public transport operators in singapore should remain as public listed companies and open for more...

PUBLIC TRANSPORT OPERATORS IN SINGAPORE

SHOULD REMAIN AS PUBLIC LISTED COMPANIES AND

OPEN FOR MORE COMPETITORS

TP 5026 TRANSPORTATION MANAGEMENT AND POLICY

ADITYA NUGROHO (HT083276E)

H.R PASINDU (HT0800203N)

MD ASIF IMRAN

KUMAR ANUPAM

WANG QING

DEPARTMENT OF CIVIL ENGINEERING

NATIONAL UNIVERSITY OF SINGAPORE

2010

i

Department of Civil Engineering

TP 5026 Transportation Management and Policy

TABLE OF CONTENTS

TABLE OF CONTENTS i

LIST OF FIGURES iii

LIST OF TABLES iii

1.0 INTRODUCTION 1

2.0 OVERVIEW OF SINGAPORE’S PUBLIC TRANSPORT SYSTEM 3

2.1 Characteristic of Singapore city 3

2.2 Growth in Travel over the Years 4

2.3 Public Transport Market 4

2.4 Industry Structure 4

2.5 Public Transport Operators 5

2.5.1 Coverage 5

2.5.2 Role of Operators 6

2.5.3 Financial Performance of Operators 7

2.5.4 Ridership Statistics 7

2.5.5 Other Statistics 8

3.0 DEVELOPMENT OF PUBLIC TRANSPORT SYSTEM 11

3.1 The milestones 11

3.2 Who are the stakeholders involved in the Singapore’s public transport system? 12

3.3 Public Transport System: A core model 16

4.0 WHY PUBLIC LISTED COMPANY? 18

4.1 What’s public listed company? 18

4.2 What’s the general issues? 18

4.3 What’s the conditions in order to get listed in Singapore? 19

4.3.1 Advantages being listed 19

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4.3.2 Disadvantages of Going Public 20

4.4 Best practice from the other countries 21

MTR (Hongkong) 21

DTC (India) 22

5.0 WHY OPEN FOR MORE COMPETITORS? 23

5.1 General problems 23

5.2 Key issues to be addressed 24

5.3 Best experience from the United Kingdom 24

5.4 Is the competition will be the long term solution for Singapore public transport? 25

5.4.1 What types of competition that should we choice? 25

5.4.2 What are the measures that should take into consideration? 26

6.0 CONCLUSION 27

REFERENCES 28

iii



LIST OF TABLES AND FIGURES

Figure 1. 1 Broad ideas of the proposed topic 1

Figure 2. 1 High rise development 3

Figure 2. 2 Growth in the Number of Trips in Various Modes of Transport 4

Figure 2. 3 Current and Future MRT + LRT Network with Current and Potential Operators 5

Figure 2. 4 Area of Responsibility (AoR) of Two Bus Operators 6

Figure 2. 5: Average Daily Ridership of SBS Transit Buses 7

Figure 2. 6: Average Daily Ridership of SBS Transit Rails 7

Figure 2. 7: Key Parameters on Ridership Using SMRT Buses 8

Figure 2. 8: Key Parameters on Ridership Using SMRT Trains 8

Figure 2. 9: Comparison of Car and Public Transport Fares in Various Cities 9

Figure 2. 10: Market Share of the Two Companies in Bus Operations 10

Figure 2. 11: Comparative Bus Route Length of Two Operators 10

Figure 3. 1: Milestones in Singapore Public Transport System 12

Figure 3. 2: Stakeholder Relationship in Public Transport System 13

Figure 3. 3: Rail Length (km) at End-of-Year 14

Figure 3. 4: Satisfaction Ratings for Bus Service Attributes 16

Figure 3. 5: Public Transport System Model 17

Figure 5. 1 Annual vehicle x km per hectare VS public transport market share 23

Figure 5. 2 Public Transport Problem Patterns 24

Table 2. 1: Financial Performance of Two Operators 7

Table 2. 2: Comparison of Public Transport Fares in Various Cities 9

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1.0 INTRODUCTION

Being an island city-state that measures 42 km East to West and 23 km North to South,

Singapore has 3,149 km of roads for a population of about 4.98 million people and 894,862

registered motor vehicles in the year 2008. By 2008, with a per-capita GDP of S$53,192 at

2000 market prices (or US$37,597) the level of car ownership in Singapore, was increased

from at 91 cars per 1000 people in 2002, was about a 96 cars per 1000 people in 2008.

Currently 12% of Singapore total land area is already dedicated to roads (compared to 15%

used for housing). Yet, public transport mode share during peak hours has actually dropped

from 67% in 1997 to 63% in 2004 and continuously dropped to 59% in 2008 according to

Singapore Household Travel Survey 2004 and 2008.

With the increasing trend of daily trips based on growing population (Household Travel

Survey 2008) and continuosly drop in the public transport mode share, it is need for the

government to do a reformation in the public transportation sector by opening up the market

for new entrants and the operator itself should remain as public listed companies. However,

the proposed topic might be challenging since the environment for this project has not been

fully analysed and implemented. Thus, this proposal aims to analyse the reformation of

public transport industry in Singapore in supporting public transport operator should remain

as public listed companies and opening the market for new operators.

To strengthening our ideas we use a figure to show of this objective. Figure 1.1 shows the

broad of topic source, which can be simplified as follows: As stated from the land transport

master plan, it is critical to make public transport as a choice of mode. It is expected to

achieve 70% modal share in 2020. From the economic point of view, greater competition in

the public transport system is one available measure for increasing mode share. We then

finally focus on this sub-topic how to achieve competition with public transport operators

should remain as public listed companies.

Figure 1. 1 Broad ideas of the proposed topic

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Public transport as a choice mode in the master plan can be dated back to 1996 White Paper:

A World Class Transport System. Its aim was targeted as, “There should be a high percentage

of trips on quality public transport as in Zurich, where 75% of trips into the city centre are by

public transport”.

Public transport as a choice mode is specified in the master plan as follows:

An integrated public transport system;

Buses will enjoy greater priority on the roads;

Expand the Rapid Transit System (RTS) network and capacity;

Greater competition in the public transport industry;

Enhance travel experience and safety.

