Thursday, February 23, 2012

Budget 2012: Thoughts on the $1.1 billion Bus Fund

Here is my take on the $1.1 billion that Tharman announced the Government will be setting aside to help alleviate the public transport problem. While there are not many details currently released on how the partnership between the Govt and the PTOs is going to be structured, IMHO the Govt should follow these principles in structuring the public-private partnership.

1. The Government should own what it pays for.

The Government should set up a special purpose vehicle (SPV) to own the buses which it is paying for. Public monies injected into this SPV should be subject to full accounting and audit by the Accountant-General. These monies should not be given to the PTOs as grants because then there is no proper way to track precisely which of these public funds were used for the purchase of buses and which of these funds were used for purchasing the buses for the PTOs or even worse, which of these funds were paid out as dividends to shareholders.

2. Bus Operations should be open to competition.

After the government purchases the buses, it should open the operation of the buses to competitive tender so that the existing operators and other potential new entrants can compete with each other to operate the buses. A competitive tender that is open to new entrants will allow the Government to achieve the most cost effective and efficient outcomes. The operators are free to bid for the operating contracts at prices which allow them to make a sufficient profit.

3. Bus Operations Contracts should be of sufficiently short term such as to ensure competitive efficiency.

If the contracts are too long e.g. 15-20 years then this would engender inefficiency because then the winning operator is not subjected to the risk of being replaced for a pretty long time. If instead the contract is shortened to 3-5 years then the operators will be forced to maintain proper performance standards for fear of replacement if it turns in subpar performance. Furthermore, a shorter operations term will allow the government to renegotiate terms and performance standards on a regular basis rather than being stuck with a long term contract which it cannot change.

4. Bus Operation Contracts should have proper performance metrics and terms and conditions.

The government should stipulate clearly the operating conditions which it wants to implement and the performance standards it wants the public transport system to have. These should be written into through the operator contract. For example, if the government wants the wages of bus drivers to be increased in order to attract Singaporeans, then this should be stated in the conditions of contract and bus operators which are bidding for the contract must be forced to comply. Other performance standards such as waiting times, breakdown frequency etc. should also be stipulated in the conditions of contract, with the bus operator suffering fines and penalties should it fail to comply.

5. Gradually, over time, the entire bus system should be converted into such a system.

Currently, the PTOs own the buses and control the operating conditions, and most importantly, also propose the transport fares! Gradually shifting the entire bus system to one where the government owns the buses and the operators operate on short term contracts allows the Government to take over the fare-setting mechanism, rather than putting the initiative into the hands of the public transport operators. This way, the Government can make the decision regarding transport fares that is in the best interest of the public, rather than one that is driven by the PTO's profit driven motives.


My hunch, however, is that such a system is unlikely to be implemented, because of regulatory capture. The PTOs are all GLCs and they are able to lobby very effectively for policy outcomes that are in their own best interests. They want the new bus fund to contribute to their bottom line as much as possible and are driven by pro lit motives rather than public welfare. To top it off, the PTO executives and board members have easy access to bureaucrats and policy makers. All it takes is a phone call or two and the CEOs of the PTOs can easily have the ear of the CEO of LTA or even the Ministers.

Hopefully the opposition MPs and maybe some of the PAP MPs have the sense to ask the Govt to implement what is in the public interest. Otherwise this $1.1 billion fund is not going to be very effective in alleviating the public transport problems that we have created for ourselves.


Anonymous said...

Totally agree. Public transport operating licenses should be open to rebidding at regular intervals (eg 3 to 5 yrs). Regular checks on service levels should be done by relevant authorities (between MOT, LTA, PTC - seems like each have different responsibilities). Demerit points should be given upon failing to meet service levels. There is no point of saying on bus panels that the bus frequency is 14-19 min @ off-peak times, when the reality is > 30 min to < 50 min.

Bus operators like this should be removed of their licence to operate the routes and open to retender.

Maintaining profits and giving high dividends is the company's problem, but failing to meet service levels is what the authorities should monitor and penalize the transport operator by removing their license.

There is no such thing as unprofitable / less profitable routes deserve frequencies nearing 1 hour.

patriot said...

Waited about One hour and five minutes for a Service 109 Bus outside White Sand Primary School on 1 Mar 2012.
An agonizing wait as it was a hot humid day.


Gintai_昇泰 said...

Are u sure? If ppl wait for MRT Train for more than 5 mins they start to scream and complt!
I think our Pte Transport need to be nationalized ! It's quite obvious that the current system is working. Why the govt is blind to all these? Look at Hong Kong, it's free for all. We shld follow that model.
Sometimes we shld not be stubborn. When we know that things don't work we got to change and innovate to seek new paradigm instead of just mati mati stick to same old ways of doing things.
It seems the current govt will never change their mindset of making more and more money out of citizens. Well if they don't change, we will have no choice but to change them for the betterment of our country! Remember the PAP is just part of the country. PAP is not the country. They don't own this country. What makes them think they can rule us forever? Really langgar!

patriot said...

Me had made a claim for
re-imbursement for the fare from White Sand Primary School to Sengkang East Way near Blk 302.

Result of my claim oni available on 8 Mar 2012. I will make entry here about the result.

Nevertheless, had I got no camel to ride on that day, I could have died of heart attack(anger) or suffered high blood pressure. There was/is no shop around to get a drink and it was really hot that day.

Thank You Fren for your response.


patriot said...

Went to Tampines MRT Station EZ Link Office to check on the Result of my fare claim at about 1710 Hrs on 9 Mar 2012.
Was inform by the Counter Staff that claim is pending as it is awaiting SBS Reply.


patriot said...

Received short message from Transitlink tis morning that my claim of $0.55 is 'approved'.

It is nice of Transitlink to inform claimant for fare refund via sms. AND their Transitlink Counter Staff should be instructed to inform claimants about it. Me had queued to check for result of claim and wasted some precious time.

Case close.