Today, I saw shades of Mah Bow Tan in Raymond Lim, Transport Minister. Like Mah Bow Tan who introduced everyone’s favourite congestion tool ERP in the past, he holds the portfolio of Transport Minister and goes one step further. He proposes a hike in GST in exchange for free transport! Mah Bow Tan implemented ERP to combat congestion, and we all know how that turns out, despite convincing arguments by national propaganda newsheet ST.
SINGAPORE : It would take a further 1.5 percentage point hike in GST if bus and train rides were to be made completely free.
There is something seriously wrong with his arguments.
Firstly, the question posed to him was whether the government would consider subisidising public transport, not providing free transport. Fair enough, he said that the subsidies would have to come from the government budget or somewhere. But nobody said anything about free transport right? Why does he have to go all out to produce shock and awe right, the direct switch between free transport and putting the burden on you immediately? you want free transport you must pay 8.5% GST you want or don’t want? its like I go and ask my MP for the possibility of some form of subisidies and my MP threatens a hike in GST to give me free food. what’s with the veiled threat seriously?Unless he equates subisidies as free? Don’t tell me he cannot differentiate between freebies and subisidies? Is that the thinking of all PAP people, who are so touchy against any form of help and classify all help as part of a welfare state?
Secondly, SMRT and SBS make PROFITS year-in year-out. I dare say if they plough the profits back as subisidies, everyone would agree that its much fairer and more acceptable. Its really hard-sell in justifying a hike in transport citing higher costs, when the company ends up making profits. It would look as stupid as someone who increased GST, citing higher social spending, and ends up making a budget surplus immediately the next year. Oh wait, that happened. Let’s move on.
Thirdly, he claimed that the public transport fare is not directly oil prices. Sorry? I must have read wrongly. Our buses and MRT run NOT on oil. This guy is a fantastic genius. I’m pretty damn sure he doesn’t take the bus and MRT today, but that does not explain his intellect and the lack of it.
Mr Lim explained: “This is because the public transport fare is not directly linked to the oil prices. We link it to national factors, like the inflation level in Singapore, and the wage level in the whole of Singapore.”
Sorry, enlighten me please. Can anyone explain how is the wage level of Singapore linked to bus fares, and inflation too? I thought that inflation is caused by increases in costs of a basket of goods and services, in which transport fares is part of the basket? Anyway, judging by the logic, now you know why your bus and mrt fares went up this year. according to government figures, you are earning more, and they are always right. That’s why you need to pay more. Too bad for you if you didn’t earn more.
Judging by his astute grasp of financial fundamentals required of a PAP minister, I predict that he will one day become a Minister in a Ministry that is directly involved in generating more income for the government=Finance Minister/Minister of National Development.
Free public transport=YOUR GST increase(not his, but YOURS, because he doesn’t take public transport so not fair to him). Not a single word on cutting the government’s budget on defence(seriously) or other aspects of government services including his own pay. Or even channelling just 1% of Temasek Holdings’ s funds into subsidising it. Isn’t it pouring already or are we still waiting for the rainy day?
its never raining
25 Comments
December 29, 2008 at 6:29 pm
Subsidies vs Freebies. Yes they’re different, and there is a definate gap b/w the two, but I don’t see a quantum leap between them.
I see subsidy as a subset of freebie. Suppose you need to pay $5 to buy an apple. Now I subidize 20%, or $1 of your cost if you want to buy that apple. Have I not given you a $1 freebie? Now if I give you $5 if you want to buy the apple, isn’t it a $5 freebie? I don’t see the “size” of a freebie as a quantum leap. End of the day, I’m still trying to help you buy that apple.
I see it as a dumb way to make a point.
In any case, as long as we cannot agree on this “leap distance”, so to speak, it would be quite meaningless to carry on debating this particular point. It’s like a Rorschach ink blot test where I see a butterfly, and you see a tiger when looking at the same blot. We’re seeing totally different things, I acknowledge that it somewhat looks like a tiger, but I’ll still think it looks more like a butterfly. I’ll agree to disagree. =p
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Is mentioning a potential GST hike a threat then?
Alright suppose we want to offer sustainable subsidies, where should we draw the funds from? Income tax? Property tax? Corporate tax? National reserves? None of these are seem very appropiate. A logical place to draw funds from would be GST, a tax on goods and services because transport is a service.
Is that a threat then? Or a harsh reality? You view it as a threat because to you view subsidies vs freebies differently. I just see it as a harsh reality presented in a untactful manner. Again it would be quite meaningless to debate this because our definitions on key terms are different.
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A public good is non-excludable and non-rivaled. In reality there may be no such thing, but certain goods come close enough.
Non-rivaled : The usage of the good by 1 person does NOT reduce the avability of it to another person
Non-excludable : Nobody can be effectively prevented from using the good
Air is a public good. When I breathe, do I deprive you of air enough to make a difference in your breathing? Can I prevent you from breathing air? Radio stations are a public good. I don’t deprive you of listening to class 95 when I’m tuning in. I can’t prevent you from tuning in to class 95 because it’s free to air.
Transport, like food, are classified under private goods – rivaled and excludable. I reduce the availability to others when I board a bus or when I eat food. I am excluded from consuming food/transport unless I pay.
You are confusing public interest with public goods. They are fundamentally different things. It is in the public interest to make transport/food available to everyone, but that does not make it a public good. My expectations of an object does not change its nature.
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I’ve been talking about economic efficiency – a “final” state where nothing more can be achieved given the resources available – whenever I mention efficiency. In reality the final state may not be possible, but we want to work towards it.
