A friend asked for my view on this matter. This was my explaination to him:
1. SMRT could already be operating at optimal revenue-to-profits curve. 2. SMRT has no plans to buy buses as they do not generate more profits 3. Commuters complain abt SMRT service and government need to do something 4. Hence, government buy the buses for SMRT to operate and bring about a better service to commuters. 5. Since the money is from taxpayers, this means the pubic transport users are being subsidised by the general population (as they include car owners) 6. Alternative method: If government were to force SMRT to buy buses, from a biz point of view, if SMRT has an opportunity to earn more by operating in other contries public transport system, it will uproot its investments in Singapore and invest in other countries.
Hmm, there is one group of people who should applaud the Govt's one over billion bus subsidy, the GLCs who owned the 2 listed transport operators, and the rest of the public shareholders. Great. They could continue to receive huge dividends, esp SMRT shareholders, have the cake and eat it all as well, indirectly milking the subsidy funded by the taxpayers, to increase their bank accounts. And the beauty of it all, these taxpayers indirectly get a rebate on their taxes paid in the form of continuous dividends, partly funded by the subsidy. On hindsight, we should be smiling.
To Soodo: What is a good solution? (playing the Devil's advocate)
To ask SMRT to buy more buses to incur more costs and with no increase in profits. Unless there is a change in the biz's objectives (eg. SMRT becomes a cooperative), the biz will not do it.
It is like asking an employee to increase his working hours from 10 to 12hrs. At the same time, decrease his pay from $3000 to $2700.
An employee will do this only if he has other objectives other than making the most money in the shortest possible time.
If forced onto him, if he has an opportunity to join another company for higher pay and shorter working hours (operate public transport in another country with higher profit margins), he will.
In the long term, this will affect the company's (country's) reputation to businesses.
of course, i am just making general assumptions. I do not have detailed information about the world's public transport profit margin and SMRT's. There are also likely to be other involving factors that i do not know of.
As a company, SMRT is valued for its special expertise/ knowledge and capital investment in Singapore.
If there is a company that is willing to operate at a profit margin lower than SMRT's and can do it with no deterioration in service standards in the long term, I'm sure the Singapore government will choose this operator over SMRT.
Just cannot believe what the DPM/Fiance Minister explained about the result of no Govt's subsidy of that S$1.1B.
Why must these two Private companies ALWAYS make money ? Let me answer for "them". 1) Because they are not so public ( >>50% owned by TH = Governmnent) 2) Because it was "promised" by someone long ago that they will pay good dividends.
There is now no better reason to Nationalise these essential services. What competition are we talking about ? What efficiency & efficient allocation of resources have been achieved so far ?
Then how about we invite foreign talents in the form of foreign bus companies. Those with world class expertise from large and dense cities like e.g. Tokyo, Hong Kong, San Francisco.
Tell them we will give them $1.1 billion dollars to buy the buses. They only need to bring in their expertise.
Then they can compete in tender exercise against SMRT and SBS Transit to see who can offer the Sinkies a cheaper, better, faster alternative.
Like this enough meritocracy, transparency, accountability and foreign talent or not?
Like this can say got no welfare mentality or not?
To Soodo: Regarding your suggestion: 1. I am thinking whether it is viable for a new company to operate just 800 buses. And how well and less expensive they can do that without any existing supports? Eg. Existing group of management, building for offices, existing carparks that can be shared. 2. Is Public transport management a strategic area that Singapore needs to develop as its own expertise (eg. Defence)? In the long term, is it better for Singaporeans to develop this home-grown expertise than to put it in the hands of foreign companies? Again, I am just commenting without having comprehensive knowledge of the matter.
One public suggestion was to nationalise SMRT. One disadvantage is the nationalised company will lose the chance to be able to operate public transport systems outside Singapore. This chance can potentially help SMRT to learn and eventually become a more efficient globetrotting company.
Dear cd-rom Thanks again for your thoughtful reply.
Your first point about cost of land and building. This opens up a new can of worms. Since government owns 90% of land and buildings (including our HDB flats). Hence land use and price up to owner/government's discretion. Nothing is going to change so let's not go there.
Your second point respectfully does not hold water. I say we nationalize SMRT and SBS Transit now. When our local talents are ready to go overseas to compete, they can always tells us. Then like HDB's Surbana, they can go overseas and compete.
There is some speculation in the Internet that this expenditure is necessary because the MRT is in quite a bad condition, due to poor standard of maintenance.
If this were the case, it would be nice for the Government to come out and admit this "fact" rather than try to hide it. An honest approach might even win support and understanding from the citizens.
As it is now, there is so much wild speculation and distrust. This is not good.
Hi Mr. Tan,
ReplyDeleteA friend asked for my view on this matter. This was my explaination to him:
1. SMRT could already be operating at optimal revenue-to-profits curve.
2. SMRT has no plans to buy buses as they do not generate more profits
3. Commuters complain abt SMRT service and government need to do something
4. Hence, government buy the buses for SMRT to operate and bring about a better service to commuters.
5. Since the money is from taxpayers, this means the pubic transport users are being subsidised by the general population (as they include car owners)
6. Alternative method: If government were to force SMRT to buy buses, from a biz point of view, if SMRT has an opportunity to earn more by operating in other contries public transport system, it will uproot its investments in Singapore and invest in other countries.
