of Lee' commentary
remained intact. However, for accuracy, I have not used Lee's figures
here. In this article, I have used the corrected figures, taken from
HDB's own annual report published on the web.
2. Includes CPF pension fund contributions, etc
3. Staff strength as at 31 March 2002 and 31 March 2001 respectively.
4. What standards should be set for public services is another
complex issue, and I don't think Singapore has always got it right.
Another article on this soon...
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