Thursday, February 23, 2012

Govt puts in $1.1B for SBS Transit to buy new buses....

I strongly believe that having a outstanding public transport system is essential. It is an effective way to elevate the quality of lives of many Singaporeans. A high quality public transport system will help to reduce the impact of the large income gap and reduce the demand for cars. I have written many times about our public transport system - the quality of service is not there and the privatization of bus and train services will limit what the govt can do to improve it. Private operators have to answer to shareholders and company decisions will be dominated by the need to make profits. When they build up a cash pile, they rather give it out as dividends than to upgrade their services. The current model means that operators are motivated to just meet the minimum service quality requirements of the PTC (Public Transport Council) to avoid fines and maximize profits for shareholders.

I truly appreciate the efforts of our current transport minister, Liu Tuck Yew, who used the public transport system personally to experience for himself the quality of service during the peak hours of operation. It is also refreshing that unlike other ministers in the past, he did not deny the problems faced by our public transport system using selective statistics to demonstrate that the system is "world class". Liu was on top of the situation when he quickly took charge when the SMRT trains broke down.

Given the services have already privatized, it was unclear to me how Liu would be able to improve the quality of service. The Workers Party suggested that the govt should undo the privatization - something really messy and costly in the short term as the govt would have to pay the shareholders and take over the entire operation.

Liu has decided to make a very bold and controversial move to sink in $1B for SBS Transit for the  purchase new buses. This move has sparked concerns among Singaporeans[Link] because the govt is giving money to a privatized profit oriented company and it is not clear if they will just end up helping the company to enhance its profits as the company can now save some of its own money that it would have had to spend to meet the minimum standards. The current model has left the govt with limited options and poor choices. That is the hazard and disadvantage of "privatizing" something that is "public". Now Liu has to try to "squeeze" as much as possible from SBS Transit and the last thing he wants is the the effects of move to show up on the company's bottom line but not in  quality of service. The bus company also has difficulty getting drivers...[Link] not just buses. The bus company will not be able to spend a billion of its own money on new buses because will not be able justify such a move to shareholders. The next step for Liu and the PTC is to push up the minimum service standard and get SBS Transit to play ball.

This whole episode shows the constraints and limitations the govt faces when it tries to upgrade a public transport system it now no longer controls. The system has been falling short as demand increases and we are still very far from a happy situation - short waiting time, enough empty seats and direct bus routes. These days I'm happy be able to squeeze up a bus. I very often have to stand on the stairs at the entrance - did it 5 times this week. During peak hours, our buses and MRT are not suitable for old folks and pregnant women. Unfortunately, in Singapore, the old folks have to work until they are at an advanced age and they often have to depend on the public transport system to take them to work.


Anonymous said...

Since govt is going to subsidise SBS and SMRT with over $1B of taxpayer money, can govt force SBS and SMRT not to raise fares for the next 5 years? And after that, any fare increase to tie-in with salary increase of the bottom 20% Singaporeans, since the poorer citizens are much more dependant on public transport?

Anonymous said...

in switzerland. The trams or buses run at 7 minutes interval at off peak hour. All trams are stroller and wheel chair or even luggage friendly. There is a section at the end of the tram allocated for the above needs. When the tram doors open, a platform will automatically open to facilitate boarding.

There are button outside the tram for passengers to open the tram doors themselves. Ticketing machines are located at ll tram/ bus stops. The drivers can concentrate on driving alone.

I pity our bus drivers, they need to dispense the tickets and drive on our supper congested roads.

I pity our commuters. I find the tapping in and out of buses hazardous and and not commuter friendly. I saw old people and people with heavy grocery bags, struggling to board and alight the buses. In case you forget to tap out - u will be charged the maximum fare !

Why are the lesser immortal easily robbed legally ?

To me, the 1.1 billion for the bus transport company is like robbing the poor.

Overheard Josephine Teo mentioned that the the 1.1 billion to the bus company is necessary because singaporean can not wait !

LOL, pushing the blame to the lesser mortals again !

Anonymous said...

"These days I'm happy be able to squeeze up a bus."
Lucky Tan

Doesn't matter whether Lucky Tan or whoever happy or not happy about squeezing up the bus or about any other matter.

As long as at least 60% are not happy to vote for the opposition at every election, and which has also become worse since the last election.

Anonymous said...

It does not matter that something or somebody is no good.

More important is that the opponent or competitor is much worse.

Or best of all, no opponent or competitor.

Anonymous said...

It may not be a good or appreciated solution but it is the best available solution. And made by a govt seen as the best available by majority voters.

Anonymous said...

Kudos to Minister Lui for putting money where his mouth is. The bickering over who should pay the bill will not help to solve the current public transportation woes.

Anonymous said...

"Unfortunately, in Singapore, the old folks have to work until they are at an advanced age and they often have to depend on the public transport system to take them to work."
Lucky Tan

If not, how? Give them money to take taxis or better still no need to work?

Anonymous said...

