I refer to the new formula for the increase of public transport fares, announced by the Public Transport Council (PTC) on 10 July. (Channel NewsAsia)
With the heightened possibility of an impending fare hike, let’s look at some of the issues.
In the past, we talked about it after the decision was made. I suggest that we debate the issue now to try to influence the decision.
The 3 per cent cap for the fare increase is 67 per cent more than 2007′s cap of 1.8 per cent.
Since “the restructuring should be largely revenue-neutral to the transport operators”, the revenue and profits of the transport operators may increase because of increased ridership due to the growing population and more visitors to Singapore, and of course any fare increase that may be approved by the PTC.
If it is revenue-neutral, the statement that “the new fare system… is expected to benefit 40 per cent of passengers who make transfers today”, may mean about 60 per cent of commuters may end up paying more.
I also do not see the logic of including a CPF component in the new formula for public transport fares.
The inclusion of the Average Monthly Earnings (National Average) in the formula for the 1.5 per cent change in the employer’s CPF contribution rate is nonsensical as CPF cannot be used like cash to pay for fares.
Using the new formula for the next five years may be catastrophic for lower income commuters, as this year’s inflation and wage increase are expected to be very high.
For example, if inflation is 5 per cent, and wage increase is 6 per cent, the increase in fares next year would be 4 per cent (0.5 x 5 + 0.5 x 6 – 1.5).
There have been 9 fare increases from 1994 to 2007.
Feeder bus fares increased by 91 per cent, or about 7 per cent per annum, from 30 cents in 1995 to 67 cents in 2007.
Profits of the 2 transport operators also rose. ComfortDelgro’s profits increased from $134 million in 2003 to $223 million in 2007. This is an increase of 66 per cent, or about 14 per cent per annum.
SMRT’s profits increased from $72 million in 2003 to $136 million in 2007. This is an increase of 89 per cent, or 17 per cent per annum.
According to this Straits Times report:
SMRT Corp posted net earnings of $150 million for the year ended March 31, 2008, while SBS Transit made $50 million last year (its parent ComfortDelGro netted $223 million).
A question which has been asked in previous debates about fare increases is this: How much is enough for our transport companies? And why does the Public Transport Council seem more interested in protecting the profits of these companies than the welfare of the commuters?
——————–
[1] Budget 2003: “Motor vehicle taxes are expected to increase by 34.2% to $ 1.99 billion owing to less preferential additional registration fees rebates”
——————–
HELP keep the voice of TOC alive!
If you like this article, please consider a small donation to help theonlinecitizen.com stay alive. Please note that we can only accept donations from Singaporeans. Thank you for your assistance.Do you have a flair for writing? Volunteer with us. Email us your full name and contact details to theonlinecitizen@gmail.com
RH: If Mrs LIE KY, the famiLIE, their Cronies and families, plus all the Govt-related elites including judges, are all banned from owning shares in the 2 govt monopolies, fares will magically stop rising. Enough said. The whole system is CORRUPT. To the very core.
PAP policies will always spring surprises for Singaporeans upon close scrutiny. Whatever good that is preached will always be returned many times by the citizens. GST will no doubt be increased at an opportune time now that LKY has hinted possible (a done deal in fact) subsidy for those working mums.
For those ultimate benefactors, remember that the funds come from the citizens and not PAP’s pocket. Please instill this clearly in your mind and not be psyched into being thankful to PAP for their deceptive moves.
So, Leong Sze Hian, interesting perspective.
May I then ask, in your opinion, what should be the ‘better’ formula to use then?
In addition, what in your opinion is the ‘bearable’ amount of profit that transport companies should earn?
Regards,
Eaststopper
Hi Eaststopper
Maybe the formula could be a combination of various factors –
median wage increase instead of average wage increase to reflect the lower wage increase of the lower-income (without including the employer’s CPF increase of course!)
lower than inflation to account for the higher inflation of the lower-income
transport operators’ profits growth seasonally adjusted historically
return on equity seasonally adjusted historically
affordability of the lower-income, etc
Cheers
Leong Sze Hian
So far, there are many formula to send man into space. But it takes more than just formula to look after the welfare of a country. We are not robots, we are human, to able to compute a formula and apply it in a society makes us more like robot. However, we are not robots, we are not computers, we are human. We don’t work by program or formula.
