SINGAPORE (Apr 23): SMRT Corp CEO Desmond Kuek is stepping down after 5½ years at the helm. It isn’t clear what his successor Neo Kian Hong can do to improve the public’s perception of the company.

Kuek took the reins at a time when public satisfaction with the train service was close to a low. Two major breakdowns in 2011 had affected more than 200,000 commuters and led to a committee of inquiry hearing. The CEO at that time, Saw Phaik Hwa, subsequently resigned.

In the interim, board member Tan Ek Kia announced a $900 million maintenance plan to renew SMRT’s assets and prevent future breakdowns. Upon coming on board, Kuek continued on the path Tan had set. The company significantly ramped up its investments in manpower and assets.

Since 2012, SMRT has roughly tripled its engineering headcount from 175 to 500. The entire workforce for the trains business has grown by 40% to more than 5,000. As at end-March last year, SMRT had over 2,900 maintenance workers — a 29% increase since 2014. To deal with complaints of crowdedness, SMRT has added trains to its network: 58 new ones on the North-South (NS) and East-West (EW) lines since 2013, 24 on the Circle Line (CCL), and 13 on the Bukit Panjang LRT line.

These investments had an impact on SMRT’s bottom line. By FY2016 ended March, SMRT was spending half of every dollar of rail revenue on maintenance-related expenditures. Its rail business experienced an operating loss that year of $9.6 million. At a media briefing on March 28, Kuek mentioned that SMRT’s maintenance-related expenditure now takes up more than 60% of fare revenue.

As the situation appeared to grow untenable for investors, two major changes were announced. First, SMRT’s rail business transitioned to a new rail financing framework. The NRFF mitigates the revenue and earnings risk for SMRT through a risk-sharing mechanism with the Land Transport Authority. Then, Temasek Holdings privatised SMRT through a scheme of arrangement. As an unlisted entity, SMRT was expected to restructure itself away from the glare of the public market and without the short-term pressures of earnings expectations. The privatisation was completed on Oct 31, 2016.

What has been the impact of all these changes? SMRT has made some headway on its reliability figures. Last year, the average number of kilometres that trains on the NSL ran without a breakdown — defined as mean-kilometre between failure — was 336,000 train kilometres. In 2016, MKBF was 156,000. MKBF for the EWL increased to 278,000km from 145,000km. On the CCL, MKBF increased to 523,000km from 228,000km. In the first two months of 2018, MKBF for the NSL and CCL exceeded next year’s target of 600,000km. SMRT says the performance of the EWL will catch up after it “settles into the new signalling system”.

But a survey by the Public Transport Council, which regulates fares and advises the transport minister on public transport matters, shows that statistical reliability does not always move in tandem with commuter satisfaction. In last year’s survey, the number of commuters whose overall satisfaction rating was six or more, out of 10, was 94.5%. This was lower than the 96.4% reached in 2016, but higher than the 91.8% figure in 2015. The survey was conducted by PTC in October last year across 22 trains and 25 bus stations and bus stops.

The mean satisfaction score was higher at 7.7, versus 7.6. However, this was due to an improvement in the ratings for bus services. The mean score for bus services improved to 7.9, from 7.6 previously. The mean score for MRT services fell to 7.5, from 7.6 previously.

The decrease in satisfaction with MRT services was probably due to do a tunnel flooding incident in October last year between the Bishan and Braddell MRT stations — an incident that observers see as sealing Kuek’s fate. Much like the 2011 breakdowns, the flooding incident caused severe disruption to train services and impacted over 200,000 commuters.

Neo is now assuming his position as CEO of SMRT under circumstances that bear strong resemblances to those Kuek faced back in 2012. Somewhat ironically, the two also have strikingly similar backgrounds.

Both are Singapore Armed Forces Overseas Scholarship recipients and hold engineering degrees — Kuek from the University of Oxford in the UK and Neo from the University of London. They started their careers in the military, Kuek serving for 28 years and Neo for 30. Neo succeeded Kuek as defence force chief in 2010. Both went on to become permanent secretaries — Kuek in the ministry for the environment and water resources, Neo first in education and now in defence. They have also served on the board of Singapore Technologies Engineering — Kuek’s term ran from 2007 to 2009, while Neo was appointed last year.

Given their similar backgrounds, will Neo take the same approach as Kuek has in dealing with SMRT’s perception problems? Or will he take a different tack? It is to be hoped that Neo has some ideas of his own. But after the amped-up focus on maintenance and asset renewal during Kuek’s tenure, it isn’t clear what needs to be done next.

This article appears in Issue 827 (Apr 23) of The Edge Singapore which is out this week

Subscribe to The Edge