SMRT Corporation - A Failed Privatisation

From a listed company to an unlisted company, SMRT Corporation is a clear example of a failed privatisation project. It highlights two significant failures:

• In a narrow definition, it fails to improve productivity and quality service; raises efficiency and maintenance level etc.
• In a broader meaning, it fails to close the rich-poor gap, level up the entrepreneurship, and showing the limitation of privatisation in economic development.  

[Privatisation but still government owns]

It is quite clear that with the current level of performance, SMRT will have problems maintaining their earning level.  It uses to be a cash cow depending on collection of fees from users. With a substandard performance and the continuation of technical problems, it will be hard to make profit without government subsidy.

It looks ugly if SMRT continues to be a public listed company. It needs to make their shortcomings public and even subject to shareholders’ questioning.  This will touch on the accountability and transparency issues.  For the PAP government, for political reasons, it is better to close this channel as soon as possible.

When the government engaged in privatisation and deregulation programs, following the happenings in USA and UK in the 1980s, the messages to Singaporeans are these programs will benefit Singapore with higher productivity, better management, better service, enterprise spirit and market orientation.  

So we see a mushroom of privatisation projects - Singtel, Singapore Power, CapitaLand, Sembcorp, SingPost etc. If a project cannot go public and list in the stock exchange, it can still get an ‘enterprise’ status to be a statutory board or a company, for example Changi Airport, PSA, Certis Cisco, etc. There are many government owned companies in Singapore, under the registration of XXX Pte Ltd or YYY Private Limited. These companies are also part of the privatisation projects and their directors are directly or indirectly appointed by the government.

Although public services are privatised, their ownership is still with the government. Hence, the management thinking and operation philosophy are still very ‘PAP’ orientated group thinking. SMRT shows such a mindset and of course, has to bear the political cost of underperformance.  

[Social mobility only benefits selected group of people]

The privatisation programs have in fact expanded the invisible hands of government in our economy. The activities of government linked listed and unlisted companies, banks, Temasek and GIC, clearly indicate such involvement.

The accumulation of these privatisation activities has created many high paying jobs. When you read that a scholar or a army general is going to be appointed director or CEO of a GLC, you know the salary for such an appointment is very likely to be a million and above.

However, the distribution of high paying jobs is unequal and uneven. This has affected the social mobility of ordinary Singaporeans. For the top paying jobs, you have to be politically ‘correct’ with same group thinking. Even for middle level jobs, your attitude must also inline with the authority.

Singaporeans, who are not working for the privatisation projects, are less likely to benefit from the deregulation of public services. Alternatively, to gain social mobility and better pay, you have to work for the multi-national companies but not small and medium businesses.

This development not only creates social mobility issue but also entrepreneurship issue. The privatisation programs are guided with the visible hands of the government. If necessary, they will grant monopoly status to the GLCs, or create ‘false’ competitions, e.g. telecoms market.

We have now seen the fruit of the privatisation.  Like US and UK, our income distribution and social mobility have not improved after more than 30 years of privatisation and deregulation. However, the high paying jobs created through privatisation have provided an excuse for awarding high compensation for our ministers and political holders. On the contrary,  American and British politicians dare not use privatisation to enrich themselves by increased their salary. This is the uniqueness of Singapore!

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Privatisation and Deregulation in questions:

In Australia:

http://www.smh.com.au/business/privatisation-has-damaged-the-economy-says-accc-chief-20160726-gqe2c2.html

In United Kingdom:

http://www.newstatesman.com/politics/uk/2016/07/theresa-may-s-mission-resolve-thatcher-s-contradictory-legacy

In Pakistan:

http://tribune.com.pk/story/1146709/think-tank-report-government-achieves-4-89-targets/