Tag Archives: SMRT

Answered: Are foreign workers exploited in Singapore?

Passport to exploitation?The question of whether or not foreign workers in Singapore suffer systemic abuses continues to attract government denials and rebuttals, but to many observers the answer has long been settled with an obvious and resounding yes. In recent years Singapore has twice been rocked by apparently disgruntled workers, firstly with the SMRT bus drivers strike, and secondly the Little India riots. The plight of SMRT’s Chinese drivers was well documented in the months after they refused to work, but as the government continues to deny such realities in the wake of last year’s riots, it seems clear that crucial lessons have not been learned. As long as such problems go ignored, denied and unresolved, relations between foreign workers and locals are likely to be volatile.

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Botched Tender? LTA performs u-turn on private bus operators

The decision to award the first City Direct private bus tender to ComfortDelGro – the parent company of existing public operator SBS transit is baffling. The original intention to use private operator capacity to augment existing public operators appears to have gone up in smoke. Was the introduction of competition to the existing government controlled duopoly operators too dangerous? Or was the tender itself simply botched up?

Original Intention

Lui Tuck Yew, then Minister for Transport, describe the tendering process thus –

“I have also asked LTA to see how we can tap on the resources of private bus operators, given that the two [Public Transport Operator]s’ resources are already very stretched”
Speech by Lui Tuck Yew, Minister for Transport, at the parliamentary debate on the population white paper. 5 Feb 2013

Josephine Teo later re-iterated this point in an oral reply in parliament –

“the move to invite private bus operators to run City Direct bus services is to tap on their existing resources to improve bus service levels. These operators may have existing buses and drivers available in between their other assignments, such as ferrying school children or workers, and it is our aim to contract them for the required bus services.”

Josephine Teo. Oral Answers to Questions. Parliament Reports. 9 July 2013.

On the face of it, this plan seems perfectly reasonable. Private bus operators with spare capacity and an interest in growing their business can be brought into the industry to address an apparent shortage of resources amongst public operators. Another obvious but unspoken change that such a move would bring is increased competition in the transport segment. The current model, where two operators – both of whom have the state as their largest shareholder – enjoy a duopoly is arguably less good at delivering value to customers than it is at delivering guaranteed profits to shareholders.

Private, Public or Parent?

In awarding the tender to ComfortDelGro, the parent company owning 75% of existing operator SBS Transit, LTA appear to have performed an abrupt u-turn. Ms Teo and Mr Lui’s stated goal of using private capacity to supplement public shortages does not appear to have been realised. While CDG does own a bus operator separate from SBS Transit, there is no meaningful independence between the two companies. With such a large shareholding, CDG enjoys almost complete control over SBS Transit – CDG’s owners control a large enough share of SBS Transit to dictate the running of the company. This is underscored by the management structure. The Chairman of SBS Transit, Lim Jit Poh, is also Chairman of CDG. SBS Transit’s deputy chairman, Kua Hong Pak, is listed as “Managing Director/Group Chief Executive Officer” in CDG’s annual report.

Rather than bringing private operators into the industry to bolster capacity, LTA appear to have achieved nothing more significant than enabling the management of CDG to work with the management of SBS Transit (who are in fact the same people) to use the resources of the former to alleviate the constraints of the latter. While the substantive difference Ms Teo and Mr Liu originally sought to draw between public and private operators is not obvious in hindsight – a bus is a bus after all – getting a parent company to assist a child company is not a game-changing achievement. One is left wondering, if the solution were this simple, why did SBS Transit and CDG not find a way to work together sooner to solve the ongoing transport crunch? Were they suitably incentivised to innovate and problem solve?

Whither Competition?

Competition is the greatest spur to innovation, and it is something that has clearly been lacking in many sectors of Singapore’s economy. Enjoying a comfortable duopoly with 54% Temasek owned SMRT in the transport segment, SBS has earned significant profits – achieving a return on equity over 10% from 2008 to 2011 – before falling to 5.5% in 2012. Were SBS complacent in the knowledge that there were no competitors existing or likely to emerge to their bus operations? Probably. Could SBS really not have found a way to increase their “stretched” capacity without waiting for LTA to award a tender to their own parent company? A parent company with the same senior managers? It seems unlikely. The suggestion that management were complacent due to a lack of competitive pressures is hard to avoid.

As it stands, the move does nothing to increase competition in the sector. The current duopoly is not threatened by a “new entrant” which is in fact closely related to an existing player. Will the man who is Chairman of both SBS and CDG allow his new operator to aggressively challenge the position of his existing player? Again, it seems unlikely – and this represents a missed opportunity. While increased competition was never explicitly mentioned as a reason for the tender to private operators, the language used caused many – not unreasonably – to assume this was an expected outcome. The government controlled Straits Times reported on expected bids from both Woodlands Transport and The Singapore School Transport Association – but made no mention that CDG might bid.

The opportunity to bring new blood into the industry, not just in terms of capacity, but new management and new ideas as well, should not have been missed. Faced with a threat to their duopoly, SBS and SMRT would have been forced to re-asses and improve their operations. Conversely, awarding the tender to a government-owned company linked to an existing PTO further entrenches the existing state-duopoly and reduces opportunities for new entrants to break into the industry. It could be that the government feared the effect of competition on the existing players – both of whom have the state as their largest shareholder – and decided to favour a bid from a related party. It is hard to know. It could also be that the government intended to bring in new players from the private market, but botched the tender by not realising that SBS’ parent company would be eligible to bid. If financial parameters were part of the selection criteria, then it is likely that CDG would have an advantage over smaller private operators – and while it could be that this is what happened, it is impossible to say for sure.

