Land Transport Authority of Singapore (Amendment) Bill

Order for Second Reading read.

5.01 pm

The Minister for Transport (Mr Lui Tuck Yew): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, in February, the Government announced the Bus Service Enhancement Programme, or what I would call the BSEP for short, to significantly expand public bus capacity and improve bus service levels over the next five years. Against the backdrop of higher than expected public transport ridership in recent years, and high levels of peak period crowding, the Government had stepped in to decisively improve bus services for commuters, ahead of the roll-out of new rail lines and capacity enhancements to existing lines in the next few years.

Under the BSEP, 550 buses will be added to the existing bus fleet with the Government's assistance. The Public Transport Operators (PTOs) will fund, at their own cost, another 250 buses. Together, this will expand the bus fleet from 4,000 to 4,800 buses, or an increase of about 20%. As these buses are progressively added, commuters can expect more frequent, more reliable and less crowded bus services. In addition, we will improve overall bus connectivity, by adding about 40 new bus routes under the BSEP. This represents a 15% increase in the number of bus services. A small number of this new bus routes will run parallel to stretches of the existing MRT network.

To execute the BSEP, we had announced that $1.1 billion would be set aside in a special purpose Bus Service Enhancement Fund (BSEF). This would cover the net costs of purchasing and running 550 buses for 10 years under the programme. To put the $1.1 billion in context, we have invested some $20 billion in our Rapid Transit System (RTS) network. We will be investing some $60 billion more to expand it over the coming 10 years. Our BSEP investment in the bus system complements our investments in the RTS network to achieve a high-quality, well-integrated public transport system where both the bus and rail systems work together to deliver high levels of service at affordable fares.

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With the BSEP, commuters will benefit from a quick and decisive improvement in bus service levels. It also means that no additional costs are borne by commuters, who may have to pay 15 cents more per journey otherwise. The Government will ensure that the PTOs make no additional profits from the BSEP, which will be run on a net cost-recovery basis.

Separate from the BSEP, as part of our periodic review of the overall bus financing framework, the Government had also announced, during Committee of Supply 2012, two other measures which were intended to more closely align support for the bus industry to what the Government has provided for the rail industry. First, a portion of the revenue currently received by the Government from bus shelter advertisements will be channelled to the PTOs. Second, the leasing and land-related costs for all bus depots and bus parks will be taken over by the Government. Both measures will be of some help to the bus operators as they have to cope with rising costs. We will continue to review and fine-tune our bus financing framework periodically.

Mr Speaker, Sir, let me now update Members on the implementation of the BSEP. Since the announcement in March 2012, LTA and the PTOs have been working out the implementation details. These have largely been sorted out. The first buses under the BSEP will be deployed on our roads sometime in September this year. We will provide details of the new routes and improvements made to existing services then.

Over the next one year, we expect to add around 250 buses to the combined public bus fleet of about 4,000 buses. This increase in 250 buses will allow us to improve the service levels for at least one in three existing bus routes and introduce about 14 new routes.

I know many of you in this House would be anxiously waiting for the new buses to come your way, but please be patient. The new routes will be implemented progressively, and as far as possible, geographically distributed to various parts of the island as needed. The implementation of new routes will be paced with improvements to existing services. I seek Members' understanding if some of your requests cannot be met, or not as soon as you would like, but I assure you that your constituencies will enjoy improvement in bus services in the not too distant future.

In this regard, LTA has been progressively engaging Members of Parliament and community leaders to better understand the needs of your residents. I would like to thank all of you for your support. We will carefully assess and prioritise the different requests. Our end objective must be to achieve the maximum possible benefit with the finite resources under the BSEP.

To support the roll-out of the BSEP, both PTOs have recently enhanced salaries for bus drivers to attract more Singaporean drivers, and together, the PTOs expect to hire about 360 new bus drivers from now until the end of the year.

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While we have made an encouraging start to recruitment of new drivers this year, especially after the introduction of the salary enhancements, I have urged both PTOs to step up their recruitment. I would expect both PTOs to closely monitor the effectiveness of their enhanced remuneration packages, and be ready to make further adjustments if required. Recruitment and retention of bus drivers will continue to be the most challenging and critical resource constraint in the roll-out of the BSEP, and I will be personally paying close attention to this matter.

Let me now bring the House through the intent and key provisions of the Bill. The proposed amendments to the LTA Act are primarily to allow LTA to implement the BSEP, to establish the BSEF, and to provide grants to the PTOs in line with the two bus financing measures I mentioned earlier.

Section 6(1)(g) will be amended to introduce a new function for LTA, which is to implement programmes, such as the BSEP, to improve public bus services provided by the PTOs and other bus operators licensed by the Public Transport Council (PTC). Specifically, the amendments provide for LTA to carry out operational planning for bus services to meet the needs and expectations of the public, including coordinating the routes and scheduling of bus services provided by the operators.

To allow LTA to fulfil this new function, a new section 7(1)(d) will be added to the LTA Act to confer powers on LTA to provide financial assistance to the various bus operators in the form of loans, grants and guarantees for BSEP, and for any future programmes to improve public bus services. A new section 13(1)(l) is also added to the LTA Act to provide that such financial assistance can be provided by LTA through its existing revenue accounts.

Finally, in line with the Government's stated intention for the $1.1 billion to be held in a special-purpose BSEF, a new section 13B will be added to the LTA Act to provide for the creation of the BSEF. The BSEF will be used by LTA to provide financial assistance to the PTOs in the form of loans and grants, to purchase buses, and to finance the operating expenditure they incur under the BSEP.

We have also built in legislative flexibility for the BSEF to collect grants or related revenues, and fund expenditures, under any other future programmes that LTA may enter into with bus operators to improve public bus services. As I mentioned in my COS 2012 speech, we will be reviewing the bus financing framework. Depending on the outcome of the review as well as the effectiveness of the BSEP in delivering the expected bus service improvements, we will not preclude that the BSEP in its current form may need to be adjusted, supplemented or even replaced. As such, it is only prudent to build in legislative flexibility so that we can respond in a timely manner to any necessary changes.

Mr Speaker, Sir, the proposed amendments are needed for LTA to establish the BSEF, to contract the PTOs to implement the BSEP, and provide grants to the PTOs in line with the two bus financing measures announced at Budget and COS 2012. Sir, I beg to move.

Question proposed.

5.11 pm

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Mr Gan Thiam Poh (Pasir Ris-Punggol): Mr Speaker, Sir, thank you for allowing me to join the debate. I will speak in Mandarin first.

( In Mandarin ): [Please refer to Pg 368-369 for Vernacular Speeches.] Mr Speaker, Sir, food, clothing, shelter and transport are basic necessities of life. People have been seeking a perfect transport solution that is convenient, fast, safe, reliable and economical. In ancient times, people looked for horses that run a thousand miles a day, while in current times, we look to MRTs and high speed trains.

Recently, I came across an article "Subsidies for Public Transport" written by Zhao Yongshan who raised three rather noteworthy suggestions: to have the right amount of subsidy, to improve the methods of subsidies, and to enhance the supervision of how subsidies are used.

Have the right amount of subsidy. Public transport is a public service. Thus, the fares and routes cannot be totally based on market principles. The Government needs to plan and regulate and provide a certain degree of subsidy. However, public transport is also a business, and too much reliance on subsidy will lower productivity and encourage wastage of resources. Therefore, financial subsidy should not only help operators manage costs but also motivate them to be more efficient. Taking a leaf from countries like the United States, United Kingdom, France, Germany, Japan, Hong Kong and even Taiwan, the amount of subsidy is best at the "level of offsetting operation cost".

Improve the methods of subsidies. First, we need to increase the subsidy for infrastructure. Generally speaking, subsidising infrastructure development has greater impact than subsidising operating cost as an efficient and reasonably priced transportation would attract more ridership. This is why governments in many countries invest heavily in public transport facilities. Beijing, for example, believes that a fast, convenient and on-time land transport is more attractive than low fares. Secondly, we need to encourage more involvement of investment, development and operation of public transport. By creating market competition and ensuring that routes will only be tendered to operators who meet the service standards and at the same time request for the least subsidy, would encourage companies to raise productivity and not waste resources trying to secure more subsidies.

Strengthen supervision on subsidy. The writer suggests that the authorities should stipulate regular disclosure of information on public transport subsidies, PTO's profits and losses, forecast and usage of subsidies. The Government should enhance the control and audit of public transport operating cost and Government subsidies.

