SETTING UP OF COMPETING BUS COMPANIES

Mr Goh Chee Wee asked the Minister for Communications and Minister for Labour to explain the rationale behind encouraging the setting up of competing bus companies, and whether this move is not a reversion to the status prior to the formation of Singapore Bus Service.

The Minister for Communications and Minister for Labour (Mr Ong Teng Cheong): Mr Speaker, Sir, to understand the rationale behind Government's intention to set up another bus company in competition with SBS, one has to go back a little in our history. Hon. Members will well recall that in the days prior to 1971, there were 11 independent bus companies, each operating a small fleet of buses. In fact, the largest of these, the Singapore Traction Company, had only 400 buses. This is about 15% of SBS's present fleet.

It is true they were competing against each other. But the competition led to chaotic conditions as each company scrambled for short-term advantage. Not surprisingly, the level and quality of service were deplorable. There were never enough buses. Being old and poorly maintained, they were prone to frequent breakdowns. Operations were totally fragmented. As the routes of competing bus companies were poorly planned, commuters often had to make two or three transfers even for short distances.

In short, this type of competition was neither beneficial to commuters nor did it serve any other useful purpose. It is not the soM of competition we intend to encourage now.

The only solution available to us in 1971 was the total reorganization of bus services. This, hon. Members will recall, was achieved by merging all 11 bus companies in two phases, with a single company formed in November 1973.

Having a single bus monopoly has not been without its advantages. Centralized planning has made it possible to rationalize routes on an island-wide scale to benefit the greatest number of passengers. Today, some 95% of commuters to the city area have a direct service. This is after taking into account the feeder services. Economies of scale, impossible to achieve in the 10 smaller companies, are more easily realized.

But despite its many advantages, a monopoly can become complacent and bureaucratic. This is a short step to inefficiency and inability to respond to changing circumstances. I am not implying that SBS is or will be taking this road. The point I am trying to make is that we must prevent this from happening. And there is no better way to do it than by introducing an element of competition.

In fact, around this time last year there was a spate of calls from Members of this House, from the press and the public exhorting the Government to find some checks against the possibility of SBS going slack. If I recall correctly, one or two Members even recommended a second bus company. I agree to this recommendation.

A second bus company will help ensure that SBS remains efficient; in fact, each company will act as a check on the performance and efficiency of the other. Neither will have any overall advantage in terms of mix of good and bad routes, taxes or hours of operation. Ultimately both will be judged by the public in terms of which company can provide the better, more reliable and more comfortable service.

There is no room in Singapore for two bus companies of the present size of SBS. The second bus company will therefore necessarily have to be smaller. Far from being a drawback, this will be an advantage; the efficiency and operating style characteristic of a smaller company, such as short chains of command and easier control, will be pitted against the advantages normally possessed by a larger company such as more sophisticated planning, economies of scale, and so on. These differences can only enhance competition and efficiency.

Let me also allay whatever fears hon. Members may have that competition between the two bus companies will mean a reversion to the turmoil that existed before the formation of SBS. The circumstances in 1971 were different. Merging the 11 bus companies was then necessary to prevent a total collapse. Over the years SBS has been consolidated and is today, I am happy to say, in good health. My concern is that it should remain that way and I believe some competition will help ensure that.

The competition will not, however, be a free-for-all. The second bus company will not be allowed to grab whatever routes it likes. It will run a reasonable mix of good and poor routes and be responsible for taking care of the public transport needs of a distinct corridor or a New Town. This will also avoid wasteful duplication. When allocating routes, we will take care to ensure that it does not result in commuters having to make too many transfers.

Competition will then largely be by comparison of performance. At the same time, however, there will be some on-the-road competition, where for example the routes overlap.

Finally, we must strike a sensible balance between our objective of introducing competition and the number of bus companies that we should have. My Ministry's view is that one or at most two competitors to SBS would suffice, Any more will be disruptive to operations, and will make planning and coordination difficult. There is also the additional expense and trouble that commuters will have to bear because of more transfers.

Mr Goh Chee Wee (Boon Lay): Sir, in view of the competition and possible improvement in efficiency, may I ask the Minister whether commuters and the general public would benefit by way of a possible lowering of bus fares, and would the competing bus companies be given a free hand to charge lower fares if they wish to?

Mr Ong Teng Cheong: Sir, the first question raised by the Member is the possibility of lower bus fares through competition. As I have mentioned earlier, to allow competition is to ensure that SBS will remain efficient, and whether this will lead to a lowering of bus fares I cannot tell the Member at this stage. But it will mean that future upward revision of bus fares will not be unnecessarily too frequent or by too wide a margin.

As to his second question, the answer is yes, to a certain extent. We will not insist on a second bus company charging the same fares as SBS but the fares will have to be cleared with the Ministry.