ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR - 1ST APRIL, 1993 TO 31ST MARCH, 1994
Sir, first of all, let me take the points that have been raised by Mr Heng and Mr Lew about the deregulation of the taxi industry. At this point, I think it is opportune for me to reiterate my Ministry's position on taxi services. Taxis have a place in our public transport system. However, they are not like buses or MRT which carry lots of people, using minimum resources, minimum road space and minimum manpower. That is why we regard buses and MRT as the backbone of our public transport system. On the other hand, taxis provide a personalised door-to-door transport service which is similar to that of a chauffeured limousine. They are more comfortable and more exclusive and, therefore, more expensive. Before the diesel tax increase, taxis paid substantially lower taxes than private cars. For example, the ARF and the import duty for taxis at that time was 50% of the open market value (OMV), whereas for private cars it was 220%. So if you translate this into actual cost of the vehicle, a typical taxi, which is about 2 litres, would cost approximately $60,000 today. Whereas a similar private car would cost about $110,000. Under these circumstances, the ROV had to ensure that taxi licences were regulated, simply because we did not want taxis to proliferate and to end up as cheap substitutes for cars. If you can buy a taxi for $60,000, why not? The Public Transport Council (PTC) had to regulate taxi fares to ensure that the savings in taxes were translated into lower fares for taxi commuters. In 1989, we increased the diesel tax for taxis to equalise the total taxes paid by taxis and private cars. There was no reason why the taxes should be different because, after all, both of them use more or less the same road space, create more or less the same congestion. Today, after that increase, the taxes paid are now roughly equal. Since that time, ROV has been more liberal with the issue of taxi licences. Today, we have roughly about 13,000 taxis running on the roads, but ROV tells me that they have issued something like 20,000 licences. So the question that we now ask ourselves is: Should we further liberalise the issue of taxi licences and allow more companies to run taxis? Having more companies providing a taxi service can inject greater competition into the business. It can spur the operators to become more efficient and it can also be the best regulator of taxi fares. I believe we should deregulate, allow more taxi companies to operate. But I would like to add that it is not our intention to let anyone enter this business. I understand the fears of taxi commuters that without some form of control on companies, some minimum standards, we will see a deterioration of service standards. So if we were to deregulate and allow more companies to operate, we should set pre-conditions to ensure that only reliable companies with the relevant expertise can operate this taxi service. Sir, once we have decided that the issue of licences can be deregulated or should be deregulated, the next issue which follows naturally is whether we can deregulate fares as well. Today, if the taxi operators want a fare increase, they get together, they agree on a certain set of fares, then they apply to the PTC for approval. The PTC then has the unenviable task of deciding whether the increase is justified or not. They ask for statistics on taxi drivers' earnings, operating cost, state of the economy, whole host of questions, before they come to a decision. Why do I say that this is an unenviable task? Because if they say yes to the increase, taxi drivers go away happy, but the PTC has to face the flak from commuters. If they say no, taxi drivers feel aggrieved; perhaps, justifiably so. So the question that we ask ourselves is: Is the PTC in the best position to determine what is the correct fare level? What is the correct taxi fare level to determine how much taxi drivers should earn? As Mr Lew pointed out earlier, there was an experience in 1985 when the Government set fare levels. It was too high. Commuters virtually shunned the taxi service and the taxi companies had to come to the Government and say, "Please, reduce the fares.". What is the rationale for Government to regulate taxi services when we do not regulate providers of other services -barbers, hawkers, fruit sellers? Surely, their numbers and the prices they charge are better left to market forces to determine. Our current regulation of taxi fares and the number of taxi companies may have led to a situation where there is an over-demand for taxis because our taxi fares are lower than what the market is prepared to pay, or an under-supply of taxis because taxi companies want to minimise competition to preserve their profits. The result of this is, on the one hand, there is frustration on the part of commuters who are willing to pay but are unable to get a taxi. And on the other hand, you have taxi vocational licence holders who want to drive but who have no taxis to drive. By regulating the fares, we may also have made it more difficult for taxi companies to differentiate their service, to innovate, to offer new services, to meet new demands. So, as long as the conditions for a competitive market exist, and they do today, as long as there are alternative modes of transport, and there certainly are today, then the provision of taxi services should not be treated differently from the provision of any other consumer service. Sir, I believe