If you got slapped in MRT but did not or cannot fight back, just too bad lah.

Anonymous said...

According to the annual report of SMRT for year 2010,Temasek Holdings owns 55% of SMRT and is considered the major shareholder.

To privatise SMRT and become a statutory board, the government have to shoulder all responsibilities and also deal with all complaints directly.

When SMRT earns huge profits, Temasek Holdings will receive big monies from dividends. Should things goes wrong, SMRT have to resolve them and not the government.

Will there be any compelling reasons for the government to take over SMRT ?

Anonymous said...

The Market Capitalization of SBS transit is only 3.2 Billion SGD

If the govt spends about $1.6 Billion to buy over the remaining company share,it will no longer need to pay dividends to share holders and can use the profits to reinvest new buses

Anonymous said...

"Will there be any compelling reasons for the government to take over SMRT ?"
Anon 23/2/12 15:14

Why not, if there is a change of government which wants to do things differently.

And assuming majority voters have compelling reasons to vote out existing government.

Anonymous said...

how can you reward a company by handing to it $1b when it has chosen to disburse profit as dividends instead of spending the necessary capex to maintain standards in the past?

By rewarding incompetence and mismanagement, how do you expect the company to change for the better?

It can't be a bottomless pit always ready to hand out dividends but get taxpayers to finance its capex.

Anonymous said...

For the govt and the transport companies to come to agreement for the $1.1B of taxpayers monies to be given to buy 550 new buses and the companies buy 250 buses, many rounds of negotiation must have taken place. Guess who holds the bargaining chips ?

Did the govt arm-twisted these companies to agree ? Or these companies have the govt and commuters by the balls that the govt have to forked out $1.1B of public money ?

From GE2011, it is quite clear that public transportation is a major issue. The PAP govt have to deal with this issue.

Unfortunately, since these companies are private enterprises, the govt cannot compel them to invest in more buses since their bus operations are not the money spinners. The only short term solution is to give them a big check to entice them to invest in new buses.

Quite clearly, this situation has demonstrated the weaknesses in turning essential public services over to private enterprises where profit takes precedence over social objectives. And the govt can't doing anything about it unless they are prepared to write big cheques.

I believe this is a perfect backdrop to start a debate over the merits of nationalisation of companies that provide essential public services.

Anonymous said...

So government gives 1.1B of our money to SBS and SMRT to buy buses and improve service levels which will then justify fare increases... This then leads to higher profits and dividends to shareholders of which Temasek owns 55%?

Sounds like taking money from the people and giving it to the government no?

Anonymous said...

SMRT was listed on 26 July 2000
and is owned by :

1) Temasek Holdings PL ( 55 % )
2) other individuals or investors

Reasons to corporatise SMRT :
1) to run as a profit making organisation

2) should SMRT encounter any breakdown or financial problems, no one can point finger directly at the govt because SMRT no longer manage by them.

When the govt provides the 1.1 billion to SMRT, the benefits will go to ;

1) other individuals or investors who DID NOT co - share to pump in any monies into SMRT

2) to win more votes in 2016

Will the govt ever privatise SMRT ? Dream on.

If ever, Minister Liu will have a hard time because right now SMRT acts as a shield for him.

Anonymous said...

Let me understand this.

The government thinks SBS Transit has under-invested in new buses to the tune of $1.1 billion dollars.

So the PAP government is proposing to reward SBS Transit's oversight by giving the profitable bus company $1.1 billion dollars as reward/punishment for under-investment?

If this type of logic can work, than can I say since I did not budget my life savings carefully, the PAP government will likewise punish/reward me with $1.1 billion dollars to ensure my financial well being?

Lye Khuen Way said...

Do not know how to put it strongly enough !
What logic ?
Same model for the Public Listed Bus Operators who have been always profitable as for SMRT ?
Trouble is these Public Listed companies have most of their shareholding with TH or some GLCs.
So unless, as someone suggested, these two Bus Operators freeze their fare for the next 5 years, give concessions to the disabled and ALL students & senior citizens, I cannot see any good outcome.
Mind you, do not buy those "Bendy buses" and are we sure there are sufficient road space ?

Anonymous said...

Simple logic ! Hiring and retrenchment of staff in a public listed company does not involves the government. All the bad image or reputation will fall on the listed co.

Corportization is a sure win formula and easy way out for them to run a country !

Imagine they dont ' t have to operate the company, and as a major shareholder, they have the final say in major decision- making.

If listed co makes monies, temasek holdings collect huge dividends. When mishap occurs, the co has to shoulder the blame completely !

Anonymous said...

The papist Leegime has fucked themselves into a corner. LKY crafted this messy system for Singapore with one aim in mind and that is absolute and total control of Singaporeans.
The world has changed and what they used to do without constrains are now look upon with disdains.

Anonymous said...

Anonymous @ 23/2/12 15:00, there are truly more dumb assholes like you than dogs in SG! Instead, why don't you explain how come dumbasses like you only know how to argue by taking the argument to the extreme?

