I am irate by the recent spate of train breakdowns and some horrifying bus accidents [Link] in the month of April. Not only by the direct impact of these breakdowns and accidents that affect human lives, time, cost and productivity, but also of the fact that commuters and taxpayers are taken for a ride by private transport companies and relevant government bodies.
Despite being slapped with a price hike (Sep 2011) in exchange of a promise of enhanced level of service, commuters are told to endure persistent train breakdowns/disruptions and the increasingly unreliability of our train and buses--I personally have the fortune to encounter a total of 4 breakdowns and accidents within a year on SMRT buses as a less-than-regular bus commuter. In addition to the price hike, respective bills of $1.1 billion to purchase buses and $900 million (co-share between SMRT and LTA) to fix train problems will be further charged to public funds.
To further rub salt into the wounds, Singaporeans were being blamed for the use of $1.1 billion public funds as Singaporeans “don’t want to wait so long” as described by Ms Josephine Teo [Link]. On the contrary, Singaporeans have waited many, many years, long enough before the 2 massive train breakdowns in December 2011. Prior to that, all feedback on excessive crowdedness on our public transport was disregarded as noise.
Persistent train breakdowns do not occur overnight but more as the consequence of prolonged negligence and lack of robust maintenance, coupled with the ill-preparedness of SMRT towards increased ridership as a result of the large influx of immigrants. In simple term, our public transport system has been overloaded. Nothing substantial was done to cope effectively in meeting increased demand apart from introducing price hike.
Both SMRT and SBS are afterall public-listed private companies. They charged commuters for their transport service, using public-funded infrastructure. However, as private companies, they share their profits among their shareholders yet expecting public funding to bring their ever-deteriorating service level to an acceptable level.
Is this not socializing costs and privatizing profits over here?
It should not be what PM Lee Hsien Loong has remarked [Link], that the government has “to allow transport companies to break even and to make reasonable profits”, as it is neither the responsibility of the government nor the public in ensuring “reasonable” profits for private companies where profits are retained within its shareholders.
SMRT and SBS are far from struggling to break even (See Figs. 1 and 2). Moreover, where do we draw the line between reasonable and unreasonable profits? How much do these companies want? Do they want $50 million, $200 million or $2 billion a year?
Fig. 1 Net profit of SMRT for financial years between 2002 and 2011.
Fig. 2 Net profit of SBS for financial years between 2002 and 2010.
Operating costs versus net profit
Between 2002 and 2008, SMRT (See Fig. 3) has been gaining year-to-year increase in net profit, peaking at approximately $161 million for the years 2009, 2010 and 2011 respectively. In a span of a decade, net profit has risen almost three times of that in 2002. Although operating costs have been rising over the years, it has not been rising proportionately to its net profit growth.
Between 2008 and 2011, during which we witness a growing population and thriving tourism, the percentage of operating costs incurred against net profit rose surprisingly small. The proportion spent on operating cost as compared to net profit, is less than that in 2002 where ridership was much lower than in 2011. We have to come back to the same question again: how much profit does SMRT want?
Fig. 3 Net Profit of SMRT for financial years between 2002 and 2011.
Conflicts of interests: public, private and government (Temasek Holdings)
From a SMRT shareholder perspective, SMRT has witnessed almost three times increase in its basic earnings per share (Fig. 4). It rose from 3.8 cents in 2002 to 10.6 cents within a decade. Shareholders stand to gain on earnings per share while commuters experience a fall in service level on our trains. From overcrowded to frequent breakdowns/disruptions. Apparently, the welfare of shareholders surpassed that of the commuters. This is a clear demonstration of the conflicts of interest between the general public and the private companies involve in public transport.
Fig. 4 Basic Earnings Per Share of SMRT
Adding to the confusion is the fact that SMRT is 54.28% (as of 16 May 2011) owned by Temasek Holdings, a government investment body. It has to account to Temasek Holdings which is its biggest shareholder. Are there not a huge conflict and a confusion of roles between the public, private companies and government over here?
While it is the government’s role to protect the public’s interest, it also demands SMRT to maximise profits at the expense of the public so as to contribute substantially towards annual net profit. Where does the government’s interest genuinely lie then? With the people or with the private company? Such overlap of roles does not bode well for our public transport system.
Unavoidable and unacceptable
It is “unavoidable” that a profit-driven private company has more to account to its shareholders than its customers.
Precisely such is unavoidable, that it is the sole responsibility of relevant government bodies to ensure stringent monitor on these privately-owned public transport providers. As a responsible and vigilant regulator, it should pre-empt problems instead of waiting for them to surface. And when problems occur, neither should it lower the public’s expectations so as to condone breakdowns and disruptions which could be avoided in the first place.
While understanding that some disruptions are unavoidable, nevertheless, it is not an excuse to disguise irresponsible regulation and negligence. Ultimately, lowering commuters’ expectation does not resolve the actual problems on the grounds.