Various economic studies have shown that privatizing state owned enterprises have consistently increased economic efficiency. Hence my stand on privatizing the transport system.
The problem with our private system today is that they have reached the point where the main infrastructure (mrt stations/rails, bus stops, roads etc.) of the transport system has already been built. The system is already fairly advanced.
The rate of improvement has peaked, and now the task at hand would be find ways to optimize the system – an extremely complex task because of the number of factors in play. A small change here could result in a minor disastor in another part of the system. Every tweak needs to be simulated and tested before it is implemented. Any improvements are gradual, and painfully slow.
This is where I say our operators got lazy (and where you said I contradicted myself) and went for the easy way out. Currently, they seem to be content at solving this complex problem slowly, and are attempting to optimize by just throwing money at it.
My main point was that our transport system would *never* have gotten as far as what it is today if it had been left to the government all along. The case for privatization is still sound.
Should return the transport system to state hands? That’s another debate on its own.
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When you bring transport under full government control, it would tend towards being tax driven. After privatization, it would be purely revenue driven because operators can no longer freely draw on tax money from the government.
Why a revenue driven model better? Because it is a self sustainable model, it need not be funded with taxpayer money. A tax driven model would mean I’m paying twice for transport, once for my fare, and another when taxed.
Example, privatizing telecommunications worked didn’t it? Prices have gone down in general; and choices, availability and services have improved since. The government isn’t using taxpayer money to fund them, but collecting corporate taxes from the 3 private operators instead. A win-win situation.
Privatizing was never an attempt to subject the transport system to free market forces, it was about increasing economic efficiency. There is a difference between the two.
The government isn’t protecting the duopoly, it’s regulating it. Again there is a huge difference. You mention that transport is an important good, that’s precisely why the government regulates it.
The reason why there aren’t any more competitors is because of the high barrier to entry of the market. A new operator wanting to enter the transport market would need to :
1) have high capital
2) have considerable expertise in transport system
3) build competing infrastructure
4) compete in a small market already saturated by the incumbent operators
None of these barriers were created by the government to discourage competition. It is the inherent nature of the industry. The returns just did not justify such a large capital outlay for most.
Is this a market failure? Possibly. Is this a case against privatization? No. Do we need to change/refine the regulations? Highly possible.
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On inflation, well you did ask “Can anyone explain how is the wage level of Singapore linked to bus fares, and inflation too?”
Correlation isn’t evidence of causation, but that never the point I was making. I was just pointing out wages, prices, and inflation are linked.
Besides, Mr Lim isn’t really wrong. It can be said oil prices did not directly cause transport prices to rise. It only caused the prices of oil derivatives like diesel and electricity (which power buses and mrts) to rise. It is weasel speak and sophistry, but logically he is correct.
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The great depression created the main backdrop for Hilter to gain power. If there was no recession, and the germans didn’t suffer prolonged inflation/unemployment, could Hitler had ever gained power? We’ll never know.
The reason I cite economic depression as possible risk towards war is because prolonged recession leads to conditions of desperation. It is the backdrop for exploitation and violence, where the worst in humans surface. A widespread depression may not cause a war, but it will create and aggravate the background circumstances that do lead to a war. Of course, wars may not happen at all. But we cannot say a widespread, prolonged and worldwide recession would not increase the chances/risk of war happening at all.
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You mention there is a price to pay for security – the US paid trillions for 2 wars and have since never been attacked – and in the same breath say defence budget cuts aren’t a risk to security. Isn’t that a contradiction? It’s like saying installing a new padlock increases security but removing 1 of your padlocks doesn’t impact the security.
Besides, there’s is no link whatsoever between the wars US fought and lack of terror attacks it has suffered since. If anything, unless you’ve wiped all the terrorist out with the war (which clearly hasn’t happened), attacking others only increases the possibilities of terror retaliation attacks on home soil.
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With the SAF as saddled with petty politicking as it is, going to change with a budget cut? Will a budget cut magically remove unneeded R&D and expenditure? No. It would take a major culture overhaul to remove SAF’s needless wastages, and I don’t see it coming anytime soon.
I fully agree with you in that we need to remove useless R&D, reduce wastage, and streamline the organization. But that is a long term project and should not be a jerk knee reaction to a recession. Cutting the budget every time a recession hits will do more harm than good. It will just increase the amount of politics within as the players scramble to reposition themselves. The last thing any army needs is instability within its own ranks.
I’m not advocating defence budget increases, I’m advocating caution in any and all defence budget cuts. The defence budget is still a magic number to the world. It is a measure of our strength in defence, or the lack of it. We still need a defence force in peace times, recession or not. Also, I don’t see where the contradiction is at all when maintaining a defence force. It’s pure reality, defence does not come free.
The entire purpose of a defence force is that it acts as a deterrence and its there when you need it. Telling the government to start getting ready only when there is confirmed evidence of hostility in the region would be naive. Telling oneself wars and unrest are a thing of the past is again naive. We always need to actively do something or change mindsets to prevent the past from repeating itself. Everything the same, the past will just happen over and over again.
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Let’s be clear here, it’s is not the role of the home team (unless you’re talking about the aftermath) to handle terrorists. The home team is trained to mitigate the impact of local disasters, provide emergency aid, perform search and rescue operations etc. Channeling more money here is good if we can afford it, but it’s not going to prevent terror attacks.
