By CHRISTOPHER TANSENIOR TRANSPORT CORRESPONDENT

ABOUT THE BIG QUIZL Co-organisers: The Straits Times and the Ministry of EducationL Presenting sponsor: Singapore Press Holdings FoundationL Innovation partner: ShellL The run-up to The Big Quiz comprises:1. A series of 12 primers on current affairs topics2. Talks given by editors and correspondents ofThe Straits Times3. A sponsored segment on students’ say to set questions

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SHOULD public transportbe nationalised? Thequestion crops up nowand again, and not onlyin Singapore.

About three years ago, Britainnationalised a London-to-Scot-land rail service after persistentcalls by MPs, only to announcelast month that it will be returnedto the private sector.

In Singapore, MPs have of latebeen asking if public transportcan or should be nationalised.

MPs Baey Yam Keng (Tampi-nes GRC) and Lily Neo (TanjongPagar GRC) were among thosewho raised the question in Parlia-ment recently. This followedstrong lobbying by the Workers’Party, who argue that the wheelsseem to be falling off our partlypublicly-funded, privately-operat-ed – and once well-run – system.

The two public transport com-panies continue to reap relativelyhandsome profits against a back-drop of deteriorating servicestandards: overcrowding, railbreakdowns and buses which areseldom punctual despite repeatedattempts to fix the problem.

Non-Constituency MP GeraldGiam of the Workers’ Party madea strong argument for nationalis-ing public transport in an op-edpiece published in The StraitsTimes in July 2011, where he reiter-ated his party’s call for a govern-ment-owned non-profit NationalTransport Corp (NTC) to run railand bus services.

“A well-managed NTC can pro-vide superior outcomes comparedto the present profit-oriented mo-nopolies,” he wrote.

Transport Minister Lui TuckYew has stoutly defended Singa-pore’s current system, arguingthat nationalisation may lead tohigher fares and a heftier burdenon taxpayers at large.

While the debate may continueon whether nationalisation is theanswer to our public transportwoes, Singapore is already mov-ing closer to a situation where thestate takes on a far larger rolethan it ever has.

In 2010, a Bill was passed tochange the rail-financing frame-work, which essentially puts allfixed and operating assets understate ownership and shortens ser-vice contracts to operators. Thelatter will then be left to focus onrunning and maintaining the sys-tem, with the threat of being re-placed if standards are not met.

SBS Transit became the first op-erator to come under this newframework when it clinched a con-tract in 2011 to run the upcomingDowntown Line for 15 years – farshorter than the current rail con-tracts of 30-40 years.

Last year, the Governmentmade a tentative move in the

same direction for buses when itannounced a $1.1 billion plan to ex-pand the public bus fleet. It alsosaid operators will get advertisingrevenue from bus stops, and thatbus depots and parking spaceswill be built by the state.

Then in February, the LandTransport Authority put out a ten-der inviting private transport com-panies to bid for a JurongWest-to-city service contract.The winning firm will run theso-called City Direct Service for afixed sum, while the Governmentcollects the fare revenue.

This is a profound change fromthe current system, in which oper-ators assume the revenue risk.

These moves mark a shift froma regulated franchise regime toone where the state does proac-tive planning (such as bus routes)and operators bid for service con-tracts with clearly spelt-out ser-vice standards, as practised in cit-ies such as London, Stockholm,Copenhagen, Seoul and Perth.

This is just one step away fromnationalisation. Interestingly,many transport firms actually pre-fer it because it removes revenueuncertainty and hefty capital ex-penditure for asset renewal.

Associate Professor Paul Bar-ter, who teaches transport policyat the Lee Kuan Yew School ofPublic Policy, feels this is a bettersystem and one that allows for a“more elegant way” for subsidiesto be handed out.

For instance, the $1.1 billionbus plan, which includes operat-ing costs and driver salaries for 10years, drew flak. Critics, fromMPs to the man in the street, ques-

tioned why tax money is used tosubsidise private and profitablecompanies. The Government saysit is actually to “subsidise com-muters” and that revenue generat-ed from the investment will bering-fenced so that operators donot benefit financially from it.

A recent move by the Govern-ment to pay for pre-morning peakfree travel drew similar criticismsfrom observers, who questionedwhy taxpayers are paying for oper-ators’ capacity shortfall.

If buses and other operating as-sets were owned by the state inthe first place, there would be less

cause for such doubts.In such a model, it is foreseea-

ble that operators will have thin-ner profit margins because theywill assume less risk. This shouldgo down well with the public.

SMRT chief executive Des-mond Kuek is in favour of the newregime. In a recent interview withThe Straits Times, Mr Kuek re-vealed that SMRT had made itssubmission to the authorities onadopting the new system, whichhe describes as “superior”.

It “gives better clarity on whoowns what”, Mr Kuek says, add-ing that SMRT will also have a

less “lumpy” capital expenditurepattern with the new format.

Insiders at SBS Transit are alsoin favour of the state being theowner of all transport assets.

“We can focus on running thesystem and meeting service stand-ards, and the Government can de-cide on how many trains and bus-es it wants to buy and who itwants to give subsidies to,” a sen-ior executive says.

Indeed, the issue of subsidies iscropping up with some regularitynow. Concessions are being con-sidered for polytechnic students,the disabled, those with low in-come and even children not yet inprimary school who are taller than0.9m, the limit currently set forfree bus and train travel.

The Fare Review MechanismCommittee headed by Mr RichardMagnus is also considering amonthly adult travel pass to captravel expenses for average-income families.

