The Future of Public Transport in Singapore

Singapore's public transport sector is dominated by two companies, ComfortDelgro Corporation and SMRT Corporation.

ComfortDelgro owns 75% of the bus routes through SBS Transit, 22% of train services through the NEL line and 62% of taxi market share.

On the other hand, we have SMRT with 25% of bus routes, 78% of train services and 11% market share of taxi services.

Together, they own 100% market share of bus and train routes and 78% market share of taxi services.

This duopoly in the public transport sector has led to a dearth of innovation as evidenced by how quickly taxi booking applications such as GrabTaxi and Uber have captured a sizable market share without owning a single taxi. In the absence of competitive forces, their first reaction to rising costs is not to innovate but to pass on the costs to consumers.

A strong example of this is credit card fees. Most merchants absorb credit card fees, choosing to utilize credit card services as a way to legitimize the business, gain additional sales and reduce the cost of payments reconciliation.

SMRT and ComfortDelgro however, chooses to pass on this cost to consumers through a 10% administrative charge when credit card fees are typically only 2% of transaction value. This unfair surcharging practice led to Visa pulling out its services from taxi operators in 2013.

Therefore, it is hardly surprising when transport operators choose to reach out to the Public Transport Council (PTC) as a first instinct to raise fares, since this has become their modus operandi when faced with falling profits or rising costs.

However, change is on the horizon. Taxi booking applications have the ability to revitalize the taxi industry and to force this duopoly to embrace innovation or see itself becoming the Kodak of taxi operators.

Furthermore, a new entrant to the bus services industry, Tower Transit is on track to bring in new industry best practices that allows the operator to pay competitive salaries while keeping costs low and meeting the Bus Service Enhancement Programme (BSEP) objectives.

One such practice is having a separate team to refuel, maintain and park buses at the end of the day, utilizing economies of scale to keep costs low while allowing bus captains to concentrate on their primary duty; driving.

In the near future and with the implementation of the Government Contracting Model in the public transport sector, there will inevitably be changes in the public transport industry. Whether these changes come about through the revitalization of existing operators or through new entrants with new tricks up their sleeves, will be the big question.

L.A.M.

On the Singapore Savings Bond and What it is about in Layman's Terms

The Singapore Government has recently announced the launching of its savings bond (SSB) program in the second half of 2015. 

The savings bond will possess the following characteristics:

A) Principal-guaranteed

This means that the issuer of the bond (i.e. the Government of Singapore), guarantees that the value of the bond, will not fall below the value of the principal. E.g. If you bought the bond for $500, you will receive at minimum $500 at maturity, provided that the Government of Singapore does not go bankrupt or into default. (The chance of this is very low).

B) Redeemable at any time with no penalty

This means that you can redeem the bond at any time without any penalty fees. This is unlike Fixed/Time Deposits where they cannot be redeemed before maturity or may incur penalty costs for redemption before maturity. Furthermore, not only will there be no penalty, any accrued interest will be paid to the investor of the bond upon redemption.

Furthermore, unlike an FD, the investor need not decide upfront how long he wants to invest in the bond.

C) Stepped up interest rates linked to the return on Singapore Government Securities (SGS)

Another characteristic of the Singapore Savings Bond, is that the average interest investors will receive over the period will match that of a SGS bond of equivalent tenure.

This means that if you hold your Savings Bond for the full 10-year term, the average interest per year on your investment will match the return if you had invested in a 10-year SGS bond. Similarly, if you hold the bond for only 1 year, you should receive the average interest on a 1-year SGS bond.

Shown below are the benchmark yields of the SGS 10-Year Bonds from Mar 2014 - Mar 2015. 

As you can see, the average yields range from 1.88-2.49%. If you were to hold the bonds till full maturity (10 years), you should receive rates equal/similar to a current issue of the 10-year SGS bond. As interest rates are expected to rise due to appreciation of the USD against the SGD as well as the upcoming raising of the Fed Funds Target Rate (US Central Bank Benchmark Rate) later in the year, we could see the returns on the Singapore Savings Bond increase. 

D) Non-Tradable and only individuals will be allowed to buy them

Unlike stocks/bonds listed on SGX or catalist, The Singapore Savings Bonds will not be tradable. This means that you cannot buy or sell the bonds on the secondary market. You will only be able to purchase them from the Singapore government and to sell them to the Singapore government. It can only be bought by individuals and thus are not available to institutions. The bonds will be sold in denominations of S$500, and there will be a cap (not set yet) to how much an individual can buy. Furthermore as the bonds are issued by the Singapore governement, they will bear the country's credit quality, which currently stands at AAA for S&P and Fitch and Aaa for Moody's. This is the highest credit rating score possible. 

The FAQ that you really wanted to ask but were too embarrassed to ask:

Q: How much can I earn from the bond?