Formula maybe a good tool to have an overview but certainly not a solution to solve human issues. Unless the government has a genius way to derive a formula that can include, passion, fairness, grace, humble and etc., which is not possible. Any Tom, Dick and Harry can be a minister if they just need to use formula to govern the country.
End of the day, the high pay government needs to take a step to come down to earth in order to comprehend and feel the needs of its society.
Hi Leong,
Just a couple more questions if you allow me,
a. Suppose we use your formula, would you be able to tell me how much the fare increase would be? Would it be more or less than 3%? I have the view that any formulation used should be keep simple as it allows price expectations to be kept easily checked.
b. For the lower income segment of the population, I am aware that there are transport subsidies in the form of vouchers and rebates. Do you feel that these measures are not sufficient? How would the fare increase look for these lower income groups if we factor in the subsides? Would you be able to provide a figure?
Regards,
Eaststopper
Hi PCL,
I am not sure if I fully comprehend your last point regarding the government. The Public Transport Council is an independent body (made up of people not in the government) to oversee and regulate a portion (not all) of the public transport policies in Singapore.
They have to balance two seemingly conflicting interests – interests of the public and the long term viability of the transport operators, which is not an easy task.
Your grouse, correct me if I am wrong, seems to stem from the fact that our ministers are getting a high pay and not the transport fare increase.
Regards,
Eaststopper
In Singapore’s case, it is very unique. We call them public transport and yet they are listed companies in the SGX market. It is hard to balance between shareholder’s profits and commuters. I’m vested in SBSTransit.
Let’s not be confused. May I suggest Mr Leong read the 2005 report on fare review which was hotly debated in the parl first and then he can criticise or challenge it if he so wishes.
Mr Leong has chosen to simply ignore the productivity gain extraction (which is now 1.5% compared to 0.3% previously) in the fare fomula .
Mr Leong suggested fomula is in effect a cost plus model of econoimic regulation (as against the price cap model of price index minus productivity gain). If we go by it, where are the incentives for operators to be productive? They will just simply add costs, justify them and then pass them to commuters!
The fare cap is not perfect but fundamentally sound. It has been used in London. Untill I have a better alternative or suggestion to tweak, I’d rather have it than without. For sure, this year I know they can’t just use fuel cost increases to up fares…
Of course, there are social implications to grapple with, whatever formula we use or not use, including Mr Leong’s suggestion. I like the public transport fund. They should do more and make sure it reaches the targetted group, ie the needy. If they do, I rest my case.
Analysis of PTC’s news release on fare increase
Posted by theonlinecitizen on September 12, 2007
By Leong Sze Hian
I refer to the Public Transport Council’s (PTC) News release on 11 September, on the increase in bus fares from 1 October.
I would like to comment on the following:-
“PTC considered Singapore’s economic outlook and the affordability of public transport. The economic outlook has been positive with the latest GDP gowth forecast for 2007 revised upwards to 7 to 8% and the unemployment rate for June 2007 at 2.4%, the lowest in 5 years.”
Will the positive economic outlook reverse the trend of declining nominal wages (before inflation-adjustment) for about the bottom 30 percentile of workers?
Unemployment has actually increased
Although overall unemployment was the lowest in 5 years, according to the Ministry of Manpower’s (MOM) 2nd quarter report on employment, “among the resident (Singaporean and permanent resident) labour force, the non-adjusted unemployment rate was 4.2%… higher than (the) 3.4% in March 2007″
The estimated 79,600 unemployed residents, was higher than the estimated 66,000 last quarter.
So, the resident unemployment rate went up, and the number of resident unemployed has increased!
Return on Total Assets
“ROTA (Return on Total Assets) in 2006 of SBST (Bus and Rail) and SMRT (Bus and Rail) was 7.9 and 11.4% respectively.
These are higher than the 6.5 and 9.1% respectively in 2005.
The Ministry of Transport has said that these 6.5 and 9.1% ROTA “returns are healthy but not excessive, compared to companies with similar industry structures and risk profiles”.
Since ROTA has increased by 22% (7.9 divided by 6.5) and 25% (11.4 divided by 9.1) over the last year, how can a fare increase be justified on the basis of ROTA?
Why do we always seem to be comparing with countries and companies with high ROTAs?
Why don’t we compare with public transport companies in countries with lower ROTA?
