Go with a smile!

Saturday, December 01, 2012

Revolution of the Singapore Transportation system

According to classic neo-liberalist theology oops I mean ideology, private companies always perform more efficiently than government companies. If there is competition, then it will spur the companies to work harder. This is the justification for the government to have privatized the transport companies a long time ago. Unfortunately, transportation is something that has always been handled by the government, instead of the private sector for the reason that they are natural monopolies, and it is very dangerous to hand the reins of natural monopolies to the private sector. So even when you had two major bus companies running side by side with each other, they don’t really compete with each other because they do not service the same routes. To a large extent, they don’t even service the same regions of Singapore.

The recent problems of the transport companies has raised the question of whether it is good or even feasible for the transport companies to remain as private entities, albeit government owned private entities. Leave aside for a moment that there are other issues, such as the failure to come up with a good emergency plan, that aren’t totally related to the financing part. The service level of the transportation services are still functional, although people couldn’t help but notice that the service levels are degrading year on year. The maintenance regimes are also degrading.

One big issue is that it is very politically costly to raise fares on transport services. This cuts away one large portion of the source of financing. To be fair to Saw Phiak Hwa, even though I personally find her repugnant, she managed to use retail store rental to offset the running expenses of the transport system. And it’s not a trivial thing to keep the transport fares from rising as quickly as energy costs. And to be fair to Raymond Lim, even though he largely seemed to be twiddling his thumbs away and doing nothing, he managed to effect the transition to distance based fares and that creates the incentive for people to use the transport system more efficiently, instead of staying on the same bus just so that you can minimise your fares.

The big problem with privatization is this: you are ultimately answerable to your shareholders, not the public. Somebody I was having a debate online with asked me, “why don’t you just spend what you need to spend on maintenance, and only pay out what’s left to the public as dividends?” Because you can’t. Because if you were to report lower profits, or pay lower dividends, all the private investors out there would start dumping SMRT shares, and the capitalization of the company would go down. Then the company would find it even hard to raise cash.

Well this would be a big problem, wouldn’t it? Unless the government was pumping in cash to make sure that a big slump in the share prices of SMRT would not pose a problem for the smooth running of the company. So here’s my theory. The government is thinking about buying back SMRT in order to nationalize it. But they want to fix things so that they don’t spend too much money to buy back SMRT. Instead, they’ll let the share prices drop. But they’ll pump money into the operating expenses in order to keep SMRT afloat. And of course, this plan is a secret because it wouldn’t really work if people were really wise to what’s going on: if they knew that the government was going to buy back the shares, the stock prices wouldn’t go down like they were supposed to do. So you’d allow SMRT to get fucked at the stock markets for a while, and when it’s cheap to buy it back, do it. Sounds like a great idea!

The COI would of course provide some impetus for “organizational change” to take place within the company, for them to refocus and get used to new ways of doing things.

I wrote this article around half a year ago, when there was some degree of debate over the nationalisation of the transport sector. Now those debates have arisen in a fairly unconventional manner. PRC workers going on strike. It doesn't change my belief that this system is straining at the edges. I don't know why people can bear to treat their own guys so badly. In any case, this is case is sensational for a few reasons.

First, it reopens the debate on transport nationalisation.
Second, it is the first strike in more than 25 years.
Third, the first strike in more than 25 years was carried out by Chinese nationals.
Fourth, it opens up the debate on our reliance on foreign labour for jobs shunned by Singaporeans.
Fifth, Chinese nationals have more reason to call us dogs, even though they are not Sun Xu and we can't expel them from NUS. But somehow they think that everybody are dogs, and I don't feel that insulted by that.

First question, what is to be done about the issue? I think that this might usher in a new era where people go for automation rather than cheap labour in order to get things done more efficiently. There will finally be financial pressure in order to drive up human efficiency. I just cannot see it happening that the labour costs for SMRT will go down. Buses need to be run, more buses need to be run, and when Singapore roads get more and more clogged, buses run slower, and more trips need to be scheduled.

Let's face it: Singapore's road system is also not very well designed. It is very difficult to serve buses efficiently. It got better with the design of newer towns, but for the older towns, the problem is that you had a "town centre" and from the "centre" you needed to change buses in order to get to other parts of Singapore. What makes it worst is that the government has long insisted on zoning, thus making sure that many types of buildings are to be found only in the CBD and nowhere else. Thus all traffic goes towards that centre or out of it, instead of a more decentralised structure where everybody travels to everywhere else.

The issue could involve jacking up bus fares for the general public. But jacking up bus fares could be potentially ruinious for the lower class people in Singapore, unless they got subsidised. In fact, I think that the transport companies need to seriously look into fare subsidies for the less advantaged. Unfortunately - the less advantaged in Singapore are also the large hordes of foreigners. So that is one question - how are you going to help the poor of Singapore when so many of the poor are foreigners?

Second question, where are the higher wages going to come from? One simple answer is that when you nationalise, you immediately do away with paying dividends every year, and it could come from those 2-3% (not exact figures) of corporate profits. That is well and good. But what happens when you've used up those 2-3% as well? You'd then have to face the music all over again, right? But the fact is that nationalisation would get ourselves rid of this 2-3% fiscal burden in the first place.

Third question, what are you going to do about the growing disgruntlement of unskilled workers from China who think they are being treated like second class citizens? You can't put them all in jail, and even if you could, the problem is that jail is even less of a disincentive for those people who are foreigners. The situation where a lot of people from China come in to Singapore could in the long term be reversed when the salaries of people from China are raised enough so that you can attract enough people to take their jobs. The problem is that a lot of people in China are developing a real antipathy for Singapore. Eventually there will be a situation like Taiwan where you have two groups of Chinese people who don't really like each other. It would be easy to say that Singapore and China would have had a better relationship if we didn't have to cram that many Chinese nationals into Singapore.

Anyway, I would encourage this strike in Singapore. It doesn't matter who fights for the rights of labour in Singapore, but anybody who does that is doing us a great service. It's high time Singapore thought about weaning itself off cheap labour from less developed countries. I realised that Singaporeans are not all enthusiastic about the strike. Many are, but others feel that there should never be any strikes in Singapore - it doesn't matter whether labourers are treated like shit or not. I think they just aren't very used to the idea.

In Mexico, the bus fares are much higher. In fact, I would say that bus fares in Singapore are probably too low, except that to raise them would be politically very bad for the government. I think a lot of people get to travel free on the buses, but I never figured out who. Students of the University of Mexico like myself get to travel free on the buses by showing their student IDs. But the point is - that's how you create a multi-tiered system, where you can still extract enough fares from the customers, but at the same time you don't kill off your poor people. Buses are run on CNG, which is a new source of energy for America - well the problem is that extracting the natural gas from the wells is very not environment friendly, but it makes running the buses less expensive than normal gasoline. They don't have traffic problems, so buses usually run on time.

Well those are lesser problems, I think. We should be thinking of going down this road.

I don't have any real problems with how the government responds in the short term. I would have said that the right thing to do is to whack the strikers, which they have done. And whack SMRT, which they have also done. Over the long term, they must realise that this system is unsustainable, and they should realise that less than 26 years will pass between this strike and the next one.


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