The Transport Minister has assured us that LTA will audit and supervise the accounts of public transport operators and funds will only be given out after the figures are in. Bus companies will not benefit from the $1.1 billion fund. This money is from the people and will be used on the people. The Government's intent of pumping in $1.1 billion is to subsidise bus fare for commuters, not operators. It is to allow all commuters to enjoy higher standards of bus services without too big a fare hike. I think most Singaporeans will find this arrangement acceptable.

Mr Speaker, Sir, I support this Bill. Singapore's population is growing, and so is our expectation of public transport. We are looking for a convenient, fast and value-for-money transportation system. And it is the Government's responsibility to build such a system.

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Convenience means having public transport at our doorstep. Even though the MRT network is expanding and the Circle Line will be fully operational, the MRT still does not reach every neighbourhood. Thus, public buses play a supportive role in making it more convenient for Singaporeans to move around.

Fast – shorter waiting time and journey. This requires bus services to be more frequent, which means, we need more buses.

To attain convenient and fast service, to get more buses and improve service standards, all of these require funding. Private companies cannot afford such a huge amount. Thus, the Government needs to render help. If the Government does not take responsibility of public transport and allow market forces to control it, more Singaporeans will not enjoy public transport or have to put up with bad services. Government subsidies will enlarge the coverage of the public transport network and ensure fairer distribution of bus routes, therefore, more people can enjoy effective public transport.

Another noteworthy problem is whether we can recruit a sufficient number of bus drivers. SBS Transit has increased the monthly salaries of newly recruited Singaporean drivers from $1,375 to $1,600. Current Singaporean drivers will have a $225 pay raise across board. SMRT will also follow suit. Newly recruited drivers, with overtime and other allowances, can expect a pay of $2,250. I hope the authorities will gradually increase the pay of bus drivers in the next few years so as to retain current drivers and attract more Singaporeans to join the industry.

The various measures are good but they would inevitably increase operating cost for small-and-medium sized bus companies, which would inadvertently drive up the fares for school buses. I hope the Government will look into helping affected families.

The Government subsidies will not only help bus operators to remain viable but also improve the service standards of our public transport for the benefit of Singaporeans. Therefore, I support the Bill.

( In English ): Mr Speaker, Sir, I fully support the Bill. Our bus capacity is straining to meet the demand of our commuters during peak hours and on weekends. Any increase to the bus capacity on the scale and within the set timeframe necessary to solve this problem can only be achieved with Government participation. The investment costs involved are simply too heavy for our bus operators to bear. We must bear in mind that not every route is financially viable but our PTOs are still required to provide bus services to serve the needs of our residents. Hence, we must evaluate our services based on the entire road network. The Bus Service Enhancement Programme (BSEP) is the fastest way to step up capacity while keeping our bus fares affordable.

We are fortunate that we have the financial resources and reserves which allow us to set aside $1.1 billion for the Bus Service Enhancement Fund (BSEF) without imposing a financial burden on future terms of Government. Furthermore, we have the reassurance of the Minister that the operators and shareholders will in no way profit from this Government injection. All monetary flows will be tracked and be accounted for. If necessary, not all of the $1.1 billion will be disbursed. I believe that MOT will be responsible for the judicious management and disbursement of moneys from the Fund to the PTOs; it will put in place the necessary checks and audits to monitor and control the flow of funds. With this assurance, I have every confidence that the programme will deliver the results we want.

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The Bill clarifies LTA's role in the provision of transportation infrastructure including bus depots, bus parks and bicycle parking facilities. This is practical as it will remove some of the entry hurdles to new PTOs in the future and allow more competition in this sector. It will be administratively easier to let the PTOs to focus and compete on the provision of bus services. The Government should continue to do more of heavy lifting through this funding, construction and maintenance of the infrastructural assets.

I would like to take this opportunity to appeal for more bus priority measures to be implemented. Without these, more buses on our roads would cause more congestion and bus bunching. In addition, we must look into expanding our bus interchanges as the few interchanges that were built in the last three years, such as the new Boon Lay and Serangoon Interchanges, are much smaller than the previous interchanges. The temporary Jurong East and Bedok Interchanges also have the same problems.

5.24 pm

Mr Pritam Singh: Mr Speaker, I seek a few clarifications from the Minister with regard to sections 12 and 13B of the proposed amendment and insertion into the Land Transport Authority of Singapore Act respectively, made necessary by the Bus Service Enhancement Fund (BSEF).

Mr Speaker, the tabling of these amendments to the LTA Act sheds more light on how the BSEF will be implemented, further detailing the points covered by the Finance and Transport Ministers during the Budget and Committee of Supply debates earlier this year. In the Minister for Finance's speech on 17 February 2012, he referred to the Government's commitment to fund 550 buses as a "one-time commitment". In the Minister's round-up speech on 1 March 2012, the Minister stated that out of the $1.1 billion package, $280 million was budgeted for the purchase of 550 buses, while $820 million covers net operating costs over 10 years. The Minister also stated that should PTO's losses in running the additional 550 buses turn out to be lower than expected, Government funding will be reduced correspondingly.

My first query relates to clause 7 which introduces section 13B(1)(e) to the Act. The section states that "there shall be established by the Authority of Bus Service Enhancement Fund comprising [amongst others] − all investments and other property purchased out of moneys in the Bus Service Enhancement Fund, including the net income from such investments". Separately, section 13B(1)(f) states that BSEF will comprise "all interest received on investments belonging to the Bus Service Enhancement Fund, and all amounts received by the Authority from the sale of any investment or other property paid for with money from the Bus Service Enhancement Fund".

In light of this, could the Minister please explain the effect of section 13B(1)(e) and (f) that I have just highlighted, which give the Government wide powers to use BSEF funds beyond bus acquisition and accounting for net operating costs as long as the object of these investments is to improve and expand the range and reliability of bus services? At first blush, it appears as if the $280 million earmarked for bus acquisition and $820 million for net operating costs do not leave much scope for additional investment since this neatly comes up to $1.1 billion. If the PTOs do not use the entire $1.1 billion set aside for 550 buses, the Bill suggests that the BSEF will continue to exist to extend grants and loans to the PTOs. I understand from the Minister that this is the case because it also accounts for potential future programmes. What this really means is that the BSEF would institutionalise active Government intervention in the public transport sector for the long term, until such a time the Government decides to dissolve the BSEF.

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The proposed Bill will also allows BSEF funds to be employed for investment in any property in addition to the standard investment power of statutory bodies, as provided for in section 33A of the Interpretation Act, which is referred to in section 17 of the LTA Act. Could the Minister share with the House the type of investments that the monies in the BSEF are envisaged to be used for, apart from those permitted under section 33A of the Interpretation Act and, more specifically, the risk profile of these envisaged investments?

My second query relates to clause 7 introducing section 13B(2) to the Act, which gives wide-ranging powers to the LTA to withdraw BSEF monies to provide grants or loans to the holder of a bus service licence or a bus service operator's licence. The inclusion of this provision clearly presages the use of BSEF to extend loans, not just grants − a point which I raised in my speech on the BSEF during the Budget debate, where I proposed that the Government claw back the $1.1 billion from the two PTOs over a fixed period of time.

This question is quite central to the disbursement of $1.1 billion the taxpayer monies, as it is clear that the Government eschewed from extending the BSEF as a loan to the PTOs, even though both PTOs operate in near monopolistic market conditions and have announced healthy dividends for their shareholders over the years. Can the Minister please share with the House what considerations the Government deliberated upon when it decided to extend the $1.1 billion BSEF to the two PTOs, as opposed to extending a loan − as we now know that this Bill also authorises the Government to use the BSEF for the purpose of extending loans to PTOs and holders of bus operator licences? In addition, can the Minister also clarify what factors would determine when the LTA would decide to extend a loan to a PTO or bus licence holder, as opposed to a grant from the BSEF?

My third query relates to clause 5 to amend section 12(1) of the Act. Sections 13A and 13B require certain revenue streams to be channelled into the Railway Sinking Fund and the Bus Service Enhancement Fund respectively, instead of the Land Transport Revenue Account. The explanatory note to the proposed Bill states that the Minister will apportion this revenue stream between the Bus Service Enhancement Fund on the one hand, and the Land Transport Revenue Account on the other. Would the Minister clarify what is the expected ratio of apportionment between the two accounts?

Finally, Mr Speaker, Sir, in the Channel NewsAsia report on 14 May 2012, it was reported that the purpose of the BSEF was for the Government to set aside money to fund the commitment for the Bus Service Enhancement Programme and provide transparency and accountability as to the use of the money.

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I have a final clarification I seek from the Minister and this pertains to a point about the potential abuse, or even the creative use of the BSEF by the PTOs.