Comparing with other countries – use a fairer approach
Why do we always seem to be comparing average fares with cities like Hong Kong, London and New York City, which have higher fares than Singapore?
Why don’t we compare with other lower fare cities and countries as well?
As cities like London and New York City have multi-modal bus passes, an average fares comparison may not be very appropriate.
Don’t we realise that the median wage in these cities are much higher than Singapore’s (about $2,050) ?
With the Residential Feeder Services Aircon Adult fare increasing from 65 to 67 cents, has the PTC done any analysis on the percentage rate increase of fares for feeder services over the last 8 years?
In this connection, a local university study found that about 15% of commuters walked a straight-line distance of more than one kilometre, despite the availability of feeder services. Has the high rate of increase in feeder service fares deterred people from using them because of affordability?
Transport vouchers – to cover only one year’s increase?
As to the $30 transport vouchers to be given out to needy commuters, has the PTC reconciled the number of transport vouchers (total funding amount divided by $30) with the number of people who live in households with monthly income below $1,500?
Is it not obvious that giving $30 or $20 whenever fares are increased does not take into account that it only covers one year’s increase? Shouldn’t transport vouchers be given to reflect 7 years’ increases over the last 8 years?
The PTC report makes no mention of the ever increasing record profits of the transport operators, or the possible effects of the GST hike.
Flaws in the Fare Adjustment formula
As there are more than 500,000 cars in Singapore, how can the Fare Adjustment Formula be based on average Wage Increase?
Shouldn’t it be the median wage increase to reflect the fact that it is the lower-income who take public transport?
As the CPI (inflation) for the lower-income is much higher than the higher income, shouldn’t the formula be based on the CPI of those who take public transport rather than the average CPI?
Why is the Public Transport Affordability Index (PTAI)* on a downtrend since 2003, when as I understand it, the MEPT has been increasing due to yearly fare increases and declining wages for the bottom 30 percentile of workers?
As to “the average wage growth was 5.5% for the 1st quarter of 2007″, I understand that the median wage has hardly moved in real terms (after adjusting for inflation) over the last few years.
$30 per year vouchers for the poor. Adequate?
According to the Straits Times report, “100,000 needy families to get $30 transport vouchers”,Straits Times, 12 September, it says:
“Among commuters who have to make one transfer to another trunk
bus, they will see a fare increase of at most 4 cents.
For example: A bus journey from Ang Mo Kio to Alexandra Road with a
transfer at MacRitchie Reservoir currently costs $1.583. From 1st October,
the commuter will see an increase of 3 cents to $1.61 (a 2-cent increase
for the 1st leg and a 1- cent increase for the 2nd leg). This is an increase of
6 cents per day or about $1.32 per month.”
If “they will see a fare increase of at most 4 cents”, why is the example one which shows a 3 cent increase per trip of 6 cents per day?
Based on just 2 trips a day, 30 days a month, an increase of 6 and 8 cents a day, works out to $21.60 and $28.80 a year, respectively.
So, does it make sense that the “Transport Ministry spokesman estimated that, typically, a single voucher ($30) could defray a poor family’s fare increase cost for one year”
$30 a year for a typical poor family of 3 to 4 persons can cover $21.60 or $28.80 fares increase per person?
Do more Singaporeans generally take buses more often and spend more on buses than trains?
*(Monthly Expenditure on Public transport (MEPT) divided by Monthly Household Income (MHI)
Sincerely speaking, I do not understand much of the Formulae used in the National System of Policies and Plannings.
In yonder years, before the sixties, wellfare was equally important to National Economy, Public Services were more services orientated than profits makings.
As for Public Transports, much has been discussed and the Hong Kong Public Transport System has been unanimously found to be a model worthy for Singapore to emulate and copy.
The Specifics of how much a company, listed or otherwise, should make for profits, will perpetually be debatable, but the spirit of public service is a different issue though minimum viability shall and should be the basis of their existences. To expect a public services entity to maximize profits makes a mockery of the spirit of public services. Likewise, we are disappointed and disapproved of our leaders paying themselves millions of SIN Dollars per year.
TIME FOR US TO DEFINE THE MEANING OF PUBLIC SERVICES IN THE RIGHT SPIRIT.
patriot.
It is a private enterprise, not a public service.