Anonymous said...

Na! na! na! na!... you kennot ketch me!..

Heads? I win
Tail? I win also!!

Me? scared of losing 2016?.. yu greedy people.. simpletons.. all I need to do is give another of handouts, put more buses on, reduce ERP, and I will still be in control!


Anonymous said...

Lui, not Liu. Totally different.

Anonymous said...

If the govt can't 'undo' the privatization, can they try acquiring majority shares instead?? They will still call the shorts, wun they? And wun it be interesting to find out at the current market price, how many shares can $1b dollar buy?? Hmm.

Jamesneo said...

We should be glad that at least the money is well spent because in the next 10years cars will become totally unaffordable due to the coming high inflation from the coming oil and financial shock that will render most middle class people much poorer. At least the money is not wasted on bank bailouts which only benefit the elites when our own banks and GLC faced big problems in the coming decade.

Anonymous said...

Temasek Holdings is the majority shareholder. What privatization? Isn't it still owned by the government? What is so difficult to nationalize when TH can easily replace the board.

SKYWalkers.SG said...

Just have to follow HK system.
That's all.
PAP just not interested in improving the transport network. Temasek Holdings is not interested to dilute their earnings by opening short haul routes to private bus companies.

If the entire network is not overhauled to increase connectivity, point to point, and restore routes parallel to MRT, the bus crowding situation will never improve.

And all transport operator must have a profit cap, whatever extra must go to a holding fund for driver salaries, then to shareholder dividends.

Shareholder can only expect transport shares to be defensive play, instead of pressuring for higher and higher profits.

Ultimately, a public good can never be allowed to make obscene profits from the public.

Anonymous said...

Looking at the way our govt dealt with accounts in this matter, it is no wonder some stat boards have very lax governance control. To prove my point, we have NEA clerk stealing money, SLA million dollar scandal, SCDF/CNB bribes, previous STTA presidents and many more will certainly stick out its dirty heads in future. I wonder, how all these accounts even passed audit.

Anonymous said...

Temasek is the biggest shareholder. Therefore should it be seen as Temasek taking money from taxpayers and receiving dividends as shareholders?

Anonymous said...

Its OK when they are throwing our tax dollars at privately owned transport operators... more buses for them to make more profit (ultimately for Temasek Holding), and they don't even need to repay a cent for the 'free' buses. On the other hand, PAP calls it "plundering" the reserves when proposed to use that money to help ordinary Singaporeans.

Anonymous said...

PAP should use this money to get shares in those companies and distribute the shares to all citizens.

This is a win-win-win situation. Govt win. Private company win. Citizen win.

If not, this is plundering the reserve for the benefit of private companies.

Anonymous said...

Will the transport companies channel the profit that generate by the new buses to society as charity?

Anonymous said...

did you guys even realize that bus operators don't even bother to wash the buses.. all those smudgy windows covered by advertising.. greedy SBS and SMRT! they don't deserve even a single cent of my tax money!

Anonymous said...

More buses will help to ease the cram but not the jam. Just take a bus during a week day morning peak hours and feel it crawl. Unless car owners give up driving and take the bus, adding more buses will only add to the congestion.

DanielXX said...

educTake a trip around Sammyboy and you will know why some sinkies LOVE crowded buses and MRTs! How dare the garment try to solve the crowded bus problem and remove the sole source of pleasure in their lives!

Anonymous said...

Here in Tokyo, there are 12 million people using the local JR trains and buses.

Buses may be full at times but no one needs to stay on the steps to get to work.

JianWen said...

To me it's not about the number of buses purchased or the amount of money invested in buying buses. No matter how many buses Singapore buys, it will never be enough because the population is constantly increasing with the influx of foreign talents.

The government should decrease the number of foreign talents here instead of increasing the buses. There's a saying: 'Less is more', unless the government never learnt this in their entire life.

Anonymous said...

I would have thought that the $1.1B spent to buy buses is just a form of operating lease to SBS and SMRT.

I.e. govt pay for the buses so that the companies do not need to come up with the capital expenditure. But the govt not stupid, they will lease the buses to SBS and SMRT, not give to them for free! Maybe the govt will profit from this as well, which may mean that we consumers have to pay more!

Xianlong said...

This is State Capitalism (pap style) to enrich state owned enterprises. In doing so, it distorts free market economics.

When old man discovered how easy to suck $$ out of the peasants through state capitalism, he just wants more consumers through imports to suck even more. He never admit his 'stop at 2' mistake which at that time he's scared the economy cannot support a growing population & yet to discover the concept of his pap style state capitalism.

Chan JY said...

It's not just the poorer people. Most people, especially those working in town, are taking public transport. $1B sounds like a lot of money. I'm sure it will buy a lot of buses. Will that be enough? Or will that justify another influx of new immigrants to keep the ridership up? Well, whatever happens, there's no such thing as a free ride.

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