For example, in anticipation of 550 additional taxpayer-funded buses on the roads, can the PTOs deploy the taxpayer-funded BSEF buses rather than their self-financed buses to service existing routes which are comparatively less revenue-generating than other routes? If so, the PTOs can plausibly improve their profit margins by deploying their self-financed buses on the more profitable routes, legitimately employing the BSEF to subsidise their operations as a whole. This is conceivable since the Minister has stated that 300 of the 550 buses will go towards supporting existing bus routes while 250 will be for new routes.

The Minister also stated during his COI speech that as an additional safeguard, the LTA will scrutinise the PTOs' actual costs for the purchase and running of BSEF buses. However, does this Government scrutiny extend to the selection of bus routes by the PTOs on which the BSEF buses will operate? The Finance Minister has assured the House that should the PTOs' losses in running the additional 550 buses turn out to be lower than expected, Government funding will be reduced correspondingly.

However, there is nothing in this Bill that can protect the taxpayer from the shrewd use of the BSEF by the PTOs – a scenario that should not be discounted because these are ultimately profit-generating entities fundamentally answerable to their shareholders. Would the Minister demand strict and active regulatory oversight over the use of the BSEF such that the prospects of abuse are significantly lowered? Can we have an assurance from the Minister that the LTA will be able to perform this role and prevent the abuse of the BSEF, in light of recent question marks over the LTA's regulatory responsibilities with regard to the COI on SMRT disruptions? With that, thank you very much, Mr Speaker.

5.32 pm

Mr Gerald Giam Yean Song (Non-Constituency Member): Mr Speaker, the Land Transport Authority (Amendment) Bill gives the Government the powers to fund and implement the Bus Service Enhancement Programme (BSEP). The BSEP provides for the purchase of 550 new buses over the next five years, the hiring of over a thousand bus drivers, and the funding of the maintenance and operational costs for these buses over 10 years. I support the objective of the BSEP, which is to improve and expand the range and reliability of bus services provided to commuters. Like most commuters, I hope to see more frequent and less crowded buses, especially during peak hours. However, I have several concerns about how the Government is going about achieving this objective.

The plans to increase the bus fleet to ease commuters' woes are long overdue. Over the past 10 years, Singapore's population has grown by over one million people, yet the pace of expansion of our transport infrastructure and operations has not kept pace. The Government's failure to expand our transport infrastructure and operations in tandem with the influx of foreigners has led to the current situation of long waiting times, overcrowded buses and trains, and very frustrated commuters.

[Mr Deputy Speaker (Mr Seah Kian Peng) in the Chair]

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The Government has belatedly realised that the quality of service (QoS) standards that the public transport operators (PTOs) signed up to previously are not sufficient to meet the needs and expectations of commuters. But who established these service standards? Is it not the Public Transport Council (PTC), which is an agency under the Ministry of Transport? Why did the PTC set the bar for QoS so low? For example, the current QoS allows for bus loading of up to 95% capacity. This is a very generous allowance, considering it includes standing passengers, not just sitting passengers. I have boarded such packed buses before, where I have found myself standing on the entrance stairs, barely able to even reach the fare card reader to tap my ezLink card. Despite this soft standard, both bus operators failed to meet the standards in three of the six months in the most recent QoS reporting period. They were issued paltry fines in the magnitude of $100 each time they were caught not meeting these standards.

Now the Government wants to set more stringent QoS standards for the PTOs. Among these, the bus loading limit will be lowered from 95% to 85%. If the Government had set these more stringent QoS standards earlier, and rolled them out more gradually over the past 10 years in anticipation of our population boom, there would be no need to suddenly ramp it up now. Bus operators could have planned their purchases of new buses and factored them into their annual cost projections. This might have cut into their profit margins, but taxpayers might have been spared having to fork out $1.1 billion to help the operators meet these sudden new standards. The Government needs to answer for this planning and regulatory failure.

A related question I have on the QoS is whether it is really the case that the Government cannot increase the standards without breaching the contracts with the bus operators. I understand the PTOs operate on 10-year contracts. When were the current contracts signed and when would they be up for renewal? According to the PTC website, the QoS standards were revised in August 2007, August 2008 and August 2009. Obviously, these were done mid-way during the contract. Why are we being told now that the Government cannot revise the QoS standards without compensating the PTOs?

A second broad concern I have about the Bill is how the Government is going to ensure that the subsidy does not get used, either directly or indirectly, to improve the bottom lines of our very profitable PTOs. During the Committee of Supply debate in March, the Transport Minister said he was going to "scrutinise the PTOs' actual costs for the purchase and running of the buses" to ensure that PTOs do not profit from this subsidy. Unfortunately, this Bill does not prescribe any mechanism for such scrutiny. Is there any process in place to prevent the PTOs from acquiring spare parts or maintenance equipment, or conducting staff training using BSEP funds that can be used to benefit the rest of their fleet? How will the LTA prevent the PTOs from making the BSEP buses run only the unprofitable routes in far flung areas, while running the profitable routes using their own buses? In short, how is the Government going to prevent BSEP funds from cross subsidising other parts of the PTOs' operations? Will the operations and accounting for the 550 buses be managed by the PTOs, who will then report the figures to LTA and seek funding accordingly? Will LTA take at face value all the figures the PTOs report to them? How will LTA audit the reporting?

Will the establishment of the BSEP mean that LTA will need to set up another department to manage and audit the operations of the PTOs? How many more staff is LTA going to have to hire to manage this 550-bus operation? How much is it going to cost? Is this cost going to be part of the $1.1 billion package or is it extra? And who is going to fund the operations and replacement of the 550 buses after the 10 years are up? Is this the last such subsidy that taxpayers are going to give to PTOs? If not, are we on a path to permanent operational subsidies being given to these two listed companies?

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Mr Deputy Speaker, during the COS debate earlier this year, the Transport Minister, in arguing his case for having profit-oriented companies run public transport operations, said that, I quote, "the profit incentive drives the operators towards higher efficiency and productivity, which keeps costs as low as possible". This sounds ironic in light of all that has happened in the past year. Commuters have experienced the most serious and sustained series of MRT breakdowns in its 25-year history. It was not just the December 15 and 17 stoppages, but several other disruptions on the Circle Line, the LRT, the Northeast Line and the East-West Line that took place after that, some of which occurred as the MRT Committee of Inquiry (COI) was underway.

Despite all the official justifications for the BSEP, there is no running away from two facts. One, that bus service standards are not up to the mark and, two, the Government is stepping in to the tune of $1.1 billion to subsidise this service recovery. What higher efficiencies has the profit-oriented model brought us? We have not seen an improvement in service quality, but a deterioration, especially over the past five years. We have seen fares increase but yet the Government still needs to pour in billion-dollar operational subsidies. We have seen trains break down due to underinvestment in maintenance, yet these companies are reporting hundreds of millions of dollars in profits each year. Since 2003, SMRT and SBS Transit have paid over $1 billion in dividends to their shareholders.

Public transport is an essential public good just like education, healthcare and public housing. The returns from this public good benefit more than just the commuters themselves. When commuters are able to get to work quickly, conveniently and in comfort, their companies benefit from their more productive work. By allowing them to reach home on time after work and with less frustration, they can build better relationships with their families, and perhaps even raise the national fertility rate. The economy and society benefit when we have good and affordable public transport. These positive externalities do not show up in the balance sheets of the PTOs.

The BSEP seems to belatedly recognise that greater Government investments are necessary to rectify the market failure in the public transport industry. With this Bill, the LTA will not just be a regulator, but will purchase the buses and fully fund their operations. Effectively the LTA, which is a Government agency, is going to be the de facto owner of a fleet of 550 buses plying our roads. However, it is neither here nor there. The BSEP does not introduce any competition to spur efficiency and service improvements, yet we do not have a full public monopoly which reaps the benefits of direct control, with profits being reinvested to improve service quality. It is the worst of both worlds.

The public transport model has a great bearing on the long-term outcomes of our public transport system. The focus of our bus and train operators should be on improving service quality to meet or exceed commuters' expectations, not maximising profits for their shareholders. Mr Deputy Speaker, Sir, as a daily commuter myself, I share the concerns of many Singaporeans about the quality, comfort and affordability of our buses and trains. The public transport failures of the past few years have caused much angst among Singaporeans. It is incumbent upon this Government to set things right, both in the short term as well as in the long term.

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5.42 pm

Asst Prof Tan Kheng Boon Eugene: Mr Deputy Speaker, Sir, I rise in support of the Bill which seeks to significantly improve the quality of bus services over the next five years. The public transport system has been very much in the news, reflecting the sentiments and concerns of the average Singaporean over the system's reliability, affordability, and overall integration. Given the growing congestion on our roads, on our trains and buses, the public transport system must rise to the challenge or else Singapore could, in effect, become a car park!

