by: Gordon Lee/
Recent days have seen much talk about public transport in Singapore – Public Transport Council (PTC) has also allowed Singapore’s two public transport operators (PTOs) to increase their fares this year.
The Minister of Transport, Lui Tuck Yew, has repeatedly rebuffed calls by NCMP Gerald Giam of the Workers’ Party for public transport in Singapore to be nationalised. The Transport Minister in effect prophesied ‘apocalypse’ should such a situation occur.
However, in practice, the fact is that public transport is already nationalised! SMRT Corporation is owned by Ho Ching’s Temasek Holdings through their 54% controlling stake[1], and in turn, Temasek Holdings is fully owned by the Government of Singapore. The Singapore Labour Foundation (a statutory board), also has shares in ComfortDelgro who is the major shareholder of SBS Transit.”[2]
Yet, even though the Government ought to be concerned about the quality of service provided, the arrangement of the Government owning shares in publicly-listed firms skew that relationship into one where the Government, as a major shareholder, is concerned about the bottom line and profit margins.
This presents a conflict of interest at best, and at worst, a betrayal of its public responsibilities. It is no wonder, then, that the Minister is quick to defend the profits of the PTOs, saying “it is not unreasonable for the PTOs to earn fair returns from the sizeable capital investments required to sustain their operations and to invest in future public transport needs.”[3]
In return, a very grateful SMRT says that they are “committed to improving profitability and growing shareholder value and returns to our investors.”[4]
Not only has the dividend per share (paid out annually) increased 22% between 2006 and 2010, the share value has also increased almost 80% between Mar 2006 to Mar 2010.[5]
Besides allowing the PTOs to increase fares, the Singapore government is also very willing to protect the market share of the PTOs by maintaining the duopoly (which characterises the market) through its control of licences. Minister Lui insists that protecting the monopoly power of PTOs is necessary to prevent “cherry-picking”.[6]
More recently, it has also come to light that the Government has indirectly subsidised the capital replacement costs of the PTOs by extending the statutory lifespan of buses from 12 to 17 years, and that is set to be relaxed even further.[7]
So, why then does the government claim that public transport is not, in fact, in public hands?
The reason is clear, the government wants to control the potentially lucrative public transport market, but it wants to keep the market lucrative and profitable for itself. Full, direct ownership of the PTOs will place immense political pressures on the government to sacrifice this cash cow for the public good.
That explains the current arrangement of indirect ownership of the PTOs, allowing the Government to eat its cake and have it too.
Moreover, following a series of massively embarrassing blunders by Ho Ching’s Temasek Holdings, the Government and Temasek Holdings have to justify the investment risk that they are taking with public funds – and when it comes to investment, the best justification is to prove high returns. Temasek Holdings proudly claims to have given the Government returns of 17% compounded annually for the past 37 years since its inception.[8]
How this incredible figure is arrived at is indeed puzzling. At the height of the financial crisis, the “Intangibles” component of Temasek’s assets shot up 50 per cent from $14.8bn in 2007, to $21.4bn in 2008.[9]
How much of this valuation is creatively done in critical years to make up for portfolio losses is anyone’s speculation.
Also, are the returns on investment skewed by the fact that yearly government budget surpluses are transferred to Temasek, which then includes those interest-free capital injections into the performance figures of its portfolio?
Looking at the portfolio of Temasek Holdings also further raises eyebrows. Temasek Holdings owns CapitaLand and other real estate companies, allowing it to profit from rocketing land and house prices. Temasek Holdings also own other state-protected monopolies, such as Singapore Power, CityGas and MediaCorp.
This is yet another case of a conflict of interest that exists with the management of Temasek Holdings.
The Minister and his Government have to decide where their priorities and duties lie, and review existing arrangements in an open, transparent and honest manner which respects the needs of the country.
–
The writer is an undergraduate student reading Economics at the University of Warwick.
–
[1] http://www.smrt.com.sg/investors/Shareholding_statistics.asp
[2] http://theonlinecitizen.com/2011/07/nationalising-public-transportation-is-it-feasible/
[3] http://www.asiaone.com/Motoring/News/Story/A1Story20110714-289124.html
[4] http://www.smrt.com.sg/investors/documents/annual_reports/2010/pdf/SMRT_A_R_2010_Low_Res.pdf (p. 44)
[5] http://sg.finance.yahoo.com/q/hp?s=S53.SI&a=06&b=26&c=2000&d=07&e=5&f=2011&g=m
[6] http://www.channelnewsasia.com/stories/singaporelocalnews/view/1143622/1/.html
[7] http://motoring.asiaone.com/Motoring/News/Story/A1Story20110804-292701.html
[8] http://www.temasek.com.sg/
[9] http://www.temasekholdings.com.sg/our_portfolio_financial_highlights_performance.htm
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That is why PAP do not want an independent president to check on them. They prefer someone from GIC like Tony Tan to keep accountability and trasparency away from public scrutiny. If Tony Tan is elected, Singapore will become bankrupt before the next election. The sign is clear for many years already. CPF interest earned is not proportionate to the Temasek self-claimed of “good returns”. I suspect there is no much left in Singapore reserves such that they came out with 50-men year excuses to find out is to tell the president not to probe further.