The role of the police is to handle and prevent civil crimes/disorder. Examples are armed robberies, riots, crowd control, petty crime etc.
Handling terrorism is the role of the military – to deter and defend against external threats, or threats to national security. The SQ Hijack was handled by the SoF, pirates in Singaporean waters are handled by a NDU special unit. The recent mumbai terror attacks were handled by Indian commandos from their army.
Are terrorists going to strike only when times are good? Would they not relish the chance to deal further damage during an a recession? The public confidence is governments is always lowered in bad economic times, and a successful attack would further undermine the regime.
You can say there have been no successful terror attempt on Singapore to date, but does that mean there the risk is gone? No. It will still take active prevention to deter these terror attacks.
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I sense my comment is already too long, so I’ll skip the minister pay issues. I do agree with most of your points though, just not your “bank teller” and the “greedy leaders” argument.
Just 1 last thing, in my opinion LHL taking a self declared paycut would be a smart policital move. In a country where he can already get almost anything he wants, more money would be somewhat pointless. A paycut would score points with the public, and PAP would score points after they follow suit. After the last election which showed that their popularity at an all time low, and seeing what happened to the Malayisian political system, they’ll need all the points they can get.
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Whatever the case, this will be my last comment on this post, as I find debating on a blog comment thread very tedious. Unless there’s some sort of forum for this you can suggest =p.
Nonetheless, thanks for your time, and enjoy your holidays!
– meander
December 28, 2008 at 5:45 pm
aiyoyo
is the ELITE that talking do economics or not huh??
and how the 1.5% increase can lead to free bus/mrt ride??
not sure if you know, the fare had been increase so many times (think > 1.5% each increase)
but do commoners had free bus/smrt rides??
aiyoyo
December 28, 2008 at 6:03 pm
please ask him, i do not understand either. =) that’s why he is paid so much. =(
on a sidenote, the next thing he will tell you is: GST increase is not linked to bus/mrt fares. it is linked to national factors such as inflation…….
December 28, 2008 at 6:08 am
I must say i didn’t expect a reply, and such a long one at that, because this wasn’t exactly a new post on your site.
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Firstly, about inference, I look at it in a different way. To me, free vs subsidized isn’t really that big a leap.
Free = well, free. I pay 0%
Subsidized = I pay a sum between 0% and 100%
If someone told you, the distance between A and B is 1000 meters. You need to travel to the midpoint from A, so it’s logical to infer that the you need to travel 500 meters.
In my point of view, he’s just trying to illustrate the full cost of running the transport system – which according to him is $1.2b annually. To fully pay for that without any other source of funding, it would take a 1.5% increase in GST. If you want a $0.1b subsidy, GST would have to rise 0.125%. Either way, it’s still your money.
Granted that this isn’t the best nor smartest way to put it but I hardly think he’s trying to instill fear into the public.
But you are right in that the “rainy day” has arrived, if now’s not a good time to open to coffers to help the people, it will never be. We shall see when the government announces next year’s budget.
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Transport is not a public good (in the economic sense) as it *is* excludable. You can exclude people from using it:
1) if you do not pay, you cannot use
2) you can stop people who do not pay from using it
Because it is economically inefficient to let transport remain under government control, it was left to private operators to implement the transport system while the government regulated it.
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You misunderstood me on management and public interest. Public interest is a tricky thing. I’m sure you’ll agree with me what no matter what the government does, someone will be unhappy. You can never please everyone.
If our transport system remained in government hands, it would be too easy for them to invent excuses to let things remain the same. They would follow the mantra “If it aint broken badly, don’t fix it”.
That is what I meant when I said public interest only breeds excuse for management to stay status quo. I was referring to management in GLCs.
Private operators on the other hand need to maintain profits, so in a way, you could say they care less about public interest and more about profits. And a good way to make profits is to increase efficiency.
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The problem with local transport operators as I mentioned is that I think they’ve gotten lazy. It’s a duopoly in Singapore, so there’s not much inventive to increase efficiency. Like you said, there’s not much choice for the people so why bother to transit to a better system?
As far as I know, the government only regulates prices, and not the implementation of the system. Perhaps they should start looking into that? Offhand suggestions I can give include sponsoring an independent study of our system to give operators suggestions. Force operators to improve quality on whatever metrics year on year to justify price increases etc.
I don’t see any benefit in letting the government take back control of the transport though. It would very likely become tax driven (use taxes to pay costs) instead of profit driven (use revenue to pay costs).
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As for Mr Lim’s statement on oil prices vs transport prices, I didn’t watch his video, so I cannot comment on that.
But you’re right, his statement was most probably politician speak. You can’t say outright say that it’s untrue, but you can say it’s bloody bullshit.
For a couple million a year, he can hire better writers to write and tell him what to say in his press conferences. I’m game =)
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Inflation is not caused by the prices of a basket of goods, it is merely measured by it. Inflation is the concept of rising prices. The basket of goods is used to calculate CPI, an indicator of how “serious” inflation is.
The main costs of transport are wages and fuel prices. The latter is a huge factor in recent times, but you cannot ignore the effect of wages on the transport price.
E.g. If I open a bakery and want to achieve 10 cents profit per piece of bread, I cannot ignore the wages of my bakers when setting the selling price. If baker wages rise, the bread price has to rise if I want to maintain the same margin.
At the national level,
a) if the national wage level rises, the prices of ALL goods increases as companies struggle to maintain margins
b) if the average prices of all goods increases, the national wage level will eventually rise to keep up as people demand for more wages to cope
I don’t see how wages and fare prices are not related. The wage/price spiral is so named because one causes the other, and in turn itself again in a vicious cycle.