Sir, I use the public transport system on every work day. As it stands, the crowded buses, unreliable frequencies, and poor service quality are a poor advertisement for our bus system. Anyone seeking to switch from private car travel to public transport will hesitate, given the litany of woes that we hear, see and experience on a daily basis.

Sir, the Transport Minister in March this year had informed us that the 800 new buses – 550 funded with Government's assistance through Bus Service Enhancement Programme (BSEP) and 250 from the bus operators – will also see the two public transport operators (PTOs) having to deliver higher service standards, beyond the current requirements of the Quality of Service standards. At the outset, I seek a clarification from the Minister: what happens if a PTO does not meet the higher service standards? Will the sanctions for non-compliance be made known before the funds are disbursed? In the interest of full disclosure, they should be made known.

Sir, the Bill provides for the Bus Service Enhancement Programme to finance a wide range of purposes. These include:

• the purchases of buses;

• the acquisition of immovable property;

• the salaries of bus captains, the running costs including fuel and maintenance;

• investments in accordance with section 17 of monies in the BSEP, to payment of principal or interest borrowed; and

• the set-up, administration and management costs of BSEP, including legal costs.

Would the Minister enlighten us as to the ball-park percentages of the BSEP funds that will go to the various expense items, broadly defined? While I am not in favour of legislators or bureaucrats micro-managing, my concern is that the BSEP becomes unwieldy with a significant part of the funds going towards indirect operational costs such as the set-up, administration and management costs. In short, notwithstanding the accountability that is necessary for public funds, the financial assistance to the PTOs should not become unduly burdensome in its administration.

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Sir, the Bill also explicitly introduces a new function for the LTA in order to allow LTA to implement BSEP. The Explanatory Statement to the Bill informs us that this new function includes "operational planning for bus services to meet the needs and expectations of the public". It goes on to note that this function is "without prejudice to the role of the Public Transport Council".

Sir, issues of accountability can be complex, if not blurred, where different regulatory agencies share powers and responsibilities. While I doubt there will be a turf war between the two statutory boards, the LTA and the Public Transport Council, can the Minister clarify how the LTA's roles will not duplicate, or conflict with, that of the Public Transport Council's? How would the two agencies coordinate better for the larger benefit? Or would we have a situation in which where one agency assumes that the other is minding a particular operational planning subject-matter?

In addition, I note that this new function seeks to provide the LTA with "operational planning" power. How does this conflict with and compromise the LTA's role as a regulator? Would it not be timely and necessary to consider a distinct separation of the regulatory arm and the operational arm of the LTA? After all, the LTA should not regulate and/or audit its own operational planning. It is more likely than not, however, that the LTA will not regulate or audit its own operational planning.

Sir, the BSEP has been designed and presented as a financial assistance scheme to our public transport operators. We have heard of and been given the assurance that the PTOs will not profit from the injection of the buses and the funds. At one level, that is accurate. During the Committee of Supply's debate on his Ministry on 7 March this year, the Minister for Transport assured this House "the $1.1 billion that the Government is putting into this programme is, in reality, a subsidy to benefit public transport commuters so that they enjoy a higher level of service. It is not a subsidy to the operators".

However, it is also important to appreciate that the public transport operators stand to gain financially and non-financially in the medium- to long-term if our public transport system and the PTOs are held in high regard by the users for its affordability, reliability, efficiency and effectiveness. In this regard, the BSEP can play the catalytic and complementary role in boosting public confidence in our public transport system. I hope the public transport operators would recognise that and be mindful of their social responsibility even as they pursue their commercial interests.

Notwithstanding my reservations, Sir, I welcome this Bill. Thank you.

5.48 pm

Mrs Lina Chiam (Non-Constituency Member): Mr Deputy Speaker, Sir, I recall the debates in this House on the Bus Service Enhancement Fund back in March during the Budget debate. The consensus was that more buses are certainly needed but, for various reasons, our bus companies are incapable of funding these themselves. Concerns were raised by Members of all political parties in this House as to the effectiveness of our hybrid public transport model, which adheres neither to genuine privatisation nor nationalisation, and yet seems to be afflicted by the problems of both.

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Clause 3B of this Bill empowers the LTA in implementing the Bus Service Enhancement Fund to provide financial and other forms of assistance to holders of bus service operator licences to improve the range and reliability of the bus services. This, of course, refers to the two big companies, SBS and SMRT, which effectively enjoy a monopoly of bus service operations in Singapore. My fear is that the two bus companies will come to rely on the financial and other forms of assistance from LTA like a handicap. It is like a bail-out fund you know you can always fall back on when you cannot do your job properly. At its worst, it may be a disincentive for the bus companies to operate efficiently.

I believe the problem may lie in how our bus service licensing works. Some elements of market competition could be introduced to the process of awarding the bus service licence to a bus company. In London, for instance, operators bid for bus routes from the government body, Transport for London, in a tendering system. Other bus service models could be studied. In Hong Kong, franchised bus services, which are operated by some of the world's largest privately-owned bus companies, run alongside with non-franchised services which serve routes that are less profitable but still indispensable. These are just some of the ways which could create the right conditions for our bus operators to operate more efficiently and not to be fixated on delivering big dividends to the shareholders which has no bearing on the bus service itself.

Therefore, my question to the Minister in relation to clause 3B of this Bill is, would he consider the benefits of the Bus Service Enhancement Fund to potential new and rival bus companies? Would he consider ending the monopoly of SBS and SMRT? Would he at least consider reviewing the bus service licensing process, now that SBS and SMRT stand to benefit from this handicap? And, lastly, if the amendment Bill is passed, would the Minister set up a committee consisting of some independent members from the public to oversee the control of this Fund?

5.51 pm

Er Dr Lee Bee Wah: Mr Deputy Speaker, Sir, transport was once the bane of our society. Buses were overloaded, people had to fight to hang on for a ride, and schedules were chaotic. The Government stepped in and, with its intervention, came the merger of the bus companies. Things went on for a smooth ride at least for a good period of time, and we had the MRT on our shores. This time, however, the problem is different. It persisted like the 100-day cough and refuses to go off despite prescribing various measures. The problems range from the lack of skilled bus drivers to mechanical breakdowns, inconsistent frequencies and over-crowdedness.

The Transport Minister has taken a step in the right direction to amend the Bill and give more attention to how public transport operators (PTOs) are managing a key asset of the nation. I praise the Minister for his doggedness in turning up at each major incident to personally see how the operators are coping. He is dedicated and committed to solving the problems before him, though they may not be of his doing.

In recent years, greater emphasis has been placed on expanding our train network. Up came the North East Line, followed by the Circle Line, which no doubt benefited many more residents greatly. The planning of bus routes and bus services seems to have taken a backseat. In fact, some bus routes have even been cancelled or re-routed. This is a shame, because buses can share the peak hour burden with the trains, as well as serve as an alternative form of transport during train breakdowns, if bus routes are efficient and reliable. I am glad to note that the LTA plans to assist PTOs with improving the coordination of bus routes and scheduling of bus services.

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I wish to take this opportunity to ask for a new bus service to Khatib MRT station for Yishun residents. This is something I have requested several times in the last few months, and I have even raised the issue during this year's Committee of Supply Debate, but to no avail. I urge the Minister to give serious thought to this matter because regardless of how exemplary our train network is, it would be of little use to those residents who have problem in taking a bus or buses to the MRT station. I have in mind the residents in Jade Spring and Dew Spring estate and other upcoming BTOs. They live between Yishun MRT station and Khatib MRT station. The bus ride to Yishun MRT station is 10 minutes away, and residents have complained of waiting times as long as 20 minutes due to over-crowding. The total journey to the MRT station alone adds up to 30 minutes. And there is no direct bus to Khatib MRT station.

With four more BTO projects coming up, heartlands will expand, more residents will be taking the already overcrowded bus and they will require better connector services. The problem of overcrowding of buses will worsen, and bus frequencies will fall behind further. I urge the Minister to add more buses to existing bus services, including bus 806 and 969, and perhaps introduce parallel bus service during peak hours.

In the meantime, PTOs should hire more drivers but ensure that bus drivers are well-trained to understand and abide by local traffic regulations, and are familiar with their bus routes. I note with concern that SMRT bus drivers now have to do six-day work week, including Saturdays. Although they theoretically receive a salary increase, I am aware that some drivers are unhappy about the new system and claim that the adjustment to their working hours and salary, in fact, does not lead to a salary increase as SMRT claims. I hope that LTA will look into this and ensure that the drivers are paid what they rightfully deserve, while working hours that they are comfortable with. Otherwise, I fear that this will compromise the safety of the commuters and also worsen the shortage of drivers.