As a believer in the driving force of competition, one can only hope for a better outcome in subsequent City Direct tenders. However, only ten routes will be tendered in total and all are likely to be valuable to a new player seeking to establish themselves. For this reason, the decision to award the current tender to CDG is particularly disappointing – with any luck, subsequent routes will go to a new player with real independence from the existing government linked players.


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What is a contract worth in Singapore?

I think Singapore fancies itself as a respected and admired global player that can attract the best people and businesses. Certainly the PAP would like us to think this way – that we must attract international investment and MNCs to make up for our lack of natural resources. But to be successful this strategy depends on certain factors. Rule of law is important to international businesses, so is the enforceability of contracts. Do you think billion dollar big businesses are run on a handshake? Business agreements rely on contracts and a reliable legal system. So when I read that the striking SMRT bus drivers had apparently had their employment contracts disregarded by SMRT I was slightly surprised.

As reported by TOC and others [1][2], the drivers originally came to Singapore on employment contracts requiring a 5 day working week. This was subsequently replaced with a 6 day working week contract, for less money on a pro-rata basis, and the drivers don’t seem to have had any chance for constructive discussion on that at all. Is it fair? I know I would hate that. I doubt Teo Ser Luck or any other PAP minister can understand this point, since parliament only sits 30 days out of the year, but being required to work an extra day a week seems extremely unfair to me. It seems obvious that if the drivers had been given a fair chance to negotiate the re-writing of their contracts, a fair deal agreeable to all parties could have been worked out, and this whole mess could have been avoided. But the reality is that the drivers have been trying to engage with MOM and SMRT for months, and have been ignored for months. When going through the “proper channels” leads nowhere, and people get ignored for months on end, what do you expect to happen, really?

So we have a government controlled company that can just re-write hundreds of contracts and ignore the very legitimate complaints of their counterparty. Deaf to all criticism, that is what they would like you to think. The reality actually is that the PAP is not deaf, it is hyper sensitive to criticism, and the system depends on silencing all critics, hence deportation and imprisonment (and the ISA). But such short-sighted and heavy-handed tactics inevitably lead to blowback, which we can see already with protests in HK [3] and Human Rights Watch calling for the release of the prisoners [4]. Singapore is being shown in a terribly bad light on the global stage and it is because of the incompetence of the PAP, signalling to the world that they don’t treat people fairly.

But the real blowback will not be felt immediately. Maybe it will take a few months or even a year, or perhaps a few years, but by treating people unfairly and not honouring contracts, the government will start to squander international confidence in our country, in our system, in the Singapore model. And once that happens Singapore will be on a downward slope, because like it or not, Singapore cannot easily flourish if it is isolated – there will always be foreign companies, foreign ideas, even some foreigners with real talents, that we should try to attract to our shores. In a country where 60% of GDP is attributable to government linked companies, government mistakes and incompetence can have a hugely damaging effect on our economy, so it is all the more inexcusable for the PAP to have allowed this situation to develop.

Indeed, it is hard to comprehend the level of incompetence that could have allowed such a dangerous situation to develop. Ignored by the senior management of their government controlled employer, receiving no meaningful representation from government controlled unions, and clearly receiving no helpful support from the government’s Ministry of Manpower, it is not hard to understand why these Chinese workers ended up having no faith in Singapore’s “Tripartite Model” and decided to take matters into their own hands. Refusing to go to work is the oldest trick in the book for disgruntled staff and anyone with some sense would realise people who suffer unfairness and ill-treatment may resort to this or something similar eventually. I know some would like you to believe that the Chinese drivers should just go home, but remember (and know that SMRT knows this very well) that the Chinese drivers are surely indebted to employment agencies back home, so the prospect of just packing up and leaving would probably leave them in serious financial hardship – the workers were effectively trapped in a very difficult situation with nowhere else to turn.

And remember one more thing. The strike worked. A few ring leaders were arrested and some drivers deported, but the vast majority were let off with a simple warning, and will now be upgraded to HDB flats [5], and they will also receive a pay rise of $25, back-dated to July [6]. SMRT would like you to think that the pay rise was actually decided before the strike but I find that hard to believe, presumably because management and the government do not want to let on about the benefits that can be won by fighting.

[1] http://theonlinecitizen.com/2012/05/smrt-bus-service-drivers-blow-the-whistle/
[2] http://theonlinecitizen.com/2012/12/you-can-resign-and-go-to-sbs-the-drivers-were-told/
[3] http://www.todayonline.com/World/EDC121205-0000125/HK-trade-unionists-protest-over-Spore-bus-strike-clampdown
[4] http://www.hrw.org/news/2012/12/05/singapore-drop-charges-against-bus-strike-leaders
[5] http://entertainment.xin.msn.com/en/radio/938live/singaporenews.aspx?cp-documentid=251235356
[6] http://www.todayonline.com/Hotnews/EDC121204-0000026/No-further-pay-raise-for-China-drivers–SMRT


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