A: The interest received will depend on how long you hold the bond for. If you hold the bond till maturity, you will receive the 10 year SGS Bond Rate 2-3%. If you hold the bond for 2 years, you should receive a rate similar to the 2 year SGS Bond Rate.

Q: Can use CPF to buy or not?

A: No, it is cash only. Furthermore it would be unwise to use your CPF to buy SSBs, since you are currently earning between 2.5-4% in your CPF account.

Q: If I buy already and then I vote for opposition in the upcoming election and then the PAP lose the election, will I lose my money? 

A: No, there is a distinction between the ruling party and the government. You should not "lose" your money, in the event that the PAP loses the general election. However, this is not an encouragement for you to vote for the opposition. You should vote wisely. (This also does not mean that you should vote for a party that names itself as "wisely").

Q: Why is the government doing this? Is there something wrong with our CPF or our economy that they need to borrow money from citizens?

A: The Government of Singapore does not issue bonds for the purpose of fiscal borrowing or to cover budget deficit. The SGS bonds are issued to develop a bond market and to provide the market a market derived benchmark rate for long term fixed incomes securities. For the SSB bond issue, it is likely a response to HKMA's issuance of inflation protected bonds and to provide retail investors an alternative investment option. 

Q: Is this like CPF 2.0 where halfway through the gahmen can raise the minimum sum or change to an annuity or whatever?

A: No this is a bond not a pension scheme. If the characteristics of the bond are changed in anyway, or the coupons are not paid or the principal not allowed to be redeemed, it will be deemed as a default and may affect our AAA/Aaa sovereign rating.

Q: How do I buy this bond? Will the government give me a piece of paper like an IOU which I have to keep under my mattress or in a safe?

A: It is highly unlikely that you will receive a physical paper which is susceptible to theft or fire. You will need to open a CDP account to hold the bond. Information on how/what medium you can purchase the bond from is not available yet but you can likely purchase it through similar channels for primary auction of SGS as well as through ATM (probably).

Q: Should I put my money in OCBC 360 or this?

A: If you fulfill at least 2 out of 3 criteria required for bonus interests, you will receive 2.05% in the OCBC 360 account. At 2.05% should be better off than the SSB unless you hold it till maturity or there are big swings in interest rates. 

However do note that the bonus interest only applies for deposits up to SGD 50,000.

Update: OCBC recently announced changes to the OCBC 360 account. You can read more about the changes as well as access an analysis tool to see what are the impact of those changes on you here

Q: Wah, this bond looks very good leh. I'm going to take out all of my money from my bank account and under my mattress to invest in this.
A: There will be a cap on the amount of SSBs that an individual can purchase. The cap will be revealed on a later date. So it is unlikely that an individual can invest all of his life savings into the SSB. Furthermore, it would not be prudent to invest all of your savings into a single instrument. Depending on your risk profile, you might like to diversify your savings into other investment vehicles.

Q: The return of 2-3% is so chui, if I buy Hyflux or Capital Mall bonds, I can get 6%/3.8% respectively.
A: The SSB is effectively risk free (very very small chance of default), whereas Corporate bonds have a higher chance of default. Also the SSB is principal protected, whereas, unless you hold the corporate bond till maturity, you may end up redeeming the value, you bought it for.

Conclusion:

The SSB will provide an alternative investment for retail investors which is principal protected, provides liquidity and to some extent, inflation protected. Depending on the coupon rates, it could provide a strong alternative to the bank's FDs. In the coming months, we could see banks coming up with innovative products or more attractive rates to retain or attract liqudiity for their longer term funding needs.

If you have any other FAQs, please feel free to leave a comment and I will answer them to the best of my ability.

L.A.M

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On S.R. Nathan's 90th Birthday.

So, yesterday was former President S.R. Nathan's 90th birthday. Our Prime Minister, Lee Hsien Loong gave a good tribute to Former President S R Nathan, highlighting his role as a "tree planter", building up young nascent organizations into mature institutions like NTUC, SID, MFA, etc.

Although, people are generally divided in their opinions over whether S R Nathan had been one of our better presidents, one thing we can be certain about is that S.R. Nathan is a national hero.

Wait, a minute. Some of you might be re-reading that last sentence and wondering, since when was S.R. Nathan a national hero?

If you are one of these people then I guess it's story time...

On 31 January 1974, four men armed with submachine guns and explosives attacked the Shell oil refinery complex on Pulau Bukom. The half of these men were from the Japanese Red Army (JRA) and half were from the Popular Front for the Liberation of Palestine (PFLP). They planned to disrupt the oil supply from Singapore to other countries, especially South Vietnam.

 At the beginning of their operation, the terrorists' boat ran aground on a coral reef. They managed to reach the shore of Bukom after convincing an unsuspecting boatman to tow them towards the island. As they headed towards a gate of an oil tank installation, they fired shots at two passing vehicles although no one was injured. A sentry at a security post managed to escape and raise the alarm.