The explanation for „greater competition in the public transport industry’ is cited from the

LTA Transport Masterplan:

To encourage greater efficiency and service improvements for the benefit of

commuters, we will introduce greater competition in the Rapid Transit System

(RTS) industry by issuing shorter operating licenses for future RTS lines,

compared to the 30-year licences today. The basic bus service market will also

be gradually opened up to allow competition for the bus market i.e. competitive

tendering for the right to operate a package of bus services.

The general rationale for this is that competition promotes improved efficiency and

greater sensitivity to users needs. Moreover, when associated with private ownership

and/or management, this can improve access to capital, introduce new skills and enable

different and more effective ways of working.

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2.0 OVERVIEW OF SINGAPORE’S PUBLIC TRANSPORT SYSTEM

2.1 Characteristic of Singapore city

With a greater number of high density residential towns (comprises 25 high rise residential

towns in Singapore) it takes 85% population inhabitants. As can be seen from the Figure 2,

the high-density housings around some towns are also close to each other, but some are very

far separated. However, the evident fact is that there definitely are journeys within them, be it

short distance or long distance.

On one hand, this characteristic is very significant since the number of trips between these

residential zones may challenge the public transport service capacity.

Figure 2. 1 High rise development

On the other hand, the existence of this issue of high density is critical since Switzerland, a

European country without crowded residential district experienced that their deregulation of

bus went to bankruptcy. If someone have been to such European countries, it is easy to find

that the public transport system, especially the bus and train, has very few passengers.

Since transport planning is closely related to the land use, the characteristics of land and

people, which are its main participants, should be analysed carefully to ensure the accuracy of

forecast. The failure or success of transport planning might be largely dependent on the

accurate analysis of these characteristics.

Obviously, Singapore is an example of a city with crowed public transport service and it is

fiercely challenged with increasing journeys. As stated in master plan, the number of daily

trips will arrive at 14.3 million in 2020 from 8.9 million in 2007. It is seriously challenged by

this increase in travel demand. However, this increase in travel demand must be met largely

by public transport.

• No of major towns - 25

• % of population - 85%

• Dwelling units/town - 20,000 - 70,000 High - density housing

CBD

Major Town

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2.2 Growth in Travel over the Years

The growth in number of trips using various modes of transport in Singapore has increased in

the recent years (Household Travel survey, 2008). In Figure 2.2, the growth in average daily

ridership is shown for various modes of transport including taxi, bus, LRT and MRT. It is

evident from the diagram that among the four modes of transport depicted in the diagram, the

average daily ridership in LRT and MRT has increased steadily over the years. On the other

hand, the same remained more or less constant for taxis and an erratic pattern is shown in the

case of buses. As an aggregate of these four modes of transport, the total daily ridership has

shown an increase in most of the years.

Figure 2. 2 Growth in the Number of Trips in Various Modes of Transport

2.3 Public Transport Market

Singapore is an island nation, where car ownership is limited to only 10% of the entire

population. Because of this, 55% of all trips are made by public transport. According to an

estimate made in year 2003, on average, people spend 4.1% of household income in

transport. A striking feature of the island nation is that its population is one of the highest in

the world with 6481 persons per square kilometres (according to 2003 estimate).

2.4 Industry Structure

The public transport industry (bus and rail) in Singapore is a regulated duopoly, where the

state regulates the price and services of the two operators, namely SBS Transit and SMRT

Corporation. These two companies don‟t have the freedom to select their fares and routes of

operation according to their will, which instead are decided by the authorities. However, the

operators internalise the cross subsidies between profitable and non-profitable routes, lines,

modes and services. For bus services, the operators have been assigned Area of

Responsibility (AoR) in various regions of the island. Currently, the only competition is in

the right to operate a new rail line.

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2.5 Public Transport Operators

Currently, there are two operators in the public transport market of Singapore, namely SBS

Transit and SMRT Corporation. Both of these two companies are public listed companies,

who operate multimodal operation in the public transport market of Singapore. Among them,

the SMRT Corporation is the dominant rail operator, whose operations are predominantly rail

(MRT + LRT) oriented, whereas the SBS Transit is the dominant bus operator, whose

operations are predominantly bus oriented. Through the services provided by the SMRT

Corporation, 1.1 million rail trips and 0.6 million bus trips are made every day. On the other

hand, through the services provided by the SBS Transit, 2.1 million bus trips and 0.3 million

rail trips are made every day.

It is important to mention here that the ComfortDelGro is the dominant taxi operator in

Singapore, which not only operates 18000 taxis, but also owns 75% of SBS Transit, which is

the second largest public transport company in the world.

2.5.1 Coverage

The SBS Transit operates majority of bus services. Its fleet consists of 2900 buses, which

operate in 222 routes. Its Area of Responsibility (AoR) is mainly on the southern portion of

the island. Currently, it operates one MRT line, namely the North-East line. In future, it is

expected to operate the Eastern Region line and the North Coast line of the MRT. As far as

the LRT is concerned, it currently operates the Sengkang LRT and the Punggol LRT.

Figure 2. 3 Current and Future MRT + LRT Network with Current and Potential Operators

The SMRT Corporation operates minority of bus services. Its fleet consists of 800 buses,

which operate in 75 routes. Its Area of Responsibility (AoR) in mainly on the northern

portion of the island. Currently, it operates three MRT lines, namely the North-South line, the

East-West line and the Circle line. In future, it is expected to operate the Bukit Timah line

and the Downtown line. As far as the LRT is concerned, it currently operates the Bukit

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Panjang LRT, while in future it is expected to operate the Jurong Region LRT. It is important

to mention here that in addition to bus and rail, it also operates SMRT Taxis.

In Figure 2.3, the current and future rail network (MRT + LRT) is shown along with the

current operators and the potential future operators. In Figure 2.4, a map is shown depicting

the Area of Responsibility (AoR) of the bus operation by the two companies.

Figure 2. 4 Area of Responsibility (AoR) of Two Bus Operators

2.5.2 Role of Operators

The two public transport operators (SBS Transit and SMRT Corporation) have some role to

play in the field of transport in Singapore. In the following points, the roles are elaborated:

The operators are responsible for the purchase and maintenance of vehicles they

operate such as buses and trains. It is one of the most important roles because they

have to do this on their own given that the government does not subsidise the

operators anyway.

The operators are responsible for fleet planning and scheduling of their operations.

