By Derrick Sim
On 3rd May 2014, SMRT Corp announced that talks had been ongoing with the government to extend the financing framework for their existing lines.
If approved, under this framework, government will buy back the rail infrastructure from SMRT and all maintenance of rail infrastructure will carried out by government using public fund. Though the discussion are underway, industry observers had stated that the proposal is almost a done deal.
I would like to stress that the initial fund that was used to construct the rail infrastructure was public fund, and not fund raise by SMRT Corp. In fact, the amount of fund required to construct the initial rail infrastructure was so huge, ($5 billion in 1980s) that the-then Minister for Communication (now Minister for Transportation) and former President Mr Ong Teng Cheong faced strong opposition from the cabinet to get approval of the project.
In 2000, SMRT was privatised and listed on SGX with all rail infrastructure under the purview and maintenance of SMRT Corp. I find it strange that how did the rail infrastructure becomes asset of SMRT without SMRT paying for it. Even stranger is right now, SMRT Corp is seeking to sell it back to government so that it can reduce its capital expense on the maintenance of the rail infrastructure.
It seems to me that SMRT Corp is asking the government to use public fund to bail the company out so that it can focus on running the service, without maintaining the rail. If the proposal is approved by government, the cost of maintenance will be shouldered by the government using public fund and SMRT Corp would also receive a huge injection of fund from government through the sales of the rail infrastructure. It is understandable that the maintenance of the rail infrastructure is a huge burden on SMRT Corp in recent years. However, like any listed entity, SMRT can raise fund through various methods.
I would like to urge the Land Transport Authority to seriously consider the sanity of this proposal as it involved the use of public fund. I also look forward to any clarification by LTA on this matter.