Saturday, 24 January 2015

Singapore - Social Contract Breached

Singapore Public Transport Operators Breach Social Contract
In Breach of Social Contract in Public Transport

Some years back in 1996, it was clearly stated in no uncertain terms that “a kind of social contract (exists) among the Government, the people, and the transport service providers on the kind of land transport system we want”. 

It is another fine example of Tripartism as the organizing basis for Singapore society by nurturing and promoting the partnership between the government, people and private enterprises through dialogue and mutual understanding for long term beneficial benefits.

This sacred Social Contract in Public Transport emphasises a strict sense of social responsibility and social conscience in that “it will NOT leave it entirely to market forces to determine the market structure and fares. Instead, it demanded public transport operators (PTO) to embark on long-term strategic planning, fiscal prudence, and the efficient allocation of resources through market forces.  In essence, competitive market forces shall be leveraged wherever possible to impel and drive PTO to operate in a socially responsible manner by being efficient, productive, improving services continuously and provide value to the commuters (people). 

In return for PTO’s corporate social responsibility in managing public transport, the government (representing the people) would continue to develop and invest in the train and public bus infrastructure, as it does in roads and public works for other road users.  

PTOs as private enterprises are expected to manage the MRT and public buses efficiently and “profitably” insofar as to enable revenue to  recover the use of operating assets while maintaining a socially acceptable level of quality services.  At the same time, they (particularly, for MRT operators) have to set aside and accumulate sufficient reserves, like any prudent management, to replace operating assets fully. 

An examination of recent SMRT Annual Reports reveals that it has grossly inadequate provision in its Reserves for the replacement of operating assets.  Its first set of operating assets is supposed to be replaced in 2017 at a estimated cost of $6.9 billion, and SMRT’s share is to be $1.6 billion with the government paying the rest.  SMRT Reserves has set aside more money for the issue of employees share options and performance shares for Management than for the crucial replacement of MRT operating assets for the continuous benefits and enjoyment of MRT commuters.

Clearly the SMRT, like other PTOs, has no sustainable policy on MRT and public bus assets development. These profit-seeking private companies expect the government ie the people to continue pumping public funds into THEIR operating assets!

In 2013, the government announced that it would inject an awesome S$1.1 billion to help the PTOs purchase 800 brand new buses PLUS helping them finance the operating costs of these buses for the next 10 years. This is in addition to the government’s unceasing efforts in expanding hundreds of kilometer of MRT tracks and builds the associated infrastructure for more MRT stations.

Interestingly, one should note that in 2011, SBS Transit made $36.7 million overall, when included revenues from its other businesses (e.g rail and advertising) but it announced an operating loss of $6 million on its bus business.  Similarly, SMRT made $119.9 million in FY2012, even though its bus operations incurred an operating loss of $11.6 million.

The SMRT is also expected to increase revenues from its new Kallang Wave Mall, 70% owned with NTUC Fairprice, with over 41,000 sqm of retail space. It has already reaped bumper profits from train operations in 2014 as well as from the leasing of approximately 34,000 sqm of commercial space along its rail network, together with 700 shop spaces, 80 event spaces and 16 push carts.

And with fuel costs sharply down and huge bumper profits, both SBS and SMRT apply for fare hikes citing rising costs and lower profits.  Quite unbelievably, it has been announced that public transport fares will increase 2.8% by April 2015.

Affordability, a key Principle of the Social Contract, is defined as “fares had to be realistic and revised periodically to adjust for justifiable cost increases”.  This is breached in the light of the latest arbitrary, non-transparent and unreasonable public transport fare hike.

Non-Affordability is evident from the fact that government has to use S$7.5million of public funds to subsidise the latest fare increase in order to mitigate its impact on more than 1.1 million commuters.  This is tantamount to subsidising the profits of highly profitable private PTO companies.

In fact, the Social Contract in Public Transport has been eroding over the years as the temptation for profits in PTOs precedes their duty of social responsibility. The obsession with profits without social conscience means a “race to the bottom” in terms of public service quality. Without operating assets development and timely replacement, the current MRT and public bus systems are plagued by overcrowding, delays, breakdowns and other manifestations of poor service. Without investing in operating assets, which is another breach of the Social Contract which demands a “Longer Term View”, any amount of fare increases for better revenue is counter-productive for service quality.

We need to have a new Social Contract in Public Transport with more socially responsible National PTOs beyond the current types and model of private obsessive profit-seeker types of companies. We need Public Transport Social Enterprises that have embedded social responsibility values into its leadership and management.  

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