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On 21 May 2014, the Government announced its plans to overhaul the sector by shifting from the existing privatized model to a “Government contracting model”. This outsourcing of transport operation is said to promote greater efficiency among operators which will lead to better bus services over time. The Government also promised that it will continue to ensure fares remain “affordable” for commuters.
I would like to shed some light and debunk the myths of this model, and point out that this method of outsourcing is no different from the existing privatized model.
Cheaper and better?
Will outsourcing public transportation mean more efficient and cheaper services? Private companies exist to make money, public services exist to serve the public. Making a system where making money trumps good service is just a bad idea. Often corners will be cut, and this can greatly impair service quality and maintenance of vital assets.
This outsourcing requires substantial administrative resources for monitoring and oversight. Substantial time and personnel are necessary to adequately monitor contracts, especially those involving essential governmental functions. Due to the possibilities of systematic abuse by large corporations, precious resources and the constant need for strong supervision from the government is required.
These hidden and indirect costs, can make privatisation more expensive than in-house services for governments. If governments don’t dedicate sufficient personnel and time to monitoring contracts, they run a high risk of poor contractor performance and wasting large amounts of money.
In December 2011, the government commissioned a Committee of Inquiry into the state of breakdowns and disruptions of the train services.
There have have been many instances, where private contractors failed to deliver, leaving communities without vital services. To make matter worse, it can be very expensive and time-consuming to alter contract terms or cancel a contract. Taxpayers can be stuck with legal expenses when companies or government file lawsuits seeking greater payment. Additionally, contract cancellation can lead to service interruptions or loss of access to public assets during the transition period.
Some believe that this model allows for more precise budgeting, since the inflow or outflow of money appears fixed once a contract with a private entity is signed. But hidden costs and cost overruns can significantly distort these figures, market circumstances can reverse the estimates, and ripple effects of outsourcing can increase unexpected areas of governmental budgets.
There are public services such as water and power supply, national defence, telecommunications that should not be outsourced to private entities for reasons of national security. Public transportation is one of these services that, in the wrong foreign hands, can be vitally damaging in a national crisis.
Adding stress to our market
Private companies naturally seek to maximise profits. Coupled by the absence of minimum wage and retrenchment insurance, experienced staff or locals will be cut for lesser skilled and far less paid foreign worker. The profit motive will also cause the quality of the service to go down while the price remains high. With good marketing and controlled media, the customers can be kept ignorant of the diminishing quality while being assured that the products are better than ever.
Outsourcing could also lead to monopolies of the services under control of private companies. This is bad because the motive of profit (being stronger than the motive to help people) would give companies the incentive to provide a deteriorating service while continuing to raise prices. A good example is the privatization of water in Bolivia: the price of water increased and eventually became unaffordable for the citizens.
The private sector should remain private, without government interference. Businesses should function with very limited government restraints. But public services, services for the common good, should remain in the hands of the state.
If the public service goes wrong, the people can always demand that the government fix it. With a private corporation running the service, it is easier for the government to push the blame to the company and perhaps levying a fine which is often treated as a cost that is passed on to the customer. This is already happening even with the semi-private SMRT. The government will only be too eager to pass the blame to a private company.
Privatisation coupled by non-transparent governance can lead to corruption that undermines public interest. Political representatives can become beneficiaries of contracts awarded to private companies where the decision is based more on insider connections rather than the quality of the company.
Privatisation of public transport also opens up the possibility that a ruling party, upon losing an election, can influence companies whose leaders are part of its crony-network to disrupt services or break their contract, causing a nation-wide disruptions of service.
Private companies have the primary goal of making money, while government has the primary goal of serving its citizens and creating a better society. If money were the primary goal of the government, citizens would come second to profits. A government’s focus should be on the needs of the community, not businesses.
Alvin Ong is a member of the Young Democrats and coordinates the Technical Communications of the SDP’s communications Unit.