that if taxi companies are allowed to set their own fares, they will be encouraged to be more responsive. If more taxi companies are set up, the taxi service can become more efficient. This belief is as basic as the fundamental tenet by which we have chosen to order our economy today - that the free market is the most efficient form of economic organisation. I have received a lot of feedback since the idea was mooted. I am aware that there are fears and concerns on the part of both commuters and taxi drivers. They like, each of them, part of the proposal. Unfortunately, they like different parts. Commuters like the idea of more taxi companies but they do not like the idea of Government deregulating fares. Taxi drivers want to be free to set their own fares but they do not like the idea of more taxi companies coming in. So while there is an element of fear of change, resistance to change, call it what you like, I can understand some of these concerns. For example, will existing companies get together and form a cartel and raise taxi fares indiscriminately? I do not think so. If more companies can enter the market to provide taxi service, it is not that easy to form a cartel. And, also, Singaporeans are a practical lot. If taxi fares are too high, they simply avoid taking taxis. There are alternatives, as I indicated earlier, and also, as I cited, the experience in 1985 when taxi fares went up beyond what commuters were prepared to pay, there would simply be no business. Another concern is about confusion over the different fares. I think this is easily solved, if we require taxi companies to widely disseminate information, if we ensure that taxi fares are prominently displayed, as Mr Heng suggested, inside and outside the taxi, if we make sure that all fares are metered, and, if necessary, we can also require taxis to install receipt issuing machines. If we have all these measures, if we have this proper mechanism in place, the fear of confusion is not founded. Sir, I want to take this opportunity to assure Members that deregulation of both taxi licences and fares will not result in any reduction in service standards. ROV will continue to ensure that qualified people become taxi drivers, taxis will continue to be inspected for road-worthiness. If there are any cases of over-charging, whether it is tourists or locals, ROV will still investigate. Should we deregulate or not? ROV and PTC are now working out a proposal, taking into consideration the feedback that we have received, addressing the concerns that have been raised by taxi drivers, members of the public and Members of this House. I wish to assure Members that we will study this matter carefully before we make a final decision on this matter. And if Members have any further suggestions or views, I will be very happy to hear them. Sir, I turn to the point made by Dr Wang Kai Yuen regarding the integration of bus routes. First of all, let me say that the PTC which regulates bus services in Singapore is open to the idea of private operators running special bus services. He has mentioned the example of three services in Clementi. They are examples of special services which serve special needs at special times, which the PTC recognises and which the PTC has approved. There are many other examples of such services. I have asked for a list of them, and it is quite a long list. I do not think I will go into it at this time. But suffice it to say that while PTC approves these services, they do so with certain conditions attached such as safety standards, service levels, and so on. Fares also must not exceed the maximum set by the PTC. But I think the one condition that is probably of most concern to Dr Wang is that any such proposed service must be integrated with the main public transport system. In other words, it does not duplicate any of the services operated by the main operators - SBS and TIBS. Why this condition? Today, we allow SBS and TIBS to operate the entire bus network in Singapore. In return for this monopoly on bus services, what Dr Wang called a social contract, in return for this social contract, they are obliged to operate the money-losing services, but what we would consider essential services, to ply rural areas, low demand areas, and they do so by using the profits that they make from the money-making services. In other words, they cross-subsidise. They can do this so long as there are more money-making services than there are money-losing services, so that at the end of the day they remain viable. The more unprofitable services they run, the greater the threat to their viability, the greater the pressure to raise fares for all commuters. Conversely, less unprofitable services mean less pressure on fares. So this is the real reason why PTC sets this condition. It does not allow private operators to cream off profits from SBS and TIBS which SBS and TIBS use to fulfil that social contract which Dr Wang is talking about. But Dr Wang has raised an interesting alternative, an alternative to the current practice of PTC approving applications which serve a very small niche. And that alternative is to allow Town Councils, as he put it, more flexibility, more responsibility, to run services, plan their own routes, maybe even charge their own fares. In other words, they decide on the level of service that they want to provide to their residents, they decide on how much they feel their residents are prepared to pay. It is like devolving a part of the role and responsibilities of the PTC to the Town