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WP asks if Temasek’s buyout of SMRT would reduce financial and operational transparency




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The following is a press release by The Workers’ Party.

The Workers’ Party views the new rail financing framework for SMRT as a step in the right direction. It is a long overdue corrective to a major policy mistake.

This move corrects the mistaken course taken by the government in the year 2000 when MRT operations were privatised, which created a tension between the private company’s impulse to maximise shareholder value from a quasi-monopolistic position, and the rightful goal of operating a public transport system that best serves the public.

This policy misstep contributed to the many problems that the MRT has faced in the past decade, from overcrowding to frequent breakdowns, problems that long-suffering commuters bore the brunt of. This corrective move is long overdue but welcome.

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In its GE2015 manifesto, the Workers’ party called for placing all operating assets under a new government body, the National Transport Council, so as to separate the ownership and regulatory functions.

We are, however, concerned about the buyout of SMRT by Temasek Holdings. While this may seem like a move towards nationalisation, it is not. In fact, it could result in none of the benefits of nationalisation (e.g., government control over MRT’s operations and management), while SMRT’s financials and operations may become less transparent to the public.

We call for:

  • a shortening of the SMRT licence period from 15 years to 10 years to enhance contestability. Given that the SMRT has had 15 years of operating experience as a private company, another 15 years of operating licence is unnecessary before the government considers if and how the award of the operating license can be changed for the NS, EW, Circle and Bukit Panjang LRT lines. In its last manifesto, the Workers’ Party called for assessing the changed government public transport financing model for 10 years before once again reviewing if the model has worked at driving both quality and efficiency.
  • clarity on whether a Temasek takeover would reduce financial and operational transparency given Temasek’s status as a private exempt company, and how Temasek would manage the tension between its role of maximising shareholder value and delivering better public transport value.
  • clarity on whether and by when the NE Line and Sengkang-Punggol LRT under SBS Transit would transition to this new framework.

Dennis Tan 
Non-Constituency Member of Parliament
The Workers’ Party

Editor’s note:

Temasek has put a buyout offer of around $1.18 billion for 46 per cent of the shares it does not already own. it is offering $1.68 for each SMRT share. SMRT’s shares which has been suspended since Friday, last traded at $1.545 each.Temasek’s offer values SMRT at $2.57 billion.

If the Courts approve the shareholders meeting and if the shareholders approve, the deal is expected to be effective from October or November this year.

If the deal goes through, SMRT will be privatised and taken off the SGX – becoming a wholly-owned subsidiary of Temasek Holdings.

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