The document discusses Singapore's shifting public transport model away from a regulated franchise system towards one with greater state involvement. It describes how the government is taking on ownership of fixed assets like trains and buses, and shortening operator contracts. This approach is similar to models used in London and other cities where operators bid for contracts with clear service standards. While nationalization raises concerns about efficiency, the current system in Singapore also faces issues, and greater state ownership may help address problems like rising subsidies.

1. By CHRISTOPHER TAN
SENIOR TRANSPORT CORRESPONDENT
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S
HOULD public transport
be nationalised? The
question crops up now
and again, and not only
in Singapore.
About three years ago, Britain
nationalised a London-to-Scot-
land rail service after persistent
calls by MPs, only to announce
last month that it will be returned
to the private sector.
In Singapore, MPs have of late
been asking if public transport
can or should be nationalised.
MPs Baey Yam Keng (Tampi-
nes GRC) and Lily Neo (Tanjong
Pagar GRC) were among those
who raised the question in Parlia-
ment recently. This followed
strong lobbying by the Workers’
Party, who argue that the wheels
seem to be falling off our partly
publicly-funded, privately-operat-
ed – and once well-run – system.
The two public transport com-
panies continue to reap relatively
handsome profits against a back-
drop of deteriorating service
standards: overcrowding, rail
breakdowns and buses which are
seldom punctual despite repeated
attempts to fix the problem.
Non-Constituency MP Gerald
Giam of the Workers’ Party made
a strong argument for nationalis-
ing public transport in an op-ed
piece published in The Straits
Times in July 2011, where he reiter-
ated his party’s call for a govern-
ment-owned non-profit National
Transport Corp (NTC) to run rail
and bus services.
“A well-managed NTC can pro-
vide superior outcomes compared
to the present profit-oriented mo-
nopolies,” he wrote.
Transport Minister Lui Tuck
Yew has stoutly defended Singa-
pore’s current system, arguing
that nationalisation may lead to
higher fares and a heftier burden
on taxpayers at large.
While the debate may continue
on whether nationalisation is the
answer to our public transport
woes, Singapore is already mov-
ing closer to a situation where the
state takes on a far larger role
than it ever has.
In 2010, a Bill was passed to
change the rail-financing frame-
work, which essentially puts all
fixed and operating assets under
state ownership and shortens ser-
vice contracts to operators. The
latter will then be left to focus on
running and maintaining the sys-
tem, with the threat of being re-
placed if standards are not met.
SBS Transit became the first op-
erator to come under this new
framework when it clinched a con-
tract in 2011 to run the upcoming
Downtown Line for 15 years – far
shorter than the current rail con-
tracts of 30-40 years.
Last year, the Government
made a tentative move in the
same direction for buses when it
announced a $1.1 billion plan to ex-
pand the public bus fleet. It also
said operators will get advertising
revenue from bus stops, and that
bus depots and parking spaces
will be built by the state.
Then in February, the Land
Transport Authority put out a ten-
der inviting private transport com-
panies to bid for a Jurong
West-to-city service contract.
The winning firm will run the
so-called City Direct Service for a
fixed sum, while the Government
collects the fare revenue.
This is a profound change from
the current system, in which oper-
ators assume the revenue risk.
These moves mark a shift from
a regulated franchise regime to
one where the state does proac-
tive planning (such as bus routes)
and operators bid for service con-
tracts with clearly spelt-out ser-
vice standards, as practised in cit-
ies such as London, Stockholm,
Copenhagen, Seoul and Perth.
This is just one step away from
nationalisation. Interestingly,
many transport firms actually pre-
fer it because it removes revenue
uncertainty and hefty capital ex-
penditure for asset renewal.
Associate Professor Paul Bar-
ter, who teaches transport policy
at the Lee Kuan Yew School of
Public Policy, feels this is a better
system and one that allows for a
“more elegant way” for subsidies
to be handed out.
For instance, the $1.1 billion
bus plan, which includes operat-
ing costs and driver salaries for 10
years, drew flak. Critics, from
MPs to the man in the street, ques-
tioned why tax money is used to
subsidise private and profitable
companies. The Government says
it is actually to “subsidise com-
muters” and that revenue generat-
ed from the investment will be
ring-fenced so that operators do
not benefit financially from it.
A recent move by the Govern-
ment to pay for pre-morning peak
free travel drew similar criticisms
from observers, who questioned
why taxpayers are paying for oper-
ators’ capacity shortfall.
If buses and other operating as-
sets were owned by the state in
the first place, there would be less
cause for such doubts.
In such a model, it is foreseea-
ble that operators will have thin-
ner profit margins because they
will assume less risk. This should
go down well with the public.
SMRT chief executive Des-
mond Kuek is in favour of the new
regime. In a recent interview with
The Straits Times, Mr Kuek re-
vealed that SMRT had made its
submission to the authorities on
adopting the new system, which
he describes as “superior”.
It “gives better clarity on who
owns what”, Mr Kuek says, add-
ing that SMRT will also have a
less “lumpy” capital expenditure
pattern with the new format.
Insiders at SBS Transit are also
in favour of the state being the
owner of all transport assets.
“We can focus on running the
system and meeting service stand-
ards, and the Government can de-
cide on how many trains and bus-
es it wants to buy and who it
wants to give subsidies to,” a sen-
ior executive says.
Indeed, the issue of subsidies is
cropping up with some regularity
now. Concessions are being con-
sidered for polytechnic students,
the disabled, those with low in-
come and even children not yet in
primary school who are taller than
0.9m, the limit currently set for
free bus and train travel.
The Fare Review Mechanism
Committee headed by Mr Richard
Magnus is also considering a
monthly adult travel pass to cap
travel expenses for average-
income families.
