Land Transport Authority of Singapore (Amendment) Bill

Order for Second Reading read.

2.35 pm

The Senior Minister of State for Transport (Dr Janil Puthucheary) (for the Minister for Transport): Mr Deputy Speaker, Sir, on behalf of the Minister for Transport, I beg to move, “That the Bill be now read a Second time.”

Sir, Singapore has come a long way since we debated whether to build our first MRT line many years ago. We are in a much stronger fiscal position today. However, building a new line remains a major decision due to the large upfront capital outlay involved. For example, the construction of the Downtown Line cost $21 billion, or close to 5% of our GDP in 2017. This escalation in costs over time is not just due to inflation, but also because we are now building under more challenging conditions, for example, deeper MRT tunnels and stations amidst our increasingly built-up environment.

Although the development costs are hefty, the benefits extend over many generations of Singaporeans. We should be responsible and set aside funds to invest in our rail network for the benefit of future generations.

This is why the Government announced the Rail Infrastructure Fund, or RIF, earlier this year at Budget 2018. The RIF will enable the Government to save up when our fiscal position allows. This will smoothen out the large capital outlay for rail projects.

In line with this, the Ministry of Transport proposes to enact the LTA (Amendment) Bill to formalise the establishment of the RIF. Let me now explain the key provisions in this Bill.

As the developer of the rail network in Singapore, LTA is well placed to hold, manage and administer the RIF. Clauses 4 and 6 of the Bill establish the RIF as a Statutory Fund under LTA and assign the function of managing the RIF to LTA.

Clause 6 further sets out the sources of money for the RIF. This enables the Government to set aside money from the Consolidated Fund or Development Fund for the RIF through Supply Law.

Clause 6 also defines the purposes for which LTA is empowered to withdraw moneys from the RIF. Essentially, this ensures that the RIF is only used for the development of the MRT and LRT network. The key uses of the RIF are:

First, to expand the MRT and LRT network. This includes constructing rail infrastructure such as stations, tunnels and tracks, acquiring the first set of operating assets such as trains, performing investigative studies, as well as associated costs such as the cost of land. The RIF may also be used to replace existing operating assets, if such replacement is required to operate the expanded rail network. For example, when we build rail extensions that connect to existing lines, operating assets on the existing lines may need to be replaced to allow both sections to interface properly.

Second, to replace, upgrade and add rail infrastructure, such as tunnels and tracks, for existing rail lines. The development of a rail line does not end after it is constructed. We will need to continually invest in the upgrading and renewal of the rail civil infrastructure as they age, to ensure safe and reliable operations. These renewal works will similarly require large capital outlays. It is prudent for us to put aside money in anticipation of such spending.

Third, to invest in accordance with the standard power of investment for Statutory Boards. This is to enable the RIF to keep up with inflation. The investments made using the RIF moneys will be held within the RIF, to ensure that the proceeds continue to be ring-fenced for the development of the MRT and LRT network.

Currently, the moneys in the Railway Sinking Fund (RSF), which is another Statutory Fund under LTA, may also be used to acquire operating assets. Clause 5 distinguishes the use of the RIF from the RSF. The RIF is intended for the expansion of the rail network and the acquisition of the first set of operating assets necessary to enable this expansion. On the other hand, the RSF is intended for the renewal of rail operating assets, such as trains. While the RIF is solely made up of Government subsidies, the RSF comprises a mix of Government subsidies and Licence Charge collected from the rail operators under the New Rail Financing Framework. This distinction reflects the allocation of financial responsibility between taxpayers and commuters – tax dollars will be used to invest in the civil infrastructure and the first set of operating assets. Thereafter, every generation of commuters will need to pay part of the recurrent cost of operating the rail network, including the renewal of operating assets. This ensures that the burden on taxpayers remains sustainable.

Sir, the Rail Infrastructure Fund will allow us to save up and re-invest in our future, to benefit generations of Singaporeans to come.