My point is that the national wage level, general prices, and inflation prices are all linked. You’ve seen the prices of daily necessities rise as a result of inflation, why not transport prices?
Note: I’m just raising the point that wages, prices of goods and inflation are linked here, I’m *not* advocating the decision to raise transport prices.
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True, the great depression isn’t the sole cause of WWII, but historians have generally cited it as one of the many circumstances that led to WWII. The issue is whether the depression was a cause, or an aggravating factor towards WWII. Either way, it can be considered a risk (small or large?) to cut the defence budget.
The US defence budget cuts are fundamentally different in nature. They went abroad to fight a (meaningless) couple of wars that cost trillions and now their economy, along with the rest of the world is feeling the after effects. Our SAF is primarily a defence force, we’re not paying them to go invade our neighbours.
In the end I guess it’s two totally different schools of thought. Major defence budgets cuts aren’t something I would advocate though, in light of the rise in number of terror incidents around the world in recent years. The economical and infrastructural damage caused by a terrorist attack on our soil would totally devastate our small country.
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Lastly, as for the minister pay issue, I think you misunderstood me, or I didn’t make my point clearly.
I think ministers should enjoy a certain salary because of their position and responsibilities. If you pay ministers peanuts:
1) you get lucky and they serve you well
2) you get monkeys
3) you get people who serve well at the start but turn into monkeys later
Singapore being the pragmatic society that we are, need to pay a certain level to attract top talent to serve.
The cookie jar statement was merely to make the point that if you pay someone more, it is *more likely* he will stop stealing from you and start working for you.
How much “more” is subjective and up to the individual. Of course, there are always bastards who will steal from you no matter how much you pay them.
In any case, I do not endorse the millions that our ministers are getting. In fact, I would rather LHL lead the way by declaring a major paycut during these tough times. If he did so, other ministers would have to follow suit even if they were unwilling to. It would be committing political suicide otherwise.
Now, that would be the mark of a promising leader.
– meander
December 28, 2008 at 6:01 pm
let us be clear on this. there are many alternatives that he can easily quote if he really intended to answer the question on SUBSIDIES. examples include diverting some money from other sectors to pay for it, asking the transport operators to create a fair and transparent pricing system and do something about the escalating transport costs etc. to go straight to GST easily means a threat, hitting at something close to every singaporean’s heart especially his audience. and like i reiterate, a subsidy is not a freebie. there is a clear distinction on this, and he made the quantum leap without answering the question and threatened singaporeans.
if judging by what you say, everything is excludable including air. transport falls under the category of public goods because it is in public interest and national interest to NOT exclude anyone from using it. like i said, you talk about efficiency under government control, please kindly show me how more efficient is it today under private operators. the key thing about privatisation is a free market, not a monopoly or duopoly protected by the government, for the efficiency to take root as private operators fight for consumers and therefore fight to lower costs and increase efficiency. in today’s situation, how different is this from GLCs then? in my opinion, they are trying to have the cake and eat it too, and doing a good job from it. i am sure you know who owns most of the stakes in this new “private” operators.
my full apologies for not defining inflation properly. yes thats wage inflation. and yes i never said they are not linked. what i said are the causes. the cause to the increase in CPI is the increase in costs of the basket of goods in which transport is included. let us be clear on the cause and effect here. and fuel prices account for the huge majority of the operating costs, just take a look at the annual financial report. if they really pay so well such that the labour costs really mean anything to them, i doubt they will complain about having trouble finding singaporeans to work. =) perhaps they pay so well, i wouldn’t know. but to the directors? =)
the depression is not directly linked to world war 2. it created the ideal circumstances for hitler to rise to power. but hitler’s rise to power also came from many events eg reichstag fires and the night of thousand knives etc. appeasement of hitler also didn’t help.
cutting the defence budget in today’s climate is not a risk. we are spending millions in excess on R&D and wastage you wouldn’t imagine. so much for costs controls, SAF has many units that frequently break their annual budget buying useless things and not using them or wasting them, and top-ups are routinely approved. meaningless? not to many americans still.true, they are unhappy with Bush for misleading them about the iraq war but there is a price to pay for security. and since the 2 invasions, has US ever been attacked again? no. and i strongly disagree about linking the current economic climate to the 2 wars.
you are contradicting yourself once again. if SAF is a defence force, all the more we should cut down, given such a bad economic climate, unless the government can prove conclusively about impending threats from our neighbours instead of constantly harping on events that occur 60 years ago. hell, even europe is cutting down on their defence expenditures. there is no direct links that can prove that increasing the defence budget for conventional forces can prevent terrorist attacks. i’m sure you will agree that the bulk of SAF are conventional forces.
since when has SAF been actively involved in terrorism prevention other than a few units here and there? If they are serious about using SAF as something against terrorists, all the more they should streamline SAF and cut down on units and things that are not needed. and if they are really serious about preventing terrorist attacks, the money should be channelled to the HOME team instead.
absolute power corrupts. that’s why we need check and balances. =) something that is not-existing in singapore today. even if you pay the sky for ministers, without check and balances, absolute power corrupts still in the end.
i am not saying they should be starving and be on public assistance. i am saying that their wages must be comparable to their peers in 1st world countries(giving them much leeway already), not private sector. to attempt to peg public sector pay to private sector simply smacks of immense greed, and that they are of course wanting the cake and eating it too.private sector pay plus public sector stability. you will really wonder what sort of people are being attracted to join the government.
