Hansard, Friday, 13 February 2015

1 Er Dr Lee Bee Wah asked the Minister for Transport (a) how are the public transport operators' recent fare increments derived; (b) whether the Ministry has plans to revise the fare increment computation formula; and (c) whether the fares have to be revised annually.

2 Er Dr Lee Bee Wah asked the Minister for Transport (a) with the sharp drop in oil prices, why are the public transport operators allowed to raise their fares; (b) how much will these operators benefit from the fall in oil prices; and (c) why are these operators not absorbing the 2.8% increase carried over from 2014 given that they are running profitably.

Madam, with your permission, may I take Question Nos 1 and 2 together, please?

Yes, please.

Mdm Speaker, fare adjustments are guided by the fare adjustment formula and process recommended by the Fare Review Mechanism Committee (FRMC) and were accepted by the Government in 2013. The formula is pegged to changes in the core Consumer Price Index (CPI), Wage Index and Energy Index over the preceding year, less 0.5% for productivity gains. The core CPI and the Wage Index constitute 40% each of the fare formula. The Energy Index, constitute the remaining 20%.

The formula broadly reflects the operating cost structure for the public transport operators. The FRMC had also recommended that fare review exercises be conducted annually. This is so that commuters do not have to endure a sudden, large fare adjustment after a few years. This formula and process for fare adjustment is valid for five years, until 2017, and we will review it again thereafter.

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Er Dr Lee has asked how the recent 2.8% fare increment was derived and why fares were increased despite the sharp drop in oil prices. Er Dr Lee will recall that the full fare adjustment quantum considered by the Public Transport Council (PTC) in the 2013 fare review exercise was actually 6.6%. So, they considered 6.6% for the 2013 fare review exercise. But the PTC was mindful of the impact of a large fare increase on commuters. So, the Council decided to grant only a 3.2% increase, or less than half of the 6.6% increase.

The remaining 3.4% was carried over to the fare review exercise for 2014. If we add this 3.4% to the negative 0.6% for the 2014 fare adjustment quantum, we, therefore, get a total fare adjustment quantum of 2.8% for the 2014 fare review exercise. In short, the current fare increase was due to the carry-over from the last exercise and the fall in oil prices in 2013 helped to mitigate this.

The continued fall in oil prices in 2014 and the start of this year will generate some cost savings for the transport operators. I should point out, however, that energy costs comprise about 20% of the operating costs for the sector, which is why the Energy Index is only 20% of the fare formula. Other costs, which include salaries for bus drivers and other public transport workers, account for the remaining 80%, and these have continued to experience upward pressure. We also expect operating costs to go up when higher operating standards come into effect from 2016. Notwithstanding this, overall, we are likely to see a negative fare adjustment of about 1% for the fare review exercise in 2015, because the energy costs have come down significantly in 2014. The 2015 fare adjustment that we will do at the end of this year will take into account all the indices of 2014.

When deciding on the fare adjustment, the PTC also has to ensure that the overall public transport system remains financially viable. Er Dr Lee has asked if the public transport operators could absorb the fare increase out of their profits. The fact is that operating buses and trains is not a highly profitable business; far from it.

In fact, of all the profits that are generated, roughly about 95% comes from the non-fare business and, at most 5% comes from operating trains and buses. Only in the recent quarters have fare revenue and income crept marginally above costs. Operators, however, need to make profits, for example, to pay for future capital expenditure. In a previous Sitting of this Parliament and in reply to a supplementary question from Er Dr Lee Bee Wah, I mentioned that SMRT has significant future capital commitments from now to 2019, somewhere in the region of $2 billion. We spoke about that. From now to 2019, SMRT has significant future capital commitments in the region of $2 billion. How do we put this $2 billion in context? Well, it is more than three times the cumulative profits that it has made in the last five financial years.

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The most important thing is to reassure Members of this House and the commuting public that the Government is committed to ensuring that public transport fares always remain affordable. In this regard, it is worth noting that households have generally been spending a smaller proportion of their income on public transport over the last 10 years – a point that I made in previous Committee of Supply (COS) debates and I will again show this in the coming COS debate in March.

In addition, during fare exercises, special attention is paid to vulnerable groups, such as senior citizens, persons with disabilities and lower-wage workers. For this year, fares will remain unchanged for these groups of commuters in the April fare exercise and, generally, the fares for more than 1.1 million commuters will be held constant.