With that, Mr Deputy Speaker, I beg to move.

Question proposed.

2.40 pm

Mr Darryl David (Ang Mo Kio): Mr Deputy Speaker, Sir, the MRT and LRT networks are vital transportation arteries that residents of Singapore rely on. Based on statistics released by LTA in 2017, the average combined daily ridership on our rail MRT and LRT networks is approximately 3.3 million per day. This represents a sizeable proportion of daily commute on our public transportation system, and these numbers are expected to rise in the near future when our total rail capacity is further expanded with the opening of new train lines.

Since 2016, train operators have gradually transferred their rail assets to the Government under the New Rail Financing Framework (NRFF). The NRFF is meant to create a more reliable system where maintenance regimes of train operators are regulated by the enhanced Maintenance Performance Standards.

In principle, the NRFF should have a positive impact on rail reliability since it increases the onus of preventative maintenance on the network operators. Yet, there have been several high-profile train disruptions in 2017, such as the flooding of the MRT tunnel in Bishan, the Joo Koon train collision, and a series of incidents that affected three train lines on the same day in November 2017.

These incidents do not seem to gel with the pledge that SMRT and LTA made in July 2016 that they would increase the headcount of maintenance and engineering staff to meet the enhanced standards. In this regard, I hope that the Transport Ministry could give the House perhaps an update on whether SMRT and LTA are on track to increase their maintenance capacity, how the Ministry is holding SMRT and LTA responsible to adhering to the Maintenance Performance Standards, and perhaps the consequences they face for not doing so.

The NRFF also introduced a new framework to enhance the financial sustainability of the network – train operators will now pay a licence charge into a railway sinking fund that can be used to build, replace or upgrade operating assets. It was subsequently announced in the 2018 Budget that the Government will inject $5 billion into the Rail Infrastructure Fund (RIF) that the Minister spoke on earlier.

In principle, the RIF is meant to allow the Government to save when the fiscal position allows, so as to finance the development of new rail lines and to renew and upgrade existing rail infrastructure. I hope that the Minister can provide clarification on the financing model of the RIF to meet future needs beyond the initial capital injection of $5 billion. I would also like to inquire if the Ministry has developed a set of financing guidelines for the fund and whether it will be making these guidelines known.

The topic of public transport, Sir, is not just a critical one, but it also somewhat an emotive one because it affects everyone in one way or another. While Singapore continues to upgrade and enhance our rail and network system, we need to build in a rubric of checks and balances to ensure that our investments are reaping due returns in the form of enhanced performance and reliability. Has the Government then pre-determined a set of expenditure-performance ratios to measure the returns of capital expenditure from the RIF vis-à-vis the expected improvement in train reliability and performance?

Aside from setting up the expenditure-performance ratio, has a set of asset replacement guidelines been drawn-up to ensure that capital equipment is replaced or bought before the need to do so becomes pressing? For example, lifts in public housing estates are generally replaced when they hit the 28-year mark or thereabouts. What is the lifespan of rail assets before they are being replaced and how is the operational lifespan of these assets determined?

Mr Deputy Speaker, Sir, the coming decade will see several big ticket expenditures in our public transport. While we are setting aside the RIF to fund current expenditure, I think it is also good that the RIF will form one of the foundational pillars to ensure that we have a reliable public transport system to meet future capacity.

With that, Sir, I end my speech in support of the Bill.

2.44 pm

Assoc Prof Walter Theseira (Nominated Member): Mr Deputy Speaker, Sir, thank you for the opportunity to speak in this debate.

The costs for rail infrastructure development have risen sharply over the years. In a speech that the Minister for Transport gave on 13 November 2017, he noted that the North-South Line costs about $160 million per km, while the Downtown Line costs about $490 million per km to build.

Inflation aside, the real costs for rail development will continue to rise because our rail development now takes place in a highly built-up environment. And as our rail network grows, we will always be renewing some part of the system which will also be costly.

