By Gordon Lee

On 16 July, LTA announced a record $2 million fine for SMRT, or 1.4% of SMRT’s forecast profit. These figures were splashed over the national newspapers, presumably intending to create a “shock and awe” effect, and to produce the impression that the LTA takes a tough stance on service disruptions.

Is the fine significant? Let the market be the jury…

SMRT share price


Source: Yahoo finance

Conflict of interest

The Government, through the LTA, is of course concerned about the quality of public service. At the same time, however, Temasek Holdings (which owns a majority stake in SMRT) is fully owned by the Government. SMRT’s profits and losses are reflected in its share price, and hence also in the portfolio value of Temasek Holdings.

There is a serious conflict of interest in the management of public transport in Singapore. On whose side should the Government stand on? On the side of the Government-protected and Government-owned duopoly of private companies, or on the side of commuters?

It is no wonder that Minister Lui Tuck Yew had to stress his claim in public repeatedly that the $1.1 billion bus bailout package is “not for operators profit”, although the operators are likely to benefit.

Singapore’s public transport duopoly

Singapore’s public transport duopoly is protected by the issuance of a Bus Service Operator’s Licence.

London has a population of almost 8 million (about 50% higher than Singapore), but has about 20 bus operators running routes based on a competitive tender.

One of these bus operators (Metroline) in London is owned by Singapore’s ComfortDelgro since 2000. As you might expect from a Singapore-owned bus operator, “Metroline was reported as the bus company with the second-most complaints filed with Transport for London… [In] 2006 Metroline bus drivers staged two one-day strikes over pay. It was the first London bus drivers’ strike of its kind in the 21st century.

A question of pockets

Until the conflict of interest problem has been sorted, and until a more competitive tendering process is in place in Singapore, all these publicised “fines” would simply be a question of pockets – right pocket out, left pocket in – one way or another.