yes, and so you are saying to prevent the “more likely” stealing, we need to pay the sky? i believe there is such thing as integrity. if such is the case, those who handle money should be paid highly for it, including bank tellers. after all, to prevent them from the “more likely” stealing from the bank, and making them do the work properly(count the money), we need to pay them so much such that they will really do the job. does this sound stupid to you? if it does, there you go.
he declare a major pay-cut for himself? PLEASE. it will snow in singapore, and temasek holdings would open their books.
without any effective opposition to pose a challenge to him, he cut his own pay? that’s the kind of leaders you want isn’t it? those that will work and not think about the cookie jar. if you give me 3 million, i also too lazy to think about the cookie jar(for a while). until i realise i need an aeroplane which i cannot afford on the 3 million peanut salary, then maybe i will think about that cookie jar again.
promising leader and singapore don’t go together. greedy leaders yes.
=) appreciate your comments. its my pleasure.
December 27, 2008 at 2:24 am
“It would take a further 1.5 percentage point hike in GST if bus and train rides were to be made completely free.”
There is nothing wrong with this statement. It just needs some logical inference. He’s just trying to say “if you want subsidies on public transport, GST will have rise as a result. In the end, you’re still paying for it yourself. What’s the point?”
Whether this implied statement is true or not is debatable, but to say he doesn’t understand the difference between freebies and subsidies seems to me like you’re just plain bitching instead of trying to start any meaningful debate.
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As for public transport companies earning profits year in year out, that was inevitable once the government privatised the transport system. Imagine you’re a shareholder of our dear SMRT. Would it be acceptable to you if SMRT said to you “sorry dude, there’s no profit this year because we’re trying to help the public out here by giving out massive subsidies, bear with it for a couple of years”.
Which sane investor would invest then? Would you invest without hope of returns just for public interest?
If the transport remained in the hands of the government, I dare say we’ll be seeing a way -MORE- inefficient transport system. To see a very good example of inefficient government systems, just look at our very own SAF.
Because the government HAS to put the public interest first when they design the transport system, it will naturally be inefficient. Public interest just breeds excuses for the management to stay status quo.
However, put the transport system in the hands of profit-minded people, and they will naturally -TRY- to find the most efficient method. Because the most efficient method usually makes the most money. It’s somewhat of an irony in economics, but true.
What I think is the problem with the transport companies in Singapore is that the management isn’t trying to find and implement the most efficient method, but the easiest method aka :
1) Just raise prices to maintain profitability
2) pay lip service,
3) implement a few changes (that hardly make a difference) so no one can’t say they’re not trying.
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“This is because the public transport fare is not directly linked to the oil prices. We link it to national factors, like the inflation level in Singapore, and the wage level in the whole of Singapore.”
I think he probably means that public transport is not ONLY linked to oil prices. It’s linked to national factors like inflation and wage levels because at the end of the day, they still have to make transport prices affordable to everyone.
What is “affordable” would be another debate altogether.
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“Sorry, enlighten me please. Can anyone explain how is the wage level of Singapore linked to bus fares, and inflation too?”
As for how the wage level, bus prices and inflation is linked, it is also economics. Inflation is a “natural” occurrence in economics and one of the main causes is the “wage/price spiral”.
To give a simplistic example, lets say you work for SBS and you earn $1 per hour. You demand for a pay raise because of the rising costs of living (aka inflation), and the company finally gives in after some time. Now you earn $1.50 per hour. But SBS will pass the cost of YOUR pay raise to their passengers by raising the transport prices.
One of SBS’s passengers called Peter sees that bus prices have risen, so he asks his company XYZ for a pay raise to cope. XYZ finally relents and gives Peter a pay raise of $0.50 per hour. Now XYZ sells rice, and passes on the cost of Peter’s pay raise to -their- customers by raising the price of rice.
Now you eat rice, and you notice the price of rice has risen. You ask SBS for a pay raise to cope. SBS agrees but raises transport prices to pay for your raise …
It’s a vicious cycle that will keep going on because it is human nature. One of the ways inflation can come down is recession, where pay is cut, and companies cut staff and reduce prices to maintain competitive.
Of course there are a lot of other factors in inflation, but that’s a simple view of it.
So now that you know some economic basics, are you going to stop asking for pay raises to help curb inflation?
Hell, I know I’m not.
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It’s not a good idea to cut the defense budget during depressions. You never know what desperate neighbouring countries will do. Case in point, the great depression resulted in Hilter and WWII.
The huge downside is that we’re paying :
1) ST Kinetics to develop more useless crap,
2) SAF monkeys to WALI and engage in petty politics.
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As for minister pay, I’m of the opinion that if you pay peanuts you get monkeys. If you pay a minister crap, he’s a lot more likely to grease his palm with a LOT more of taxpayer money.
Of course you can be paid a lot, and still be corrupt, but chances are you’ll feel more guilty when you have high pay. Contrast this with the monkey-pay-minister who will think “f*** this, they don’t pay me much anyway so why not?”
We all know they think peanuts are after the NKF saga, but only the ministers know what pay is “enough” to stop them from dipping their hands into the cookie jar when no one is looking.
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Lastly, for the record, I’m not from PAP, I don’t work for the government, and I’m not affiliated to anyone in high places.
I’m just another poor computer engineer with an interest in economics.
– meander
December 27, 2008 at 2:20 pm
let me dispute all your points below.