With the amendment of the Bill, I understand that a fund will be established to finance the PTOs. There are some Singaporeans who believe that there are measures we can adopt to improve our public transport system without utilising public funds that can otherwise be placed to better use elsewhere.

Our PTOs are private companies. They are profit-run; they have reserves and banking facilities. Advertising is a rich source of revenue for them. As corporations, they can issue bonds to raise capital quickly without diluting the current shareholders' equity. Do they require assistance from the Government? Why are they not investing their rich resources in improving our transport system? Why have they not prepared a comprehensive continuity plan in times of train breakdown? After all, even top cities with world-class transport systems are known to experience a mishap every now and then.

I quote Andrew Barr, Operational Planning and Integration Manager of the London Underground, referring to his recommendations for a backup plan during a train breakdown which he presented at the Committee of Inquiry hearing for the 2011 MRT breakdowns: "fairly common sense and not rocket science". Those were his words.

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So, the various failures in our transport system are not due to lack of funding. They are the result, perhaps, of poor management of resources or insufficient allocation of resources at the right place or at the right priority. What the LTA should do, instead of providing funds and resources to the PTOs, is to assist them with hiring management personnel who actually know how to fulfil their duties, as well as drawing up guidelines and benchmarks, and ensuring that PTOs fulfil them.

Meritocracy has always been the foundation of our success; we reward those who perform well and, at the same time, we do not give the top jobs to those who are undeserving of them.

If PTOs fail to perform to public standards, the Government should step in once more, revoke their licences and de-privatise our transport system, at least until the persistent problems go away, and Singaporeans get back our efficient and reliable transport system we were once proud of.

The above is the view of some Singaporeans, including some of my residents, and I urge Minister to explain in detail why public fund is used to buy buses. For me, as a Member of Parliament, I would like to see better bus services for my residents.

We can say a lot about the grand plans that we have to improve our transport services, but the test of the pudding is in the eating.

How will our residents benefit? How will 800 new buses translate to meeting the residents' needs and expectations? When will this be done? And can this be done faster? Is 800 buses enough? If not, can the Government invest more funds to meet the residents' needs? Just now, the Minister urged us to be patient. I would like to respond, in Mandarin, in the form of a song. "你知道我在等你，吗？" 我希望部长不要让义顺的居民痴痴地等下去。我们要看的是实际行动。 ("Do you know I am waiting for you?" Yishun residents will continue to wait. What we want to see is practical action.) ( In English ): With that, I support the amendment Bill.

6.01 pm

Mr Png Eng Huat (Hougang): Sir, I am happy to note that commuters can expect better transport services going forward. The $1.1 billion package by the Government to help public transport operators (PTOs) meet service levels in bus operations is, indeed, extraordinary.

This Government has also pulled out all the stops to ensure bus operations remain viable going forward by bearing the development and land costs for bus service infrastructure. It will also allow PTOs to retain a portion of the advertising revenue from bus shelters.

While this Government continues to tinker with the transport model, the introduction of the Bus Service Enhancement Programme (BSEP) is nonetheless a tacit admission that privatisation, particularly for bus operations, has not produced the intended results as envisioned by the Government. I know the Minister has stated that the $1.1 billion package is a subsidy to benefit commuters, not a subsidy to benefit the PTOs. But depending on how you want to look at it, a glass can be half-empty or half-full. The BSEP will definitely benefit the operators because it will lift a huge burden off their backs in meeting enhanced bus service standards without hurting their bottomlines.

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The establishment of the Bus Service Enhancement fund under section 13B of the proposed amendment to the LTA Act allows the LTA "to provide for grants or loans to any holder of a bus service licence or a bus service operator's licence for the purpose of improving and expanding the range and reliability of the bus services". From the onset, the Government has already decided to give the PTOs a grant instead of a loan despite the operators being financially healthy to begin with. These publicly-traded operators have paid out more than a billion dollars in dividends to their shareholders over the years.

We must send a message to these operators that it will not be business as usual after the gifting of the 550 additional buses that comes complete with drivers and full maintenance. Because at the end of the day, the commuters should be the ones smiling and not the shareholders.

The two main reasons cited by the Government on the need to introduce the BSEP to help PTOs are: first, the Government cannot mandate the PTOs to add 550 buses to improve bus service levels beyond what is stipulated in the existing regulatory framework; secondly, the PTOs' bus operations are already running operating losses.

While it may be seen as unfair to expect PTOs to meet higher bus service standards on short notice, it is not unreasonable to expect these operators to have planned for projected increases in ridership over the tenure of their service agreements. I believe the PTOs have done their projections. That is why they have the provision and the ability to buy 250 additional buses on their own to meet the growth in ridership.

So, what went wrong with their ridership projections that this Government sees fit to come up with a shock treatment for bus operations to the tune of $1.1 billion? The clue lies in an article in The Straits Times on 7 September 2010. It reads: "On housing, Mr Goh acknowledged that the surge of immigrants in 2007 and 2008 caught the Government by surprise. But the Government had not stopped them from coming because the booming economy needed workers". Mr Goh Chok Tong went on to say the National Development Ministry "did not provide for the sudden surge" in its housing plans.

Sir, when housing, which requires long-term planning, can be caught by surprise by a surge in population growth, what hope is there left for public transport to avoid the sudden crush? When you have a problem housing the extra immigrants, you will have a problem moving them. In fact, most of the infrastructure and essential services will suffer the same fate. So, the issue here is beyond the question of whether it is right or it is wrong to mandate the PTOs to ramp up their bus operations to cope with the rising demand. It is an issue where the right hand did not know what the left hand was doing, and the problem began to snowball to a point where this Government had no choice but to implement a $1.1 billion shock therapy to help bring back some sanity into our transport system.

I am happy to note that the Government has decided to exercise more control in bus operations. The Workers' Party has always advocated that. This will improve reaction time to meet any surge in demand for essential services caused by inorganic growth in population in the future.

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The next justification by the Government on the need to help privatised and profitable operators run their bus operations is also disturbing. Both the Finance and Transport Ministers have voiced their concerns about the viability of the bus industry going forward. The Transport Minister said "the reality is that the finances of the bus industry have been deteriorating in recent years" and that "the PTOs' bus operations have been running operating losses for some time already."

Sir, it is not correct to single out bus operations as a loss-making business to justify the need to help PTOs. The operators are also given other cash cows to operate to make good money for their shareholders. Cross-subsidy is not an uncommon practice in business operations. Cross-subsidy is even more critical when it comes to essential services. It allows such services to continue even if they may become unprofitable. If the PTOs are losing some money in bus operations, the train operations and advertising revenue are more than sufficient to cover the losses incurred in the running of the buses.

I decided to find out how long the PTOs have been running losses for the past five years beginning 2007 for bus operations and how profitable the operators are as a company. For bus operations alone, SMRT made a profit of $1.5 million in 2007 but lost $20.1 million from April 2008 to March 2012. The total bus operation P&L for SMRT for the five-year period is a loss of $18.6 million. But over the same period, the company made a total of $756.5 million in after-tax profit. Although SMRT lost money on bus operations for the past four years, the amount is minuscule when compared to the total profit made from other operations. It is not easy for SMRT to run bus operations because it does not enjoy economies of scale. Its fleet size is only a third that of SBS Transit.

The picture for SBS Transit is quite the opposite. For bus operations alone, the company made a loss of $6 million in 2011 but made an operating profit of $71.4 million from 2007 to 2010. So, 2011 was the only year it lost money on bus operations for this period. Over the same period, the company made a total of $236.2 million in after-tax profit.

Sir, the case that the finances of the bus industry have been deteriorating in recent years and that bus operations have been running operating losses for some time already, does not hold true for SBS Transit. The company was running a healthy bus service with the exception of 2011. It is not a coincidence that both companies lost money in 2011. Last year was a challenging year for businesses that depend a lot on fuel and electricity to operate. Oil prices ended 2011 up 13.3% to average nearly $111 a barrel for the year, as reported by Reuters . But despite the volatility in oil prices, the most important thing to note is that both PTOs have healthy cash cows in the form of rail operations to keep their shareholders happy.

The BSEP and PTOs make strange bedfellows. One entity in this unusual partnership is willing to spend without expecting a return while the other expects nothing but attractive returns. The combination of these two entities may result in a smoother ride for commuters but not a cheaper ride. The combination of these two entities will not guarantee commuters a stay in fare increases but it will guarantee shareholders attractive dividend yield for the next 10 years.