While a nationalised entity will
be equally well placed to decide
on subsidies, history has shown
that state-run public transport
systems generally fare poorly.
Prof Barter says they tend to be
“inefficient and overstaffed, as in
parts of India and North Ameri-
ca”. The late British prime minis-
ter Margaret Thatcher recognised
the inefficiency of state-run enti-
ties, and went on a privatisation
spree when she was in power.
That however, led to unfet-
tered competition, cherry-picking
of routes and diminished service
standards outside London. Singa-
pore experienced this before SBS
Transit was formed in 1973.
So, it would appear either ex-
treme model can be problematic.
But National University of Singa-
pore transport economist Antho-
ny Chin says any model can work
if it is well run and regulated.
“It’s the institutional and gov-
ernance structure which you put
in place,” he says. “For example,
Singapore Airlines and PSA are
contrasting cases. The former
commercial and listed, and the lat-
ter for all intent and purpose a na-
tional corporation which is effi-
cient.”
christan@sph.com.sg
S
INGAPORE is looking to
London as an example to
follow. But it has not
been smooth sailing for
the British city. It went
from private to nationalised to pri-
vatised to the contracts model.
Before the 1930s, London’s
public transport was pretty much
private and laissez-faire.
From 1933 till 1984, the system
was in various forms of state own-
ership, according to a 2006 report
by Mr Richard Pond of the Lon-
don Metropolitan University.
When the late Margaret That-
cher became prime minister in
1979, she began “the sale of state
industries and the introduction of
market forces into sectors that
had been dominated by state mo-
nopolies”, the report reads.
The London bus industry went
through several stages of liberali-
sation and privatisation, with bus
routes outside London fully dereg-
ulated by 1985. Today, the vast
majority of bus routes – tendered
out by the state – are run by a
number of private companies, in-
cluding Metroline and FirstGroup.
London Underground, howev-
er, remained under state owner-
ship but the track infrastructure
and maintenance were farmed out
to public-private partnerships.
The present model seems to be
working well, and is emulated by
many cities across the world.
Sir Peter Hall, a professor of
planning and regeneration at Uni-
versity College London, says: “I
think there’s general agreement
that the London model – franchis-
ing the bus service to various oper-
ators with strict control over ser-
vice levels – has worked brilliant-
ly, while the total deregulation in
the rest of the UK has not. Curiti-
ba and Bogota have used the Lon-
don model successfully.”
But detractors have called the
system inefficient and wasteful,
citing soaring state subsidies for
bus trips. Subsidies have, accord-
ing to a government report, risen
from £24 million or 2p per passen-
ger trip in 2001 to £393 million
(S$740 million) or 17p per passen-
ger trip last year.
At the same time, bus commut-
ers pay a flat £2.40 per ride if
they pay cash – hefty by many
standards. (Trains cost more.)
Associate Professor Paul Bar-
ter, who teaches transport policy
at the Lee Kuan Yew School of
Public Policy, points out, howev-
er, that card payments are much
lower (£1.40), and many commut-
ers travel for free. These include
those over 60 years, the disabled,
and children up to 15. Those be-
tween 16 and 18 pay concession-
ary rates. Card users also enjoy a
daily cap of £4.40 regardless of
the number of trips they make.
Observers reckon this may be
the way Singapore is headed if it
adopts the London model.
But first, the bus sector will
have to undergo a dramatic
change. Perhaps along the lines of
the restructured rail industry,
with a new financing framework.
Government Parliamentary
Committee for Transport chair-
man Cedric Foo paints this scenar-
io: “This is how it works. Public
transport operators (PTOs) will
sell all the expensive assets like
rail cars, buses and heavy mainte-
nance equipment to a public trust.
“In turn, the PTOs will lease
the assets from the trust accord-
ing to a public tariff. Against a set
of operating standards, prospec-
tive PTOs will bid for a parcel of
service every five years or so.”
The operator with the lowest
bid and reasonable track record
wins the contract, while the Gov-
ernment keeps fare revenue.
Meanwhile, Transport Minister
Lui Tuck Yew says the Govern-
ment is looking at various other
options, including a co-op model.
“We are always on the lookout
for other possibilities... If there
are interested entities like NTUC
who may perhaps offer to run part
of the bus system... this is certain-
ly something we will be prepared
to look at very, very carefully,” he
told Parliament in February.
CHRISTOPHER TAN
The Government last year unveiled a $1.1 billion bus fleet expansion plan. In addition, operators will get revenue from bus-stop ads, and bus depots and parking spaces will be built by the state. ST FILE PHOTO
London franchises the bus service to various operators with strict control over service levels. Its system is emulated by
many cities but detractors have called it inefficient and wasteful, citing soaring state subsidies. PHOTO: REUTERS
FIVE MAIN PUBLIC TRANSPORT MODELS
Source: PAUL BARTER, 2008
State has strong
interest in outcomes
State has less
interest in outcomes
Public
monopoly
(nationalised)
Proactive
planning
with service
contract
Well-
regulated
franchise
Passive
franchise
Deregulation
(fully
privatised)
ST GRAPHICS
This is the fourth of 12 primers on various current affairs issues, which will be published in the run-up
to The Straits Times-Ministry of Education National Current Affairs Quiz.
PRIMER
A step closer on road to nationalisation
THE SINGAPORE PERSPECTIVE
London leads way but
overhaul needed first
WORKING MODEL
I think there’s general
agreement that the London
model... has worked brilliantly.
– Sir Peter Hall, of University
College London
A20 OOPPIINNIIOONN M O N D A Y , A P R I L 2 2 , 2 0 1 3