Wednesday, May 09, 2007

Crutch Mentality Of Public Transport



Latest: One supporter has made a podcast out of this article. All thanks to him/her! ;)

PAP government has taken every fine measures to prevent "crutch mentality" from developing among our citizens. Any tiny suggestion of "welfarism" is considered as a big taboo.

However, we have been witnessing public transport companies raising fares every now and then and this is done with the blessings of the government. Ever since public transport companies are being "privatized", the reasoning is always the same; these companies must make money. It seems to me that only transport companies are "blessed" in such a way that a profit will be guaranteed no matter what. Of course, the easiest way for a public transport company to make money is to raise fares. If cost went up, raise fare to cover the short fall. Never mind if the companies themselves lack efficiency or lack creativity in making money from other means.

I have put up an article on fare hike before and here again, I am going to show why we should not let transport companies to persistently ask for fare increases.

The two most important aspects of a public transport companies are:

1) Serving the masses
2) Provide convenience

These are the responsibilities as well as the means that the companies could make money from. However, if a public transport company only think of making money out of charging fare alone, then it will fail miserably. It should learn about what "cross subsidies" can do to boost bottom line.

If a public transport company only thinks about making money out of charging fare, then it will inevitably end up in a vicious cycle of losing commuters and thus ridership, forced to increase fare. There is nothing mysterious about this. One way to make more profit is to squeeze cost. This means that to increase the number of trips a commuter needs to take, reduce competition, reduce frequency of services, increase fare....etc.

This is partly why we end up with an interesting situation here whereby the cost of car is so expensive but yet, Singaporeans are still prefer to have a car of their own. This is basically because public transport has become so inconvenience and unbearable.

I have learnt from the HK public transport model that the main profit is generated from sources other than the fare itself. Due to the competitive environment, bus companies in HK have to provide efficient system of bus services. This would mean an increase in costing but they could cross subsidize it by having more advertising income. If you look at our buses on the road or the trains, you will realize that advertising space is not fully utilized.

If you walk into the HK's MTR station, you will realize that every space possible for advertisement will not be left empty. Every space available for shops that provide convenience is not spared. The trains will have digital board running with news updates and advertisement. Every MTR stations or bus terminals are linked closely with some residential flats. The newer MTR stations are built together with shopping malls as well as residential flats on top or just linked next door. Some projects are done by the train company in cooperation with other property developers. It means that train stations are integrated with residential projects to provide maximum convenience. In return, the train company earn a cut from development as well as property maintenance. By doing so, it will retain higher ridership and in the end, higher profits from advertisement.

Have you seen any MRT station in Singapore which is integrated with residential projects? Could you find a shopping mall with residential flats on top standing next right to a MRT station? There are residential flats with as many as 20 flats of 30 storey high sitting next to a MTR station in HK! This is one of the fundamental reason why Hong Kongers prefer to take public transport instead of driving their own cars. And by doing so, the train company get to hold on to a strong demand of commuters by virtue of convenience. On the other hand, by virtue of the massive commuters it has, it could command a good return from advertising because its effective and efficient in reaching out to consumers.

If we look at the design of our town planning, it seems that most people need to take feeder bus service before they could reach a train station or the bus terminal. It not only inconvenience commuters but also added cost to them. In the long run, with such time consuming, costly as well as inconvenient system, people who could afford a car will give up on public transport.

In Singapore, it is a total dismay in such strategic thinking. When the development of Ang Mo Kio Hub was given to Singapore Labour Foundation, it was first planned to have residential cum office on top. However, for some reasons, the idea was scrapped. Now, if the project is given to either MRT or SBS Transit, the outcome would be very different. These transport companies could earn rents from the shopping mall as well as the offices, at the same time, earn from the sales of those residential flats on top. Why not? But no. No shopping mall projects or condominium projects near any MRT stations or bus terminals were given to the transport companies! Why is the case?

If the transport companies were given priority in developing the shopping malls and condominium or residential projects surrounding it, it could better incorporate linkages to these projects. Furthermore, it would rationalize according to its priorities and business model. Alternatively, city planning in Singapore towns must be revamped. It means that land near the transportation nodal points must be marked out as residential cum shopping malls. The overall strategic thinking of both the transport providers and city planners must change in Singapore.