While a nationalised entity willbe equally well placed to decideon subsidies, history has shownthat state-run public transport

systems generally fare poorly.Prof Barter says they tend to be

“inefficient and overstaffed, as inparts of India and North Ameri-ca”. The late British prime minis-ter Margaret Thatcher recognisedthe inefficiency of state-run enti-ties, and went on a privatisationspree when she was in power.

That however, led to unfet-tered competition, cherry-pickingof routes and diminished servicestandards outside London. Singa-pore experienced this before SBSTransit was formed in 1973.

So, it would appear either ex-treme model can be problematic.But National University of Singa-pore transport economist Antho-ny Chin says any model can workif it is well run and regulated.

“It’s the institutional and gov-ernance structure which you putin place,” he says. “For example,Singapore Airlines and PSA arecontrasting cases. The formercommercial and listed, and the lat-ter for all intent and purpose a na-tional corporation which is effi-cient.”

christan@sph.com.sg

SINGAPORE is looking toLondon as an example tofollow. But it has notbeen smooth sailing forthe British city. It went

from private to nationalised to pri-vatised to the contracts model.

Before the 1930s, London’spublic transport was pretty muchprivate and laissez-faire.

From 1933 till 1984, the systemwas in various forms of state own-ership, according to a 2006 reportby Mr Richard Pond of the Lon-don Metropolitan University.

When the late Margaret That-cher became prime minister in1979, she began “the sale of stateindustries and the introduction ofmarket forces into sectors thathad been dominated by state mo-nopolies”, the report reads.

The London bus industry wentthrough several stages of liberali-sation and privatisation, with busroutes outside London fully dereg-ulated by 1985. Today, the vastmajority of bus routes – tenderedout by the state – are run by anumber of private companies, in-cluding Metroline and FirstGroup.

London Underground, howev-er, remained under state owner-ship but the track infrastructureand maintenance were farmed outto public-private partnerships.

The present model seems to beworking well, and is emulated bymany cities across the world.

Sir Peter Hall, a professor ofplanning and regeneration at Uni-versity College London, says: “Ithink there’s general agreementthat the London model – franchis-ing the bus service to various oper-ators with strict control over ser-vice levels – has worked brilliant-ly, while the total deregulation inthe rest of the UK has not. Curiti-ba and Bogota have used the Lon-don model successfully.”

But detractors have called thesystem inefficient and wasteful,citing soaring state subsidies forbus trips. Subsidies have, accord-ing to a government report, risenfrom £24 million or 2p per passen-ger trip in 2001 to £393 million(S$740 million) or 17p per passen-ger trip last year.

At the same time, bus commut-ers pay a flat £2.40 per ride if

they pay cash – hefty by manystandards. (Trains cost more.)

Associate Professor Paul Bar-ter, who teaches transport policyat the Lee Kuan Yew School ofPublic Policy, points out, howev-er, that card payments are muchlower (£1.40), and many commut-

ers travel for free. These includethose over 60 years, the disabled,and children up to 15. Those be-tween 16 and 18 pay concession-ary rates. Card users also enjoy adaily cap of £4.40 regardless ofthe number of trips they make.

Observers reckon this may be

the way Singapore is headed if itadopts the London model.

But first, the bus sector willhave to undergo a dramaticchange. Perhaps along the lines ofthe restructured rail industry,with a new financing framework.

Government Parliamentary

Committee for Transport chair-man Cedric Foo paints this scenar-io: “This is how it works. Publictransport operators (PTOs) willsell all the expensive assets likerail cars, buses and heavy mainte-nance equipment to a public trust.

“In turn, the PTOs will leasethe assets from the trust accord-ing to a public tariff. Against a setof operating standards, prospec-tive PTOs will bid for a parcel ofservice every five years or so.”

The operator with the lowestbid and reasonable track recordwins the contract, while the Gov-ernment keeps fare revenue.

Meanwhile, Transport MinisterLui Tuck Yew says the Govern-ment is looking at various otheroptions, including a co-op model.

“We are always on the lookoutfor other possibilities... If thereare interested entities like NTUCwho may perhaps offer to run partof the bus system... this is certain-ly something we will be preparedto look at very, very carefully,” hetold Parliament in February.CHRISTOPHER TAN

The Government last year unveiled a $1.1 billion bus fleet expansion plan. In addition, operators will get revenue from bus-stop ads, and bus depots and parking spaces will be built by the state. ST FILE PHOTO

London franchises the bus service to various operators with strict control over service levels. Its system is emulated bymany cities but detractors have called it inefficient and wasteful, citing soaring state subsidies. PHOTO: REUTERS

FIVE MAIN PUBLIC TRANSPORT MODELS

Source: PAUL BARTER, 2008

State has strong interest in outcomes

State has lessinterest in outcomes

Publicmonopoly

(nationalised)

Proactiveplanning

with servicecontract

Well-regulatedfranchise

Passivefranchise

Deregulation(fullyprivatised)

ST GRAPHICS

This is the fourth of 12 primers on various current affairs issues, which will be published in the run-upto The Straits Times-Ministry of Education National Current Affairs Quiz.

PRIMER

A step closer on road to nationalisation

THE SINGAPORE PERSPECTIVE

London leads way butoverhaul needed first

WORKING MODEL

I think there’s generalagreement that the Londonmodel... has worked brilliantly.

– Sir Peter Hall, of UniversityCollege London

A20 OOPPIINNIIOONN M O N D A Y , A P R I L 2 2 , 2 0 1 3