Singapore Media Watch

Sunday, October 22, 2006

Your views: Increase in Transport Fares

I refer to the Ministry of Transport’s (MOT) press release on the transport operators’ earnings.

The MOT said that "SBS Transit earned $ 32 million but has $ 500 million of assets, so its return on assets (ROA) was 6.5 per cent, SMRT earned $ 100 million but has $ 1.1 billion of assets yielding a return of 9.1 per cent.

These returns are healthy but not excessive, compared to companies with similar industry structures and risk profiles".

The ROA should not be the only, or a very appropriate measure because in the case of the Singapore transport operators, a fair share of the assets were built-up from the retained earnings of ever increasing profits over the years.

Thus, in a sense, it was a self-perpetuating system under which the people of Singapore, in a way, paid for the bulk of the accumulated assets.

Other measures like the transport operators' ever increasing profits, return on equity (ROE) and dividend yield relative to other listed companies, could also be used in determining whether "returns are healthy but not excessive".

According to the PTC's web site, "It monitors affordability for the general public by tracking the percentage of monthly household income spent on public transport by a characteristic family in the second quintile (21st to 40th percentage) household income group which is considered representative of the average transport commuter as recommended by the Committee on the Fare Review Mechanism (FRMC) in 2005.

The public transport affordability indicator has been on a down-trend from 2003 (7.0%), to 2004 (6.8%) and 2005 (6.6%)".

According to the Department of Statistics' General Household Survey 2005, (GHS), household incomes for the 11th to 20th percentile and 21st to 30th percentile fell 4.3 and 0.5 per cent respectively per annum from 2000 to 2005.

The 31st to 40th percentile rose by just 0.3 per cent, and was actually negative after adjusting for inflation.

Since fares were increased in 2000, 2001, 2002 and 2005, according to PTC's web site, and the Public Transport Affordability Index (PTAI) is Monthly Expenditure on Public Transport divided by Monthly Household Income, I am somewhat puzzled as to how the PTAI can be improving over the years when income was generally declining and fares were increasing ?

I refer to media reports that SBS/SMRT will give $ 1 million of $ 20 vouchers, and NTUC will give $ 30 ez-link top-up vouchers to 20,000 low-income union members.

This means that the total from NTUC is $ 0.6 million. Between last July and June this year, the CCC ComCare Fund has helped about 12,500 cases and given out $ 1.95 million.

Therefore, the total public transport assistance for the needy is estimated to be about $ 3.55 million (SBS/SMRT + NTUC + CCC ComCare). This means that the number of needy getting $ 20 each is about 177,500 persons.

According to the PTC, "among commuters who have to make a transfer (1 in 4 commuters), most require one transfer, say from a bus to the MRT or to another trunk bus. The majority of such journeys will see a fare increase of 3 to 4 cents".

If one makes two such journeys a day, the increase per year is $ 21.90 to $ 29.20.

It the average commuter affected by the fare hikes pays five cents more a day, assuming 2 bus/MRT transfer trips a day, the increase per year is $ 18.25.

This is based on a conservative assumption that one only makes two trips a day, that is travelling from home to only one destination, without going anywhere else.

According to the GHS, there were 113,646 households with monthly income below $ 1,500, and 106,384 households with no working persons and thus no income from work.

If the average household has four persons, the total number of persons from "below $ 1,500" households is 454,584.

Similarly, the total from "no income" households is 212,768, if we assume two persons per household.

Since the $ 20 transport assistance will be given to about 177,500 persons, are the rest of the 489,857 (454,589 + 212,768 - 177,500) needy Singaporeans getting $ 20 transport vouchers too ?

The needy whose incomes are declining should be given transport vouchers as a matter of course, and not only when fares go up.


Leong Sze Hian

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