I would say that local public transport companies should be more aggressive and creative in making money instead of waiting for the approval of fare hikes. Instead of strengthening their means to create value, they have been diminishing their value in the name of "cost cutting". Frequency of their services have been lowered. In the long run, ridership will fall. If we aim to accommodate 6.5 million people, how can this go on like this?

The demand of regular fare hike is a crutch mentality in the making. There are really many other ways that public transport companies in Singapore could make profits, not just from fare but from their strength in convenience and the masses they command. If we continue to allow other GLCs or SLF to develop prime areas in towns instead of the transport companies, how could there possibly be full utilization of resources and cross subsidies to public transportation companies?

In comparison, our public transport companies have not fully capitalize on advertising revenue as compared to their Hong Kong counterparts. Instead they have put more time in thinking of ways to maximize profits by means of creating more demand on services via re-routing and feeder bus services. However, this inconvenience commuters and will result in loss of ridership in the long run.

While our government always self proclaim to be "World Class" that command "World Top Salaries", I think they should do better than increasing public transport fare hikes every now and then. It is time to evaluate efficiencies of public transport companies in terms of generating other revenues rather than over depending on revenues from fares alone. Most importantly, stop the crutch mentality of public transport companies depending on increasing fare hikes to increase profits. Please think out of the box!

Goh Meng Seng

12 comments:

Anonymous said...

Very well articulated, Mr Goh

Good analysis..Pity the govt wont listen or implement

Anonymous said...

http://talkr.com/audio/s/i/n/g/1224052.mp3

Anonymous said...

Yeah, GMS is good at twisting his words in petty squabbles with the opposite sex, but when it comes to challenging the PAP, he is at a loss of words! Shame on you, fatty!!!!

Anonymous said...

the way i see it, from my point of view..

the common people are just complaining and complaining and complaining.. why not do something about it?

sure protest is ban in here but what about creating awareness to people about the disadvantages of an increased transport fare?

we can do this if the people are united as one. but no.. the people only listens to PAP..

my point: the people will forever be nodding to whatever the government said or suggests or implement.

what's the difference?

anyway, i respect you for this entry. i could almost feel the anger in your soul while readin it..


peace & unity,
singaporean who's a DIY silent activist, not politically but socially.

Leo said...

Alternative sources of revenue is not a new idea. The problem it seems is whether there is a market for advertisers and retail stores. On this point the experience seems to be mixed - success in some areas, and poor to depressing in others. The retail space at Dhoby Ghaut Station is an example. Other stations in the less populated area are understandably poorer retail prospects. Rental is a great idea. But it's not guaranteed. I would have thought Dhoby Ghaut was a sure thing.

As for advertisement, the video screens on the platform is an indication of poor take up. Hell is being stuck in an MRT station waiting for the next train which is 5 minutes away, and there is only ONE advertisement alternating with the train information every 15 seconds on the video screens!

But yes, Hong Kong is the right model to follow. It has the critical mass, that allows for retail, advertising and residential linkages to work.

But here are some differences to consider.

1) The population of Hong Kong is almost 7 million people compared to Singapore's 4 m. So before ridership goes up (and makes up for more fare revenue, and makes advertising more attractive to advertiser who can reach out to more people), Singapore's population needs to reach that same critical mass. 6.5m has been mentioned.

2) HK has an area that 50% larger (1000 sq km vs the less than 700 sq km of Singapore), but less than 2000km of roads. Singapore has about 3200 km or 60% more roads.

What this means is that the problem is not just simply the MRT and how inefficiently it is run. The pull factor that keeps people on the road is that there is so much of road. Despite the complaints about the cost (and inconvenience!) of driving, people still choose to do so because Singapore roads are still more convenient than public transit. A few weeks back there was even an article that wondered if there were too many parking lots in Orchard Road which keeps parking charges down and encourages people to drive into the city.

So there may be a push factor for people to use the MTR more than driving.

