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Privatisation of public transport may have gone too far: Mahbubani

He calls on Singapore to free itself from 'old economic ideas' and to have political courage to make policy U-turns

Prof Mahbubani cites two other challenges Singapore faces - the US-China geopolitical rivalry and the strategic importance of Asean to Singapore’s survival.


PRIVATISATION of Singapore's public transport system may have gone "too far", and the government should consider running the system instead, a leading academic said on Thursday.

Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, urged Singapore to not be "a prisoner of old economic ideas" and to have the "political courage" to make policy U-turns, including on the idea of the role privatisation plays in the country's economy.

"Let us consider the possibility that we may have gone too far, and we have become a prisoner of old economic ideas. And, to suggest one concrete area where we have gone too far, is in the area of public transport."

He was speaking as a panelist at the Singapore Economic Policy Forum, an annual forum co-organised this year by the Economic Society of Singapore and Nanyang Technological University.

In his speech to forum attendees, Prof Mahbubani listed out three challenges that Singapore might face in the future, including the geopolitical rivalry between the United States and China, and the strategic importance of Asean to Singapore's survival.

It was in the context of the third challenge - that of being willing to make policy changes - that his point about Singapore's reluctance to deprivatise the public transport sector was raised.

He said public transport was a public good, but Singapore had decided that private operators were better placed to deliver such a service.

"Then we ask ourselves: Why is the MRT breaking down so often?" he mused.

His comments come in the wake of faults and breakdowns in the country's rail system in the past three days, which disrupted trunk services on operator SMRT's North-South and East-West Lines and SBS Transit's North-East Line.

Prof Mahbubani attributed the frequency of breakdowns to the operators being profit-maximising private corporations, to whom long-term maintenance works were viewed as costs.

He referred to a recent media report about Hong Kong's MTR Corporation (MTRC) spending 37 per cent of its rail revenue last year on maintenance, against SMRT's 19 per cent.

Separately, SMRT clarified on Wednesday that its rail-related maintenance costs ranged between 39 per cent and 45 per cent of rail revenue during financial year 2015.

Its revenue for 2015 was S$1,235.5 million; that for SBS Transit last year was S$951 million.

Prof Mahbubani's comments on Thursday drew a firm rebuttal from Banyan Tree Holdings executive chairman Ho Kwon Ping in a question-and-answer session.

Mr Ho, who also spoke at the forum, said he did not support "excessive privatisation", but also believed that re-nationalising industries was not a solution. In his view, MTRC owns the real estate that sits above its stations, so it can generate revenue from that, which underwrites the non-profitable parts of public transport.

"We privatised wrongly, and Hong Kong privatised in a way that is probably more correct," he said.

Analysts were cautiously optimistic about prospects for better railway services in Singapore.

Some said the transition to a new rail financing framework and government contracting model for bus fleets would alleviate strains on capital expenditure for SMRT and SBS Transit, which would in turn free up cash flow for them to focus more on preventive maintenance.

They added that the new regulations that allow the government to impose harsher penalties on operators for service disruptions constitute an added prod to operators to invest more in maintenance.

Then, there is the political factor.

Eugene Chua from OCBC Investment Research said in a September report: "In our view, with Singapore's General Election 2015 over and a new transport minister appointed, we do not rule out the possibility that rail reform could potentially be accelerated."

Ultimately, Prof Mahbubani said that the state of Singapore's public transportation was a good example of Singapore's readiness to confront mistakes in public policy.

"I'm afraid of what's happened in Singapore - that once you make a decision to go in a direction and when it becomes clear that it is not working, we are very reluctant to do a U-turn and do something else," he said.