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9/20/2006

remove affordability and profitability from the equation

I was reading the Secretary of Public Tansport Council, Looi Teik Soon's reply to Lim Boon Hee's 'Absolute fare comparison is misleading.' And after adjusting for Purchasing Power Parity, Singapore's transport fare is still CHEAP compare to HongKong, London and New York. The argument on this basis is perfectly sound and logical. It is based on affordability. The income of those commuters in other cities are higher so they should pay more. Our income is lower, then we should pay lesser. But we should not be paying lesser as the comparison says that all things being equal, we should be paying more. After adjusting for PPP we should and could be made to pay as high as New York. So our average fare should be $1.42 instead of 66c. Anyone sees anything wrong with this logic? The approach for how much the commuters should be paying is not dependent on operating cost or profitability but how much one can afford. Just like our HDB pricing. So if Singaporeans can afford to pay $20, this logic will say our average fare should be $20! I still think that we should return public services back to the govt and remove the idea of profitability and affordability from the thinking and equation. Public services are essential services and should be cost and charged on a different formula from commercial enterprises.

6 comments:

Anonymous said...

Redbean, it is arguable whether public transport is an essential service like the supply of water and utilities. One main difference is that not everyone uses public transport whereas everyone uses water and electricity. if the public transport system is run by the govt at a loss, the effect will be that those who don't use public transport, like me, will be subsidising those who do. Give me one good reason why that should be so.

redbean said...

agree with you that definition can vary. but your argument that public transport system is run by the govt at a loss is the same as the govt saying that an organisation must be run privately or else it cannot be efficient.

no one is saying that the transport system should be run at a loss. i am asking for it to run efficiently at lesser profit, enough to replace and renew when needed.

Anonymous said...

Please read my message again. I did not say that the public transport system is run by the govt at a loss, I said IF it is run at a loss, then the non-users of public transport like me will be subsidising the users. You cannot guarantee that it WILL NOT be run at a loss or run with lesser profit. The experience of our government with running businesses has not been very encouraging. So, it is fair to infer that there is a possibility that it MAY be run at a loss.

redbean said...

the people who run the public transport and any other privatised companies, eg hospitals, are the same people from the same pool. no difference. if one can make money the other also can.

take the mrt now as an example. revert it to a stat board and run it with the same people. will it make lesser profit? how could it be? it can only make lesser profit if the objectives of the company is changed.

we should not assume that a public company should be run at a loss even if it is a stat board. fire the ceo and the management if they cannot perform.

i am always very disturb when people give the logic that to be efficient and profitable, then the organisation must be privatised. it also means that all those that are not privatised are inefficient and unprofitable. is it logical?

this is the same logic that when you pay people well they will not be corrupt. i don't buy that. people who will corrupt will be corrupt whether you pay them well or not well. but to be reasonable, we should pay people well but not exceedingly well. after a point it is diminishing return.

and to satisfy people who are already being paid exceedingly well, you need to pay them a ransom to be meaningful. eg when someone is making a million, don't bother to give him an increment of $1k. It is meaningless to him. His appetite now is very big.

Anonymous said...

redbean said ... "take the mrt now as an example. revert it to a stat board and run it with the same people. will it make lesser profit? how could it be?

Oh yes it can be, Redbean. You take out the profit motivation, and complacency will set in. Why should someone slog away when at the end of the day, his remuneration as a public servant is pretty much fixed ? The culture of the civil service is not conducive to the demands of running a business and making sure that business stays viable and above water.

redbean said...

i don't blame the culture. i will take the person in charge and fire him.

the mrt to be run as a public service should also be thinking of running at a specified profit for self renewal. not profit for everyone to laugh to the bank.

the remuneration and incentive for better performance shall be on a different formula instead of just profits. there are many other considerations to formulate something that is workable and reasonable. anyway, you don't need a genius to run a mrt. no need genius pay. but can rotate genius around as part of job rotation.