Councils. I see pluses and minuses in this proposal. Obviously, on the plus side, I think Town Councils can respond much, much faster than PTC to the changing demand patterns in their estates, changing requirements of their residents. On the other hand, it means removing a chunk of the bus network from the main operators - SBS and TIBS. And if this chunk is a profitable chunk, then the main operators would have less profits to cross-subsidise the essential but money-losing services. I think we need to study this proposal very carefully and I will ask my officials to do so and, perhaps, we could have the benefit of the views and experiences from Members of this House when we do this study. Dr Wang has also cast some doubts about the role of the PTC. He asked whether PTC serves the interest of bus companies or commuters. I took the liberty of asking for a detailed list of the members of the PTC. There is one academic, one large employer (MNC employer), several grassroots leaders, one teacher, one accountant, one transport professional, the three operators - bus, MRT, taxi - and, of course, ROV. So I think he will realise that the PTC actually has a wide cross-section of people. And to be fair to the PTC, I think they do not have an easy job to do. They try their best to balance the interests of commuters and the operators and I say they have been doing a marvellous job so far. 3.45 pm Sir, I turn quickly to the other points made by Dr Wang. First of all, the question of Electronic Road Pricing. He asked whether taxis will be exempted from the ERP. The answer is "no". Taxis today are not exempted from the Area Licensing Scheme for the simple reason that they contribute as much congestion as the person driving a private car. However, obviously, they recoup the cost of the licence from their passengers which is fair so that, ultimately, at the end of the day, a passenger in a taxi and a person driving a private car will more or less pay about the same if he wants to go to the same place and travel the same distance. On cruising for business, when the ERP comes in, one major impact I would envisage is that the mode of operation of taxi companies will change and change quite drastically. In particular, this practice of empty cruising, or cruising around looking for passengers, I think, will become much more expensive. Taxi companies will have to become more innovative, to look at new ways of getting passengers, radio phones, booking system, contracts, etc. And, in fact, deregulation will allow them more leeway and more flexibility. He also asked a question about the merging of the ERP meter with the taxi meter. Yes, it is, I believe, technically feasible but at this stage, I think the Committee is looking at a more simple solution which would give the passengers an idea of how much they are charged without having to go into complicated modifications to the system. Finally, Dr Wang's point about land beneath MRT tracks. These are actually State land but they are remnants of land. They are usually constrained by a lot of difficulties in meeting planning controls, and I believe controls on sanitation, buffer space, car parks, etc. MRTC also has their own constraints, particularly, for example, the height of buildings below the viaduct. I am told that it must not exceed one storey and the activities must be of low fire risk. While URA will consider proposals to use land beneath MRT viaducts, I would suggest that the land is best used for very narrow purposes, such as car parks, lorry parks, and so on. Right now, some of these lands are being used for bus interchanges and some are being used for car parks. And there was one very interesting use made by a Town Council where they have built a physical fitness park. So if there are any such proposals from the Member, MRTC and URA will be pleased to consider them. Finally, Sir, the comments by Mr Robert Chua on the impact of transport policies on business. We are well aware of the high costs of ownership of vehicles in Singapore, cars, trucks, etc. The reason is very obvious. The Member has mentioned that all this is to serve a purpose of making our roads free of congestion. This is something that we should not treat lightly because there are many, many experiences in many developing as well as developed countries where the situation has been allowed to deteriorate to the extent that it is very hard to put back. It is obvious that, in our case, we have the fundamentals in place. We have the quota system and soon we will have the ERP system which will allow us to relax the quota a little bit and yet be able to control congestion. All this is not cost-free. There is a high cost to it, not least a high political cost. But if we do nothing, then I think we will pay an even higher cost which other countries are paying. It is an invisible cost. People do not compute how much money they have lost by staying in traffic jams, and so on. But as a businessman, Mr Chua will understand very well what this cost means. It may be invisible but, ultimately, it shows up in its bottomline. So I think this is something that we should not treat lightly. We have decided to make our costs visible and to make the user pay. It is not only a fair thing to do but is also an efficient way of allocating a scarce resource, which is road space. Finally, of course, every dollar that the Government collects, in terms of road taxes, ARF and COE premiums means one dollar less is required from taxpayers, whether individual taxpayers or corporate taxpayers.