“”It would take a further 1.5 percentage point hike in GST if bus and train rides were to be made completely free.”
There is nothing wrong with this statement. It just needs some logical inference. He’s just trying to say “if you want subsidies on public transport, GST will have rise as a result. In the end, you’re still paying for it yourself. What’s the point?”
Whether this implied statement is true or not is debatable, but to say he doesn’t understand the difference between freebies and subsidies seems to me like you’re just plain bitching instead of trying to start any meaningful debate.”
let’s be clear on what’s inference and what’s not. inference is the act of passing what is known as a true statement and extending it to another statement which truth is believed to be preceded by the former. for example, A=B and B=C therefore A=C. this is inference. I am sorry but to LEAP from subsidies to freebies is NOT inference.Please kindly enlighten me on any form of inference here. I am trying to show that he is attempting to use scare-mongering or the layman form of “slippery slope” to try to divert attention to subsidising of public transport. No one in the audience asked for free transport. and to leap from discount to free is definitely not inference. Is this meaningful enough? If he wanted to say that subsidies would lead to GST increase, JUST SAY IT. Nobody said anything about freebies. be clear on this.
“As for public transport companies earning profits year in year out, that was inevitable once the government privatised the transport system. Imagine you’re a shareholder of our dear SMRT. Would it be acceptable to you if SMRT said to you “sorry dude, there’s no profit this year because we’re trying to help the public out here by giving out massive subsidies, bear with it for a couple of years”.
Which sane investor would invest then? Would you invest without hope of returns just for public interest?”
this is the meaning of public goods, goods that has to be produced by governments because they are non-rivalled and non-excludable. You wish to make it private and exclude those that cannot afford to pay for it? Transport is a necessary good for everyone. Since it is necessary, and not right to exclude anyone from it, it should be a public good and the government has the moral obligation to produce it. And because it is a public good, ditto for your point about shareholders.
“If the transport remained in the hands of the government, I dare say we’ll be seeing a way -MORE- inefficient transport system. To see a very good example of inefficient government systems, just look at our very own SAF.
Because the government HAS to put the public interest first when they design the transport system, it will naturally be inefficient. Public interest just breeds excuses for the management to stay status quo. ”
Not if the KPIs work as they should and bonuses be paid as according to performance. I will agree with you on the SAF. Why don’t we privatise the SAF then, since you talk about inefficiency? Security right? Same for public transport. overwhelming public interest to not privatise it. I agree that profit motives are important in finding optimal efficiency. What I do not agree is that it should exist in public goods. There are ways the government can increase its efficiency even though it is in government hands, such as the proper use of rewards for management and KPIs etc. You said something about the public interest being an excuse for maintaing status quo, the taxpayers should not allow this to be an excuse in the first place.
“What I think is the problem with the transport companies in Singapore is that the management isn’t trying to find and implement the most efficient method, but the easiest method aka :
1) Just raise prices to maintain profitability
2) pay lip service,
3) implement a few changes (that hardly make a difference) so no one can’t say they’re not trying.”
totally. so much for privatising. aren’t you contradicting yourself now about your earlier points? let’s not neglect to mention about the monopoly. if they are really serious about privatising, then dismantle the monopoly and make it easier for people to get into the market. Otherwise, it is nothing than a sham for the GLCs to milk more money from the people.
“”This is because the public transport fare is not directly linked to the oil prices. We link it to national factors, like the inflation level in Singapore, and the wage level in the whole of Singapore.”
I think he probably means that public transport is not ONLY linked to oil prices. It’s linked to national factors like inflation and wage levels because at the end of the day, they still have to make transport prices affordable to everyone.”
bullshit. we all know that public transport fares is linked to costs. Die-die the fares has to cover the costs, and the costs consist mainly of? Inflation? wage levels? let me remind you that inflation is caused by a basket of goods, in which transportation is included. Not the other way round as he is trying to say i.e. fares is caused by inflation. And I am sorry. For a 2million dollars paid minister, I expect and demand better and clearer articulation of ideas. Not someone who tries to mumble and jumble up everything. If you watched the video, you will find that he doesn’t even look convinced by his own arguments.
yes they have to make it affordable to everyone, but to say it is not linked to oil is downright ludicrous. if like what you said he meant to say something else, then he is downright stupid and an embarrassment to his salary.
“”Sorry, enlighten me please. Can anyone explain how is the wage level of Singapore linked to bus fares, and inflation too?”
As for how the wage level, bus prices and inflation is linked, it is also economics. Inflation is a “natural” occurrence in economics and one of the main causes is the “wage/price spiral”.
To give a simplistic example, lets say you work for SBS and you earn $1 per hour. You demand for a pay raise because of the rising costs of living (aka inflation), and the company finally gives in after some time. Now you earn $1.50 per hour. But SBS will pass the cost of YOUR pay raise to their passengers by raising the transport prices.
One of SBS’s passengers called Peter sees that bus prices have risen, so he asks his company XYZ for a pay raise to cope. XYZ finally relents and gives Peter a pay raise of $0.50 per hour. Now XYZ sells rice, and passes on the cost of Peter’s pay raise to -their- customers by raising the price of rice.