I hope that, moving forward, the Government does not see it fit again to dish out free money to profitable PTOs. These operators are not cash-strapped to begin with, and no operator will reject free money to improve service levels. As mentioned at the beginning of my speech, I am happy that commuters can look forward to a better and less stressful public transport service. I would like to ask for more bus services to Hougang and Aljunied areas. I look forward to working with the LTA to improve bus services in the Aljunied-Hougang areas. Last but not least, I want to thank the voters of Hougang for giving me this opportunity to serve them at the national level.

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6.09 pm

Dr Janil Puthucheary (Pasir Ris-Punggol): Mr Deputy Speaker, Sir, our public transport system has increasing demands placed on it, both in terms of capacity, as a number of my parliamentary colleagues have mentioned, as well as expectations from the public. The operators, the regulatory agencies and the transport commission have been under increasing scrutiny. Er Dr Lee Bee Wah has mentioned the "100-day cough". It is a seductive temptation for a physician to use a medical analogy. Seeing as my colleague has brought it up, I will extend it. In the 100-day cough, there are three big challenges that a physician faces. The first is to reassure the parent of the child that everything will be okay in the end, and, second, that no medicine is going to provide you with a quick fix, and the third is that you know what is happening and you understand what is going on. The Ministry of Transport, the Minister for Transport and the LTA have my sympathies. I commend MOT and LTA for the amendments to this Bill which seek to allow significant changes to both the regulatory and financing frameworks of our public bus services, in order to make right the current gaps. The amendments clarify and strengthen the role of LTA in the private-public partnership that we have as our hybrid model and further emphasise and enhance the hybrid nature of our national public transport system. Nevertheless, I have some concerns.

Sir, the BSEP is targeted to meet the needs of bus commuters, but it has been described as an unanticipated "catch-up" measure where the provision of services will follow sometime after the demand has grown. On one hand, this is commendable in that it reflects the willingness to do what is right, to put right the problem, and to do so in a comprehensive and decisive way. Rather than looking back at why the situation has occurred – this has been discussed extensively – it is perhaps more valid to ask, looking forward, what strategies the Ministry has in general for our transport system to ensure that there is some anticipation, some building ahead of need, some provision of capacity in excess of demand. If we build capacity too far ahead, our trains and buses run close to empty for years, and we pay a financial cost. If our public transport services are bursting at its seams before we increase capacity, we pay a social cost. The Minister has described that there is a willingness to consider if the BSEP is sufficient or appropriate and for it to be reviewed in the future. Can we avoid this situation in the future?

Sir, the need for more bus drivers, and the need to increase their salaries has been brought up. Some of the public discussion has been about the suitability of recruiting a large number of drivers from overseas. Is this concern valid? Specifically, has there been an increase in the number of Singaporeans applying for the job, especially with the higher salaries? Concerns, such as the risks to the safety of commuters and other road users, have also been raised. The assumption has been that while these additional drivers are essential to the provision of a much-needed service, the large number of new drivers will be a risk that needs to be managed. Are there steps that will be taken to ensure that the safety of commuters and pedestrians is not compromised? Will the training programme for the new bus drivers be enhanced? And are there plans to address the supervisory framework for these new drivers?

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More buses on the roads will be better for passengers. The services, especially those that ply the heavily utilised routes, will increase in frequency and this will ease the congestion within the buses, but what about on-road congestion? If on-road congestion were perhaps better managed, the existing bus fleet could provide a better service, and handle a higher throughput of passengers. Some, such as Mr Gan Thiam Poh, have raised the concern that there may be road congestion as a result of the increasing number of buses. I have to respectfully disagree. I do not believe that this will be a significant factor because, in truth, there will be far more cars added to our roads over the same time period, which are going to affect congestion to a much greater degree. Are there any new plans to manage traffic congestion in the near future? Given that cars are our greatest contributor to road congestion, would the Minister for Transport elaborate on the changes to the projected COE growth numbers and is he, in particular, prepared to comment at what point we anticipate reaching a point of zero car growth?

Sir, as the COEs are turned over, what consideration is given to the utilisation of COEs by our taxi services? The reason I bring this up is that taxis can be viewed, on the one hand, as a form of private transport – a private car, but one that you hire for the duration of a journey, or they can be viewed as an enhanced version of public transport – a transport service at a higher charge to meet a specific time-limited need. We can see taxis as an extension of public transport, and I believe we should. Does the Ministry? Does the Minister intend to drive – pun intended – an increase in the size of the taxi fleet? Or, alternatively, an improvement in the provision of taxi services can be made by ensuring that each taxi COE is optimally used. This is an issue because the utilisation of taxis, in terms of the number of hours a given taxi operates, is highly variable. A taxi that is sub-optimally operational has taken a COE that might be otherwise more productively used

Is there an optimum operational utilisation of a taxi, and, if so, how is this target achieved? Could the Ministry leverage on an improved provision of taxis, to fill the gaps where public transport is insufficient? Do we have enough taxis on the road, and are they being used optimally?

Sir, returning to the Bill and the BSEF, a portion of the revenue currently received by the Government will be channelled to the PTOs. Will the PTOs have a role in generating or attracting more advertisers to place advertisements? Is this a shift in their focus and role? Furthermore, should the PTOs require a loan from the Government, has consideration been given to how comparable these conditions will be to market rates? I would encourage that the conditions are supportive but not overly generous as these companies are publicly listed with their own shareholders, as has been pointed out many times. While we want to provide support so that our public transport is financially viable, we do need to strike a balance to ensure that the companies will have to be prudent and responsible.

Sir, the financing framework merits further explanation and discussion. Despite repeated reassurances from the Ministry on this subject, members of the public and of this House continue to be concerned that public money is being used to help a private company turn a profit. As has been explained by Er Dr Lee Bee Wah, the public continues to wonder if improving internal cross-subsidy would be better. Some are assuming that the operators could continue as is, without any help, and, possibly, with minimal fare increases. Some of these concerns are, of course, inflated and inflamed, some as a result of misunderstanding, as has been brought up before, a misunderstanding about the amendments to section 6, where LTA takes on the role of being the route planner and central planner, rather than leaving this to the PTOs. That has been misunderstood several times. Some of these concerns are inflamed as a result of misinformation, some of which may be deliberate. The key points, that no profit will be made as a result of the BSEP, that the assistance it provides to the operators will be calibrated and adjusted to ensure this is so, need to be explained and discussed. The public needs reassurance − reassurance that must be repeated and reinforced.

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Sir, the amendments to the Bill allow LTA to take the necessary steps to deal with some major current problems affecting our bus services. They ensure that subsidies continue and that these subsidies are on the side of infrastructure and supply rather than primarily on the side of demand, and that this approach serves all Singaporeans. The amendments ensure that revenue from the bus shelters can be put to work to improve services for commuters. The amendments make explicit LTA's role as central planner as well as the provider of infrastructure. These amendments emphasise the hybrid nature of our system. They emphasise the intent to use a model of partnership between a private operator, a public planner and a public regulator to provide the best possible transport service for our Nation. Sir, I support the Bill.

Mr Lui Tuck Yew: Mr Deputy Speaker, Sir, let me try to respond to all the comments, suggestions and views that have been expressed, and it has been a wide range of views. It ranges from "why do", to "do now", to "do more". There have been expressions of clear, unequivocal support. There have been others that have stayed silent on this matter altogether, like Mr Pritam Singh, and there have been others who have taken a more nuanced position, like Mr Png, who welcomes it but did not quite express support for it. I understand their concerns. Indeed, I will try to take this opportunity to explain it as best as I can. But let me also assure you that there is no intention whatsoever on my part to impose the benefits of the BSEP on your residents over your objections and against your principles. So, I would be very clear on that score.

I would like to categorise the points that have been made, and try and deal with them in a few categories. I think there has been this nationalisation versus privatisation issue that has been raised by both Mrs Chiam as well as Mr Giam. Related to it, why not more competition, why not take the opportunity to look at a third operator? There have been views on the bus financials, how it stands − and I think Mr Png did a great deal of work in researching the financials of the bus industry over the last five or six years − but also questions related to why we should not have the PTOs cross-subsidise between the rail and the bus networks. There have been points that are raised about very frustrated commuters, that bus services are not up to the mark, and these are points that have been raised by Mr Gerald Giam. So, I hope to talk a little bit about where exactly we are, lest people run away with the impression that the whole system is so broken and so poor.