Hmm, there is one group of people who should applaud the Govt's one over billion bus subsidy, the GLCs who owned the 2 listed transport operators, and the rest of the public shareholders.
ReplyDeleteGreat. They could continue to receive huge dividends, esp SMRT shareholders, have the cake and eat it all as well, indirectly milking the subsidy funded by the taxpayers, to increase their bank accounts.
And the beauty of it all, these taxpayers indirectly get a rebate on their taxes paid in the form of continuous dividends, partly funded by the subsidy.
On hindsight, we should be smiling.
Private assets, public debt.
ReplyDelete@ cd-rom.
ReplyDeleteHow about I set up a $2 paid up capital, private "bus" company.
And then I get $1.1 billion dollars from Singapore's reserves to buy my buses.
Can or not?
If not, why not?
To Soodo: What is a good solution? (playing the Devil's advocate)
ReplyDeleteTo ask SMRT to buy more buses to incur more costs and with no increase in profits. Unless there is a change in the biz's objectives (eg. SMRT becomes a cooperative), the biz will not do it.
It is like asking an employee to increase his working hours from 10 to 12hrs. At the same time, decrease his pay from $3000 to $2700.
An employee will do this only if he has other objectives other than making the most money in the shortest possible time.
If forced onto him, if he has an opportunity to join another company for higher pay and shorter working hours (operate public transport in another country with higher profit margins), he will.
In the long term, this will affect the company's (country's) reputation to businesses.
To Soodo:
ReplyDeleteof course, i am just making general assumptions. I do not have detailed information about the world's public transport profit margin and SMRT's. There are also likely to be other involving factors that i do not know of.
To Soodo: Your idea- I think 'no'
ReplyDeleteAs a company, SMRT is valued for its special expertise/ knowledge and capital investment in Singapore.
If there is a company that is willing to operate at a profit margin lower than SMRT's and can do it with no deterioration in service standards in the long term, I'm sure the Singapore government will choose this operator over SMRT.
Just cannot believe what the DPM/Fiance Minister explained about the result of no Govt's subsidy of that S$1.1B.
ReplyDeleteWhy must these two Private companies ALWAYS make money ?
Let me answer for "them".
1) Because they are not so public ( >>50% owned by TH = Governmnent)
2) Because it was "promised" by someone long ago that they will pay good dividends.
There is now no better reason to Nationalise these essential services. What competition are we talking about ?
What efficiency & efficient allocation of resources have been achieved so far ?
@ cd-rom
ReplyDeleteThanks for your kind response.
Then how about we invite foreign talents in the form of foreign bus companies.
Those with world class expertise from large and dense cities like e.g. Tokyo, Hong Kong, San Francisco.
Tell them we will give them $1.1 billion dollars to buy the buses.
They only need to bring in their expertise.
Then they can compete in tender exercise against SMRT and SBS Transit to see who can offer the Sinkies a cheaper, better, faster alternative.
Like this enough meritocracy, transparency, accountability and foreign talent or not?
Like this can say got no welfare mentality or not?
To Soodo: Regarding your suggestion: 1. I am thinking whether it is viable for a new company to operate just 800 buses. And how well and less expensive they can do that without any existing supports? Eg. Existing group of management, building for offices, existing carparks that can be shared. 2. Is Public transport management a strategic area that Singapore needs to develop as its own expertise (eg. Defence)? In the long term, is it better for Singaporeans to develop this home-grown expertise than to put it in the hands of foreign companies? Again, I am just commenting without having comprehensive knowledge of the matter.
ReplyDeleteOne public suggestion was to nationalise SMRT. One disadvantage is the nationalised company will lose the chance to be able to operate public transport systems outside Singapore. This chance can potentially help SMRT to learn and eventually become a more efficient globetrotting company.
ReplyDeleteDear cd-rom
ReplyDeleteThanks again for your thoughtful reply.
Your first point about cost of land and building.
This opens up a new can of worms.
Since government owns 90% of land and buildings (including our HDB flats).
Hence land use and price up to owner/government's discretion.
Nothing is going to change so let's not go there.
Your second point respectfully does not hold water.
I say we nationalize SMRT and SBS Transit now.
When our local talents are ready to go overseas to compete, they can always tells us.
Then like HDB's Surbana, they can go overseas and compete.
http://en.wikipedia.org/wiki/Surbana_Corporation_Pte_Ltd
There is some speculation in the Internet that this expenditure is necessary because the MRT is in quite a bad condition, due to poor standard of maintenance.
ReplyDeleteIf this were the case, it would be nice for the Government to come out and admit this "fact" rather than try to hide it. An honest approach might even win support and understanding from the citizens.
As it is now, there is so much wild speculation and distrust. This is not good.