Now you eat rice, and you notice the price of rice has risen. You ask SBS for a pay raise to cope. SBS agrees but raises transport prices to pay for your raise …
It’s a vicious cycle that will keep going on because it is human nature. One of the ways inflation can come down is recession, where pay is cut, and companies cut staff and reduce prices to maintain competitive.”
i know what is inflation. thanks. there are many factors that are linked to inflation. but let me be clear once again. inflation is caused by increases in transportation costs, along with other necessities. wage levels has no relations to transport costs, but that higher transport costs can erode wage increases. you get the relation here? A caused B. Not B caused A as he said. If he is serious about making transport affordable, then ask yourself again why is it privatised, given that private companies exist to make profits?Efficiency?we all know its far from the truth. Something has to give here. There you go, contradiction once again.
“So now that you know some economic basics, are you going to stop asking for pay raises to help curb inflation?
Hell, I know I’m not.
”
of course, whether your boss is going to agree I wouldn’t know. =)
But no harm asking if the climate is right and you feel you are worth more. =)
”
It’s not a good idea to cut the defense budget during depressions. You never know what desperate neighbouring countries will do. Case in point, the great depression resulted in Hilter and WWII.
The huge downside is that we’re paying :
1) ST Kinetics to develop more useless crap,
2) SAF monkeys to WALI and engage in petty politics.”
we should have seen an increase in wars during Great Depression then? Did we? Great Depression gave Hitler a reason to come to power as he was able to find a scrapegoat for germany’s problems at that time, by linking it to World War 1. Let’s just say that there are many other factors that allowed war to break out then. Great Depression was just one of the reasons that allowed Hitler to come to power, but it didn’t lead to war breaking out. let’s not make that leap again, as there is no co-relation.
judging by what you say, do you propose an increase in defence budget then? how are you going to justify it in such a climate? Even USA is cutting on defence budget amidst such tough times, and scaling back on major programs. If the world’s only superpower can do it IN recession time, I do not see the threat here sorry. Anyway, our neighbours are perpetually poorer than us. Does that always mean we should keep a huge army, judging by what you say, so as to prevent them from attacking?
“As for minister pay, I’m of the opinion that if you pay peanuts you get monkeys. If you pay a minister crap, he’s a lot more likely to grease his palm with a LOT more of taxpayer money.
Of course you can be paid a lot, and still be corrupt, but chances are you’ll feel more guilty when you have high pay. Contrast this with the monkey-pay-minister who will think “f*** this, they don’t pay me much anyway so why not?”
We all know they think peanuts are after the NKF saga, but only the ministers know what pay is “enough” to stop them from dipping their hands into the cookie jar when no one is looking.
”
sure, we can go on and on about peanuts and monkeys. what happens if we pay alot, and still get monkeys like such ministers? What do you say then?
I am sure you agree high pay does not necessarily get you the best men for the job.Look at Daimler, Ford and GM and other companies. Compare that to Toyota Honda etc. Governing is a different ballgame all together from private sector work. Since those ministers can earn so much outside, nobody is stopping them from it. Go ahead. A country deserves people who are passionate about serving it, not people who are passionate about the money gotten from serving it. Obama definitely didn’t want the presidency because of the “high” pay. Are you telling me the top Harvard Law grad of his year cannot earn more than 400k USD per year?
Let me tell you. greed is never enough. “We all know they think peanuts are after the NKF saga, but only the ministers know what pay is “enough” to stop them from dipping their hands into the cookie jar when no one is looking.” This statement is a major fallacy. they themselves know how much is enough? its akin to them saying know how much they need to prevent themselves from being corrupted. that’s completely ridiculous. Maybe the boss of the company knows how much is enough to prevent himself from dipping into his company’s coffers? How about that accountant there? Maybe the lawyer too? The cashier that works at NTUC? I dare say the only thing they know is that its never enough. so why should ministers be any different? Paying high amounts to prevent corruption is just bullshit. as simple as that, and no, quoting one two countries out of hundreds does not cut any ice.
thanks for putting in so much effort in attempting to argue.I appreciate it, and you have raised valid points. i will disagree with most though. =)
”
Lastly, for the record, I’m not from PAP, I don’t work for the government, and I’m not affiliated to anyone in high places.
I’m just another poor computer engineer with an interest in economics.”
what record? =) you can come from PAP, and that will not make much of a difference, if your arguments raise valid points. Unfortunately,many PAP members/supporters tend to be outright defensive and go along the routes of red herrings and dire warnings here and there to bring out their points, which is quite stupid and representative of that party, in my opinion.
December 23, 2008 at 11:47 pm
This guy the mentality is sub standard, just like Mah Bo Tan and Lim swee Say. They are in the same league. “Chao durian” $10 for 3 kind of durian. Pay him million dollar say nonsense, I would prefer to vote in opposition pay him MP salary and talk nonsense. It is cheaper, cost saving. Really many ministers collect million dollars and are non productive, useless, can’t tackle recession, can’t fight for workers rights. I wonder why 66 % of the people voted for them ??
December 24, 2008 at 2:52 am
are you one of the 66%? =)
anyway many people didn’t get to vote. so….
btw, the two opposition members in parliament are doing exactly what you said. paid MP salary, and talk nonsense. since when did they take up issues that REALLY matter? Since when have they behaved like they should, which is to put up vigorous fights and check the incumbent party?
December 23, 2008 at 11:34 pm
companies exist to make money. if you’re employed (or were ever employed), you should know that’s the bottom line – what’s this bullcrap about SBS and SMRT ploughing their profits back into subsidies about??
the ministers should take public transport as a matter of experiencing what the common people experience at least one work week in the year – it’ll give them perspective on life as a low-wage worker who has to take public transport (feeder to the mrt, mrt then another feeder…).