Fleet planning refers to selecting vehicles for the right route at the right time in order

to achieve most efficient utilisation of resources based on time dependent demand

throughout the day. Scheduling refers to selecting the time of departure from and

arrival to the origin and destination respectively, while ensuring that the vehicle

arrives at certain intervals at various intermediate locations along the route.

The operators play a role to train the drivers of various modes of public transport

operation. The objective of this training is to ensure a safe, efficient and comfortable

journey of the passengers.

The operators perform the operation and maintenance of a major portion of the

infrastructure associated with public transport operation such as stations, bus

interchanges, depots and terminals.

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2.5.3 Financial Performance of Operators

In Table 2.1, the summary of financial performance of the two public transport operators is

shown.

Table 2. 1: Financial Performance of Two Operators

Operator Revenue (Million

S$)

Net Income

(Million S$)

SBS Transit (2008) 729.6 40.6

SMRT Corporation

(2009) 879.0 162.7

2.5.4 Ridership Statistics

In Figure 2.5, the ridership statistics of SBS Transit is shown for buses and in Figure 2.6, the

same is shown for rail. In both cases, the average daily ridership is shown for all the months

of the past few years. From the tables, it is evident that the ridership of both bus and rail has

increased more or less gradually over the years.

Figure 2. 5: Average Daily Ridership of SBS Transit Buses

Figure 2. 6: Average Daily Ridership of SBS Transit Rails

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In Figure 2.7, the ridership statistics of SMRT Corporation is shown for buses. The figure

shows year-wise variation of some key parameters associated with bus operation. It can be

observed from the figure that during most of the years, the ridership has grown steadily while

being consistent with the population. In Figure 2.8, the ridership statistics of SMRT

Corporation is shown for rails. The figure shows year-wise variation of some key parameters

associated with rail operation. The figure reveals that in recent years, the ridership of rail has

grown drastically.

Figure 2. 7: Key Parameters on Ridership Using SMRT Buses

Figure 2. 8: Key Parameters on Ridership Using SMRT Trains

2.5.5 Other Statistics

In Table 2.2, the comparative fares of bus and rail for four different cities of the world

(including Singapore) has been shown in terms of Purchasing Power Parity (PPP) equivalent

Singapore Dollars. The table, which is based on the conversion factors published by the

World Bank, reveals that public transport is the cheapest in Singapore compared to three

other cities.

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Table 2. 2: Comparison of Public Transport Fares in Various Cities

City

Average PPP

Adjusted Bus Fare in

Equivalent S$

Average PPP Adjusted

MRT Fare in

Equivalent S$

Singapore 0.65 0.94

Hong Kong 1.31 1.58

London 1.00 3.51

New York 1.28 1.87

In Figure 2.9, a comparative cost of journey by car and public transport is shown for various

cities of the world including Singapore, which is taken from Mobility in Cities Database

(Union Internationale des Transports Publics, 2006). It shows that Singapore is one of the

cheapest cities of the world in terms of the comparative cost of journey in public transport

with respect to that for car.

Figure 2. 9: Comparison of Car and Public Transport Fares in Various Cities

In Figure 2.10, the year wise market share of the two bus operators for both trunk services

and feeder services is shown from the data provided by the Public Transport Council. It

reveals that in both type of bus services, SBS Transit outnumbers SMRT Corporation.

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Figure 2. 10: Market Share of the Two Companies in Bus Operations

In Figure 2.11, the year wise total one way bus route length of the two companies is shown,

which is found from the Public Transport Council. It suggests that the total one way bus route

length of SBS Transit is about three times to the one of SMRT Corporation.

Figure 2. 11: Comparative Bus Route Length of Two Operators

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3.0 DEVELOPMENT OF PUBLIC TRANSPORT SYSTEM

3.1 The milestones

1925-70: Mixed Operation Period

Singapore Traction Company was the main operator which enjoyed a monopoly and

protectionism to operate in the city area. Smaller companies operate around the surrounding

areas. The main characteristic of this period was the frequent labour protests made, citing low

salary, poor working conditions among the main reasons. Furthermore while the major

market operator suffered from poor employee relationships, inefficient services the smaller

companies suffered as a result from poor managerial and technical expertise to provide a

quality bus service. Hence overall standard of public transport was poor and it was deemed

government was neglecting the needs of the ordinary citizens.

1970s: Formation of Singapore Bus Services

Government intervention in a meaningful manner is first evident in the 1970s, when it

decides to amalgamate the small bus companies to 3 larger companies. Intention of this move

is to bring about more managerial efficiency to the operations and the increased capital

availability will allow the operators to enjoy greater economies of scale. However the

underlying issues with transport system remained, such as the irregular route network,

unreliability of the bus services, management issues. Hence the bus transport system in

general was still at a poor level of service. Government further decided to merge the three

companies to form Singapore Bus Services (SBS) in 1973. Further intervention in order to

reorganize the organizational structure and improve operational efficiency yielded positive

results. The gradual improvement in the bus operation resulted in SBS listing in the

Singapore Stock Exchange to be established itself as a public listed company. Another

characteristic of this era, is the end of Singapore Traction Company‟s operations as bus

operator which enjoyed a virtual monopoly and beginning of new monopoly with formation

of Singapore Bus (1978) Limited.

1980s: Emergence of Competition

Government with the intention of introducing competition to the market invited a new

company to operate bus services. In 1983 Trans Island Bus Service (TIBS) assumes

operations of bus services. In 1987 train transportation was added as a new mode to the

public transportation system. Singapore Mass Rapt Transit Corporation operated the urban

train services. The market structure from this period onwards consisted of a duopoly (SBS

and TIBS) in the bus services and SMRT functioning as the sole operator in the urban train

services.

2000s: Multi Modal Public Transport Operation

Government identifies mass rapid transport as an essential part to expand the public transport

ridership in Singapore, hence continues to improve the rail network. With the development of

new rail networks, government invites new companies to operate and SBS wins the tender in

2001 and renames its company as SBS Transit Ltd. SMRT acquires TIBS in 2001 and

transforms itself into a multi modal public transport operator. By 2003 with SBS assuming

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operation on new rail lines, both companies effectively function as multi modal public

transport operators and continue till today.

Figure 3. 1: Milestones in Singapore Public Transport System

3.2 Who are the stakeholders involved in the Singapore’s public transport system?

Public transport system in general has four groups of stake holders as shown in the Figure 3.2

below. Implementation of a new policy needs to incorporate each of these groups and analyze

how the relationship between each group varies during the changes.

