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The flaw in privatising public services

by Dr Joseph Teo

I am sure many Singaporeans are as flabbergasted I was upon learning that public hospitals were paying agents to solicit foreign patients (The Straits Times, 30 Sep 2018, “MOH puts a stop to foreign agent referral contracts”).  Hospitals that are set up with public funds, ostensibly to provide healthcare to Singaporeans, are instead trying to make profits by soliciting foreign patients.  This raises a whole host of anxious questions: Do I, as a subsidised Singaporean patient, get the same quality of service?  Are there technologies available to foreign patients that are not available to me because I am not rich? In the cases of conflicting demands for the same resources – doctors, operating theatres, diagnostic equipment, am I queued behind wealthy full-paying foreigners?

The fact that the Ministry of Health has put a stop to this practice may perhaps make these questions moot.  However, reacting to this one instance misses the underlying problem behind many of negative outcomes for Singaporeans.

Our government’s approach of privatisation and assigning a profit motive to providers of public services creates the wrong incentives for the leaders.  In order to meet the Key Performance Indicator (KPI) of making money and being profitable, they lose the sense of mission behind serving the public, and making Singapore a better place for Singaporeans.

I cite just three additional examples:

We privatised public transport, with the claim that somehow competition will make transport cheaper and more efficient for Singaporeans.  We assumed that somehow, profit making companies will be incentivised to invest in infrastructure.  The real consequence: profits were distributed to shareholders (some of whom were foreign investment funds), and massive failures occurred, and continue to occur, due to underinvestment in infrastructure. Taxpayers had to reinvest in infrastructure, and now Singaporeans have to pay more for public transport. After all, someone must pay for the additional capacity supplied by the Bus Service Enhancement Programme (BSEP).

We privatised TV programming and telecoms, because we would get more variety, and competition would bring costs down.  We assumed somehow that companies would somehow invest in infrastructure, and consumers would benefit.  The real consequence: companies share infrastructure to cut costs, resulting single-points of failure across multiple service providers.  In addition, companies create unnecessary competition over content, resulting in 60% or more increases in the price of watching World Cup football matches.

We gave up managing hawker centres, instead giving them to social enterprises.  Somehow the social enterprises will keep costs low and provide affordable cooked food for Singaporeans. As a consequence: Hawkers are slapped with hidden fees and compulsory costs, and if a limited number of affordable food options are available, the costs of all other options have to be increased.

I am sure that there are many other examples, and shall depend on the net community to highlight them. All of these examples have a common thread – a reasonably well-managed public service was privatised, thus giving the organisation that provides the services a profit motive.  Instead of serving the public, the goal is now to “make money”.

One instance of a negative externality might be an accident or a co-incidence. Two instances might give rise to a minor suspicion that a policy might need to be tweaked.  Many instances across industries might perhaps suggest that there is something fundamentally wrong with the approach. I urge the government to seriously reconsider its approach in providing public services.  Yes, any public service must be provided in a sustainable manner – but sustainable does not mean “make money”.  Instead, the government should decide what outcomes are useful for Singaporeans, and how they can be achieved without introducing a profit motive.