Increasingly as I look at what is happenning around Singapore, I grow more and more disheartened and depressed. This analysis only makes that feeling worse. It doesn’t seem like we can ever get ourselves out of this complex and incestous web. A lifetime of hardwork by citizens is being enjoyed by a few. And it is being legislated more and more, entrenching this duplicity. I am losing hope of a better tomorrow.
The difference lies in this : If public transport is run and managed by LTA or a government board, the profits goes directly into the MOF; but when it is owned by TEMASEK, this help to boost TEMASEK profits, help make TEM look good; effectively it is the blood and sweat of citizens that help provide a lifeline to TEMASEK. – Who ends up getting the glory for this? Compound this situation with other domestic dominated services and business such as SINGTEL among others. – WHAT GREAT GLORY AND BRILLANCE.
Who was it who said – Some are born great – Some achieve greatness – SOME HAVE GREATNESS THRUST UPON THEM
If things are in such an bad state ( in this instance, so-called public transport, which it certainly is not), this continuous wishing and wondering about why or what it ought to be is a waste of time and energy.
Voters decided by voting in for a one-party rule and how they want to be ”treated” and it is not going to get any better. It is folly to expect transparency, responsible and accountable governance.
The worse is yet to unfold.
LHL and his cohorts are hypocrites and sadly the mainstream media (both broadcast/print) are biased in their ..
Conflict or interests/ rule of law, sense of justice or … is a myth here inn this red dot.
It is all about scheming, lying and at the end of it all – the citizens suffer.
I m being cynical but that is the reality.
It is to be expected.
It was a futile exercise for the public to create an uproar over fare increase by the duopoly and public pleadings had fallen on deaf ears.
PTO completely ignored public outcry and pleadings and proceeded to approve a 1% fare increase for public transportation.
Can the public expect an improvement in service with the fare increase especially in reducing the endemic congestion and delays faced by the public? Will Temasek Holdings plough more funds into the duopoly to acquire more equipment to relieve the sardine-packed condition of traveling on public transportation?
The government promised to listen more intently to public sentiments but it appears it is a hollow promise for political expediency.
The CEO of SMRT is paid more than a million annually. How can this be? The commuters paid for her! In many China cities, public transport is charging one yuan per trip. Seniors are allowed free ride. I fully support nationalizing Public Transport to make it truly a community service company!
@shalom
Your comparison is rubbish. If public transport in China charge only 1 RMB per trip, no wonder the transport companies there making losses. Eventually, taxpayer must pick up the bill. Our transport operators are doing a very good job, and our fares are still considered very cheap.
China got 1.3 billion people. Everything there is cheap due to cheap labour. Life is cheap there.
Please dun insult our country by comparing us to China. China can never be as great as our country.
The real issue in public transport is not ownership but how it operates. What is its primary mission and what are the appropriate KPIs for it?
In any event, most important to keep Ho Ching out of it. She is the most “dangerous” person in Singapore – incompetent yet never accountable (because she is LKY’s daugther-in-law).
They should let NTUC run the transport companies at low profit margins. SMRT/SBS should venture overseas.
Nathan also never question this … u think TT will do so?
Ya, can never be as great as our Country …..but apparently we hve to “kow tow” to our China counterparts ..hee hee!
Has Ho Ching made any comments on this issue? Or she happens to be related to LKY, and by extension a target to villify? By taking her out of her post, that’ll make way for a government owned public transportation?
Any shareholder has a price. Pay it and the share is yours. The immense cost of taking a stable, lucrative dividend firm private is likely one of the top considerations. I guarantee that it’ll be the biggest windfall for Temasek Holdings if it is taken over.