Politicians

Stakeholder who represents the government, mainly involves with development of policy.

Transport policy is developed within the larger framework of the overall economic policy of

a government since transportation and especially public transportation is integral aspect of a

country‟s economy. The government in collaboration with the other governmental

organization related to transport presents it‟s the vision for the public transportation sector as

given in the master plans released in 1971 (White Paper: Reorganization of Motor Transport

Services of Singapore), in 1996 (White Paper: A World Class Land Transport System) and

most recent one in 2008 (Land Transport Masterplan 2008: A People-Centred Land Transport

System)

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Figure 3. 2: Stakeholder Relationship in Public Transport System

The governmental organizations

Stakeholders such the Land Transport Authority (LTA) which have statutory authority to

implement plans on behalf of the government, essential acts as the agent. The three objectives

of the LTA demonstrate the important role they play in the country‟s public transport system

which are:

To deliver a land transport network that is integrated, efficient, cost-effective and

sustainable to meet the nation's needs.

To plan, develop and manage Singapore's land transport system to support a quality

environment while making optimal use of our transport measures and safeguarding

the well-being of the travelling public.

To develop and implement policies to encourage commuters to choose the most

appropriate transportation mode.

LTA‟s other major function is providing the necessary infrastructure for public transport

services to operate successfully. The investment cost for transportation is extremely high and

most private companies will not have the financial strength to absorb a capital investment of

that magnitude. Hence the government has assumed the responsibility of investing in

infrastructure development and considers it as sunk cost in financial terms which will not be

recovered from the operators or the passengers directly. The infrastructure development work

include,

Construction of bus infrastructure of interchanges/termini, bus shelters and priority

measures, such as bus lanes and bus signals.

Construction of the track (see the growth of rail network in the Figure 3.3 below), the

stations, the control centre

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LTA will take on the role of central bus network planner by 2009 in order to shift the focus to

place the commuter at the centre and take a holistic approach in planning the bus network,

taking into consideration development in the Rapid Transit System (RTS) network and other

transport infrastructure.

Figure 3. 3: Rail Length (km) at End-of-Year

Regulator

Another key stakeholder in the public transport system is regulator, especially considering the

fact that public transportation is considered as a „people‟s need‟ and has a strong welfare

orientation in government‟s policy making. Therefore the regulator‟s role is essentially to

balance between „social welfare‟ from the side of the commuters and „operational

profitability‟ from the side of the transport service providers. Public Transport Council (PTC)

was established in 1987 as an independent body to safeguard the interest of commuters by

ensuring adequate public transport services and affordable fares, ensure long-term financial

viability of public transport companies.

Core functions of the PTC include:

Licensing of bus services that charge fares

Regulating bus service standards

Licensing of bus service operators

Licensing of transit ticket payment service providers

Regulating bus and train fares

Fare regulation and service standards are the key aspects ensuring public transport remains

affordable to the masses as well the service quality is maintained by the operator. These are

vital elements in pursuing the vision to improve public transport sector with the aim of

increasing its ridership and the modal share. Under the price-cap formula, operators have to

absorb the cost of these improvements, and are not allowed to pass them on to commuters in

the form of higher fares. Under the formula, fare adjustments are determined by overall

economic indicators, namely the change in the Consumer Price index (CPI) and the national

15



Wage Index (WI), and not the operators‟ specific costs. As such, the costs of buying new

buses and operating additional bus trips will not affect fares.

Maximum Fare Adjustment= 0.5 D CPI + 0.5 D WI – 1.5%

Where:

CPI = Year on year change in Consumer Price Index

WI = Year on year change in Average Monthly Earnings (National Average),

adjusted for any change in the employer‟s CPF contribution rate

1.5% = Productivity extraction component that is based on 50% of public transport

operators average productivity gains

Quality of Service (QoS) standards set by PTC cover 6 essential aspects of service:

Bus service reliability

Loading

Safety

Provision of information

Availability of bus services

Integration with other modes of public transport

The PTC has auditors to ensure operators maintain the standards and in case of continuous

violations, penalties are imposed on the operator. Public transport services such as ticketing,

integration of services between the different operators are carried out by separate companies.

EZ-Link Pte Ltd and Transit Link Pte Ltd handles management of fare payment cards and

carries out integration work related to fare, information and network for the two operators,

respectively. These companies are also regulated by PTC.

The commuters

Commuters interest is what ultimately matters in determining the success of a public

transport system. It is crucial to identify what are their expectations, before changes are

proposed to the existing system. For example as shown in Figure 3.4, bus service attributes

satisfaction ratings derived from a surveys in 2007 and 2008, show that waiting time is a key

attribute which the customers are dissatisfied with.

As a result, since 1 August 2009, the Public Transport Council (PTC) has tightened the

Quality of Service (QoS) standards for bus services. 80% of bus services will now have to

leave the bus interchanges and terminals every 10 minutes or less during weekday peak

periods, from the previous 15 minutes. For feeder services, 90% of feeder services now have

to do so at 10 minutes or less, up from the previous 85%. To meet the tighter standards, the

operators have added more than 260 bus-trips to 109 services during the morning and evening

peak periods. Frequencies of these services have improved by 18% and their carrying

capacity by 24%.

However, changes to the public transport system will be more effective if these issues are

addressed, for example low satisfaction on waiting time means most commuters experience

higher waiting time possibly due to lower frequency of buses on routes. The solution is to

increase the number of buses in operation, so the authorities can make a decision on; how

best to accomplish this (e.g. introducing more competitors to the market to increase supply,

16



negotiating with the existing operators to increase frequency for selected routes etc.). Without

understanding the customer‟s or the public needs, the changes made to the existing system

may not have significant impact and hence may not achieve the expected targets.

Figure 3. 4: Satisfaction Ratings for Bus Service Attributes

Understanding the role of each stake holder is imperative in policy formulation, since we

need consider whether the stake holders are prepared to function effectively under the new

environment. For example the case of route planning, currently it is the operators who

propose the bus route and get approval of the PTC to start bus services. In a scenario where

the policy decision is made to introduce more competitors this system may lead to a

inefficient bus route planning and possibly a chaotic situation. Hence it is important that the

route network planning is centralized under the LTA, in order to ensure the system efficiency

is maintained. Therefore as shown through this example new policy also should be made in

conjunction with the planning and operational changes within the relevant organizations.