Mdm Speaker, I would like to thank the Minister for his comprehensive reply and patience. The fact is that whenever there is a fare review, it attracts a lot of discussion amongst residents. The fact is that the operators are allowed to do business beyond bus and trains, and so, residents expect them to cross-subsidise. The fact is that both SBS Transit and SMRT recently reported huge jumps in profits. If I remember correctly, SBS Transit reported a 27.8% jump in 2014 profit and SMRT a 58.4% increase in Q3 profit.

Therefore, I would like to ask the Minister to seriously consider the fare review formula. Can this formula include profitability instead of just about operating cost? And can the review of the formula be brought forward, instead of waiting until 2017?

Mdm Speaker, let me thank Er Dr Lee Bee Wah for her passion and for championing these various areas. Indeed, there is a certain amount of cross-subsidy that is taking place. Even for SBS Transit, if you have seen the recent results for the whole of FY2014, the buses continue to make a loss. The reason the company remains profitable – and I will come to the profit figures in a while – is because of the other income that they have managed to generate as a result of rentals, commercial operations and so on.

For SBS Transit, the profit for the whole year increased from about $11 million-plus to $14 million-plus. In percentage terms, very high; but in terms of absolute numbers, measured against total revenue for the year of about $1 billion, you really see that the profit margin is about 1.5%.

The profit margin for SMRT for the past financial year (FY) – their FY ends only in March 2015 and it would not be appropriate for me to speculate what the final quarter's figures are – was 5%. As I had mentioned before, this was largely due to the revenue and profits that they generated from their non-fare business – commercial operations, rentals, taxis and so

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on. SMRT, you may recall, had been losing money on buses for quite a number of years, and it is only in the recent quarter that we have seen a turnaround, helped partly by measures that they have taken as well as the fortuitous situation of a reduction in fuel costs.

At the end of the day, the overriding factor that is of importance must be: are our fares affordable, how do our fares compare with those of other countries and cities? Because if you say that you stifle every possibility of a private operator making some profit, improving efficiency, productivity of which there is a dividend that is paid to all commuters through that 0.5% in the fare formula, if you stifle all that, then, ultimately, if it results in an even larger increase in fares, is that of benefit to everybody? That, to me, must be the question that we always ask.

That is the question that the PTC looks at very carefully: how do you find a balance between making sure that fares are affordable to commuters and yet ensuring the financial viability of the entire system? If the system ultimately is not financially sustainable, then, over time, the Government and all taxpayers will have to step in to bail it out. The important thing is to make sure it remains financially viable; make sure that our fares are affordable on two counts. One is in comparison with other cities; and two, in comparison with household income and the percentage that households are paying on public transportation.

Mdm Speaker, I thank the Minister for his explanation. I think the overriding factor must be whether there is a justification for an increase in the fare since the reported profit keeps going up. Anybody who invests in the company will know that those operators do not bear high risk because they are providing a basic need; everybody will have to take public transport if they do not own a car. My question is to come back to this fare review formula. Can the profitability of the PTOs be included in the fare review formula: can the change in the formula be effected earlier?

On the formula, I think it is always useful to allow a formula to run for a number of years. We have had this formula running since 2013. I think it is useful for it to continue until 2017 and we do a review then.

On the point that profitability has increased and, therefore, we should not increase fares – I take the Member's point. Thus, the converse must also be true – that when profitability has decreased, even though they are profitable, we must allow them to increase fares.

So, the Member's point was that when profitability increases, take that into account and, therefore, do not allow them to increase fares. Now, I see the Member's point: that as long as they are profitable, we cannot allow them to increase fares. Hence, we come back to

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the question of what incentive is there for them to be even more efficient and more productive, which ultimately benefits the commuters? If they run a shoddy operation and the business becomes very expensive, ultimately, we all bear the costs. That always is a fundamental.

The second point is this: we have mentioned that they have major financial commitments over the next few years, until 2019. I hope that point is not lost. They have commitments to buy trains and all the other projects that we had spoken about in the previous Parliamentary sessions, amounting to about $2 billion.

Therefore, if you take $2 billion, what does it all mean? It is more than three times the cumulative profits over the most recent five years. More than three times of that. They will have to figure out a way to meet these commitments. They will have to figure out a way to make sure that they remain profitable. But most important of all, they will have to figure out a way to make sure that they continue to improve on reliability and the service that they offer to commuters.

I would like to ask the Minister: in relation to the provision of public transport, is there not also a duty on the part of the providers to see that as part of their public service? In other words, we should not look at profitability and determine the price of public transport fares, just solely on the basis that the buses may or may not be making profits. The fact is that there is cross-subsidisation within the company, and overall, there is profit. So, should the PTC then not take that into account in determining the fare as well?

Mdm Speaker, I thank Ms Chia for that supplementary question. Indeed, as I have mentioned earlier, there is a certain amount of cross-subsidy. They do not determine the fares; neither do they determine the standards because, really, at the end of the day, they are almost running like monopolies. The last thing you want for them to do is to be able to determine standards and to determine fares. So, the standards are actually determined by the Land Transport Authority. The fares are determined by the PTC.

We have debated extensively in this House about the fare formula that was derived in 2013 after Mr Richard Magnus and his team took an extended amount of time to study this matter carefully, as well as to consult widely, before coming out with the fare formula.

My fundamental point is this, which is really an elaboration of what I have mentioned to Er Dr Lee Bee Wah: are we better off if the services are provided by an entity that is run effectively, that is able to keep costs down, that is able to allow us to enjoy relatively low

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fares, certainly compared to cities around the world? Is that of benefit to us?

And if that is of benefit to us, rather than the converse – which we have seen in a number of cities where they run nationalised systems, not very efficiently done, the cost goes up, they have no handle on that, as well as on other aspects of transportation, ultimately, it is borne by much higher fares in those cities or through a large subsidy from government and taxpayers – if you look at those two possibilities, then, certainly, the former must be more enjoyable and acceptable for Singaporeans. That is the situation that we have today.

I understand the point and I understand the concern that people always have over profitability of these operators – what is the reasonable amount, what is acceptable and so on. In the past, we also looked at Return On Total Assets (ROTA) but, for the recent fare formula, they have also tried to make sure that we just do not look only at ROTA but try and have a formula that mirrors more closely the operating cost of the two operators and, at the same time, make sure that the productivity improvements that they do make, part of it is given back to commuters as well.

So, hopefully, we are trying to arrive at a balance where fares are affordable, in relation to household income and expenditure; fares are affordable in relation to what other cities around the world may be paying for the same level of service or a lower level of service, in fact. And fares are affordable because there are various targeted subsidy schemes that the Government may put in place in order to protect the most vulnerable groups. That is the situation that we are trying to achieve.

Mdm Speaker, a supplementary question. From the Minister's reply, it seems to me that the fare needs to be increased, so that the operator remains profitable and, with that, they can thereby be more efficient. That is the logic, as I understand it. But on the converse, will it be that if the company or the operator is profitable and productive enough, they would have made enough profits and there is no need to increase the fares?

Mdm Speaker, I am not really sure I follow the argument of Mr Low Thia Khiang. But let me try to interpret what I understand from it: that if they are profitable and productive enough, there is no need; or if they are efficient, productive and profitable enough – sorry, forget about the profitability; if they are efficient and productive enough, there is no need to increase fares.

Theoretically, yes, except that they do face cost pressures as well. They employ more people, many of them Singaporeans. Their employees do expect wages to go up. You run

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Town Councils, some of you run companies and so on, and you know the cost pressures that we all come under, and they come under, too.

Much as they would like to reach that state of nirvana where efficiency, effectiveness, productivity can overcome all these pressures, the truth is that 80% of their cost largely mirrors the core CPI as well as the wage increases. We know wages have been going up; we know that core CPI has been going up; we have been fortunate that the 20% component, that is, the Energy Index has gone down, using the index for 2013. In the second half, prices have come down, compared to 2012.

So, I am not so sure that you can actually escape from the fundamental point that they do, like every other entity, public or private, come under the same cost pressures, the same expectations of their employees to see a reasonable increase in their wages. Driving buses, for example, is a very manpower-intensive kind of operation, together with the maintenance of the buses. Inevitably, they cannot avoid coming under the same pressures which are reflected in the formula that Mr Magnus and his team have derived.

3 Mr Gan Thiam Poh asked the Minister for Trade and Industry what is the projected reduction of electricity and gas tariffs in the next six to 12 months in view of the lower price of fuel oil.

(for the Minister for Trade and Industry): Mdm Speaker, the Ministry of Trade and Industry and the Energy Market Authority (EMA) do not project electricity and town gas tariffs. Both the electricity and town gas tariffs are reviewed by EMA on a quarterly basis to ensure that the tariffs fairly reflect the underlying costs of production, which include fuel costs.

The fuel cost component of the electricity tariff is based on the average forward fuel oil and dated Brent prices in the first two and a half months in the preceding quarter and makes up approximately half of the electricity tariff. For town gas, the fuel cost component is based on the average forward fuel oil and naphtha prices for the quarter and makes up about 40% of the tariff.

The price of natural gas, which is the main fuel used to produce electricity and town gas in Singapore, has fallen, in tandem with global oil prices. This is because our natural gas contracts are indexed to oil prices, which is the market practice in Asia.

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In the recent tariff revisions, the electricity tariff for January to March 2015 decreased by 7.9% to 23.29 cents/per kilowatt hour (kWh), and that is compared to a decrease in fuel cost of 16.4%. As I have mentioned, fuel cost is approximately half the cost of generating electricity. The town gas tariff for February to April 2015 decreased by 8.7% to 19.02 cents/kWh, compared to a decrease in fuel cost of 23.1%.

4 Mr Gerald Giam Yean Song asked the Minister for Trade and Industry (a) whether the economic promotion agencies have set targets for the number of SMEs to be groomed into Globally Competitive Companies within a specific period of time; and (b) if so, what are these targets and time periods.

(for the Minister for Trade and Industry): In its 2010 report, the Economic Strategies Committee set an aspirational goal of having 1,000 Singapore enterprises with revenues above $100 million by 2020. This is an increase of 470 from the base of 530 such enterprises in 2007. The goal of reaching 1,000 such companies reflects the objective of developing a strong base of globally competitive companies to create a vibrant corporate ecosystem in Singapore and grow the external wing of our economy.

I thank the Minister of State for the reply. I just wanted to ask the Minister of State what are the current schemes that the Government is putting in place in order to achieve this target of 1,000 companies and are there any benchmarks on these schemes to achieve those targets?

For companies to grow to $100 million of revenue in size, they have to do a few things: expanding their base revenue and creating new revenue streams. At the same time, they have to look at the type of sectors they are in and which kind of markets they should target, overseas especially, because Singapore, being a smaller market, may not be sufficient for them to grow to that certain size.

There are a few schemes through which we help them. First is that they have to strengthen their company, especially the internal processes and new technologies, so that it is scalable for the companies to grow to a large size of $100 million. We have a Capability Development Fund that helps them to tap on to apply technology, human capital development and also productivity improvements. Today, there are more than 1,000 companies or enterprises that tap on these funds. We hope that more companies can come forward to tap on these funds. This is for the internal processes.

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The other scheme to help them is to expand their revenue base of going international, that is, internationalisation, going overseas and all that. IE Singapore organises several trade missions where we bring companies overseas to assess the market. But at the same time, for companies that cannot go for these overseas trips or are unable to, say, set up base overseas, we have a scheme that helps them to assess the market through information and resources that we have gathered there, and then provide them with the data when they are locally based here.

For example, schemes like the Market Readiness Assistance, provide a broad-based informational, advisory and financial support for small and medium enterprises (SMEs) in order to assess whether they should go international. Secondly, of course, we have the Global Company Partnership Scheme. We identify some potential good companies and, I would not say handhold them, but we go in-depth into their operations and work together with them to assess opportunities overseas and create revenue streams.

To date, we have assisted more than 27,000 companies, of which 80% are SMEs, to internationalise, and this is an increase of 16,000 companies in 2013. We can see that more and more companies are going overseas. Hopefully, we can reach our target of 1,000 companies by 2020.

5 Mr Ang Wei Neng asked the Deputy Prime Minister and Minister for Home Affairs (a) what are the additional measures that the Police are embarking on, including co-operation with other Government agencies, to prevent further escalation of crimes involving e-commerce; and (b) how many cheating cases involving e-commerce have been solved in 2012, 2013 and 2014.

(for the Deputy Prime Minister and Minister for Home Affairs): Mdm Speaker, there were 238 reported cases of cheating involving e-commerce in 2012, 510 cases in 2013, and 1,659 cases in 2014. The sharp increase reflects the growth of online shopping transactions and greater awareness and reporting of such crimes.