3) MTR has a daily ridership of 2.6m (Jan 2007). MRT only has 1.4m (as at 2005, no recent figures). While MTR has a higher ridership, if you take the larger population into consideration, ridership as a percentage of total population, the two systems are comparable in their reach.

4) And finally, HK MTR is not cheaper. Fares range from HK$4 to HK$26. At current exchange rate that is about S$0.80 to S$5.20. Singapore's MRT max fare is less than S$2.

But that aside, the HK MTR is pretty impressive and Singapore can learn some things from it. But not in fare pricing.

Goh Meng Seng said...

Dear Leo,

Very good views you have here. My take is this:

1) It is no mystery that transport companies could increase their profit by advertising. Comfort Delgro's financial report last year has demonstrated that there is great potential in this area. However, it is a matter a focus.

2) You may think Dhoby Ghaut MRT shopping is a sure thing, but it flops. What's the problem? It boils down to the design.

3) Granted that there is a difference of 3 million population between HK & Singapore but HK's public transport system also evolves over time; from the time of less populated to now. The truth is, over the decades, they have tried every means to increase ridership by building residential flats just next to any MTR stations. Even as we speak right now, there are still projects in process.

4) In short, we should not just give the excuse that our population has not met 6.5 million therefore our public transport could not get enough ridership. I think that's lame. What we see right now, after two decades, there is no sign of strategic development in integrating residential cum commercial projects along with MTR stations. Some MRT stations are "closed" down basically because they are waiting for more residential flats to be built nearby!

5) While Singapore has more roads but our roads are "priced" by ERP. HK did not price their roads despite having less roads. Ultimately, the truth lies somewhere in between; the real cost plus opportunity cost to road users.

6) I think you are mistaken about HK's fare. The cheapest fare of HK MTR is HK$3.5 which is S$0.80. The highest fare for the MTR system (without taking consideration the new train system in new terroritory) is about HK$12.00 which is about S$2.40. But this is taken into consideration of the toll fees that each has to pay for using the undersea tunnel. If travel mainly on Kowloon and not across to HK island, the fare normally will not exceed HK$10 aka S$2.

My point is simple, yes, you are right, there are many push factors for people to take either public transport or private cars. In Singapore's case, I would say that the inconvenience of the public transport is one main reason for people to switch to private cars.

If public transport companies could get extra income by developing residential cum commercial complex next to its stations or terminals (transportation nodal points) and at the same time increase its ridership, why isn't them doing it now? If not now, when?

Goh Meng Seng

Anonymous said...

Hey fat ass, why not you stay in HK for good? Do you still have the face to stay in Singapore after your disgraceful online behavior has been exposed in public? Shame on you!

Leo said...

Dear Mr Goh,

Please check this website:
http://www.mtr.com.hk/eng/train/intro.html

The cheapest fare is HK$3.80 not $3.50 as you claimed. (I rounded up to HK$4). But I was wrong about the maximum fare.

If you travel from the Airport to Hong Kong, the fare is HK$100. Yes, it is the airport express service, so there is a premium. But for S$20, I could take a cab from Changi airport and reach the city.

There are also premium fares for the Disneyland line. Most of the fares are over HK$15 and about half are over HK$20. Again. Premium line?

And you excuse the higher fares to HK Island because of toll for the underwater tunnel? Is this some scenic glass-tunnel that the commuters will enjoy the underwater view? Because our MRT goes under the Singapore River and there's no extra charge.

The long and short of it is that yes, you are correct - most fares would be less than HK$12 or S$2.40. This is just a little more expensive than Singapore. But the MTR fare pricing is more complex than Singapore's MRT. That is an improvement?

And with such complex fare pricing (with "premium" fares for some lines), I would question your assertion that they rely less on fares for revenue. It seems to me that they rely more (S$20 for a train ride anyone?). Why does the Disney line have to charge up to HK$26? Does that include admission into the park? Definitely not.

As for roads, my point was that Singapore has more roads so that actually encourage drivers to stay on the roads rather than take public transit because of the convenience of driving. ERP should make it more expensive to drive but that has not deterred drivers. Dragging in ERP (which raises the cost of driving) actually supports my point that the convenience of driving far outweigh the costs!