3.3 Public Transport System: A core model

Figure 3.5 represents the stakeholder‟s role in a typical transport system. The operators

(private company) is confronted with two seemingly opposing forces, one from the regulator

which pushes for more „welfare‟ and the other from its owners/ share holders who push for

more „profit‟. The operator has to balance between maximizing welfare and profit. The

government has to provide adequate support through meeting the infrastructure needs. This

17



scenario represents an ideal model for a sustainable approach for public transport system. The

government‟s role is restricted to policy formulation and infrastructure provision and no

subsidies given for operations, regulator ensure public welfare element in transport services is

maintained through fare regulation and service standards, and operator focuses on running the

company efficiently to attain profitability while confining to the constraints imposed by the

regulations. In this system the roles are clearly defined, and all the stake holders can focus on

successfully carrying out the specific role in the system.

Figure 3. 5: Public Transport System Model

This scenario changes if the operator becomes a government company. In which case it will

be a case of „self regulation‟ and the transport services will be carried out more as welfare

service. This would push the balance towards maximizing welfare; the operations may no

longer be profitable and would have to rely on government subsidies to recover costs. The

operational efficiencies will be lower in this environment. Subsidies which are funded by

government taxes are indirectly funded by the public and are seen as an inefficient way of

cost recovery. Therefore serious doubts arise whether public transport services can be

provided maintaining high service standards in such an environment. The other extreme is a

case where there is very poor regulation and the public transport services are carried out by

private companies. In this situation, the companies will try to maximize profits and push for

increase fares, operating in profitable routes only and not pay much concern on public

welfare aspect. This would result in reduced ridership in public transportation and overall

service level reduction.

Box 1. Public transport system model

The government has to provide adequate support through meeting the infrastructure

needs. Regulator ensure public welfare element in transport services is maintained

through fare regulation and service standards, and operator focuses on running the company efficiently to attain profitability while confining to the constraints imposed by

the regulations.

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4.0 WHY PUBLIC LISTED COMPANY?

4.1 What’s public listed company?

A company issuing stocks, which are traded on the open market, either on a stock exchange

or on the over-the-counter market. Individual and institutional shareholders constitute the

owners of a public company, in proportion to the amount of stock they own as a percentage

of all outstanding stock. Thus, shareholders have final say in all decisions taken by a public

company and its managers, especially through its annual shareholders' meeting. Public

companies have greater access to financing than other companies, as they have the ability to

issue more stock. However, they are subject to greater regulation: for example, they must file

reports with on their earnings and they are more likely to be subject to corporate taxes. A

public company is also called a publicly-traded company.

A public listed company is a company that has permission to offer its registered securities

(stock, bonds, etc.) for sale to the general public, typically through a stock exchange, or

occasionally a company whose stock is traded over the counter (OTC) via market makers

who use non-exchange quotation services. Usually, the securities of a publicly traded

company are owned by many investors while the shares of a privately held company are

owned by relatively few shareholders. A company with many shareholders is not necessarily

a publicly traded company. Companies that report under the 1934 Act are generally deemed

public companies. The first company to issue shares is thought to be the Dutch East India

Company in 1601.

4.2 What’s the general issues?

The debate on private or public ownership of public transportation has been continuing to the

present day. There are numerous case studies pro and against each case, especially in

developing countries state owned public transport companies have run into severe debt and

low quality operational standards, as a result public transportation was also privatized along

with other government run sectors such as banking, airlines, broadcasting, trading etc.

However in several European countries such as Switzerland there are government run

transport companies which operate successfully. As World Bank reported in its background

paper on „Reforming Transport: Maximizing Synergy between Public and Private Sectors‟1:

The public and private sectors are intrinsically involved in the provision of both

transport infrastructure and services, but the dividing line between public and

private varies significantly from country to country and among the different

modes of transport. These variations reflect a wide range of factors, such as the

technologies available, the scale of their capital requirements, changing views

of the relative importance of system wide planning and management (as against

customer responsiveness in improving performance), the stock of managerial

and technical skills, government finances, and —last but not least— each

country’s historical experience and inherited institutions ”.

1 Reforming Transport: Maximizing Synergy between Public and Private Sectors Background Paper

http://go.worldbank.org/4NU14ZFO30

http://go.worldbank.org/4NU14ZFO30

19



The key aspect among many other factors such technology availability; capital requirement

etc. is the each country‟s „historical experience and inherited institution‟. The public transport

policy needs to incorporate this aspect in determine which is most suitable direction it needs

to go choose to progress.

It is imperative that for a public transport system to be successful it should incorporate the

following three concepts.

Involving the private sector to foster the dynamism and innovation in the public

transport service

Strong regulation to balance between ensuring people‟s need and operator‟s

profitability

Government involvement restricted to policy making and supplying the infrastructure

needs

4.3 What’s the conditions in order to get listed in Singapore?

1. Company may have more than 50 shareholders

2. Company can acquire capital by offering transferable shares or debentures to the

public

3. Company can be listed on the Singapore Exchange (after due approval

from Singapore Exchange Limited)

4.3.1 Advantages being listed

Access to Capital

Singapore companies like in other jurisdictions mainly go public because of the financial

benefit -- in the form of raising capital. Capital can be boosted through an Initial Public

Offering (IPO). IPO is the company‟s first sale of stock, and it is often used as a way to

generate the capital needed to expand. This capital can be used to fund further growth, fund

capital expenditure, or to pay off existing debt. IPOs often generate publicity by making the

company's products known to a new group of potential customers. Publicly traded businesses

are usually better known than private businesses. This leads to an increase in market share for

the company. Going public also creates a type of currency in the form of its stock. Companies

can use this to make acquisitions.

Unlocking Shareholder Value

Going public is an excellent way of enabling your company‟s stock to be based on fair-

market-value, whereby demonstrating its true value and creating a significant return on

investment for its shareholders.

Compensation

Public companies in Singapore may issue their securities as compensation for their directors,

officers and employees. Securities from a public company typically have an established fair

market value at any given time as determined by the price the security is sold for on the stock

exchange, where the security is traded.

http://www.sgx.com/

20



Liquidity

In selling a private company's stock, a stockholder must find an individual who is interested

in the acquisition of the shares. This process becomes much easier when a Singapore

company goes public, because the company creates a public market for its stock in which

buyers and sellers participate.

