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Tuesday, July 12, 2011
The flipside of privatisation....
Two pieces of news appeared recently:
1. Transport Operators seek fare increase [Link].
2. Govt finding ways to integrate private and public healthcare[Link]
In the past 2 decades, many govts including the PAP believed that privatisation of govt services will bring about greater efficiency in the provision of these services. While it is true for the initial years after privatisation, the efficiency gains quickly tampers off while the profit motive of these privatised enterprises stick around forever.
About a decade ago, the PAP govt had this idea to turn Singapore into a medical hub for the rich in the region. More private hospitals were build. Resources shifted from public hospitals to the private sector to treat foreign patients and the rich. If you go to a public hospital to visit someone today, you will find that the hospitals almost every single hospital bed is filled. If you visit a private hospital, very often you find that most of the beds are empty.There are private hospitals today allow rich patients to purchase private suites that are used only for themselves and their family members. The best specialists and surgeons move to the private sector because they get paid more for seeing fewer patients - one of them, a Dr. Susan Lim, billed her patient $20M for dedicating the entire resource of her practice to a single patient. Cost of medical care spirals up and begin to ampllify the effects of the widening income inequality in our society. In our eagerness to become a medical hub, we have made the some of the same mistakes as the Americans in believing that privatisation will lead to good results - we are seeing cost spirals and inefficient use of resources unter the present system. Minister Tharman now wants to fix it by tapping resources lost to private hospitals.
Here's a picture of Minister Liu Tuck Yew taking the MRT. I'm always happy to see minister try out first hand the system under their purview. Suppose one day you contract a bad case of food poisoning and have to be hospitalised at a govt hospital - you are treated like evey other Singaporeans that goes t. You wake the next morning to find the health minister, Mr Gan, in the same ward treated by the same doctors - now that would really change your view of the PAP leadership wouldn't it? Ordinary citizens appreciate the idea of having leaders who put themselves in the shoes of the people. That was what Minister Liu did for a few days - experience something that ordinary Singaporeans have to cope with every single day.
I'm not impressed by the transport operators request to raise the fares again. Why? I took a bus today and it was so packed, I stood on the steps at the entrance of the bus. The people behind me couldn't get on/ When the SBS was privatised, it was hoped that privatisation would bring about greater efficiency in its operations. All the gains in efficiency probably occurred its first few years as a private company. As a listed company, they need to answer to shareholders and the profit motive would dominate how it operates. Running a bus service that is frequent enough for passenger to be seated comfortably through the ride is not a profitable thing to do. Packing every bus to the limit is a lot better for the bottomline. Keeping to the minimum standards of quality of service laid out by the transport authority would be most optimal for profits - there is no motivation to do any more than that. Passengers have other no choice - our cars are the most expensive in the world and controled by a strict quota. Taking taxis during peak hours can be 10 times more expensive so there is no real competition for our public transport operators for force them to improve the quality of service further.
Suppose profits is not important and the comfort of bus passengers is the most important goal.
The following figures are extracted from SBS Transit's latest quarterly financial report:
Figures in '000 S$.
Staff costs - 72,044
Repairs and maintenance - 20,140
Fuel and electricity costs- 29,743) 25.3
Premises costs - 7,787
Depreciation expense - 11,261
Other operating expenses - 14,641
Total operating expenses ; 155,616
It costs a total of S$155M to run the public bus system. Roughly $620M per year. The profit is about 10% of the cost.
Suppose we want to improve the live of the millions of Singaporeans who take the bus everyday. Lets say the govt spends, say, another $300M. Maybe to provide an overlay network of buses to complement the current bus system and improve service during peak hours. To improve the bus service tremendously we are talking about an additional spending roughly several hundred million dollars, say, $300M. This amount can transform the lives of millions of Singaporeans because they would be able to get to work in much greater comfort everyday. To put things in perspective $300M is less than 3% of our annual defense budget which has grown to $12.08B much of which is spent on systems that will likely turn obsolete without seeing any real action in war given the current geopolitical climate.
Instead of a transport service provider that tries to maximise its profit by pushing down service quality to as low as possible, we can elevate the quality of life of millions of Singaporeans by putting in place a transport system that puts the comfort and convenience of commuters at the top of its priorites. This is money that has a direct impact on the lives of Singaporeans and we can do it not by spending more in our annual budget but reallocating a small portion of it for this purpose. The Worker's Party suggests re-nationalising the public transport system and then combining the SMRT & SBS Transit to get cost savings. Whatever it is something has to be done to our public transport system because it greatly affects our quality of life. A "for-profit" transport system that is a monopoly will always limit the quality of service and the question is whether we should be doing something more instead of tweaking this system so that just continue to meet basic standards.
