Fare (and other) hikes
add to gloom
Wages, rents, consumption down, unemployment up, so why are monopolistic public transport fares being raised? By Seah Chiang Nee
June 28, 2002

STILL trapped in economic hardship and record unemployment, Singaporeans are being hit with another whammy – higher parking fees, public transport fares and probably a lot more.

In line for imminent increases are local telephone rates and electronic-assessed road usage.

Then on Dec 1, the Goods and Services Tax (GST) will go up from 3 percent to 5 percent, and this will give a bigger headache to hard-pressed Singaporeans.

These increases will affect every home or business in Singapore, exerting an upward pressure on other prices.

Last week, mass transit, light rail and bus operators were permitted by the government, which owns 62 percent of the operating company Singapore MRT, to increase fares by 3 to 5 cents per trip with effect from July 1. Some trips will increase by up to 10 cents.

A high 87 percent of Singaporeans who rely on public transport, given the high costs of operating a car, reacted with predictable anger.

(Damage control centres on an explanation that it is better to raise fares a bit at a time rather than by a big amount in a longer period.)

That became worse recently when the authorities made parking in housing board estates more expensive.

And soon road usage will cost more when the Electronic Road Pricing system pushes its charges higher.

Now comes another piece of bad news. Singtel looks set to receive the official nod to raise local phone rates by, according to unconfirmed reports, as much as 50 percent.

Southeast Asia’s biggest “telco” (67.5 percent government-owned) is going through a bad patch.

Run by Lee Hsien Yang, youngest son of Senior Minister Lee Kuan Yew, Singtel recently reported a 19 percent decline in net profits for the year to March 31. Its shares have fallen to an all-time low of about S$1.40.

Further depressing Singaporeans was the downgrading of its credit rating by Moody’s Investor Services following its S$14bil purchase of Australian telco, Optus.

For the 2002 fiscal year, the company went from a net cash position of S$3.1bil to a net debt of S$9.89bil.

“Based on its current financial structure, it will be very difficult for it to reduce its debt significantly,” said a Singaporean analyst.

Raising local phone rates is bound to provoke another round of public criticism. Singaporean phone-users will see it as an effort to make them pay to finance Singtel’s adventures abroad.

All these increases couldn’t have come at a worse time.

During the past couple of years, workers had been caught in the grip of an economic crisis, with spending power reduced through wage freezes and, in many cases, pay cuts.

Bankruptcies and unemployment are up, sales are down and with property and share prices in the doldrums, there is much to cry over even without a higher cost of living.

Understandably, they have raised a great deal of public bitterness. To begin with, it is highly unusual to see such hikes in times of poor consumer demand, reduced wages, rents and generally lower business costs.

In such conditions, company executives are normally reluctant to increase prices but Singapore MRT Ltd is a 73 percent government-owned monopoly.

Last year its net profits fell from S$102.8mil to S$56.8mil due to mainly higher investment and other costs.

Officials often say that Singaporeans would have to pay if they want to enjoy a world-class transport system. Commuters, however, feel they are being made to pay for fanciful luxury investments that they neither need nor ask for in times of recession.

Bus and train operators recently installed a S$100mil e-zine cash card system similar to what Malaysians use. These operations have installed computer screens that provide information on arrival times of all trains or buses.

Meanwhile, buses recently installed television sets to entertain commuters and the bus interchange at Toa Payoh (monthly electric bill: S$30,000) has been air-conditioned.

Feeling victimised, some commuters are calling for a freeing of the public transport monopoly to allow other players into the arena to compete..

There’s little chance of that happening soon. It was not long ago that the two bus companies and the mass transit firm had merged into one big corporation.

It has defended its price hike, the second since June 2000, saying it has done its best to control costs. But many Singaporeans disagree, saying these companies are not losing money but merely making lower profits.

The whole thing has highlighted once again the government’s powerful hand in business.

“The profit of this monopoly is lower, expectedly so because there’s a recession,” said a business management undergraduate.

“Why can’t a government-linked company take a knock during a downturn like everybody else without being helped by a price hike?”

In an online forum, “Legionaire” said: “Bad move. This one really alienates most Singaporeans. The hikes will compound the plight of an already demoralised populace.”

“Kucheech,” another forum participant, simply said: “Are our voices really heard? I have no mouth and I must scream!”

But there are a few who moderated the debate.

“Be fair to them. It's just a few dollars a month. The operators applied for more but the government approved only a small amount,” declared one of them.

The intensity of the opposition was realised at the beginning by strong labour movement National Trades Union Congress (NTUC) that said the timing was not right.

The Consumers Association of Singapore (CASE) also opposed the move because of the weak economic environment.

“Although there are signs the economy is picking up, unemployment still remains high and the unemployed workers continue to face grim prospects,” it said.

The biggest problem is the trend of declining passengers in public transport.

Buses and the mass rapid transit have been losing passengers by 1 percent or 2 percent a year, which implies that fares at least will rise every two years. Bus passengers fell by 3 percent last year.

The rise in public transport, and eventually in telephone charges, will exert pressure on the cost of almost everything else – except in wages. The job market is still weak.

It will also raise the cost of doing business in Singapore, something the government is working hard to cut down. (

This article was first published in The Star, Malaysia on June 23, 2002)