I'm not sure if you know what you are arguing for, or are you just tossing out "ERP" because that's a sore point for drivers?

You did not provide any real response to the Dhoby Ghaut example. "Bad Design" explains nothing. You might as well have said "Bad Feng Shui".

The point of my raising Dhoby Ghaut was that the retail strategy works in some and it doesn't work in other cases. I'm saying I do not know why that is so. You seem to imply that you do. Share your theory. "Bad design"? How is it bad and what would make it good? How is it bad compared to City Hall, or Orchard.

The rest of your responses miss my point completely. You want advertising, you must be able to tell the advertisers that you can reach people. HK MTR can reach 2.6m riders a day compared to 1.4m by S'pore's MRT. As a percentage of total population, Singapore actually attracts about the same percentage - 35%. BUT advertisers are attracted not by percentages but by sheer numbers. And that can only increase when Singapore's population increases.

The alternatives, if as you say we need to focus on raising ridership at any costs, is to close down roads (about 1,200km of them), and or raise ERP to force drivers to take MRT. In other words we want 60% of the population or 2.4m people riding the MRT each day.

Oh and we should close down some bus services to channel people who would otherwise have ridden on a bus to take the MRT.

Of course, your proposal to build more flats over MRT stations may work too, but that will take about 18 mths to 2 yrs for the flats to be built.

Raising ERP, closing roads and cancelling bus services would be a lot easier and faster.

All this so that ridership goes up, MRT can make more money from advertising and they don't have to raise fares, right?

I don't know about you, but I think it's pretty drastic. And if you ask people who squeeze onto the trains every morning, the trains are crowded enough as it is.

But your suggestion actually got me thinking. Are there actually fewer car owners living around MRT stations? Do people who live near MRT stations choose not to buy a car or drive to work each morning? Can condo developments next to MRT stations save on space by providing fewer parking lots? I do not get a sense that this is happening, but then again, I have not really looked.

Something to pay attention to...

Goh Meng Seng said...

Dear Leo,

Thank you for taking time in writing this lengthy comment here. I really appreciated it.

1) Yes, my mistake, the lowest fare is HK$3.80 instead of HK$3.50. My apologies.

2) The distance to Changi Airport is very different from distance to the HK airport.

3) Besides, there are toll fees to be paid. Maybe I should elaborate on the toll fees. There are a few tolls for tunnels and bridges in HK. These are administrated by private companies which have invested in building the infrastructure like the underground sea tunnels or on behalf of the govt to provide maintenance to the infrastructures. Vehicles, including trains, that uses the infrastructure will have to pay toll.

2) Disney and the Airport are situated in Lantua Island which is connected by the Tin Ma bridge which impose a toll fee.

3) You would find that bus services that crosses the sea will be more expensive basically because of the toll fees also.

4) There are two ways of looking at the issue of car ownership:

a) People want to drive cars even with ERP because there are more roads.

b) It is basically because the inconvenience impose by our public transportation system that citizens find driving cars important to their livelihood even with ERPs.

5) The converse is true. Hong Kongers may find it more efficient to take public transport because it is very efficient and truly world class, partly also due to the jams and inconvenience of finding a parking space for their cars.

6) I think you miss my point too. Before you could tell advertisers that you could reach to a wide network of commuters, the public transport companies must be able to ensure that ridership is secured. It could do it by two ways:

a) develop as many residential cum commercial projects next to the transport nodal points so convenience will dictate ridership

b) Improve efficiency of their transport models...eg don't cut on frequencies to "save cost".

7) You want to know why Douby Ghaut fails? Where are the residential flats? Where are the office towers on top of it? If they could build a residential condo or office towers on top of their MRT stations, they will be more successful than Takashimayah! That's why Taka is successful despite the fact that it does not have a MRT station right below it; it capitalizes on it instead by making linkages to the Orchard MRT station. So, is this design problem or not?

8) Your suggestion of increasing ridership by closing down roads is too drastic and impractical. What you need is just to increase convenience to potential clients by building flats along with commercial buildings next to MRT or bus terminals.