So, in this light, the Rail Infrastructure Fund is a timely move. We want to avoid raising taxes substantially or borrowing at perhaps unfavourable rates when the time comes to make these investments. Provided that the Government can commit to prudently setting aside this money, the RIF will help us to finance these important infrastructure developments at the lowest possible cost. It is a move that makes our transport finances future-ready.

However, there are also other challenges involved in ensuring that our transport system is future-ready. Sir, the Government has planned for Singapore's MRT network to reach 360 km long by 2030. This is nearly double that of the present network. The RIF will provide us the financial capability to pay for these important investments, but we must also have the human resource capability to operate and maintain the systems and we must have the public support that commuters and tax payers alike are willing to pay the upkeep of the system.

Let me first touch on the human resource factors. Sir, our rail engineers and transport workers perform a highly skilled and often thankless job under demanding conditions. In 2017, SMRT announced that they were on track to increase their engineering staff strength to 700 engineers by 2020. This followed a 2012 review by SMRT that identified a need to triple the engineering strength to handle the maintenance, renewal and operations of future MRT lines.

Now, tripling your engineering staff strength in just a few years means that the majority of our rail engineers today are relative newcomers in the field. Sir, I do not doubt the training, integrity and commitment of our rail engineers. But experience and expertise does take time to develop, and I think the question is why was the engineering strength in our core public transport operators allowed to remain at levels that are manifestly inadequate to the task?

Let me suggest some reasons. Under the old financing model for public transport, operators had to survive based on profits from the very narrow margin between fare revenue and operating costs. Since there is little that our operators can do to raise the fare revenue side of the box, they had to keep costs down. Maintenance and operations are cost centres, so the pressure naturally fell on engineering to do more and more with less and less.

Sir, this was efficient from a narrow point of view. The old public transport financing model was designed to push operators to minimise costs and, hence, to minimise the fare burden on the public. And because of that we paid relatively little to operate a world-class transport system while the system was new. But we ended up paying for it later through deferred maintenance and poor reliability. And, today, our rail operators are also paying the price. SMRT trains lost $86 million in the Financial Year 2018 because fare revenue simply does not match the operating expenditure required to provide a high quality, reliable system. It is not hard to see the danger in this.

Sir, I think it is important that the Government put the financial model for our train operators on a path for long term stability and sustainability. The Government has already done so with the Bus Contracting Model for our bus operators. A similar contracting model that mitigates fare revenue risks for rail operators, that also gets value for money through competition or benchmarking, may be needed for the rail sector. It is not about rescuing shareholders or private companies. It is about ensuring that our rail operators and their core engineering capabilities have the resources needed to thrive. Of course, we must ensure there are incentives to remain efficient. But the financial model needs long-term stability. A young talented Singaporean must see rail engineering as a viable long-term career where they can make a real difference. With support from the right Government financial and training framework, our public transport operators can build the human resource capabilities for our future rail system needs.

Now, let me touch on the issue of public support for these investments. Planning for our original Mass Rapid Transit system took place in the public eye. Early studies began in the 1960s. The final decision to proceed with a rail-based system was only made in 1982. The high costs of a rail-based system, versus an all-bus system, were the sticking point. I think we are all glad that the Government made the decision to invest in the MRT. But the point is that the public was aware of, and publicly debated, these decisions to spend billions of dollars on rail infrastructure.

Today, I am concerned that we lack a similar level of public engagement and shared responsibility for decision-making in the transport system. The Senior Minister of State for Transport is now chairing the Land Transport Master Plan 2040 public consultation exercise. This is excellent. But I would suggest that we go beyond current efforts. We must continue to involve the public as a co-creator of decisions made in public transport, ranging from investing in MRT lines, to determining the quality of service offered. These decisions have cost implications and the public is ultimately paying the bill.

