Here's some points I've come up with.
1) Usually, shareholders will be the investors who put in money to fuel innovation and quality so as to be able to charge higher prices. Example a pharmaceutical company will invest money from shareholders to do research so that the company can come out with one good patented product and make super normal profits.
2) For LTA to allow public transport prices to increase without seeing an increase in quality of transport services, is akin to a restaurant serving poor food but increasing prices first saying that they need money to buy better raw ingredients. The problem is that for restaurants, we can choose to eat at other places.
3) SMRT is a monopoly. There isn't much choice in this. You can't say you have options. The alternatives are much more inconvenient. I can choose not to take MRT but I'll take forever to get to work by bus.
(Having an alternative is being able to choose what to eat in a food court. Alternative is taking PIE vs ECP, Singtel vs Starhub. Where the opportunity cost of taking the alternative is low enough so that I am able to switch.)
So I'm forced to take MRT with worsening service but higher prices as this is the most efficient method. This constitutes to a semi-monopoly since they can't raise fares on a whim. If there are other train services/more private bus services, I would take them. But licenses are not cheap and it's hard for private transport to make a profit. I don't mind paying more for private bus services that travel from my home to work. However, these currently do not exist in my area.
4) SMRT was privatized with the intention to allow the free market to make it more efficient. For better competition and efficiency so that shareholders will hold the management accountable for poor profits and service standards. By allowing price increases without being able to maintain the same service standards, goes against this objective to make management accountable to shareholders of these companies as they can increase their fares without better service. Furthermore, these companies have increased ridership with the increase in population of Singapore. This should increase the profits of the companies already as there is more demand for the products.
5) By increasing the fares unjustly will signal that the LTA is willing to overlook the inefficiencies of SMRT. This is akin to rewarding poor behaviour. If I was the management of SMRT, I could potentially put less emphasis on increasing services standards as I now know that LTA will increase the fare hikes. Also by increasing fares, what is the use of fining SMRT for the breakdowns? The cost will just be passed on to the consumer.
6) If LTA had the intention of raising service standards of SMRT and decreasing breakdown times, they should show clear indicators to SMRT that such service will not be tolerated and disallow the increase in fares. Then the intention of point 4 will kick in, when shareholders pressure the management to be more productive and improve services standards as their inefficiencies are eating into their profits and also preventing them from raising fares to maintain/generate more profits.
Thus, when I put the above points together, it appears that the actions of the LTA to allow increases in prices without corresponding increases in services standards goes against the original intent of allowing the free market/shareholders to maintain efficiency and competitiveness has failed and that the actions of the LTA appears to work against the interests of the citizens to ensure and create the right incentives for the public transport companies to run efficiently and provide good service quality to the citizens of Singapore.
The 3% fare increase does not impact me much. It may impact other Singaporeans more. However, my post is not to address this. This post is to highlight that the actions by LTA makes no business/market sense as it does not send a clear and appropriate signal to SMRT to encourage better behaviour.
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