My only consolation is that after surviving publici transport in Macau and Dubai, you paid for the conveniences and efficency of a duopoly in Singapore.
It is convenience as compared to public bus services in a small univerisyt town (70,000 pop.) in Cornwalis, Oregon.
Monday to Friday – bus services stop at 7 pm.
Saturday – 10 am to 3pm.
Sunday – no public bus services.
And yes, I stopped driving in 2001 and depedn on public transport to work before I am working oversea.
And yes, public bus services in MAcau si controlled and subsidised:
- Within Macau Penisula – MOP2.50 (S$0.50)
- Within Taipa Island – MOP2.80 (S$0.56)
- Taipa to COlaone island MOP3.30 (S$0.66)
- Macau to Coloane – MOP5.00 (S$1.00)
People, you are talking of PAP Government to subsidise public transport.
What is the best formula to benefit the People?
The “lucrative profts” make by SBS elsewhere is subsidising the money losing SBS-Transit operating Punggol-Sengkang LRT, and I suspect, the money-lossing North_East Line as well.
Similarly, the “lucrative” N-S/E-W Line is subsidising the money-lossing Bukit Panjang LRT Line…and maybe even the spur line to Changi Airport and Expo.
And I suspect, Circle Line maybe a money-losing operation as well.
How do we factor in money-losing operations with highly profitably operation elsewhere?
has the proposal being submitted? it seems that the PTC had already decided that that shall be and increased of about 1cents or 3%. if that being so, what’s the purpose to the PTC.
My beef is: what’s so ‘public’ about transport?
The word ‘public’ in government’s dictionary means public common places. So public transport means transport vehincles that transport you along public roads to public places. The profits earned doesn’t necessarily translate as rebates or subsidies or better services.
Whereas the word ‘public’ in Australia where I am living now means ‘community public service’. So public transport here means transport vehicles to service the common man to public places. The profits earned usually translate back into keeping the fares consistent and paying the drivers and operators to maintain the service.
That’s why we are paying millions to the ministers. They are NOT public servants but stakeholders, senior diretors and CEOs in the economy.
Think about it.
Kaffein
As a senior citizen, I think that PTC is not doing enough for the elderly group. especially those from the low income group. I mean we have to work even at this age (no thanks to our government) but we would appreciate a little compassion for the rising costs that we face and the stagnant wage that we get. The government and LTA and PTC prides itself as world class but they should take a leaf from London, which has the so-called Freedom Pass for people over 60 and that has benefitted the poor in terms of transport costs.
http://www.freedompass.org/
Instead, we are forced to travel within restricted hours (where waiting for a bus during these hours can be heinous given the weather here) and then when someone raised this, some well-paid minister says that when the government gives half a cup of water, don’t you dare ask for the whole cup. This is patently stupid and insensitive.
“The “lucrative profts” make by SBS elsewhere is subsidising the money losing SBS-Transit operating Punggol-Sengkang LRT, and I suspect, the money-lossing North_East Line as well.
Similarly, the “lucrative” N-S/E-W Line is subsidising the money-lossing Bukit Panjang LRT Line…and maybe even the spur line to Changi Airport and Expo.”
Then the government ought to let us know the overall profit after subsidising. I thought that when someone announced a profit, it after all these deduction of expenses ?
Profit = Revenue – expense
Or is there something government never tell us just like GIC & Temasek ?
16) Daniel on July 15th, 2008 10.33 am
Just go on the assumption that you are right – by the measurement of your own pockets.
Do not waste too much time trying to figure out their own brand of mathematics. We will get to nowhere. They will always make it sound that price increases are necessary and for our greater good. Really ?
Very much as I would like to twist my brain cells to believe and give them the benefits of doubts by weighing the explanation they have given, my brain cells are so stubborn and refuse to give way a single inch.
They are so very very lucky that they are in control of MSM.
I have nothing useful to comment, except for a minor peeve of mine after reading numerous blog posts making such comment:
The 3 per cent cap for the fare increase is 67 per cent more than 2007’s cap of 1.8 per cent.
I thought it would be good manners for a writer to avoid using percentages to describe changes in quantities which are measured in percentage point. It can be rather confusing at times.
Perhaps the cause of this is the “indignation” of various bloggers who decried the MSM describing the increase in GST from 5% to 7% as a 2% increase (such bloggers were insisting that it was a 40% increase). Naturally, both are correct, but they differ in the “unit” of percent.
