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Thursday, December 5th, 2019

MP: Five reasons why Singapore has cheaper public transport

by August 9, 2016 General

DAP’s Dr Ong Kian Ming says SMRT which operates Singapore’s rail services and SBS Transit (SBST) which operates the bus services have recorded a profit in each of the past 16 and six years respectively. — TODAY file picDAP’s Dr Ong Kian Ming says SMRT which operates Singapore’s rail services and SBS Transit (SBST) which operates the bus services have recorded a profit in each of the past 16 and six years respectively. — TODAY file picKUALA LUMPUR, Aug 9 ― Public transport in Malaysia is more expensive than in Singapore because Prasarana is unprofitable, has high debts and low non-fare revenue, besides factors like poor fare regulation and no direct government funding for infrastructure, DAP’s Dr Ong Kian Ming said today.

The federal lawmaker noted that an LRT ride from Gombak to Putra Heights costs RM6.10, three times more expensive than an SG$2 (RM6) MRT ride from Pasir Ris to Pioneer in Singapore on a dollar for dollar basis.

“Since Prasarana was established in 1998 to take over the assets of the STAR and PUTRA LRT lines, the company has only managed to be profitable in 2 years, way back in 1999 and 2000. It has been making losses in 15 out of the last 17 years,” Ong said in a statement, referring to the Finance Ministry-owned company that owns and operates LRT and bus assets in the Klang Valley.

He pointed out that in contrast, SMRT which operates Singapore’s rail services and SBS Transit (SBST) which operates the bus services have recorded a profit in each of the past 16 and six years respectively.

“Given this, it is not surprising that Prasarana has accumulated losses of RM5.182 billion as of FY 2014 compared to SGD741m and SGD261m in accumulated profits for SMRT and SBST respectively as of FY 2015,” said the Serdang MP.

Secondly, Prasarana has very high financing costs because of its high debts, said Ong, noting that the company was paying finance costs totalling RM399 million in 2014 as it was RM13.6 billion in debt at the end of the 2014 financial year.

“Its financing costs was 81% of its total revenue of RM490 million. In other words, 8 out of every 10 dollars which Prasarana was taking in was being used to service its debt. And this is not even taking into account operational costs such as paying salaries and electricity bills!” said Ong.

In comparison, the finance costs of Singapore’s SMRT and SBST were 1 per cent and 0.6 per cent of revenue respectively. SMRT and SBST had revenues of SG$1.3 billion and SG$1 billion in 2015 respectively, while their debts totalled SG$821 million and SG$338 million that year respectively.

Thirdly, Prasarana’s non-fare revenue, such as sources of income other than revenue collected from ticket sales like advertising, rental of space at LRT stations and even property development, is less than 15 per cent compared to 28 per cent for Singapore’s SMRT, said Ong.

“Advertising at bus stops, on buses and at train stations are regular income earners for public transport operators around the world.

“In Malaysia, many advertisers are reluctant to advertise via these channels because of the perception that the middle class drive cars rather than take public transport. For example, most of the bus stops in the Klang Valley do not feature any advertisements, even in places where there is a high number of passengers,” said Ong.

Fourthly, Ong claimed that the Land Public Transport Commission (SPAD) had done a “very poor” job of regulating fares in Malaysia, noting that one of Prasarana’s reasons for its losses was because LRT fares had not been revised for 15 years, prior to the December 2015 fare hike.

“One of the reasons why the quantum of the fare hike was so high (by more than 100 per cent on some routes) is because Prasarana did not know when SPAD would allow it to increase its fare again. So they decided to strike while the iron is hot and to maximise the fare increase,” said Ong.

“It almost seems as if SPAD bases its decision on how much of a rise in taxi or train fares the public can withstand or ‘tahan’. And then, it will wait for some time before fares are adjusted again. This creates a vicious cycle whereby public transport operators will try to get the highest possible fare raise when SPAD allows for a fare adjustment,” he added.

The lawmaker pointed out that in Singapore, the Public Transport Council (PTC) since 2013 has been conducting an annual fare review exercise to adjust bus and train fares based on a formula that includes inflation, changes in wages and the cost of energy.

“Not only is this a more transparent way to determining the fare structure, in some cases, it can also result in the reduction of fares because of a drop in energy prices as was the case in December 2015,” he said.

Fifthly, the Malaysian government does not directly fund the construction costs of public transport projects, compared to Singapore where the government funds the construction of public transportation assets like train tracks and rolling stock, while a separate operator, such as SMRT, will run the services related to these assets.

“In Malaysia, at least for the LRT, the funding of the previous and upcoming lines comes directly from Prasarana including the proposed LRT 3 line. This means that the debt of Prasarana will continue to grow as mentioned above,” said Ong.

“One of the main reasons why the Malaysian government does not want to directly fund the construction costs of these public transportation projects is because of its budget position. Malaysia has been registering budget deficits since the 1998 Asian financial crisis,” he added.

He said the Malaysian government’s commitment to reduce its budget deficit to zero by 2020 and to not exceed a 55 per cent government debt to GDP ratio means that the costs of financing public infrastructure projects have been shifted to government owned companies like Prasarana.

“Prasarana’s debt is not registered officially as Malaysian government debt which means the government can continue to pretend that it is reducing the budget deficit. The cost of this ‘pretence’ is that companies such as Prasarana will be forced to resort to increasing the amount of revenue it can extract from the ‘rakyat’ via measures such as fare increases,” said Ong.