Prestige

A public offering of stock can help a Singapore company gain prestige by creating a

perception of stability. A company's founders, co-founders and managers gain an enormous

amount of personal prestige from being associated with a client that goes public. Prestige can

be very helpful in recruiting key employees and marketing products and services.

Image

People have a better perception of public companies. This is particularly important in those

industries, where customers' and suppliers' long-term commitments are essential to the

company's success.

Publicity

A public offering of stock brings with it prestige, publicity and visibility. These are effective

in marketing your Singapore Company and bringing people's attention to it. This can

sometimes lead to new business developments and strategic alliances. It can also attract the

attention of potential partners or merger candidates.

Mergers and acquisitions

The company's stock is valuable as cash and can be used in acquiring other businesses.

4.3.2 Disadvantages of Going Public

Loss of confidentiality

Public companies need to disclose a lot of information about its operations as they operate

under a close scrutiny of its public shareholders and the regulating authorities.

Added Cost

The cost of IPO offering as well as complying with ongoing regulatory requirements can be

very high. For example, IPO costs can climb to as much as 25 percent of the offering

deal. Some of the additional costs include the accounting fees, legal fees, miscellaneous fees

and professional adviser fees.

Added Liability Exposure

There is an increased risk of exposure to civil liability for public companies, executives and

directors for false or misleading statements in the registration statement. Officers may face

21



liability for misrepresentations in reports filed with the SGX or for disclosing false

information.

Time Consuming

Converting into a public company is also a tedious and time consuming process. Thus,

business operations may be disrupted if senior management is too much caught up in the IPO

process.

Loss of control

Public companies are faced with the pressures of the market. This would likely cause them to

focus more on short-term results rather than long-term growth. Furthermore, public

companies are at greater risk of takeover attempts due to its public trading of shares.

Reporting and Fiduciary Responsibilities

Public companies must continuously file reports with SGX and comply with exchange

guidelines and statutory requirements. This is not only costly but also provides information to

competitors.

4.4 Best practice from the other countries

MTR (Hongkong)

MTR, or Mass Transit Railway, is the rapid transit railway system in Hong Kong. The MTR

first began service in 1979. On 5 October 2000, the operator of the MTR network, MTR

Corporation Limited (MTRCL), became Hong Kong's first rail company to be privatised,

marking the beginning of the Hong Kong government's initiative to dissolve its interests in

public utilities. Prior to its listing on the Hong Kong Stock Exchange, the Mass Transit

Railway Corporation (MTRC) was wholly owned by the Hong Kong government. The

offering involved the sale of about one billion shares, and the company now has the

largest shareholder base of any company listed in Hong Kong. In June 2001, MTRCL was

transferred to the Hang Seng Index.

MTRCL has often developed properties next to stations to complement its already profitable

railway business. Many recently built stations were incorporated into large housing estates or

shopping complexes. For example, Tsing Yi station is built next to the Maritime

Squareshopping centre and directly underneath the Tierra Verde housing estate.

On 11 April 2006, MTRCL signed a non-binding memorandum of understanding with

the Hong Kong government, the owner of KCRC, to merge the operation of the two railway

networks in Hong Kong in spite of the strong opposition by the KCRC staff. The minority

shareholders of the corporation approved the proposal at an extraordinary general meeting on

9 October 2007, allowing MTRCL to take over the operation of the KCR network and

combine the fare system of the two networks on 2 December 2007.

http://en.wikipedia.org/wiki/Rapid_transit

http://en.wikipedia.org/wiki/Railway

http://en.wikipedia.org/wiki/MTR_Corporation_Limited

http://en.wikipedia.org/wiki/MTR_Corporation_Limited

http://en.wikipedia.org/wiki/Privatisation

http://en.wikipedia.org/wiki/Utility

http://en.wikipedia.org/wiki/Hong_Kong_Stock_Exchange

http://en.wikipedia.org/wiki/Share_(finance)

http://en.wikipedia.org/wiki/Shareholder

http://en.wikipedia.org/wiki/Hang_Seng_Index

http://en.wikipedia.org/wiki/Tsing_Yi_Station

http://en.wikipedia.org/wiki/Maritime_Square



http://en.wikipedia.org/wiki/Memorandum_of_understanding

http://en.wikipedia.org/wiki/Hong_Kong_government

http://en.wikipedia.org/wiki/Kowloon-Canton_Railway_Corporation

http://en.wikipedia.org/wiki/Kowloon-Canton_Railway

22



After the merger, the MTR network included three more lines, East Rail Line, West Rail

Line and Ma On Shan Line, as well as the Light Rail network and Guangdong Through

Train to Guangzhou.

DTC (India)

Govt. of India, Ministry of Transport took over the local bus services in Delhi in May 1948 in

the name of Delhi Transport Service when they found that the services offered by Gawalior

and Northern India Transport Company Ltd., the then licensee, were inadequate. A Delhi

Road Transport Authority was constituted under the Road Transport Corporation Act, 1950.

This Authority became undertaking of Municipal Corporation of Delhi by an Act of

Parliament in April, 1958.

On the recommendation of a Working Group of Planning Commission which concluded that

Delhi Transport as an extension of Municipal Corporation of Delhi had not been functioning

efficiently and adequately resulting in leakage of revenue and very high operation cost, Govt.

of India took over the management of the undertaking by passing the Delhi Road Transport

Laws (Amendment) Act, in 1971. It took over the assets and liabilities from the erstwhile

Delhi Transport Undertaking (DTU) operated by the Municipal Corporation of Delhi till 2nd

Nov,1971. Thus the DTC was set up in 1971. In section 22 of the Road Transport

Corporation Act, 1950, following objectives were laid down for the DTC:

To provide or secure or promote an efficient, economical, reliable and properly

coordinated system the road transport in Union Territory of Delhi and any extended

area.

In doing so, it shall act on business principles.

To achieve a high level operational efficiency.

To charge fares not exceeding those prescribed by the State Under Section 43(1)(i) of

the Motor Vehicle Act, 1939.

To attain financial self-sufficiency.

Box 3 Lack of efficiency by government company

Overall the achievements have not been achieved once a

path of government owned company is taken.