Posting Time <A class=timestamp-link title="permanent link" href="http://singaporemind.blogspot.com/2011/07/flip-side-of-privatisation.html" rel=bookmark><ABBR class=published title=2011-07-12T22:51:00+08:00>10:51 PM</ABBR>
Posted by Lucky Tan
The flipside of privatisation....
Two pieces of news appeared recently:
1. Transport Operators seek fare increase [Link].
2. Govt finding ways to integrate private and public healthcare[Link]
In the past 2 decades, many govts including the PAP believed that privatisation of govt services will bring about greater efficiency in the provision of these services. While it is true for the initial years after privatisation, the efficiency gains quickly tampers off while the profit motive of these privatised enterprises stick around forever.
About a decade ago, the PAP govt had this idea to turn Singapore into a medical hub for the rich in the region. More private hospitals were build. Resources shifted from public hospitals to the private sector to treat foreign patients and the rich. If you go to a public hospital to visit someone today, you will find that the hospitals almost every single hospital bed is filled. If you visit a private hospital, very often you find that most of the beds are empty.There are private hospitals today allow rich patients to purchase private suites that are used only for themselves and their family members. The best specialists and surgeons move to the private sector because they get paid more for seeing fewer patients - one of them, a Dr. Susan Lim, billed her patient $20M for dedicating the entire resource of her practice to a single patient. Cost of medical care spirals up and begin to ampllify the effects of the widening income inequality in our society. In our eagerness to become a medical hub, we have made the some of the same mistakes as the Americans in believing that privatisation will lead to good results - we are seeing cost spirals and inefficient use of resources unter the present system. Minister Tharman now wants to fix it by tapping resources lost to private hospitals.
I'm not impressed by the transport operators request to raise the fares again. Why? I took a bus today and it was so packed, I stood on the steps at the entrance of the bus. The people behind me couldn't get on/ When the SBS was privatised, it was hoped that privatisation would bring about greater efficiency in its operations. All the gains in efficiency probably occurred its first few years as a private company. As a listed company, they need to answer to shareholders and the profit motive would dominate how it operates. Running a bus service that is frequent enough for passenger to be seated comfortably through the ride is not a profitable thing to do. Packing every bus to the limit is a lot better for the bottomline. Keeping to the minimum standards of quality of service laid out by the transport authority would be most optimal for profits - there is no motivation to do any more than that. Passengers have other no choice - our cars are the most expensive in the world and controled by a strict quota. Taking taxis during peak hours can be 10 times more expensive so there is no real competition for our public transport operators for force them to improve the quality of service further.
Suppose profits is not important and the comfort of bus passengers is the most important goal.
The following figures are extracted from SBS Transit's latest quarterly financial report:
Figures in '000 S$.
Staff costs - 72,044
Repairs and maintenance - 20,140
Fuel and electricity costs- 29,743) 25.3
Premises costs - 7,787
Depreciation expense - 11,261
Other operating expenses - 14,641
Total operating expenses ; 155,616
It costs a total of S$155M to run the public bus system. Roughly $620M per year. The profit is about 10% of the cost.
Suppose we want to improve the live of the millions of Singaporeans who take the bus everyday. Lets say the govt spends, say, another $300M. Maybe to provide an overlay network of buses to complement the current bus system and improve service during peak hours. To improve the bus service tremendously we are talking about an additional spending roughly several hundred million dollars, say, $300M. This amount can transform the lives of millions of Singaporeans because they would be able to get to work in much greater comfort everyday. To put things in perspective $300M is less than 3% of our annual defense budget which has grown to $12.08B much of which is spent on systems that will likely turn obsolete without seeing any real action in war given the current geopolitical climate.
Instead of a transport service provider that tries to maximise its profit by pushing down service quality to as low as possible, we can elevate the quality of life of millions of Singaporeans by putting in place a transport system that puts the comfort and convenience of commuters at the top of its priorites. This is money that has a direct impact on the lives of Singaporeans and we can do it not by spending more in our annual budget but reallocating a small portion of it for this purpose. The Worker's Party suggests re-nationalising the public transport system and then combining the SMRT & SBS Transit to get cost savings. Whatever it is something has to be done to our public transport system because it greatly affects our quality of life. A "for-profit" transport system that is a monopoly will always limit the quality of service and the question is whether we should be doing something more instead of tweaking this system so that just continue to meet basic standards.
Posting Time <A class=timestamp-link title="permanent link" href="http://singaporemind.blogspot.com/2011/07/flip-side-of-privatisation.html" rel=bookmark><ABBR class=published title=2011-07-12T22:51:00+08:00>10:51 PM</ABBR>
Posted by Lucky Tan
