An Analysis Of The Three Options

Following a quick analysis of the strategies, an analysis of the three options: 

1.       Government Involvement

Government Corporatization

In the article ‘Public administration and public governance in Singapore’ by M. Shamsul Haque in 2009, he analysed the organizational structure and management of the Singapore organizations and noted that the government has corporatized various departments and statutory boards into autonomous agencies, to ensure greater managerial autonomy and operational flexibility, including those of Changi International Airport Services and Civil Aviation Authority of Singapore.  It was highlighted that the minister of finance in his 1997 budget speech had mentioned that the government had converted 102 ministry headquarters, departments, and statutory boards into autonomous agencies in 1997.  These autonomous agencies were based on a framework of autonomy and flexibility which had hoped to encourage greater efficiency and performance.

Has It Worked?

As a testament to how this model has worked out, The Straits Times shared on 1 July 2015 ‘Corporatized airport still soaring high’ that since 1 July 2009 when the Changi Airport Group (CAG) was created after the Civil Aviation Authority of Singapore was split into two, Changi Airport has won about 150 best airport awards, most recently World’s Best Airport 2016 for the fourth year in a row, disproving the fears that it would lead to a focus on profits at the expense of service standards. 

Government Co-Funding

However, the Government is mindful that Changi Airport must remain competitive in an increasingly challenging environment.  To this, Senior Minister of State for Transport Ms Josephine Teo said in The Straits Times ‘Government to co-fund Changi's big expansion’ on 5 August 2015 that the Government will co-fund Changi Airport's expansion, including the construction of the future Terminal 5, although the final cost-sharing has not been decided.  Mr Liew Mun Leong, chairman of CAG had earlier commented that the project was expected to cost tens of billions of dollars and is an investment that is beyond the means of the CAG.  He had in fact suggested for the Government to foot the entire bill, and his team to run the airport.

2.       Private Sector Leads

Efficient Use of Resources

In making his case for private sector involvement, Associate Professor Terence Fan, a transport specialist from the Singapore Management University, said in The Straits Times ‘Government to co-fund Changi's big expansion’ on 5 August 2015 that the Government should consider some private sector involvement in the Changi East project.  He added that "When the private sector is involved, whoever pays is keen to ensure that resources are used efficiently. This helps the Government get the best bang for its buck."

Senior Minister of State for Finance and Law Ms Indranee Rajah in The Business Times on 11 March 2016 'Singapore pushes for private investments in infrastructure’ said that "Private sector players need to be activated, and governments need to be proactive in undertaking reforms to facilitate infrastructure and urban development."

Nationalisation Versus Privatisation

Similarly, SIM University economist Mr Walter Theseira said in Channel News Asia on 30 October 2015 ‘Government should run public transport system’ that the key issue is ensuring the appropriate incentives are in place to yield the desired quality of service.  He was responding to the dean of Lee Kuan Yew School of Public Policy Mr Kishore Mahbubani who had said that Singapore’s public transport system should be run by the Government, as private corporations lack the incentive to invest in the long-term maintenance of a public good.  Mr Walter Theseira argued that “It is tempting to suggest that nationalisation would fix the problem, but it is not nationalisation itself that would fix the issue, but rather, ensuring that the incentives and resources are in place to address maintenance shortfalls and make decision-makers accountable for those problems. Likewise, privatisation without appropriate regulation may not generate efficiency gains.”

3.       Government-Linked Companies Investments

Private Sector Investment

The Straits Times article on 1 July 2015 ‘Corporatized airport still soaring high’ highlighted the case of the Changi Airport's ownership, which was to have been transferred from the Ministry of Finance to investment firm Temasek Holdings.  This has not happened yet due to uncertainty over how future airport expansion and other projects would be funded. This point was mentioned by Mr Liew Mun Leong, chairman of CAG when he shared “My personal view is that it's always better to have a commercial body manage a commercial body... The Government's role is to govern."

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In reality, the three options are in place.  While Changi Airport and CAG are corporatized, their immediate and ultimate holding entity is the Minister for Finance (MOF), the Singapore government.  The ownership was to have been transferred from MOF to investment firm Temasek Holdings, but has not happened yet.  The government is also aggressively pushing for private sector investments in its aerospace hub strategy.

To compare the strategies with the Middle East air hubs, the three Gulf carriers Emirates, Etihad and Qatar are all wholly owned by their governments.  The countries are rich in oil reserves, and industry sources have suggested that their strategies are really about putting their airlines and airports on the world map as quickly as possible. They are expanding their capacities very quickly by investing aggressively in aircraft and other airlines. Their decision-making process is also fast and efficient without the need for bureaucratic red tape. Their strategy is not about making immediate return on investments, but about its long-term branding of their airlines and airports, their countries’ pride.