Unless you wish for property rights to be revoked in the name of your cause.
wow, israel populations mass protest that nation gdp goes up… but their lives is not improving and in fact their live is devoured slowly by currencies depreciation and inflation and also govs profits…
sg or rather pappies sounds like this situation… pathetic
I quote from the July 2011 Edition of The Economist, in the article “An Empire at Bay,” which is about the fall of Rupert Murdoch’s News Corporation: “…the real abuse of power…..comes when commercial interest becomes intertwined with the state.” In Singapore there is really no boundary between powerful commercial interests and the State of Singapore and between the persons in charge of them. That is why Gorden Lee, the author of the article, can say that SMRT is already nationalized, while the citzenry is now clamouring for it to be nationalized. What a mess! This symbiosis between commerce and state may contain the source code for all our woes, from the mindblowing Ministerial salaries, to the foreign population explosion, to the utter disdain of the concerns of the average citizen, to the chorus -like concurrence of all and every issue at Government level. Because the top office holders are indistinguishable from the captains of industry ans commerce. Commonsense says that we are heading towards a catastrophic failure of governance if this interlocking is kept up.
It is becoming known to the citizenry that the ownership and management of State enterprises are in the hands of a small circle of elites, some of whom are related. The head of Temasek Holdings is the wife of the PM. Temasek Holdings owns some 54% of SMRT. The need for concentration of power requires such mutualism engendering an intense form of conflict of interests, Avoidance of conflict of interest is no longer practised in Singapore. Witness that although conflict of interest is so prevalent across the public and private sectors, it is seldom reported on by the authorised press. So from the point of view of the controlling elites the most urgent course is for MRT fares to go up and up and up to feed the facade of great profitability in this commercial enterprise of the State. Control of State enterprises should be more widely spread amongst unrelated and unconnected persons to avoid conflict of interests and concentration of power. But this phenomenon of concentration of power in a few persons is the source of power itself.How can such a good thing be relinquished by the Powers voluntarily? Suharto’s devotees own Indonesia’s assets. LKY’s devotees manage Singapore’s assets at astronomical salaries. Does it matter which form of plunderis better?
Temasek’s profits only come from domestic,
monopolistic investments like the GLCs, they use this profit to cover the losses they made overseas. And they call the funds have recovered their losses these 2 years.
International Agencies said Temasek is always jinxed when they invest abroad, always losing money.
So they need dumb, dumb President like Nathan, they want no kaypoh President to dig into their Funds’ affairs, and in return is willing to buy off obedience with high pay as a reward.
Agreed, the most dangerous woman in Singapore is Ms. Ho Ching, the longer she stays, the more Temasek would lose our moneys in the coming years, already the investment in commodities recently has lost a great part of it.
Always buy high and sell low?
WHAT THE HECK!!!
i am shocked to hear in news that 8dollars increase per year for average people, meaning that some working adults will spend 2cts X 4 trips per day 8 cents X 365 days = 29 dollars X average 3000000(3millions) commuters = 87 millions to 100million more profit this year!!! !!!
what the playing of words of media on average 8dollars increase, i guess those unemployed or business not so good then no need to travel that much…
@steven Kho
Oh, insult to compare with china? Why don’t you tell this to LKY n his puppets, they like to compare us with china. LKY even said that our political system has similarities with china. Lately they all tried to suck up closed to super power china. If you are one of their followers you have fallen behind. Better catch up b4 they dump u.
Excellent article. Kudos to Gordon Lee.
I cannot agree more with Gordon Lee on the point that by exercising an indirect ownership of the PTOs our govt has already planned ahead in its desire to have its cake and eat it, too.
good article GordonLee. Why We must year in year out blackout GLCs for the profitability and continued monopolies when the focus on non core overseas ventures and investments outside primary function of public transport.ANy SIngaporean getting any bonus or cash for these?
LKY Quote: “I will not apologise to say that the PAP is the government and the Government Is the PAP.” New YR2011addition: ” And The President Is Also The PAP Only”
So SIngaporeans decide if you want this?
PS: Missed out the figurative line probably:” Singaporeans will have 5 years to REPENT if they vote for anyone else then our PAP Tony Tan”
SMRT/SBS CEO must take 30% paycut. PTC Gerard Ee must review transport CEO salaries.
The hard truth in wanting a fare increase is that the ruling party needs fund for the multi-billion dollar MRT project. Plain and simple.
Now u know y so many contracts were awarded to ST yet MINDEF paying NSMen peanuts.
U think will fight the war for them? My foot. 12 billions defense budget. What have been delivered? Any? Nothing.
Except higher and higher pay for the regulars.
War come, NSMen will decide who to shoot!
@Cok 8 August 2011
>>>Now u know y so many contracts were awarded to ST yet MINDEF paying NSMen peanuts.
….
