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Competition? SBS and SMRT are operating as ‘cartels’ to fix prices in public transport
July 15th, 2011 |
Author: Online Press
In a posting made on his Facebook recently, Transport Minister Lui Tuck Yew explained why nationalizing public transport will lead to higher fares and reduced productivity:
“A nationalised public transport operator (PTO) that depends on government funding and which operates on a cost recovery basis would have little incentive to keep costs down. Cost increases will be passed on to commuters. Over time, this will lead to higher costs for the same level of service, which means commuters pay higher, and not lower fares. Not only would people have to pay more, nationalising the operators could result in a stagnation of service quality or efficiency over time.”
It is disingenuous of Mr Lui to even suggest that SBS and SMRT are ‘private’ transport operators in direct competition with each other. On the contrary, both of them are operating effectively as ‘cartels’ to fix prices which explain they almost always submit their proposals together to the Public Transport Council (PTC) to raise bus and train fares.
Such a scenario will be an anomaly in a free market where private transport companies compete with one another to provide the best service to commuters at the lowest possible price which will help keep the fares in check. If one transport company raise its fares while the others do not, it will surely lose customers.
Both SBS and SMRT do not have such worries as they raise their prices in tandem with each other to ensure that they do not lose customers.
Furthermore, SMRT enjoys an absolute monopoly over the mass rapid transit system in Singapore while SBS Transit owns more than 80 percent of the public buses on the road. They do not have any near competitor at all.
SMRT and SBS are hardly considered as private companies. SMRT itself is owned 54 percent by giant sovereign wealth fund Temasek Holdings while SBS Transit is a subsidiary of Comfort Delgro which was formed from a merger between NTUC Comfort and Delgro group in 2002.
Using Mr Lui’s rationale, increased competition will help to drive costs down further and therefore he should inject some real competition into the public transport sector by giving small bus companies a slice of the pie.
In Hong Kong, the green and red-top minibuses are run by private companies. For a beginning, Mr Lui can consider allowing such minibuses run by private operators to ply short-distance routes in individual HDB estates to provide direct competition to SBS Transit’s feeder bus service.
SMRT’s monopoly can also be craved up by allowing private companies not controlled by Temasek Holdings to run the LRT trains instead.
It’s time Mr Lui walks his talk by injecting much needed competition into the public transport sector which has been monopolized for far too long by SBS and SMRT.
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In a posting made on his Facebook recently, Transport Minister Lui Tuck Yew explained why nationalizing public transport will lead to higher fares and reduced productivity:
“A nationalised public transport operator (PTO) that depends on government funding and which operates on a cost recovery basis would have little incentive to keep costs down. Cost increases will be passed on to commuters. Over time, this will lead to higher costs for the same level of service, which means commuters pay higher, and not lower fares. Not only would people have to pay more, nationalising the operators could result in a stagnation of service quality or efficiency over time.”
It is disingenuous of Mr Lui to even suggest that SBS and SMRT are ‘private’ transport operators in direct competition with each other. On the contrary, both of them are operating effectively as ‘cartels’ to fix prices which explain they almost always submit their proposals together to the Public Transport Council (PTC) to raise bus and train fares.
Such a scenario will be an anomaly in a free market where private transport companies compete with one another to provide the best service to commuters at the lowest possible price which will help keep the fares in check. If one transport company raise its fares while the others do not, it will surely lose customers.
Both SBS and SMRT do not have such worries as they raise their prices in tandem with each other to ensure that they do not lose customers.
Furthermore, SMRT enjoys an absolute monopoly over the mass rapid transit system in Singapore while SBS Transit owns more than 80 percent of the public buses on the road. They do not have any near competitor at all.
SMRT and SBS are hardly considered as private companies. SMRT itself is owned 54 percent by giant sovereign wealth fund Temasek Holdings while SBS Transit is a subsidiary of Comfort Delgro which was formed from a merger between NTUC Comfort and Delgro group in 2002.
Using Mr Lui’s rationale, increased competition will help to drive costs down further and therefore he should inject some real competition into the public transport sector by giving small bus companies a slice of the pie.
In Hong Kong, the green and red-top minibuses are run by private companies. For a beginning, Mr Lui can consider allowing such minibuses run by private operators to ply short-distance routes in individual HDB estates to provide direct competition to SBS Transit’s feeder bus service.
SMRT’s monopoly can also be craved up by allowing private companies not controlled by Temasek Holdings to run the LRT trains instead.
It’s time Mr Lui walks his talk by injecting much needed competition into the public transport sector which has been monopolized for far too long by SBS and SMRT.
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