Box 2 Getting globalisation

Overall it is clear that once we go for public listed company getting globalisation becomes possible given the limited

expansion scope in Singapore it is a very clear choice.

http://en.wikipedia.org/wiki/East_Rail_Line

http://en.wikipedia.org/wiki/West_Rail_Line

http://en.wikipedia.org/wiki/West_Rail_Line

http://en.wikipedia.org/wiki/Ma_On_Shan_Line

http://en.wikipedia.org/wiki/Light_Rail_(MTR)

http://en.wikipedia.org/wiki/Guangdong_Through_Train_(MTR)

http://en.wikipedia.org/wiki/Guangdong_Through_Train_(MTR)

http://en.wikipedia.org/wiki/Guangzhou

23



5.0 WHY OPEN FOR MORE COMPETITORS?

As a large, compact city, Singapore is approaching limits to road capacity expansion and

faces a traffic-clogged future unless public transport‟s role can be widened. Public transport

will increasingly be called upon to compete with cars for customers who have a choice. This

will be impossible without a vision that is more ambitious than currently. This has

implications for how public transport is organised and regulated. Existing arrangements are

almost certainly not up to the task and fine-tuning will not be enough. This alternative is the

emerging state-of-the-art approach, and involves introducing real competition to the public

transport market, but at the same time, requires a stronger role for the public sector in

planning a highly-attractive, comprehensive and well-integrated system.

5.1 General problems

As reported by Union International des Transports Publics in Millenium City Database for

Sustainable Mobility (2006), the volume of public transport supply in relation to population is

plainly linked to network traffic since operators adapt services to demand. However, this

indicator does not offer a good explanation for passenger numbers (vehicle occupancy rates

vary from 13 to 36% depending on the city) and even less so as regards competitiveness vis-

à-vis the car. More than the supply volume per inhabitant the level of urban space coverage -

measured using supply volume per hectare - is the crucial factor. This indicator provides

information about stop and station proximity and about access on foot to public transport.

Clearly, the greater the urban space that services cover, the higher public transport ridership.

Networks providing intensive coverage of the metropolitan area on lines with sufficient

transport capacity are the most attractive, as illustrated (in decreasing order of supply density)

by the cases of Singapore and London (see Figure 5.1).

0

10

20

30

40

50

60

70

80

90

100

0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000 50.000Pu

blic

tra

ns

po

rt m

ark

et s

ha

re

(%

of m

ec

ha

nis

ed

an

d

mo

toris

ed

trip

s)

Number of annual vehicle x km per hectare

13

R²=0,80

Singapore

Hongkong

Moscow

London

Figure 5. 1 Annual vehicle x km per hectare VS public transport market share

24



5.2 Key issues to be addressed

The key issue for sustainable mobility in Singapore can be identified as the causing a gradual

decline in the modal share of public transport and decreases order of supply density. The

existing high modal share of public transport (59% of trips) in Singapore is primarily a result

of captive users or the person who unable to have a private car. When income reaches higher

level and city residents have access to private car, the share of public transport is bound to

drop sharply since the service level offered by public transport system primarily based on

conventional bus system is no match to that offered by private car. Such declining trend of

modal share of public transport in fact is an empirical manifestation of serious structural

problems in the underlying system.

GDP per

capita

Critical stage

Mo

da

l sh

are

of P

ub

lic T

ran

sp

ort

(P

uT

)

Feasible

Difficult

Unfeasible

Feasible

Expected

path

Desirable

path

Figure 5. 2 Public Transport Problem Patterns

Figure 5.1 presents this problem mode graphically. Now the policy challenge is how to

maintain or regain the desirable modal share of public transport. According to Morichi (2005)

one of the obvious policy options is to deregulate bus industryor opening up the market for

competition which can offer greater efficiency and service improvements for the benefit of

commuters thereby compete with private mode. What is important in this context is to give

balanced emphasis to both sort-term and long term optimal solutions. For example, tightening

quality of service public transport maybe become short-term solution which may be easier to

implement and may give immediate relief but it may not bring about the desirable scenario in

the long-run. On the other hand with proposing greater competition in public transport

industry may become long-term solution which may not produce immediate improvement

and might appear as inefficient.

5.3 Best experience from the United Kingdom

Where should we look for best practice? Certainly not to automobile dependent cities such in

North America or Australia, where public transport has largely admitted defeat and retreated,

such as serving radial work trips and providing welfare service for people without

alternatives (Barter, 2007). UK is one of the good role models in the form competition of

public transport industry. More than 30 private operators using over 5,500 double and single

decked conventional buses and around 1,000 minibuses provide bus transport in London

under contract. Light rail transport is currently provided by Docklands Light Railway, which

25



has 3 lines in the East of London. Driverless trains provide Service. London has an extensive

metro network of 12 lines covering 412 km.

The overall authority for bus and metro transport in London is London Transport (LT). LT‟s

main responsibilities are the planning and co-ordination of public transport within London.

LT provides integrated ticketing for bus, metro and suburban railways. LT is also responsible

for the operation of the metro. Bus contracting in London started in 1985 when LT bus

operations were formed into a separate, subsidiary, operating company. Bus service planning

was retained at the centre and combined with the procurement function. From that time bus

services were progressively put out to competitive tender. In 1994/5 LT sold its bus operating

companies to the private sector.

The main impacts (using 1997/8 figures) since 1985/6 have been:

Bus ridership has increased by 12%, compared to a fall of 23% for Great Britain as

whole

Bus vehicle kilometres up by 33%

Bus operating costs per vehicle kilometre have fallen by 46%

Bus operating costs per passenger kilometre have fallen by 47%

Bus fares have increased by 38%

Direct subsidy payments have fallen by 85%

The main impacts of the franchising process were:

Competition for rail franchises has been significant – with an average of 5 bids for

each franchise.

Competition increased as the franchise process went on with a 27% reduction in

subsidy payments from the first to tenth tranches

On rail competition has been limited to a few parts of the network were there are

parallel operators

Ridership has increased: passengers up by 20% passenger km up by 16% between

1993/4 and 1998/9

Revenue has increased by 25% (1993/4 to 1998/9)

5.4 Is the competition will be the long term solution for Singapore public transport?

The answer is yes. Competition will be the long term solution for Singapore public transport

if the existing regulated monopoly arrangement with „benchmarking‟ competition meet with

social needs, safety needs, and fairness in the level playing field for all players. Generally

speaking, approach of open entry to the public transport industry or „competition in the

market‟ might destroy integration and be disastrous.Thus we should look carefully what type

of competition choice that would be suitable for the Singapore.