9) You feel that the train is crowded. There are two problems here:

a) Again this is a design problem. HK trains have 8 cabins while ours only 6. So you want to have the same population as HK? ;)

b) the frequency of the trains here sucks. ;)

Having cars or not is not the issue. It is whether you would use your cars if the MRT station is next your flat. If the frequency thus efficiency of the train system is improved, the more you would feel that your car is redundant.

Goh Meng Seng

Leo said...

Dear Mr Goh,

Let me just summarise my views on this. That HK MTR is impressive and has lessons for us is without doubt.

That said, what I think is simplistic is to assume that the answer to future MRT fare increase is just simply to imitate the HK experience on just two points: 1) build residences above MRT stations in order to raise ridership so as to 2) attract more advertising as a alternative source of income for the MRT operators.

Our previous comments show that there are clearly differences not just in the way the MTR and MRT are run, but also the context of the two societies (population), geography (the size and layout, land and terrain), infrastructure (roads), traffic management (ERP for Singapore, tunnel tolls for HK) and competition for passengers (buses and we have not even mentioned taxi fares - HK is more expensive).

In other words, the issue is complex, but you propose a simple solution that ignores the contribution of all these other factors.

Take Dhoby Ghaut. I don't even know what is the point you are trying to make any more.

First in your main article, you say "no shopping mall projects... were given to transport companies." Dhoby Ghaut Xchange is a retail space run by the MRT and it is failing. I say I don't know why.

You say it is design. Now you ignore the fact that it *does* have a retail section that is doing badly and instead harp on the fact that there are no residences atop the station. Then you compare it to takashimaya and say what a success it is compared to Dhoby Ghaut because the shopping centre links itself to the Orchard station.

When did the issue become whether shopping centres are successful because of links to MRT stations? If that is somehow the issue (tho I fail to see your point), then isn't the fact that Plaza Singapura linked to Dhoby Ghaut and very successful relevant?

I would say that the fact the Plaza Sing is doing fine and Dhoby Ghaut Xchange is not would seem to suggest that MRT operators should focus on their core functions and competencies.

Then in your last reply, you say, "its whether you would use your car if the MRT station is next to your flat." In other words, you agree that just building flats above MRT station is no guarantee that people will use MRT more!

Then why suggest that as a solution?

Yes, it's good to think out of the box. But the box is there for a reason too.

Goh Meng Seng said...

Dear Leo,

First of all, I think this simple solution applies to whatever different context of different cities: i.e. every human beings like to have convenience to meet their transportation needs.

The fact that in Singapore, it is really lacking demonstrate the inability of the market to strategize their planning according to consumers' needs.

I think you have misread my point here. In fact, I do not agree to have merely shopping centres built next to MRT stations or bus terminals. What I am suggesting is to build a mix of both commercial as well as residential flats. The fact is that there is always great demand of flats situated next to subway stations or bus terminals, regardless of where you are on Earth. And yes, it applies here in Singapore too. There is nothing so different in Singapore on this one.

And the truth is, transport companies could make more profits by engaging in these projects. It is justifiable as the "spill over value" of their presence in the locality created premiums for such projects. Thus, why shouldn't the transport companies capitalize on such premiums created by themselves instead of letting other GLCs having a cut in these?

Back to the point about Plaza Singapura vs DG. The fact is that Plaza Singapura is not merely a shopping centre. It consists of offices above as well. What about DG? ;)

The point is simple, if you take a closer look at shopping malls even along Orchard road, there are very different fortunes for different buildings. You will find that those which are exceptionally successful consist of three things: MRT station, shopping mall plus offices or residential flats.

Even the difference of a several hundred meters make a difference. This is a fact of human behavior, regardless of which city you stay in.

Goh Meng Seng

Anonymous said...

Dear Leo,

Why did you bother to debate with GMS in the first place? He is a well-known NATO in sammyboy forum, talk cock good only, but ask him to do something concrete, he will MIA.

Please don't place false hopes on this useless fatty. He will soon be sacked from NSP for disgracing its party (again) in internet forums.