Saturday, January 05, 2019

Big and small economies need different approaches

There are big countries and small countries. There are big economies and small economies.

In a big country with a big economy, it make sense to open up the market for competition. The electricity market can have many producers and distributors, each operating their own facilities and network.

This does not apply to a small country. In a small country, there is insufficient scale to have many producers and many distribution networks.

To open up the energy and telecommunication markets in Singapore for competition does not lead to lower prices. Indeed, it will lead to higher prices, as the cost of competition will add to the final price paid by consumers.

A monopoly in the energy and telecommunication markets will also increase profits due to the excessive profit margin of the provider. However, the provider can be state owned and given the mandate to operate efficiently to bring down the cost to consumers.

It is not difficult to manage a monopoly with the non-profit mandate. There are ways to compare the efficiency of non-profit operations by looking at the indicators, e.g. unit cost of production.

There is also a need to measure the quality of service, but this is not difficult.

For example, immigration checkpoint is run as a monopoly. The service standard can be compared. If it takes twice the time to clear vehicles at the Singapore checkpoint compared to the Malaysian checkpoint, something must be wrong with our efficiency.

Of course, the authority can cook up some excuse, such as the need to be more stringent in checking, but this can also be verified.

Singapore used to be quite efficient in our public service and state owned enterprises, in telecommunication and utilities. The performance has deteriorated in recent decades. The cost has skyrocketed.

Opening up the market for competition is not the solution; indeed, it is the cause of the problem.

Tan Kin Lian










1 comment:

Anonymous said...

Make our life easy and simple ??

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