December 24, 2008 at 2:50 am
so phineas, you have to ask yourself why is a company providing public services now and expecting to make profits? public services are necessarily provided by the government because it does not make economic sense for companies to take them up, UNLESS there is a profit motive. When there is a profit motive, one will have to question why is there profit motive in public services. Do you expect profits to be made by supplying electricity, education, safety, national security, etc? you get the drift yea?
Secondly, SBS and SMRT wants to be private companies and make money? Fine, then let the government loosen up and liberalise the entire market. In this way, commuters are not held to ransom like now and there is real competition in the markets, allowing them to fight for market share fairly instead of being protected by the government and still expect private sector profits. basically, you cannot have your cake and eat it too, if the government cares for its people. since the government doesn’t care, they want their cake and still eat it too at the expense of its own people.
heads they win, tails you lose. =)
they take public transport? Don’t make me laugh. mandatory one work week?we all know what will easily happen. SMRT and SBS will clear or provide special services. Can you imagine a multi-million dollar minister late for work? Goodness gracious me.
December 23, 2008 at 9:30 am
Really scare-mongering at its worst…
Who has ever asked for “free” transport?
Did he even ask us? Most of us would say no – we will have a lot of free riders in the form of migrant workers and other “foreign talents”…
Subsidies go directly into helping Singaporeans – free is well, free for all…
December 23, 2008 at 9:45 am
i had the impression much of the foreign talent and workers are already free-riding in some form, given singapore’s myriad of benefits for them.
you know, actually we are getting our money’s worth for this minister. we pay him to “look ahead” and “pre-empt” possible questions. =)
in his mind, Singaporeans will progress from asking for subsidies to asking for freebies to………..asking the government to pay them to use transport?
December 22, 2008 at 10:56 pm
Actually it may be a good idea if public transport can be really free for an exchange in an increase of 1.5% in GST. The benefits: no more price hikes in future. The people that relies on public transport will really benefit. The problem: their definition of “really free” may be different from ours.
December 22, 2008 at 7:23 pm
Pray God…he’s not part of the Div 1 Team…sigh
December 22, 2008 at 10:37 pm
can’t you see he is trying to break in now? to join the elite of the elite?
December 22, 2008 at 5:22 pm
[...] details: Transport Minister gunning to be Finance Minister? « Everyday’s … [...]
December 22, 2008 at 2:54 pm
“It is the typical response of the ruling regime. Always take the extreme scenario but never address the question head on.”
Our gov do not take the EXTREME case to backup their argument, they have been using the FALLACY case for argument. This is the corrupted regime if they can even use a 100% IMPOSSIBLE example to argue and justify their policy. Remember the case of NO FOREIGNER.
Be known, this is the only gov in the world that can say such a thing in the world and still can away totally. Singaporeans are just screw by the blatant lies and distraction.
December 22, 2008 at 4:54 pm
well, they just wanted to take the opportunity to warn you.
have you ever wondered why all the agencies uses the stock ending of “we thank blah-blah-blah for giving us the chance to clarify?”, but when you look at the content of the letter it usually clarifies nothing but substantiates the point about inane replies? Mr Lim here was taking the chance to ‘clarify’ too. He wanted to tell you that you want free transport you gonna pay one way or another, and strikes fear into you by saying the magic 3 letters
ERP. GST.December 22, 2008 at 2:16 pm
That is why he can only be the second Minister for Finance for a while. Maybe the previous Finance Minister (Lee HL) did not really like the way Ray adds things up.
December 22, 2008 at 4:47 pm
He is now gunning for Minister of Finance isn’t he? Submitted credentials through the GST increase proposal already.
December 22, 2008 at 1:21 pm
It is the typical response of the ruling regime. Always take the extreme scenario but never address the question head on.
In the first place, the regime is the one who establishes the oligopolistic marketplace in public transport, allowing SMRT and SBS Transit as the only 2 players.
Public transport is a public good. The govt has already subsidised the infrastructure e.g. land for building MRT tracks and public roads. Is is not fiscally irresponsible to subsidise public transport users since the public good element is strong.
Who was the ones who said raising GST was to help the poor? And now the regime representative wants to say you have to endure another 1.5% hike to subsidise more? SMRT and SBSTransit profits are in the hundreds of millions. They are not only more than commercially viable, they are cash cows milking their respective monopolies to the maximum under a regime approved system that comes with built-in annual fare increases.
For the record, Raymond Lim was the second Minister for Finance before taking on the Transport portfolio.
December 22, 2008 at 1:15 pm
Hi, i just wonder…
Previous budget 2007 due to increase in 2% GST, there was surplus of 6B.
Thus logically speaking, every year as long as GST remains at 7%, there will be roughly a Surplus of 6B +/- since the 2% is a ADDITION and not the base. (I still hanging on to the hope tat one day GST will go back to 3% but ya i noe how ridiclous tat is.)
Thus Mr Lim mention tat annual cost is 1.2B. thus Yearly Surplus of 6B will more than cover the cost right? zzz
But hey, good pt, while i was reading tat article, i didn’t realise tat he jumped from subsidy to free.
And of coz not to mention e fact tat so far there’s no mention of reducation in other areas of budget.
December 22, 2008 at 4:52 pm
i have given up trying to reason their logic reasonably. its impossible and becomes a joke after a while.
December 22, 2008 at 11:29 am
[...] of an entrepreneur: Fare Hike Is Not Linked To Oil Price? – Everyday’s Life in a Snapshot: Transport Minister gunning to be Finance Minister? – TOC: Transport fares not linked to oil prices? [...]