Where did that ‘$100′ figure come from?

Posted on 24 December 2011

Today newspaper’s Conrad Raj’s op-ed quotes a mysterious ‘$100′ figure. Do you know where it came from?

By Belmont Lay

Where did Conrad Raj get that $100 figure from? Do you know?

The best op-ed piece of this year was published yesterday. Did you miss it?

It is titled “Time to reconsider the N-word” and it’s written by Conrad Raj, the editor-at-large for Today newspaper.

His point? The nationalisation of our public transport should be welcomed in the wake of the recent train failures and security breaches in the past two years.

Nationalisation does three things:

1. It promotes efficiency

2. It promotes cost-savings

3. It puts commuters ahead of shareholders

And nationalisation replaces SMRT and ComforDelGro with a single entity. It could be a statutory board or state corporation.

This article should be applauded for various reasons besides its frankness.

But one paragraph in his article left some readers, including me, slightly confused. And in it, lies what is perhaps a hideous error in counterfactual thinking that threatens to upend the entire thesis.

This is the paragraph:

“Each Singaporean will be able to save at least $100 a year on public transport – based just on the profits in the last financial year of the two companies, S$161 million for SMRT and $220 million for ComfortDelGro. More savings can come from greater efficiency.”

A few people I’ve spoken to, either completely didn’t get it or thought “$100″ was merely a random figure plucked out of thin air.

Perhaps due to space constraints, Conrad didn’t get to elaborate this point. Which is really a pity.

But it’s worthwhile to ferret out the logic behind it.

Here goes: (Note that this is my personal take on it. I’ve no idea if it is correct)

I believe Conrad made the assumption that there are presently 3.8 million Singapore citizens. This information is perhaps somewhat inaccurate, but a liberal assumption that helps him make his point. The 3.8 million figure can be found here.

Based on the figures Conrad quoted, the combined amount of SMRT and ComfortDelGro profits summed up to approximately $381 million last year ($161 million + $220 million).

Assuming all 3.8 million citizens take public transport: $381 million divided by 3.8 million citizens comes up to roughly $100 per citizen.

Therefore, if public transport is nationalised, which means the system doesn’t run for profit, it would, in theory, cost each citizen $100 less a year. Because this amount won’t be going to shareholders but back to everyday commuters.

So far so good?

And this is where we throw a spanner in the works.

Leaving ComfortDelGro out of this for the moment, note that SMRT profits are reaped from three aspects: Ridership, rental and advertisements.

Therefore, if public transport is indeed nationalised, which means it shouldn’t be profit-driven, can we even make the assumption that rental and advertising rates remain competitively high, or as high as what SMRT is currently pricing it to generate part of the $161 million profits that are to be construed as cost savings?

Would rental and advertisements even exist as avenues to generate revenue when public transport is nationalised, since being profit-driven is not even the main motive?

If not, would ridership alone generate enough revenue to cover its own cost?

Last but not least, am I getting this whole argument wrong and this isn’t exactly what Conrad meant and had in mind?

In light of all these questions, do re-read that befuddling paragraph from what is perhaps still the best op-ed piece published this year:

“Each Singaporean will be able to save at least $100 a year on public transport – based just on the profits in the last financial year of the two companies, S$161 million for SMRT and $220 million for ComfortDelGro. More savings can come from greater efficiency.”

There are two things we can do at this point in time:

1. Can we try to crowdsource this question to get to the correct answer?

Please?

The suspense is killing me.

2. We can leave it as it is and pretend nothing happened.

Feels like The Matrix, doesn’t it?

Editor’s note: If the Singapore Armed Forces can always be run without profit, you should never doubt that public transport can ever be run without profit either. It’s a matter of will and the imposition of structure.

This post was written by:

- who has written 554 posts on New Nation.

Belmont plays the guitar, made Jamie Yeo sing his song, shook hands with Susilo Bambang Yudhoyono, swam in the river above Bangladesh, visited Nagaland, outsmarted pickpockets in KL, was the editor of The Campus Observer and worships the writings of Nassim Taleb and Christopher Hitchens. He intends to be an astrophysicist, take up salsa and watch Led Zeppelin live at least once before offing it.

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  • Qwerty

    Previously, essential public services like the basic provision of
    water, electricity, housing, healthcare and transport were all under public domains.
    Then they were de-nationalised, opened up and sold to private companies
    in the name of free market which in one way led to the
    astronomical rise in our cost of living and in other ways to inefficiencies and deficiencies. So in the wake of the recent
    debacle, the running of our transport system should not be the only one
    but should be the first to be seriously relooked.

    Under present operating model,
    public funds are used to build our
    transport system and the Land
    Transport Authority (LTA) is responsible for owning and maintaining the
    infrastructures. It leases out the infrastructures to private companies
    and thereby partly recovers the cost of the buildings. It also benefits
    in revenue collection by imposing fines whenever problems are caused by
    train delays or malpractices like security lapses.

    SMRT and
    ComfortDelGro, both public listed companies, lease the infrastructures
    and are responsible for the maintenance of their rolling stocks. They,
    however, have
    shareholders to answer to and are therefore motivated by the need to
    produce ever-increasing profits, S$161 million for SMRT and S$220
    million for
    ComfortDelGro in the last financial year.

    In a situation like this, everyone is happy – LTA, SMRT, ConfortDelgro,
    Tumasek Holdings which has substantial stakes in both public transport
    providers, CEOs who are paid million-dollar salaries, and the shareholders. All except our commuters who are
    inconvenienced and face ever-increasing transport costs, including
    higher taxi prices.

    Next is the passing of the buck and pushing
    of blames for poor unreliable service like the recent trains failures.
    The present situation allows blames to be shifted from one organisation
    to another in terms of maintenance in infrastructures or rolling stocks.
    An attempt was even pushed to blame the
    increase in train frequencies that had left less time for the operators
    to carry
    out inspections and maintenance.

    Even the inability of certain races amongst SMRT staff to speak English
    “well enougth” was taken as blame by Ang Mo Kio GRC Member of
    Parliament, Seng Han Thong who had since apologised for his
    “regretable” mistake. And let’s not forget that the Public Transport
    Council was even blamed by netizens for approving the decision to raise
    fares. So here again under present conditions, everyone benefits except our poor commuters.

    THE
    Workers’ Party (WP) had reiterated its call made
    during the 2006 and 2011 GEs for a National Transport Corporation to
    oversee and run major transport services and proposed a transport body
    not driven by profits but operate on a cost and depreciation recovery basis. It was
    however, slammed by the People’s Action Party (PAP) during the 2011 GE
    saying that
    the WP’s proposal would lower service levels and burden taxpayers, who
    would have to subsidise the system.

    Under such present happy situations, would the Authorities consider one single entity for our transport system?