This question of public support for our transport system has often been framed as one of commuter satisfaction. But I think that is a narrow definition. If you put huge subsidies into the system and you greatly improve quality, as the Government has done in recent years, then of course the commuter will be satisfied, or at least more satisfied. The taxpayer may not be. But the problem is that today, the commuter may be satisfied without having any idea of the real costs and trade-offs involved in providing a world-class transport system.

Sir, in the Financial Year 2018, the Land Transport Authority spent $1.5 billion dollars on bus service fees and collected only $831 million dollars in fare revenue. For rail, the Minister for Transport said in the Committee of Supply debate this year that $4 billion will be spent to renew the rail system over the next five years. Meanwhile, an NTU study, commissioned by the Public Transport Council, found that our fares were the second lowest among 12 major cities worldwide. Commuters may not realise that their fares are low, because they are only asked to pay today for a relatively small part of the operating costs.

I think the Government must set out a clear long-term vision of how commuters will contribute to the longer term funding and investment decisions for public transport. The Public Transport Council’s introduction of the Network Capacity Factor, which links fares to the relative supply and demand for public transport services, is a good first step. It means that when the public enjoys better connectivity and less crowded rides, they share in the costs of providing these services. But now that the public pays part of these system costs, they must also have a way to say when they have had enough. We do not want to force people to buy business class tickets when what they really want is economy – or premium economy. There are no market forces that would allow commuters to tell us what is the right mix of quality and price in public transport, so the Government has to do more to engage the public to discover this.

Sir, I strongly support the Bill. It places the Government on a firm financial footing to continue to provide a world-class public transport system. I hope the Government can assure us that, in addition to financial capacity building, equally strong measures will be taken to build human resource capabilities, and public engagement and support, for our public transport system.

2.54 pm

Mr Kwek Hian Chuan Henry (Nee Soon): Mr Deputy Speaker, the amendments in LTA Bill will strengthen the governance surround investments and maintenance of our rail lines. Therefore, I rise in support of the Motion.

Before I start, on behalf of my residents who use the North South Line, I would like to thank the MOT, our MRT workers, as well as those involved with the NS Line upgrade for their countless hours of hard work. After the completion of the re-signalling project, the reliability of the line has improved. So, thank you.

I would like to raise three points today.

First, can LTA share how we determine on the life-span of the key assets and system? If we draw on the lessons over the last decade or so, the key issue is how do we ensure timely upgrades, as well as preventive maintenance. Does LTA determine this life span through international benchmarks? Or through LTA’s internal assessment working with engineering consultancy companies?

If LTA relies on international benchmarks, can LTA share which country and which system did we use for? And when we localise those benchmarks for use locally, do we account for Singapore-specific conditions such as our heat and humidity levels?

Secondly, I would like to request that LTA communicate to our people the true cost of the MRT system per trip. With that, I strongly agree with the previous Member's view that our people will need to understand, not just the quality of service, but how much it cost them. In the long run, our spending depends on our citizens' needs and expectations. So, our citizens need to know the true cost of service provision, even though we continue to ensure that fares, after subsidies, remain affordable to the broader public.

For example, in our medical bills, we reflect the true cost, and then we reflect the subsidies, before arriving at the amount that Singaporeans have to pay. That is a good approach to keeping Singaporeans informed. As such, from time to time, through various channels including on the MRT station platforms and trains, we should communicate to our people the true cost of our MRT networks per trip. This cost should include components such as infrastructure investment cost as well as total operating cost. This is important information for our citizens, and I suspect, will shape our discussions in our Chamber over time. I hope we cannot just talk about satisfaction levels, but also whether or not, like the previous Member said, are we over-consuming or under-consuming transportation resources.

And my final point is a technical one. In clause 6 (a), can I check how LTA will ensure that the expenses are charged accurately in the "Railway Sinking Fund" and/or "Rail Infrastructure Fund" since "demolition and replacement" expenses could be for both Funds? I assume that the Sinking Fund is for existing lines and the Infrastructure Fund is for new lines. Demolition and replacement expenses of any rail line is likely to be a major expenditure. When will LTA charge these under Sinking Fund and when will it do so under Infrastructure Fund?