War come, NSMen will decide who to shoot!<<<
Are you proposing Phony Tony, his son no-license doctor, and incompetent generals like Kee Chiu.
As I said before, only IVoteAhMEng can shut that PAP-ass licker Steven Kho up.
I echo the views of so many readers that Ho Ching is the worst CEO of Temasek ever.
Losses after losses, Micropolis, Thai Shin Corp, ABC Education, Merrill Lynch, Indosat, Optus, Doa Heng Bank and others.
But as others have pointed out, by accounting sleight-of-hand, and government asset injections, everything is window dressed to look like it is Singapore’s second greatest investment firm, after GIC, that is, since it must not be more successful than GIC, chaired for 25 years by her father-in-law and now by her hubby.
Nepotism & cronyism are rife everywhere you look, at the GLCs, statutory boards, ministries.
With puppet Phony Tony installed at the Istana, the picture is complete.
I still do not believe that nationalisation would solve any problem. Countries like India/China etc have nationalized transport systems, but I do not think they are any better.
The purpose of a governtment is to govern, not to do things. More like a managerial role. The current govt could have made a better job of managing the transport companies and therein lies the failure.
The grass is always greener on the other side.
to Steven Kho – you are uttering rubbish yourself.
Do you know you are insulting your idol LKY and the PM by saying ‘China can never be as great as our country’ ? Do you not know that both father and son are kowtowing to China ? S’pore is just a small dot, China can squash us any time. That is why father and son are importing tons of China men/women as they are under the thumb of China Leaders, both keen to lick their boots.
If the Workers’ Party is interested, they can start buying the shares of the Transport Company, and slowly becomes the owner. They then can lower the bus / train fare accordinlgy.
Dont wait, start buying now.
What do you say, Mr LTK – quiet as a mouse as usual.
Talk Big and No Action Sec Gen.
oute 8 August 2011
If the Workers’ Party is interested, they can start buying the shares of the Transport Company, and slowly becomes the owner. They then can lower the bus / train fare accordinlgy.
—————————————–
If WP become shareholders, why should they lower bus/train fare? Shouldn’t you be asking then, since current PAP govt is shareholder, why dun they reduce fares? Wanna continue shooting yourself in the foot?
.
.
BUT MRT USED THE PANELS FOR ADVERTS N EARNS TONS OF MONEY.
THE MONEY EARNED FROM SUCH ADVERTS SHOULD BE RETURNED TO LTA
Gorden Lee -your article truly reflect the sorry state of affair in our transport system- gahmen runs SG like big corporation whose aim is to maximize profit so not surprising to have fare increases come oct. as per PTC headed by Gerard Ee who seems to head every committee of inquiries…
@Steven Kho,
go and eat kow sai (dog shit) for breakfast lah. Everything that comes out from your mouth smell badly. Dog like you should eat your own kow sai
I think the solution to all the problems
with public services is simple. Just don’t make PROFIT a top priority. After
all, its PUBLIC SERVICE! Or have we forgotten the meaning of the term?
whoever’s in the way should be given 3 veral warnings to step aside, failing that, be steamrolled flat like pancake/s! :P
unless govt or National Reserves no money, cannot afford to even buy back just PTOs. then its a whole new ballgame.
makes me wonder why civil servants need swear-in ceremony to serve the country = the people, in the 1st place.
the greater good, not who is greater. there are limits to how it can be interpreted without changing the meaning.
maybe the ‘apocalypse’ of nationalising PTOs, will finally unmask the ugly truth about the current powers-that-be? people say female ghost from far look very pretty, males will surely fall for her, but once in her hands, she will reveal her real monstorous face, it will be the last thing the man will see. too late to regrate = apocalypse…?
If you get what you wish for, Singaporeans in 20 years will be decrying runaway costs in state run PT, cronyism in the ranks, government misuse of PT money, crying and cursing that PT should be privatized.
@Steven Kho,
Your comment reflected a mindset that shows the arrogance of Singaporeans. That is why our neighbor Malaysia also think that we are arrogant. Be humble and be modest even if you think you are better.
We are only better than them economically but they will sooner or later catches with us. In other fields like entrepreneurship, innovation and cultural, we are not lacking. In short, dun be too big headed… Ever heard of “jiao bing bi bai”.
@Puppy cannot make it,
Precisely! if we are nice and humble, we can still drink natural water in next hundreds of year, instead we have to drink sai water soon!
@Les, haha… :)
If we are not humble, not only drink sai water because neighbour dont want to sell natural water. We would be flooded by saliva. Why? Ever heard of an analogy that if every PRC person spits at Singapore, we would kenna get “tsunami-ed”…