Home News Featured News Why only partially nationalise public transport? Govt should go all the way

Why only partially nationalise public transport? Govt should go all the way

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By: Chris Kuan

I am sure that Desmond Quek, SMRT CEO will get a round of condemnation from social media by saying this:

“Despite the steady increase in non-fare earnings, this trend of declining profitability is expected to persist under the current financing framework as the additional capital expenditure and increased depreciation would exert additional pressure on the future cash flows and profits of the SMRT train entities.”

He is talking about the $2.8b needed to upkeep the ageing rail infrastructure as too onerous for SMRT to bear and of the shortfall in profitability due to fare concessions etc.

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We should refrain from shooting the messenger. If a company is unable to meet a minimum return on risk capital, that company ought not be in existence because shareholders will have better use of their funds. If the business that the company is involved in, is unable to provide the required profitability to meet that minimum return because of political and social dynamics, then the company should exit the business and that business should be in state hands.

What Mr Quek said is not wrong and he is pointing straight at the conundrum of running a public good, i.e. public transportation under the demands of capital, that is to say under a privatised operating framework. That is why I wrote previously that privatised public transportation do not really work because it pits an essential service to the public against the interest of shareholders. In most cases, shareholders win out at the cost of making the public pissed off.

It is for the same reason the public except the rich are unhappy with involvement of insurance companies in the provision of public healthcare. These sort of services are best provided by the government who through its low cost of financing and tax and spend prerogatives, can shoulder these risks far better than the private sector.

So don’t kick Mr Quek even if he is well compensated for his troubles. The real problem rests with the government’s public transport policy and its ideology that even public goods ought to be privatised. I am not even sure the complete nationalisation of the rail and rolling stock assets leaving a privatised company pay for the license to operate really solve the issue.

The question that pops is if the entire infrastructure and equipment set up is nationalised, why not nationalise the operating company as well.

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