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
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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

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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.

CBD
• No of major towns - 25 Major Town
• % of population - 85%
High - density
• Dwelling units/town - 20,000 - 70,000 housing

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.

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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

Revenue (Million Net Income

Operator
S$) (Million S$)
SBS Transit (2008) 729.6 40.6
SMRT Corporation
879.0 162.7
(2009)

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

Average PPP Average PPP Adjusted

City Adjusted Bus Fare in MRT Fare in
Equivalent S$ 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

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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,

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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

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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

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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.

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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

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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.

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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.

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.

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.

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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). 13
Public transport market share (% of mechanised and

100

90

80

70
Hongkong
motorised trips)

60
Moscow
50

40 Singapore

30
London
20

10 R²=0,80

0
0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000 50.000
Number of annual vehicle x km per hectare

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

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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.

Desirable
path
Modal share of Public Transport (PuT)

Feasible
Unfeasible

Expected
Difficult
path
Feasible

Critical stage GDP per

capita
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

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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‟

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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.

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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.

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