I want to cite, for example, the UniSIM study that is independently conducted every year, where a direct question is posed to regular commuters of both the bus and the rail networks whether they perceive bus services to have improved compared to the previous year. I shall use their response to the question to try and give an understanding of where exactly commuters are as a whole on this issue, and also to talk a little bit more about what improvements we can expect.

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Lastly, I would want to try and talk a little bit about the roles of PTC versus LTA, and perhaps to address some of the points that are raised by Mr Pritam Singh, and technical issues that are related to the BSEF itself. And if I do not manage to cover all of your queries or do not cover them adequately, please raise it again and I will try my best to answer them.

Let us start with nationalisation versus privatisation, and the issue of competition. Where do we stand? Our model is one where we allow private entities to operate and provide the services because it is our belief that it is in the long-term public interest for them to be delivered and served this way. There is a profit incentive that drives higher efficiency and productivity. But ultimately it is not for the benefit of the operators themselves. It is for the benefit of commuters because they will benefit through lower fare increases, and I will talk about fare increases versus cost a little bit later when I go into bus financials. But the room for the operators to manoeuvre is not unfettered because there are a number of safeguards that are in place. Firstly, the operators do not set the fares. That is done by the PTC. Secondly, the operators do not establish the standards. Again, that is a function that comes under the PTC. Lastly, the licence is given to them for a limited and defined period. In the case of the buses, the licences will expire in 2016. That is, again, another matter that we may have to come to and talk about under bus financials.

I think it is a truism to say that, perhaps, across all areas, not just in transport, that the solution that is not adopted becomes increasingly more attractive over time and becomes the preferred solution. Indeed, it is a truism that, over time, the solution that is not adopted becomes increasingly more attractive as the solution. But before we tack and change course because the prevailing wind has changed, it is important to see what other cities and countries are doing. Are they moving towards privatisation? Are they moving towards nationalisation? Mrs Chiam and others have actually given some examples and I think it is useful to note that in many cities in the US, Europe, Australia and Asia, the move is actually towards privatisation. I give you a few examples.

For example, London. They went into competitive tendering using privatised entities, I think some time in the mid-1980s. And over the course of the next 15 or so years, cost per vehicle kilometre came down by more than 45%, inflation-adjusted. So, the lower operating cost per kilometre actually allowed services to be expanded by some 25% or so. Nonetheless, even in London where there is competition and privatised entities are running it, notwithstanding the increased efficiencies and productivity after they moved away from nationalised companies running their bus services, today, Transport for London, or the government, subsidises bus services to the tune of about £500 million annually. And this is for a population of about, I believe, eight million people, running around about 8,000 buses.

Another example, in Taipei, they have 14 private operators providing public bus services. Yet, even with all this competition, we understand from them – Minister of State Josephine Teo visited them recently – that they provide a subsidy of more than S$100 million every year to subsidise bus operations for a population of about 2.6 million people.

I will give you two more examples in addition to what I have just mentioned. This is Sydney as well as the New York, New Jersey area. Here, it is quite interesting because they have partially privatised. So, some of the services are run by private companies and, at the same time, some of the services are run by companies that are run by the transport authority. In Sydney, we have been told that actually the private companies are able to run it at about 30% less in terms of the cost. In the New York, New Jersey area, the bus routes that have been privatised have operating costs that are about 35% lower compared to the routes that the authorities are running themselves.

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So, I think there is a clear body of evidence. One, that cities are shifting towards privatisation or have shifted, and at the same time that there are a number of these cities where actually, notwithstanding the shift, there is a need to provide a certain amount of subvention and subsidy from the government in order to maintain bus services at a very high level. Therefore, the question we need to ask ourselves is: why are governments subsidising private operators? Why not, as some have suggested, take it back themselves and run it? The answer must be that it will cost them even more to provide these services themselves and that, generally, efficiency-minded, cost-conscious governments are looking to have private bus operators involved when conditions allow them to do so. That is what I want to say for nationalisation versus privatisation.

I want to take this opportunity to talk about us. Since the Government is stepping in – 550 buses is a significant increase which is about 14% or so increase over the existing fleet − why not take the opportunity to introduce another operator? I think Mrs Lina Chiam was alluding to that, and it is a fair question to ask. Indeed, we stepped through the thinking whether this is an opportune time to bring about that competition and get a third operator in, and what are the pros and cons of doing so.

Let me just explain that of the 550 buses, we think that about 300 buses will go towards augmenting the existing services. To some, it is because we need the buses to come more regularly; to some, it is that the loading is nearer 95% than 85% and, hence, you need to inject buses in order to bring the loading down, and I will talk maybe a little bit about how it is measured. But you have about 300 buses injected into existing services.

You would appreciate that it is very, very difficult to have two operators providing this same service because your current operator, maybe SBS Transit, will be providing about seven buses, and then a new operator would come in to inject another one, or maybe, two buses. If the service does not deliver the expected standards, who do we hold to account? SBS Transit or the new operator? In practice, it is actually very, very difficult for existing routes to see two operators trying to provide the same service in a co-ordinated manner in order for the commuters to benefit from it.

What about the 250 buses that are going to be used to run the 40 or so new routes? Would that not be possible, because that is going to be delivered by one operator? So, a new route – if it is a feeder route – you may require five or six buses. If it is a short trunk route, maybe somewhere between seven and 10 buses and so on. Why not allow a single operator to do it?

The challenge is that we expect these routes to be geographically dispersed. So, there might be some routes in the North, some in the West, some in the East, some parallel to the MRT routes, some providing connections that do not exist to hubs -- financial, commercial, medical centres and so on. The difficulty with this geographical dispersion is: where do you site the depots? Do you have a few depots, three or four depots in different parts of the island, with the attendent increase in overheads because you need people and equipment in order to set up and run a depot properly? Or do you site a depot centrally with lower overhead costs but, unfortunately, with more dead mileage because the buses at the end of their routes, wherever they are, will have to return to this central depot to be maintained, to be cleaned and so on? It is not an easy solution to say, "I want to introduce a new operator using the BSEP." Nonetheless, I assure you that our intention is to try and make right the bus financials, and thereafter, to make sure that we then put out packages of routes that are carefully put together so that existing as well as potential new operators can tender for them.

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Now, I come to bus financials. If your bus financing framework is not right, I think no new operator would want to tender for a bus route package. Let me start by saying that, today, the licences for operating the trains and the licences for operating the buses are separate. They may be held by the same two operators but they are separate in that it is not necessary for any operator to hold both train and bus operating licences. It is important to keep them separate because it is going to be very hard for me, if I want to introduce a third operator, to be able to package a new rail line together with a bus licence at the same time. And, if we expect cross-subsidies between the rail and the buses, then it is important that I am able to put this composite package together which practically is very difficult to do.

Also, it is not always the case that the rail operations can subsidise the bus operations. And therein is the danger that was raised by Dr Janil, that if you build too far ahead of time, there is a cost associated with it, a cost that eventually is borne by the taxpayers. Members would remember, about 10 years ago, the introduction of the North East Line. The North East Line was planned in tandem with housing and other urban plans for the north-eastern corridor. Back in 1996 and 1997, there were long queues for flats and MND had significant plans to increase sizeably the number of flats that are located in the north-east and, so, we went ahead, we built the North East Line and the LRTs. Unfortunately, the plans did not quite materialise. And so, in 2003, when we opened the North East Line, the ridership was significantly lower than what we had projected. And, indeed, for a number of years, that line lost money. It was actually the bus operations in SBST that was providing subsidy to the rail portion. And now, of course, as Mr Png has so rightfully pointed out, it is the reverse.

If I come back to bus financials, what is happening is that the profit margins have gone down over the years. And, in fact, last year for the first time, it was negative for both operators. The trend is as important as the absolute numbers. Mr Png talked about the SMRT over the last five years, how much they have lost, SBST only over the last year, but it is important to look at what the trend is.

For them, it is the balance of fares and costs that will ultimately give them some idea of how the bus financials and, indeed, the transport financials are. If you look at fares over the last five or so years, from 2006 to 2011, fares, cumulatively, not a single year but cumulatively, went up by 0.3%. Because of the recession, we brought down the fares. With distance fares, we did away with the transfer penalty and, over time, fares came down. And so, from 2006 to 2011, fares cumulatively went up by 0.3%. What about fuel, which is a significant component of their costs? Fuel prices went up by more than 30%, while national wages went up by more than 25%. Hence, you see the dilemma that bus operators are facing, that the fare increases are nowhere near what the cost increases have been in the recent years. Hence, that is an issue that we will need to address if we are to put the bus financials right over time, so that when I put packages of routes out for competitive tendering, there will be companies who are prepared to step in and provide the service.

