Saturday, April 01, 2006

Spending the Public Transport Fund

Will the saving from petrol subsidy be channelled to right places? That is the RM4.4billion question. So far I have read that the savings from removing a portion of petrol subsidy will be used to build and improve public transport system. That is okay to certain extent, if it does not involve awarding more mega projects to well connected indivuduals.
What I dont want to hear is another electric train project to nowhere, and more cronies bagging the BOT contract.
The keyword for efficient and popular public transport system in Malaysia's urban areas is "cheap and effective".
Train system would cost a lot of money and demand higher fares, it uses a lot of land, which is scarce resources. I would suggest limiting the number of single occupant cars entering major cities to start with, to reduce congestion. Then create dedicated bus lanes on major bus routes. (Any car using this lane shall be fined) And if the city could afford it, subsidize free bus service within central city to encourage commuters to leave their vehicles at home. Existing train service should also be subsidized to keep fares low.
Instead of controlling the price of bus fare, we should subsidize the bus companies, by tendering the routes. Say, KL-Klang route, buses should depart every 3 minutes during peak times and every 6 minutes during off peak times. Bus companies would then tender their price for providing this service, taking into account the revenue collected from bus fares, staff wages, maintenance costs, capital costs and fair profit. Government could fix the bus fare, say at RM2.
Bus company then calculate the projected revenue less costs, and if the route is unprofitable, bus company then tender for subsidy to make the route profitable. This way the frequency of bus service is assured, and the bus driver wouldnt have to wait until the bus is full before starting, understandably they want to maximise revenue, hence their pay packet.
In this way, the government avoid capital cost of setting up the service (i.e. buying buses etc) and firms could invest in transport business knowing the certainty of future profits. Current government method of controlling prices (in this case bus fare) without handing out subsidies only hindersfirms investment in public transport system. No one would invest money in any undertaking or enterprise if there is no profit to be had. As such, existing bus companies run down their capital, (e.g. old buses not replaced) and in the future the public would lose the service.
Same method could be applied for train service - albeit at a higher price.
What I am suggesting here is cheaper more cost effective way of providing public transport system. Of course we could build a train system criss crossing the peninsula, but the cost is prohibitive. Unless the project has other benefits beside reducing congestion - like giving lifeline to construction sector.
I believe if we do it this way, there would still a lot of money left for other projects, like providing low cost housing for the poor and giving income top up for low income group.
The less government getting itself involved in business the better, so that it can concentrate more on governing, making the rules fair and distributing the incomes of its citizens as evenly as possible.

No comments: