Transport Minister Raymond Lim yesterday refuted the idea that the industry was 'contestable only if there are many players'.

'This is not necessarily so,' he said. 'Competition is not purely a game of numbers. You can have just a few firms and they can provide very effective competition.'

Take, for instance, Boeing and Airbus, he said. 'The key is to make sure the markets are indeed contestable, that people can indeed come in and bid for the bus route packages.'

Mr Lim's comments at the debate over his ministry's budget came two months after the Land Transport Review was made public.

Among its measures was the move to introduce competition in the bus and rail sectors, currently dominated by two public transport groups.

Operators will bid for the right to provide a package of routes designed by the Land Transport Authority.

MP Low Thia Khiang (Hougang) wanted more clarity on this, asking if it would result 'in real market competition with different operators bidding down prices that will benefit consumers'.

'My concern is whether the requirements, such as the amount of capital and track record, will be so onerous as to preclude small players, who could give the incumbent players serious competition,' he said.

Would there be 'real contestability' against the government-linked corporations (GLCs), he asked. Or would it end up being a case of huan tang bu huan yao (changing the soup but not the medicine), a Chinese proverb that refers to a change in form but not in substance.

Mr Lim replied: 'Whether it's GLC or non-GLC is really not the issue.

'The issue is to ensure that, when we design the tender package, it is a level playing field and the different operators can, if they wish, bid for the tender.'

He stressed that his ministry wanted to avoid competition that duplicated resources, as is the case in Hong Kong.

There, head-on competition means that buses compete to see who gets to the bus stop first. 'Drivers drove as if they were in an F1 race and posed a danger to the public,' he said.

Another MP who discussed the issue of contestability was Mr Cedric Foo (West Coast GRC), who chairs the Government Parliamentary Committee for Transport.

He urged the ministry to adopt a two-envelope system, where bidders submit a price proposal separately from the technical proposal.

The latter is assessed first. Only if it makes the mark is the price envelope opened. 'Such a system ensures that the price proposal will not influence the assessment of the technical offer,' said Mr Foo.

He also suggested that Singapore learn from London, where the government sets the fares and takes on the revenue risks, freeing operators to concentrate on service.

'Cost savings of up to 20 to 30 per cent over public monopolies are not uncommon,' said Mr Foo.

But Mr Lim rejected this, saying that the operator would then have no incentive to increase patronage.

Recalling what ComfortDelGro chief executive Kua Hong Pak had told him, he noted that, in London, some buses were so empty they were like 'ghost buses'. The operators had been paid to run them, whether there were passengers or not.

He spelt out two principles to which his ministry would adhere:

First, the operating costs of the public transport system must continue to be covered by operating revenues.

'If we lose this discipline, it is the taxpayer who would ultimately pay for it,' he said.

Thus, even when the LTA becomes the central planner of bus routes, it does not mean that the profitability of routes will no longer a be consideration, he stressed.

Second, to ensure a performance-based element tied to the operating rights.

'This way, operators are incentivised, even during the term of service, to provide a high level of service,' he said.