The terrorists were able to detonate 3 of the 12 explosives they were carrying, but they caused little damage. To escape, they then hijacked the ferryboat Laju at the Bukom jetty and held 5 crew members hostage. This led to a chase and Laju was quickly surrounded by navy gunboats and marine police boats at the Eastern Anchorage.

So this is where S.R. Nathan's role comes in.

Back then, S.R. Nathan was the Director of Security and Intelligence Division at MINDEF and he led a 13 men party consisting of 4 commandos from the SAF and 8 other government officials. Following a few days of intense negotiations, during which 2 hostages managed to escape by jumping overboard in the middle of the night, the negotiation party managed to convince the terrorists to release the remaining 3 crew members in exchange for a party of "guarantors" for their safe passage to the Middle East

S.R. Nathan was among the party of  "guarantors". Essentially, he volunteered to take the place of a hostage so that the hostage could go free.

On the night of 7 February. The group was transferred from Laju to the Marine Police Headquarters and then to Paya Lebar Airport where the terrorists surrendered their weapons. After they freed the remaining three hostages, the four terrorists left Singapore on 8 February at 1:25 am,

Accompanied by Nathan’s team on a specially arranged Japan Airlines flight to Kuwait. After reaching Kuwait, the 13-men party flew back and reached Singapore on the following day.

Now, how many people can claim that their president once risked his life to save a hostage. If you aren't impressed by this, I don't know what will.

On the day before Independence Day, let's also remember the 13-men party who risked their lives to save the hostages in the Laju Ferry Incident.

L.A.M.

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On whether Singaporeans are Xenophobic

When I read news like how anti-foreign protesters are burning down factories in Vietnam, I question whether Singaporeans are really xenophobic. Despite our grouses against an increasingly foreign population crowding out our infrastructure and job market, we do not burn factories or murder foreigners or push aliens onto subway tracks.



In fact, Singaporeans are far from xenophobic. When Mainland Chinese, Huang Na was murdered by a Malaysian on local soil, we opened our wallets and donated enough money for her mother to buy a bungalow. When a Thai girl fell onto the MRT tracks and lost her legs, we donated money to cover her hospital fees and more. When disasters occur in neighboring countries, Singaporeans are always among the first to offer help and relief.



The people and government officials who accuse Singaporeans of xenophobia have taken our good nature for granted. For 40 years Singaporeans have never rioted or went on strike. The first non-sanctioned strike in modern times involved only Mainland Chinese bus drivers. The first riot since independence that resulted in many torched vehicles was committed not by Singaporeans but by Indian foreign workers. Another strike we had that involved SIA pilots was instigated by Malaysians who, subsequently got their PRs revoked by none other than Minister Mentor, Lee Kuan Yew.

Now, I am ranting here not to promote xenophobia but to remind Singaporeans and our critics about who we really are. We are the people who despite working the longest hours in the world and in one of the most unhappy workforce at wages that have not risen faster than inflation levels for the low income group, continue to do so without striking or rioting. We are the people who see our sons and brothers sacrifice their lives, sweat, tears and 2 years and more of their time for an increasingly dichotomous society where foreign talents appear to be able to enjoy this peace and security without any of the sacrifice.

When you think about it, it is almost impossible to find another culture that will take so much shit and sacrifice 2 years of their lives without violently protesting, especially when, every other day governments are being overthrown and heads of states being removed by court or by coup.

We have a lot of things to be thankful to our government for, such as strong administration and relatively low rates of corruption. However, our leaders also need to be thankful that we are an extremely cooperative and hardworking populace. Although we have many complaints. We do not create deadlocks in the streets, shut down airports or throw out the government when faced with growing income inequality and uncertainty for our livelihoods. Instead we try our best to eke out a living by working longer hours, or taking on more jobs. You don't even need to leave the country to see, that this kind of tenacity and behavior is unique to its citizens and not to its government. Compare this to all the times we had a strike or a riot in the past 40 years and you can see that if our government were leading the Chinese, Indians, Vietnamese or Malaysians, the situation will be very much different. 

We get that it is important to be foreigner friendly to attract investors and improve investor confidence. But where possible, we would like to ensure that policies that favors foreigners over locals be eliminated especially since it is the sons of Singapore and not the foreign population who will rise up to defend the country in times of need. If we claim that the reason why Singapore survived the separation from Malaysia is due to the efforts of the ruling party, then the reason why Singapore is the success story it is today must be due to the tenacity and virtues of its citizens.

L.A.M.

L.A.M. on the Relationship Between Religion And Various Social-Economic Factors

Pew Research has released data indicating Singapore as the most religiously diverse country in the world with a Religious Diversity Index of 9.0. Based on their research and data, Singapore's population is made up of:

Buddhists: 33.9%
Christians: 18.2%
Unaffiliated: 16.4%

Muslims: 14.3%
Other Religions: 9.7%
Hindus: 5.2%

Jewish: < 0.1%

Looking at the data and research from Pew Research, led me to question whether there is any correlation between Religion and various other Social-Economic Factors. Luckily for me, they uploaded excel based data of their research which I was able to transpose onto various other commonly available data for Social-Economic Factors to come out with analysis like:

Before you look through the data, please note that I am not trying to demean one religion over another and am not here to incite any religious or racial hatred, all I have done is to merely provide some statistics based on widely published numbers.



Concentration of Religion vs Birth Rates

For example, I downloaded data on Birth Rates per 1000 and compared it with the religious diversity data from Pew Research to obtain the following correlation between concentration of religion and birth rates

Correlations	Birth Rate
Muslim	0.321
Folk Religions	0.087
Jewish	-0.023
Hindu	-0.061
Buddhist	-0.102
Christian	-0.128
Other Religions	-0.129
Unaffiliated	-0.387

Interpreting from the correlation table above. Higher concentration of Muslims is correlated with higher birthrates, while having higher concentrations of people with no religious affiliations is correlated with lower birthrates.




 

Shown above are scatter plots of the concentration of Muslims vs Birth Rates and concentration of No Religious Affiliation vs Birth Rates.

Concentration of Religion vs Life Expectancy

Correlations	Overall Life Expectancy
Other Religions	0.122
Jewish	0.095
Christian	0.095
Buddhist	0.055
Unaffiliated	0.037
Hindu	0.037
Folk Religions	-0.092
Muslim	-0.248

Interpreting from the correlation table above. Higher concentration of Other Religions is weakly correlated with higher life expectancy, while having higher concentrations of Muslims is correlated with lower life expectancy.






Concentration of Religion vs Literacy 

Correlations	Literacy
Christian	0.275
Other Religions	0.117
Unaffiliated	0.117
Jewish	0.056
Buddhist	0.015
Hindu	-0.049
Folk Religions	-0.153
Muslim	-0.374

 
Interpreting from the correlation table above. Higher concentration of Christianity is correlated with higher literacy, while having higher concentrations of Muslims is correlated with lower literacy.

 
 


Concentration of Religion vs GDP (PPP) per capita

Correlations	GDP (PPP) per capita
Other Religions	0.142
Unaffiliated	0.087
Jewish	0.087
Christian	0.079
Folk Religions	0.050
Buddhist	-0.015
Hindu	-0.026
Muslim	-0.210

 
Interpreting from the correlation table above. Higher concentration of Other Religions is  correlated with higher GDP (PPP) per capita, while having higher concentrations of Muslims is correlated with lower GDP (PPP) per capita. This is very interesting, some countries with high concentrations of Muslims like Qatar (67.7%) have very high GDP per capita. However the presence of countries like Niger (98.4% Muslim), Afghanistan (99.7% Muslim) bring down the overall correlation to a negative one.



 

Concentration of Religion vs Average IQ

Correlations	Average IQ
Other Religions	0.196
Buddhist	0.147
Unaffiliated	0.081
Jewish	0.064
Christian	0.017
Folk Religions	-0.030
Hindu	-0.096
Muslim	-0.245

Interpreting from the correlation table above. Higher concentration of Other Religions is correlated with higher average IQ, while having higher concentrations of Muslims is correlated with lower average IQ.







So based on the analysis, there appears to some positive correlations between

1) Concentrations of Muslims vs Birth Rates
2) Concentrations of Other Religions vs Life Expectancy
3) Concentrations of Christianity vs Literacy
4) Concentrations of Other Religions vs GDP (PPP) per capita
5) Concentrations of Other Religions vs Ave IQ

L.A.M.

PS: Feel free to reach comment below, if you would like me to analyze between concentration of religion against any other commonly available data. Full data will be available for download at the end of today.

Note:

1)  I would like to clarify that correlation does not equal to causation. Although there are some statistical correlation between concentration of religion and various factors, it does not necessarily mean that a particular religion results in higher wealth, literacy, birth rates etc. There could be many other factors involved that are not accounted for in the analysis.

2) I am not trying to demean one religion over another and am not here to incite any religious or racial hatred, all I have done is to merely provide some statistics based on widely published numbers.

3) Finally, there will definitely be outliers in the data, so although people can claim things like but XXX country is so rich and they have alot of people from religion YYY, the presence of these outliers do not necessarily disprove the data.

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References:

Life Expectancy:  http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

Religious diversity:   http://www.pewforum.org/data/

Birth Rate:  http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories_by_birth_rate

Literacy:  http://en.wikipedia.org/wiki/List_of_countries_by_literacy_rate

GDP per capita:  http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita

IQ: http://hypnosis.home.netcom.com/iq_vs_religiosity.htm