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Let me move on now to talk about improvements. Before I do that, I want to take time to set right this impression – if I may quote Mr Gerald Giam again – "very frustrated commuters, bus services are definitely not up to the mark". That is the impression that has been given. UniSIM does an independent study every year. This is the public transport customer satisfaction survey – done in October and released in March this year. It is done in October of each year. In 2011, their study was done after the fare increases took place. But obviously, it was done prior to the breakdowns that happened in December. Among the questions that were asked on satisfaction levels of the different parts of the transport network, commuters were asked on their perception on whether bus services have improved compared to one year ago. It is a "yes" or "no" answer. No "in between'. You cannot fudge it. It is a "yes" or it is a "no". The exercise in 2011 – regular commuters who took part – 70.2% of them said that "yes, bus services have improved compared to the previous year". Obviously, the other 29.8% said "no". In 2010, compared to 2009, 67.7% said "yes", that is, bus services in 2010 have improved over 2009.

That is not to say that there are no problems or no issues that we need to address. We know the issues. We know the problems. We know the challenges, which is why the Government is prepared to step in decisively. But I think it is proper to paint the right picture and the right picture is not massive dissatisfaction that – I quote again – "they are all very frustrated commuters". There are, indeed, some frustrated commuters. And, indeed, they vent, particularly on the new media but I do not think that those views represent the majority, not least because I use, for example, an independent UniSIM survey that has been conducted over a number of years for which we can see and follow the trends.

What are the improvements that we can expect of the BSEP? Well, firstly, the loading, we expect, will improve. Today, it is a max loading of 95%, and we are going to bring it down to a max loading of 85%, measured during the heaviest one-hour period. It is not as if all buses during that period will not exceed 85%. I do not want to give you that impression. But it is that when you measure it in the same way that we do today, over the heaviest one-hour utilisation period, you will see an improvement across the entire hour. For feeders, in terms of the regularity of arrival, we expect 95% of them to come at not more than 10 minutes for the entire two-hour period instead of the 90% for the best one-hour period today. Today, it is measured over one hour, 90%, less than 10 minutes. Going forward, with the BSEP, it is going to be for the entire two-hour period, 95% of them coming at intervals of no more than 10 minutes. There are other improvements which I will not go into because of time constraints.

Let me mention a little bit about PTC versus LTA as a regulator. The PTC has quite direct responsibilities. Let me scope it as follows: they regulate bus service levels and transport fares, and they do so with two objectives in mind: One, to keep fares affordable; and, two, to ensure the long-term financial viability of the PTOs. Keeping fares affordable, I have shared some of this information in the past. We measure the second quintile, meaning, people from the 20th to the 40th percentile, because we think that that is the appropriate set to measure against. We find that expenditure on transportation versus household income has declined from about 5-plus percent in the mid-2000s to now. It is about 3.6-3.7%. This is the percentage of the household income that is spent on transportation. What we have been able to do is to keep fares reasonably affordable and, indeed, if you compare fares to what you see in Hong Kong, London, New York and other major cities around the world, I dare say that we are actually lower than what their residents have to pay.

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Why then is it so important for us to do this BSEP package? Why is it not possible for it to be funded in other ways? One, we do this programme because we want to decisively increase capacity. This is related to what Dr Janil had brought up, which is making sure that there is sufficient capacity because, otherwise, there is a social cost that we have to pay. He is right. When we put in the BSEP programme, it is in recognition that the operators, on their own, because of the bus financials, would not have been able to do so. If we wanted them to achieve this same set of standards on their own, it would take so long, because they would only introduce new buses in tandem with, if not maybe just slightly ahead of, ridership growth, that I would not be able to answer Member Er Lee Bee Wah's requests for more bus services in her constituency.

The Government recognises that even with the investment of $60 billion to build new rail lines, buy more trains, implement re-signalling, and so on, we need to decisively ramp up bus capacity so that we have a better last-mile connection because many people would take a feeder bus, rail, and maybe another feeder bus, to reach their final destination; or it is to provide better connectivity to areas that are not as well served; or it is to provide an extra alternative to those who may not wish to take the trains and would rather take a parallel bus service that would run parallel to some of the existing rail lines.

So, the PTC has that responsibility to, as I have said before, make sure that fares are affordable but also, at the same time, look to the long-term financial viability of the operators. Because bear this in mind: 2016 is the expiry of the licence for the bus operators. They have been, over the years, providing a cross-subsidy within their companies from rail to bus. For SBS, earlier days, it was from bus to rail and, now, vice versa. But legislative requirements today do not require them to do so. We do not require them to do so because these are separate licences and, as I have said earlier, if we want to be able to introduce competition in the longer term, bring in more operators to put additional pressure on the existing two incumbents, then it is necessary for us to make right the bus financials.

Let me briefly address some of the points that Mr Pritam Singh had raised – this thing about what are we investing the BSEF money in, and so on and so forth, if I got him correct. Firstly, the intention of the BSEF is actually to make sure that funds are available to buy new buses, as well as to operate them over a period of 10 years. The primary intention of such a fund is not to put aside $1.1 billion and then to try and invest them and bring returns – that is really not the purpose. But we also know that the funds are not going to be disbursed immediately, it is not going to be disbursed in one lump sum to the operators so that they can take and keep the money and use it over time. It is to be disbursed to them in order to cover the purchase of new buses as and when it happens and the operating costs of these 550 buses.

In the meantime, we need to make sure that the fund with LTA is properly invested because otherwise I can imagine that some years later, we may well be asked the same corollary question of why it was not invested in safe instruments in order to bring in some returns. But, as I have said, that is not the primary purpose of the fund. It is that, as good stewards, we ought to, in the meantime, make sure that whatever money that is in the fund is invested in safe instruments and, when the need arises, we disburse the appropriate amounts to the operators to reimburse them.

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Why not claw back the $1.1 billion? This was another question that Mr Pritam Singh raised. It is back to the same reasoning over where the bus financials are. When we actually discussed this programme with the operators, contrary to your expectations that they would be really forthcoming in terms of wanting to bring on board the buses and run these services, they were very concerned. They were very concerned because they knew right from the start that there was no upside and they had to make sure that they were properly protected to make sure there was no downside for them. For us, it was the opposite. We wanted to make sure that there was no upside for them and, hence, even till very recently, there is a lot of debate and a lot of dotting the "i's" and crossing the "t's" in order to make sure that we have as definitive an agreement as possible. But I give you my assurance that this is not intended to profit the operators. I know their concerns, I know their fears, but the way we want to use this money is to make sure that the commuters benefit from having more reliable, more frequent, less crowded buses. Certainly, the intent is not for this Government to give money to the operators in order to fatten their bottomline. Not at all.

So, as I have said earlier, the new routes, as well as augmentation to the existing routes, will start in September this year. I hear already your requests to do more, and to do so now. Again, the constraint is going to be drivers. Dr Janil Puthucheary also mentioned this concern over drivers, whether they are appropriately trained for safety and so on. So, maybe I will take a little bit of time to talk about drivers. The bus operators have been able to recruit somewhat more drivers from both Singapore and, especially Malaysia, after the increase in the remuneration package. As they are close to or have already hit the quota for drivers from China and the Ministry of Manpower is not relaxing it to support the bus sector, they have confined themselves to recruiting more Singaporeans and more Malaysians. Malaysians, I think, are more forthcoming. Singaporeans are still somewhat less so, even though the numbers have increased. But in terms of training, local drivers get nine weeks of training, the foreign drivers get a little bit more. Nine weeks, I think, is a significant time, not only to familiarise themselves with several new routes that they may have to operate but also to understand the local context a little bit better, especially so if they are foreigners – the language and nuances, a little bit of the culture, and so on.

There is always a concern over safety when there is any significant increase in new drivers and I have asked the PTOs to pay special attention to this, to make sure that we operate our bus fleet as safely as possible. Today, the standard that is set for them is no more than 0.75 accidents per 100,000 kilometres. For those of us who are driving cars, you will think that over the course of your 10 years, you may drive about 200,000 kilometres, and so over the course of the 10 years, if you exceed more than one-and-a-half accidents, you would have busted this number. So, I think it is a reasonably stringent standard that we have set for the operators and I know that certainly over the last six months that the PTC audited that they did not exceed this 0.75 accidents per 100,000 kilometres. We give you the assurance that we will continue to pay great attention to safety and to make sure that bus drivers, especially the new drivers that are brought in, know what they are required to do, namely, understand the needs of commuters, particularly of the more elderly residents, and drive with due care the buses that they operate. On that note, Mr Deputy Speaker, thank you.

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