Notwithstanding my few queries, I support the amendment Bill.

Mr Deputy Speaker: Senior Minister of State Janil Puthucheary.

2.57 pm

Dr Janil Puthucheary: Mr Deputy Speaker, I thank the Members Assoc Prof Walter Theseira, Mr Henry Kwek and Mr Darryl David for their questions and suggestions.

Our land transport system is becoming more complex, and commuters have increasingly diverse travel needs and preferences. We have land limitations and fiscal constraints. We need to make difficult trade-offs in deciding how to plan and develop our land transport network.

I agree with Assoc Prof Walter Theseira that the Government needs to engage the public when planning and developing our land transport system to develop public support and to ensure the land transport system continues to be designed with commuters in mind. This is why we have embarked on an extensive public consultation exercise, as part of developing the Land Transport Master Plan (LTMP) for 2040. Over the last two months, many Singaporeans have shared their concerns and aspirations. Some have participated in our Focus Group Discussions and LTA is gaining valuable feedback through this process. LTA is also taking the opportunity to share its planning considerations and trade-offs. Please continue to come forward and participate through the LTMP consultation process, so that together, through partnership, we do achieve the best possible outcomes.

Mr Henry Kwek suggested that LTA communicate the true cost of providing MRT services so that citizens understand the financial trade-offs. We are not able to issue receipts for each ride, so we use other ways to communicate the cost and subsidies. Over the next five years, the Government is subsidising $5 billion for bus services, $4 billion for renewal of rail operating assets and $20 billion to expand our rail infrastructure. We will continue to communicate to commuters the cost of providing public transport services.

Mr Henry Kwek and Mr Darryl David asked about the differences between the Rail Infrastructure Fund (RIF) and the Railway Sinking Fund (RSF).

The RSF is not permitted by section 13A of the Land Transport Authority of Singapore Act to fund the “demolition and replacement” of rail infrastructure, such as tracks and tunnels. Instead, the RSF is to be used to acquire operating assets, such as trains and signalling systems, to replace or upgrade ageing ones for existing rail lines.

On the other hand, the RIF is, by this Bill, to be used to expand and renew our domestic rail infrastructure, such as tracks and tunnels. This includes associated works and investments. Beyond the injection of $5 billion in FY2018, the RIF can be topped up in future years when the fiscal position allows.

LTA integrates our transport plan closely with the land use plan and builds new rail lines only when there is a strong use case. This good planning and financial principle does not change with the introduction of the RIF. The RIF simply provides the Government with the flexibility to save up, when our fiscal position allows, in anticipation of lumpy capital rail investments in future.

Mr Henry Kwek and Mr Darryl David also asked how LTA determines when to replace and upgrade key assets and systems in a timely manner. LTA determines the replacement schedule of our rail assets based on the asset design life and the specific asset’s actual condition. This is to take into account variance in life span under Singapore’s operating environment, as Mr Kwek correctly noted. Where necessary, LTA also engages engineering experts to provide third-party opinions. Going forward, LTA is developing the Rail Enterprise Asset Management System, which will integrate asset information and maintenance records across the different systems, so that the health of the various operating assets can be monitored holistically over their respective lifecycles. The system will be equipped with data analytics capabilities to monitor asset performance and identify potential faults before they occur, so that these assets can be repaired or renewed pre-emptively. This shift towards data-driven predictive maintenance and asset renewal will enable sustained rail reliability, while optimising overall lifecycle costs.

Mr Darryl David asked whether SMRT and LTA have sufficient maintenance capacity to achieve high rail reliability. Assoc Prof Walter Theseira made some remarks and asked some questions about human capital development. Mr Deputy Speaker, I note that these questions do not relate to the contents of this Bill but I will take the opportunity to make a few short remarks.