5.4.1 What types of competition that should we choice?

There is a way to enhance competition that is compatible with improved integration and

customer-oriented, improvements. It requires „competition for the market‟, which involves

competitive tendering for the right to operate sets of public transport routes as mentioned in

Halcrow Fox (see Box 4 for the types). Singapore probably may consider competition for the

market which basicly form of direct competition, namely „service contracts‟, and „gross-cost‟

26



service contracts. According to Barter (2007) this approach to introducing competition is

most compatible with both a high degree of system integration and with customer-oriented

planning. Service contracts have been very widely applied but it is in Scandinavia that the

combination of competitive tendering, excellent integration and ambitious targets for system

improvements has been most notable (Hidson and Müller, 2003). This approach involves

giving a single public agency responsibility for integrated planning of routes, timetables and

pricing, in accordance with a unified vision for the role of the public transport system. Private

operators compete via periodic tendering for the right to operate routes specified by the

agency. The gross cost approach involves the central pooling of fare revenues and payment to

operators on the basis of performance and services delivered. With the former, the number of

bus services on the roads will be specified by LTA and not left to competing bus operators to

flood the roads with their bus services, causing deterioration in traffic conditions.

5.4.2 What are the measures that should take into consideration?

When the opening up of the basic bus service market for more competition it should be

implemented gradually and carefully to minimize any inconvenience and disruption to

commuters. LTA should complete its study of how our existing bus network can be better

optimized to meet commuters‟ needs. However, when LTA take on the centralized planning

of the bus network in 2009, it is suggested that gradually open up the bus market to more

competition after that.

Careful planning and preparation is also required for competitive tendering to work well.

Singapore can easily muster the necessary institutional capacity but may be concerned about

the size of its market. Singapore‟s public transport market is far from tiny because public

transport plays such a significant role. Nevertheless, the need for sufficiently competitive

tendering may eventually prompt a gradual opening of the local public transport market to

international players. Opening the local public transport market may cause concern, but is in

line with Singapore‟s desire to encourage local operating companies to venture into public

transport markets internationally.

Box 4 Two main types

Gross cost contracting has been used successfully for procuring bus services in a

number of developed cities. It transfers the production risk to private operators but

shields them from the full commercial risks. This has the advantage of facilitating integration and enlarging the pool of competition, which is particularly important in

cities where there has been a long tradition of public provision and public transport

markets are weak.

Net cost contracts require the operator to bear most or all of the revenue risks and are

also used in bus operations. They have the advantage of relieving the authorities of

revenue risks and responsibilities and, in some circumstance can act as a spur to improving operator performance. This kind of contracting however does make

integration more difficult to achieve and requires safeguards to prevent operators

indulging in revenue-share competition, which may act against the passengers‟ interests, and to ensure that any loss making service that are required are not

neglected.

27



6.0 CONCLUSION

Pubblic Transportation System, has gradually evolved from the low standards it had in the

70s to be one of the best public transportation systems in the world in terms of service

standards and affordability. The mechanism we have in place where operators are public

listed companies and service standard is regulated by an independant authority with the

government providing the policy and infrastructure, can be considered to be effective,

therefore what is warranted is improvements to the existing system, not drastic changes.

Hence options like state run public transportation etc is not prudent to be considered at this

time. To improve the long term system by increasing efficiency and supply of services, a

realistic approach would be to introduce more competition to the market. Hence we support

the notion of maintaining public transport operators as public listed companies and open the

market for more competition it would be in line with Singapore‟s desire to encourage local

operating companies to venture into public transport markets internationally.

28



REFERENCES

Acharya, S. R. Motorization and Urban Mobility in Developing Countries: Exploring Policy

Option through Dynamic Simulation. “Journal of the Eastern Asia Society for

Transportation Studies” 5: pp.4113-4128. (2005).

Barter, P. Wanted - An Ambitious Vision for Public Transport Ethos Magazine (the magazine

of the Civil Service College, Singapore), Issue 2 (April) 2007, pp. 50-57.

EASTS International Research Group (IRG-01-2005). Sustainable TRansport for East Asian

Megacities. Unpublished report, 2007.

GTZ, 2009.Transportation Demand Management: Training Document. Deutsche Gesellschaft

für Technische Zusammenarbeit.

Halcrow Fox, 2000. Review of Urban Public Transport Competition, Draft Final Report for

the UK Department for International Development, May 2000.

Hidson, M. and Müller, M. (2003) Better Public Transport for Europe through Competitive

Tendering - A Good Practice Guide, ICLEI - Local Governments for Sustainability.

LTA, 2009. Singapore Land Transport Brief. Land Transport Authority, Singapore.

LTA, 2008. Singapore Household Interview Travel Survey, Singapore.

LTA, 2008. Land Transport Masterplan : A People-Centred Land Transport System. Land

Transport Authority, Singapore.

LTA, 1996. World Class Land Transport System. Land Transport Authority, Singapore.

Government White Paper.

Morichi, S. Long-term Strategy for Transport System in Asian Megacities. “Journal of the

Eastern Asia Society for Transportation Studies” 6: pp.1-22. (2005)

PTC, 2009. Change in Transit. Public Transport Council Annual Report, Singapore.

Singapore Department of Statistics, 2008. Singapore Economic Data and Transport Statistic

of Singapore. Accessed via http://www.singstat.gov.sg

SBS Transit. Annual report 2008/2009. Available online

http://www.sbstransit.com.sg/generalinfo/annualreport.aspx

SMRT Corporation. Annual report 2008/2009. Available online

http://www.smrt.com.sg/investors/annual_reports.asp

Union International des Transports Publics. Mobility in City Database: Better Mobility for

People Worldwide. (CD-RO M), UITP. (2006).

World Bank, 2006. Reforming Transport: Maximizing Synergy between Public and Private

Sectors : Background Paper.

http://www.singstat.gov.sg/

http://www.sbstransit.com.sg/generalinfo/annualreport.aspx

http://www.smrt.com.sg/investors/annual_reports.asp

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