Here is another case of private gains but socialized losses.
The Star reports that some bus operators wanted the government to bail them out. They reasoned that they would go bankrupt. Fares “that they collect can no longer cover costs.”[1]
That is nice, is it not?
When things go awry, get somebody to pay for you. When the going is good, keep the money for yourselves.
Without any doubt, I prefer bankruptcy to bail out. In fact, bankruptcy is likely to be good for these bus operators.
One, if they face competition along the routes that they serve, then some of them will be out of business, which then grants the surviving operators monopoly power. The fares can be raised after that, subject to other constraints, like train services, cabs or private cars. The government of course should refrain from the temptation of regulating those fares. If they cannot compete with these other means of transportation, then clearly the market does not appreciate the bus service, and thus, no need for this type of bus service.
Two, these bus operators will stop losing money once they are bankrupt. That is the point of bankruptcy, anyway. Coupled with limited liability, bankruptcy can do wonders. Of course, some banks in Malaysia demand individual guarantee, which makes limited liability irrelevant. Still, that is a different issue that requires solution that I cannot think of right now.
Apart from that, the Pan Malaysia Bus Operators Association president Ashfar Ali reasoned that the “government is no longer our proponent, but our competitor.”
This is the only hard point to counter.
I however prefer the government to privatize some of the services instead, like that belonging to Mara, i.e. Transnasional. For others like RapidKL and RapidPenang, I wonder how many of these private bus operators actually compete with RapidKL and RapidPenang?
[1] — PETALING JAYA: Hit by escalating cost of operations, stage bus operators nationwide have asked the Government to take over their businesses and liabilities.
Pan Malaysia Bus Operators Association president Datuk Ashfar Ali has sent a memorandum to Land Public Transport Commission (LPTC) chairman Tan Sri Syed Hamid Syed Albar proposing that the Government buy over their assets. [It’s bailout or bust, bus firms tell Govt. Teh Eng Hock. The Star. February 21 2011]
4 replies on “[2322] Bus operators should go bust”
maybe if we have the likes of airasia operating the bus companies they wont need bailing out ey.
On agreement with you on this one.
Should always let market forces determine the survival of these type of companies, otherwise it’s an inefficient entity.
If the government wants to regulate the fares then it is only fair for the government to bail out these bus companies. My family runs a a bus company in Johore and we are still solvent. If you want to know of the woes we face then come to Johor. An UMNO Malay bus company which was ‘forced’ to take up the routes of two other bus companies though on a reduced scale in the name of ‘kewajipan sosial’ is bleeding heavily. I wonder how long this UMNO company can help the government with the ‘kewajipan sosial’ bullshit. The business of the bus operators did not start of as a heavily regulated industry. However, in the name of ‘kepentingan rakyat’ and ‘kewajipan sosial’ the government made a has of the industry, All we are asking is for the government to shoulder their responsibilities.
If you want to know of the woes we face then come to Johor.I will buy you dinner and give you a short history of how the government have consistently kept the bus rates low while we scramble like idiots to keep our heads above escalating operating cost apart from having to deal with the corrupt dolts in the LPKP and JPJ.
“Coupled with limited liability, bankruptcy can do wonders. Of course, some banks in Malaysia demand individual guarantee, which makes limited liability irrelevant. Still, that is a different issue that requires solution that I cannot think of right now.”
US Chapter 11 style bankruptcy – gives court protection from creditors, while giving time for the management and shareholders to assemble a debt restructuring/business rescue program. Of course, I don’t think going cap in hand to the government is a viable rescue option.
I actually thought of Chapter 11 in reference to promoting entrepreneurship. Our bankruptcy code favours creditors too much, and given the penalties for failure, there’s obviously less incentive for people to go into business on their own.