I want to assure this House that MOT, LTA and our rail operators are working hard to raise rail reliability. SMRT has already raised its maintenance headcount by more than 700, as has been noted by Assoc Prof Theseira, since its transition to the New Rail Financing Framework. And Assoc Prof Theseira also correctly noted that it takes time to train and groom our engineers. To attract, develop and retain skilled engineers and technicians for the land transport sector, we are professionalising the rail engineering vocation and have seeded a $12.5 million Public Transport Manpower Development Fund to drive manpower development initiatives. We are also partnering our institutes of higher learning and centralised academies, such as the Singapore Rail Academy, to roll out workforce development programmes.

But maintenance capability is not only about manpower. It is also about giving our engineers and technicians sufficient engineering hours to carry out these maintenance and asset renewal works. This is why we introduced Early Closures and Late Openings (ECLO) last December.

These efforts are starting to pay off. We have turned the corner. Last year, the Mean Kilometres Between Failure (MKBF) for our MRT network was 181,000 train-km. This has tripled to 661,000 train-km for the first three quarters of this year. This is not just a numbers game. The commuters have felt the improvement and I thank Mr Henry Kwek for his comments. His residents have given him good feedback about the reliability of the North-South Line. As the new signalling system for the East-West Line stabilises, residents living in the East and West will also to begin to enjoy better rail reliability.

Instead of a complex expenditure-performance ratio, the Minister for Transport has laid out a very clear, objective target for rail reliability – to achieve 1 million MKBF for the MRT network by 2020 and sustain it at that level going forward. This is a bold target and very few metro systems around the world have consistently achieved this. MOT, LTA and our operators will continue to work hard to bring commuters safe, reliable and affordable public transport services.

Assoc Prof Theseira observed that we need a framework that allows our rail operators to be financially sustainable. This is so that they can continue to attract engineers to join the industry and to invest to sustain high rail reliability. LTA has just completed transitioning all rail lines to the New Rail Financing Framework this year. Under this model, the Government co-shares the fare revenue risk with the operators. This is a big step towards building financial sustainability that Assoc Prof Theseira spoke about. We will need to evolve our financing model to continue to adapt to the changing operating environment. The Government will continue to review our financing framework periodically, to ensure the public transport system continues to serve us well.

Mr Deputy Speaker, Sir, the idea to build an MRT network was discussed in 1967, just two years after Singapore became independent. This was contentious at the time, it would be one of the most expensive infrastructure projects for our young nation. After 15 years of careful study, the Government committed in 1982 to build the North-South and East-West Lines at a price of $5 billion, close to 15% of Singapore’s GDP at the time. It was a difficult decision but the right one. When these lines started operations in 1987, it opened up new possibilities for Singaporeans to live, work and play.

We have since expanded the rail network considerably. By 2030, with the addition of the Jurong Region Line and Cross-Island Line, we will have a total of eight MRT lines. The improved connectivity brought about by our rail network has allowed us to develop new economic centres and key facilities across our island. The implementation and success of Punggol Digital District, Changi Business Park, Changi Airport, Tuas industrial estate and Jurong Lake District, would not be possible without the enhanced connectivity brought about by the rail network.

The rail system is an economic project and a social leveller. As Mr Darryl David pointed out, Singaporeans depend on the MRT and LRT – 3.5 million trips are made on the rail network every day, bringing Singaporeans to school, to work and back home.

Today, this rail network has grown to become the backbone of our public transport system. Because of the foresight of the previous generation, our economic opportunities have expanded and our island home is now more connected. In setting up the Rail Infrastructure Fund, we are following in their footsteps, and planning for the future of the next generation. With that, Mr Deputy Speaker, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [The Senior Minister of State for Transport (Dr Janil Puthucheary)].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mr Deputy Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair again at 3.30 pm.

Sitting accordingly suspended

at 3.06 pm until 3.30 pm

Sitting resumed at 3.30 pm.

[Deputy Speaker (Mr Charles Chong) in the Chair]