Why I’m wary of LTA’s take-back of SMRT assets

 

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Now we learnt that LTA will be the owner of all SMRT assets. In short, it means LTA will be in charge of the building of train infrastructure, replacing and upgrading the operating assets for example trains, train tracks, power system and so on.

Im not immediately sure if this is a good thing. For now, I’d like LTA to answer a few of these questions:

  • Will taxes go up?

The very reason why SMRT was made private is so that it can take the strain off the national budget. In 2013, then transport Minister Lui Tuck Yew has stoutly defended Singapore’s current system, arguing that nationalisation may lead to higher fares and a heftier burden on taxpayers at large.

SMRT had committed to spending about $1.75 billion between 2013 and 2019 to upgrade and purchase assets for its rail network. They have also committed another $750 million on two items. First, it will purchase more trains for its MRT and LRT lines – this includes 24 new trains for the Circle Line. It is also embarking on a resignalling project to improve train frequencies on the North-South and East-West lines.

The $1b that LTA is using to “buy” back the assets are these that SMRT has spent.

But here’s the thing: now that LTA is directly taking over the assets, will it mean that taxes are going to increase to fund further expansion of the network?

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  • Who will profit from the advertisement and rental revenues?

SMRT makes its profits from advertising and rentals. Not commuter fares. In fact, SMRT makes a loss if it were to just depend on fares. If LTA now owns these assets, who will be the recipient of these profits? If the beneficiary is SMRT, or if it is a shared model, will it result in a rise in fares? This would necessarily be the case because it becomes unsustainable for SMRT to run the service then.

  • How can we prevent inefficiency?

A government run system does not put profit and revenue as primary concerns. They are inherently inefficient. Let’s say hypothetically they decide to put stations in Pulau Hantu or St. Johns island – how do we justify the running of these stations? Will these inefficient stations ultimately lead to increased costs to tax payers and fares?

  • Will some stations become crime hotspots?

In some countries, there exist stations that are run even if just a small number of people use the station. Because it is quiet, it doesn’t make sense to deploy staff to work there. And because of that, these stations become crime hotspots.

  • What happens if SMRT throws in the towel?

SMRT is still after all a public company. It has to survive on profit. If it is being made to run unsustainably, it may have to shut down . What will the LTA’s backup plan be then?

Nevertheless, it is still good to see some action. This has been in discussion for a very long time. The rail financing framework, announced by the Government in 2008 and implemented for the SBS Transit-operated Downtown Line in 2011, will now be implemented for the SMRT-operated North-South, East-West and Circle lines and Bukit Panjang LRT.

With this finally taking shape, we may be able to formulate our own transport system that marries the benefits of both private and national models.

 

About the author

Tay Leong Tan

Tay Leong Tan is a collective of 3 writers. Tay, Leong and Tan. (Who were you expecting?!) We are enthusiastic about labour issues, economics and current affairs in particular.

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