In any case, the original sentence can be alternatively (and in my opinion better) constructed as:
The 3 per cent cap for the fare increase is a two-thirds increment as compared to 2007’s cap of 1.8 per cent.
Hi Jackson
Thanks very much for your remarks.
In the context of the needy, like one of the couples with 2 children and monthly household income of just $800, at our financial counselling session this morning, I think to them its more like a 67% increase or two-thirds increment, rather than a 3% increase.
They have never received a single transport voucher despite their state of poverty for so many years.
Transport vouchers are given to the needy whenever fares are raised in recent years, but the quantum is typically only for 1 year’s increase. Shouldn’t they be given vouchers to cover the increase over the years, instead of just 1 year?
Cheers
Leong Sze Hian
In any public pricing equation, there are those deemed to benefit and those deemed to suffer.
Unlike the ERP hikes and GST hikes where all the $$$ got to the government directly, the fare hikes goes to the listed transport companies.
So, as the saying goes, if you can’t beat them, join them. Buy shares in Comfort of SMRT, and as shareholders, you can then benefit from increased dividends and share price should these companies make more profits from the increases.
Both currently pay fairly decent dividends of about 5-6%.. and you can use CPF to buy them too. That’s way more than what CPF or the pathetic bank FDs are gonna pay you.
Basically, the one way to beat inflation is to invest in the things that are causing inflation. Same as how the pension funds invest in commodities to offset commodities inflation.
Sze Hian:
Hmm… I don’t see how it would be a 67% increase in transport spendings for the needy family instead of a 3%. I mean, let’s suppose that they spend $100 on transport a month (an impossible number, but it’s a convenient number for an example). If the fare prices increase by 3%, wouldn’t their spending increase to $103, theoretically speaking?
But of course this does not do away with the fact that these people are indeed struggling, and that the transport voucher, even if they get them, is only a temporary relief.
korek2korek:
Heh.
You mean that the current operators have the incentive to be “more productive” as they are now? The Singapore transport system is effectively a monopoly conglomerate controlled by 1 entity. A Monopoly (especially one that covers essential needs) has no incentive to be “more productive” by nature. It has no viable competitor and the goods/service it provides is very hard to boycott. Why be more productive when you can easily generate more income by raising prices?
Buying shares is a not a bad suggestion. Except that the group of people who really needs the relief is not likely to be able to afford it.
Every thing that they do always lead back the to the same LEE, the same senile old folk who love indulging in self-praise and delusion, except that at Singaporean’s expenses.
Govt believes that producers are more important than consumers. They are wrong. Our economy is slowly shifting towards becoming more dependent on govt expenditure, investment and imports/exports RATHER than consumers because they ignore consumers’ feelings.
This article publish in MY PAPER (22-Jul-2008) in page B18 (my say, view point)..
Let see any action taken..
There are basically two models for economic (or price) regulation. One is cost-plus or rate-of-return model. The other is price-cap model. Each has its merits and demrits.
We can argue and diagree on which is better. In fact, there is no single superior model.
I just want to point out that the underlying assumption of cost-plus (Sze Hian’s suggestion) is that we can deterrmine operators’ costs accurately. Frankly, can one do so? What is peventing operators from incurring costs and then just ask for more? Isn’t Sze Hian suggestion also mean to “protect the operators’ profit”? I would even add that it is even more so with cost-plus model. (pao-chiak case! )
More fundamentally important is the injection or threat of market contestablity. LTA has said they will do so. Let see if they will realise it or not…
When more The formula should not only take into account of increased ridership. Commuters would not be fair for the commuters to bear the full operating cost. The operator should play a more active role in increasing the ridership, encouraging more people to take the public transport. With increase ridership, the increase would be less.
Public transport is an essential service provide by a government all over the world catering especially to those lower income and the poor. Despite oil price increase, in Beijing, you can board from one end and alight at the other end the bus fare is still one yuan(20 cents) and for MRT the fare is two yuan(40 cents). This is truly a public transport. Over here it should be call bus service because the bus company priority is profit. The bus company here concern more for the investors than the commuters.
No point arguing the formula and statistics. It is meant to confuse everyone.
Bottom line is set a minimum return for the transport company, let them charge as much as they want. Public vote will drive priceto an equiibriun.