SBS and SMRT should stop "passing the buck" to commuters

Public transport operators SBS Transit and SMRT appear to have short social and institutional memories, judging by their applications to the Public Transport Council (PTC) to seek an adjustment in bus and train fares.

Wasn’t it just two months ago that we saw a beleaguered Prime Minister Lee Hsien Loong address a lunch time rally at Raffles Place apologizing for the failings of the PAP-led government and the subsequent post-election ‘retirement’ of three ministers, including the then transport minister Raymond Lim.

Wasn’t it not too long ago in 2008 that the transport ministry stated that “public transport operators are not allowed to pass on to customers their direct costs, such as fuel and wage costs, or to base their fares on these costs”. Yet, this appears to be exactly what the two operators are doing going by statements articulated by both operators.

Based on reports in the mainstream media, SMRT claimed that its application for the maximum fare adjustment of 2.8 per cent was driven by rising energy and manpower costs while SBS Transit had indicated that it was facing cost pressures for fuel and energy on top of investments in its fleet renewal. Both operators also claimed that these cost pressures persist despite their efforts to lower costs and increase productivity.

No matter how much their try to dress up their applications and wrap it with the annual fare adjustment formula, their own words are a clear indictment of their willful attempt to undermine the position of the transport ministry on direct costs, and make the PTC complicit in this act of undermining the transport ministry by approving the fare increase.

To be clear, the annual public transport fare adjustment formula is pegged to changes in the Consumer Price Index (CPI) and the Wage Index (WI), which measures national average monthly earnings. What this means is that affordability of fares to the consumer should prevail over the need of the operators to manage their costs in order to improve their profit margin from operating a public service.

Given the continuing concern with cost of living issues among many Singaporeans, I am not surprised that many have reacted with disdain to the prospect of a further hike in public transport cost (in cost of living terms), even though the last adjustment to bus and train fares was implemented in 2008.

Back then in 2008, the fare increase of 1.7 per cent had been received with a sense of resignation but it would be a mistake for the transport operators, the PTC and the government to assume that the public would be so accepting of an increase in bus and train fares now. The transport ministry, now helmed by Lui Tuck Yew, would do well to remind the PTC of the ministry’s 2008 position.

Furthermore, economists have also forecasted a slowdown in Singapore's economic growth, which hopefully will be in the deliberations of the PTC chaired by Gerard Ee.

This new attitude of critical circumspection is also fueled by the general experience of commuters who have not seen much of an improvement in public transport services despite the previous fare increases. Ask anyone to think about public transportation and the images that come to mind are long queues, packed bus interchanges and MRT stations, crowded buses and trains.
 
The SMRT had also attempted to dress up its rising costs with the opening up of Phase One and Two of the Circle Line, but isn’t that to tantamount to passing the buck (the direct cost of operating the Circle Line) to the consumer? Wouldn’t opening the Circle Line lead to a new ridership base and a new revenue stream that over time would pay for the investment in the MRT network?

Such a fallacious argument is also inherent in SBS Transit’s linking of its cost pressures to its $268 million investment in 600 new buses to renew its fleet. Again, the purchase of the new buses is a direct cost to ensuring the continued ability of SBS Transit to deliver its services. Why should commuters have to bear the cost of the fleet renewal when it is the bus company’s responsibility to ensure that commuters are provided with safe and functional transportation?

Also, given the fact that both transport operators continue to report operating profits – SMRT made a profit of $161 million for the year ending 31 March while SBS recorded a profit of $54 million last year – no one can blame the average Joe for thinking that the applications to the PTC are but an attempt to line pockets of the shareholders of both operators instead of truly providing a world-class public transport experience to commuters.

This perception is borne out of the fact that both public transport operators are privatized entities instead of state-run corporations. Not surprisingly, many believe that both SBS Transit and SMRT would have no qualms about passing on the cost to commuters in their quest to boost their profit margin.

The irony of the situation is that both companies are actually operating a public service and as such, should be operating on the basis of sustainability first instead of how much profit, which translates into dividends, they can deliver to their shareholders.

Instead of exploiting their duo-poly, as most commuters have no choice but to use the services of both companies, SBS Transit and SMRT should demonstrate how they are helping Singaporeans get from place to place efficiently and comfortably without adding to their daily cost of living expenses.

And only when they can deliver the quality of service that makes public transportation a truly pleasant experience will Singaporeans be more amenable to accepting increases in their bus and train fares.
 
As commuters, all of us are ultimately customers of these companies and I believe that it would be fair to say the following is a fair depiction of how we feel: “Show me and let me experience it, and if I appreciate and like it, I would probably be willing to pay more for it. Don’t tell me you are going to do it and ask me to pay more for it, only to disappoint me with less than what I had been promised.”

