The National Solidarity Party (NSP) refers to the Transport Minister's announcement on 21 May 2014 captioned 'Transition to a Government Contracting Model for the Public Bus Industry'. This announcement which specified a new Bus Contracting Model (BCM) for the provision of public transportation, seeks to nationalise assets but privatise operations.
In 2011, NSP highlighted that it would be unrealistic to expect state-run organizations, usually large and cumbersome, to be able to respond speedily to rapid changes in demand, and that what is needed is more competition. We proposed a route licensing scheme. [Ref: NSP press releases dated 26 July 2011 and 1 August 2011]
There is one distinct difference between the BCM scheme and NSP's route licensing scheme proposal. While both are contracting models for bus operations, NSP’s proposal is premised on the buses being owned by the bus operators. Whereas the Transport Ministry's BCM scheme will see all bus operating assets including the buses being owned by the Government.
In such a scenario, what will be the role of public transport operators? Merely to function as labour suppliers for the bus system the Government owns?
SMRT Corporation's bus operation reportedly lost $28.4 million in the financial year 2013 and Comfort DelGro registered an operating loss of $14.3 million in the same year. The BCM is an excellent exit strategy provided for the public transport operators to shed operations and assets that are not lucrative and which depreciate every year.
Since the announcement of BCM, the price of SMRT Corporation and Comfort DelGro shares have reached highs never seen in many months. Foreign land transport operating companies have also expressed interest in entering the fray- all signs pointing to the fact that the current public transport operators expect to reap a handsome profit under the BCM scheme, without bearing sufficient risks for running the business.
Through the Bus Service Enhancement Programme (BSEP), the Government will spend $1.1 billion to add 800 buses to the existing fleet of about 4,000 buses owned by the two public transport operators [link]. With the BCM, the Government will be responsible for these buses.
Our population today stands at 5.4 million and the Population White Paper estimates that this will increase every year until it reaches 6.9 million in the year 2030. The population increase will mean that the buses currently in operation will be insufficient as we go forward, and the Government will have to buy more buses to add to the almost 5,000 buses we have now to cater to the increasing population and new routes.
The Land Transport Authority has indicated that it has not decided whether to buy all existing buses, or acquire them when they are due for replacement. There are, however, many unanswered questions with the BCM scheme:
- If the Transport Ministry decides to buy the existing fleet of buses from the two operators, how will it determine fair value?
- How many more buses will the Government need to add to the existing fleet to cater to the population growth?
- If 800 buses under the BSEP cost us $1.1 billion, how much will it cost to replace an aging fleet of buses and to get new buses?
- What about the costs of repairs and maintenance?
- Will multiple operators be allowed to run in each of these bundled packages, or will only one operator have exclusive right in the bundled package that it successfully tendered for?
- If each bundled package has only one operator, how will efficiency increase and waiting times decrease if there is no real competition in the routes?
There is a real risk that even as operators enjoy the profits, costs will be passed down to the commuters and/or tax-payers under the BCM scheme.
The Prime Minister in his Speech in Parliament on 28 May 2014, indicated that this would be a possibility when he reportedly said that while the Government will continue to subsidise public transport [Link], commuters must be prepared to pay their share.
NSP is unsure how the BCM will benefit commuters and whether the BCM will burden commuter and/or taxpayers with higher costs.
The Government should seriously re-consider our earlier proposal - the route licensing scheme - to introduce more competition and to further liberalise the Public Bus Industry.
Jeannette Chong-Aruldoss, Secretary-General
On behalf of the 15th Central Executive Committee
of the NATIONAL SOLIDARITY PARTY