More cost of living woes if preschool fee increases go through

Preschooling at People’s Action Party Community Foundation (PCF) kindergartens and childcare centres are expected to get more expensive if some branches go ahead with their announced intention to increase their fees to help cover their cost of operations.

According to the PCF, a branch may consider increasing its fees with justifications such as a new curricula or special programmes. However, more pointedly, the need to increase fees is based on the branch’s finances, as revealed by a PCF spokesperson in a reply to the media.

This comes less than three months after Prime Minister Lee Hsien Loong had pledged to keep fees low while maintaining a good-quality preschool programme. PM Lee was then addressing parents at the 25^th anniversary of the PCF where he said that in addition to better-qualified teachers and principals, PCF kindergartens are improving their curriculum and introducing more niche programmes and “all this while keeping fees affordable so that we can continue to meet the needs of many families in Singapore”.

Given that PM Lee had pledged to keep fees affordable, I am baffled why some three months later, the PAP Members of Parliament (MP) of PCF branches where fee increases are being considered have changed the narrative to one of sustainability and are looking to pass on the increase in their cost of operations to parents. Why should the burden of ensuring the sustainability of a PCF branch be passed onto parents, when the onus on proper financial management should rest with the management team of the branch?

This sustainability approach also seems at odds with the PCF’s mission to enhance the well-being of the community through educational, welfare and community services, and its vision of providing quality services at affordable cost to the community.

If the PCF is meant to be the social and charitable arm of the PAP, why then are its branches operating as though they are separate business entities that are charged to earn their own upkeep? Given that improvements are being introduced to continue providing quality preschool education, shouldn’t the foundation be reviewing its funding model for its branches to ensure sufficiency of operating and development funding thereby guaranteeing the sustainability of the branches instead of having the branches recover the cost from parents, some of whom can barely afford to send their children to PCF kindergartens?

The PCF is, after all, an organization that has more than $17 million in cash and deposits, and with its ratio of reserves to annual operating expenditure at 5.25: 1 (based on its financial statements as of end 2009), I am sure the PCF should have no difficulty meeting the increased operating expenditure of its branches, especially if such increases are primarily due to increases in staff salaries and the introduction of special programmes.

Well, the PCF may argue that the ratio has been declining over time due to the need to draw down on the reserves to meeting operating costs, raising concerns that this continuing trend may deplete the PCF’s reserves in the longer term.

If this is a real concern for the PCF and a possible driver for increasing fees, then the onus should lie with the MPs associated with each branch to do more to generate more donations from the community they serve. Such donations could be channelled to the PCF and would ultimately translate into gains for the community’s PCF branches. Such a community-based approach would be far better than having parents add on to their cost of living woes.

Better yet, why not have all ministers pledge a portion of their multi-million dollar annual salaries to the PCF to bolster its cash reserves?

Furthermore, as the largest preschool education operator in Singapore, with about six in 10 preschoolers attending its programme in 240 kindergartens and 65 childcare centres across 87 branches, shouldn’t the PCF be able to benefit from the economies of scale that come from being part of such a monolithic organization?

The announced intent of some branches to raise fees, citing operations cost as a key driver for the increase in fees, seems to suggest that each PCF branch is moving on its own, without any support or guidance from the centre.

The questions raised above and many more are probably running through the minds of parents who expect to be impacted by the proposed fee increase – sooner or later. Even with fees pegged from $90 to $120 per month as of August 2010, some families have already had to seek financial assistance to give their children a headstart in education.

With the anticipated increase in fees, I would expect the number of parents applying for aid through the government’s Kindergarten Financial Assistance Scheme as well as the PCF’s Headstart fund to increase, to include possibly even families in the lower-end of the middle-income bracket who are struggling with cost of living issues.

And if the government and, by extension, the PAP, is to live up to its mantra of not denying any child the opportunity of an education due to cost considerations, it would have to ensure that all, if not most, applications for financial aid are approved. Anything less of the desired result would be seen as a failure of the social compact that the government had promised for the future of our children.

If we are to be convinced that the government continues to be invested in education as a leveler in society and that it is the “best way to uplift the lives of our people”, the way forward is definitely not by passing the buck to parents.

More can and needs to be done for preschool education, and the government and the PCF have a big part to play in this regard.

Endnote: The last fees increase was effected in 2008 by 50-plus PCF branches, citing rising operating costs. If we simply accept this rationale, then like everything else in Singapore, we may very well see preschool fees increasing on a regular cycle. I, for one, am not for that.