From 2012 to 2014, 132 arrests were made in connection with such cases. However, many perpetrators are based overseas, making it harder for the Police to track them down. Investigations also take more time given the transboundary nature of such crimes and the Police need to work closely with their international counterparts.

As more people are making purchases online, criminals will attempt to capitalise on this trend. Police will continue to educate consumers to beware of such scams when they do

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online shopping. For example, in November 2014, the National Crime Prevention Council and the Police launched a nationwide Anti-Scam Public Education Campaign to raise public awareness of common scams in Singapore. This includes a new website, advertisements and other materials that explain how scams are carried out.

The Police are also working closely with partners, such as the Media Development Authority, Monetary Authority of Singapore, major financial institutions and online shopping sites, to broaden efforts to educate consumers about online scams.

I thank the Second Minister for the comprehensive reply. The crime rate involving e-commerce has increased by more than 200% in 2014 – 225% to be exact – and it is a cause for concern. And the problem, as the Second Minister said, is compounded by the low solving rate of e-commerce crime.

I had, last year, in September, suggested that the Police consider setting up a dedicated cybercrime unit so that they can really look at the different aspects of cybercrime, get the relevant skillsets and also look at the transboundary kind of situation. But it did not appear to Senior Minister of State Masagos at that time to take this suggestion seriously. So, if the e-commerce crime rate has increased so rapidly, would MHA consider this suggestion again?

Madam, we share the Member's concern over the rising rate of such cybercrimes. The Police have been taking a series of measures. As I mentioned, one aspect of them pertains to the collaboration with other Government agencies as well as the transaction or service providers and also conducting broader education campaigns in order to raise awareness.

Police are also constantly upgrading their cyber capabilities and work closely with international partners and experts in order to track down persons who use the Internet to commit crimes. The nature of this crime is such that it is somewhat elusive at times, given the nature of the medium and the transboundary nature of the transactions. But having said that, there is increasing collaboration and the Police have got specific resources allocated for this purpose. And I would add that the Police are also working with Interpol's new Global Complex for Innovation, which is located in Singapore. One aspect of this Complex is a digital crime centre that supports digital forensic and develops new solutions to tackle cybercrime.

So, I want to assure the Member and, indeed, all Members of the House, that this is something that is taken seriously. The Police have allocated specific resources, maybe not a division, as suggested by the Member, but there have been allocated resources and specialties developed, and there is collaboration with international bodies as well as the

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Interpol centre in Singapore.

6 Mr Gan Thiam Poh askedthe Minister for Transport whether the public transport operators (PTOs) will consider extending a special transport voucher to all Singaporeans especially the Pioneer Generation, in commemoration of SG50 and/or extending a special fare rebate to all commuters due to the current low oil prices.

Mdm Speaker, I thank the Member for the suggestion. It is also one that Mr Seng Han Thong had separately raised to me earlier. As part of the 2014 Fare Review Exercise, the two public transport operators will contribute $13.5 million to the Public Transport Fund. We intend to use up to $7.5 million from this Fund to provide 250,000 Public Transport Vouchers of $30 value to needy families for this fare exercise.

The Government also has plans for the remaining amount in the Public Transport Fund and we will announce the details when we are ready to do so.

I thank the Minister for the positive reply. I think we are all aware that Singapore public transport is heavily subsidised by the Government. My thinking is that since it is heavily subsidised, and actually there are profits made by the transport companies and there are also savings there, would the Ministry perhaps consider making all Singaporeans as shareholders of these public transport companies, so that they get to share in the savings, especially for this year, which is the 50th year of Singapore's Independence (SG50)?

I think we had done that in the past via the issuing of Singtel Special Shares. Perhaps, the Government may consider that to celebrate SG50 and to thank all Singaporeans for their support this year, the understanding that they have shown, their support of the transport operators, especially in the past two years, and for the inconvenience that some of them have to go through.

Mr Gan, can you please put your question?

Okay. Thank you.

Mdm Speaker, let me thank the Member for his suggestion which is to make all Singaporeans shareholders in the company. I am afraid that this is something that goes beyond the ambit of the Ministry of Transport, but I will raise this matter to the

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Minister for Finance and let him consider this in his own good time.

7 Mr Ang Wei Neng asked the Minister for National Development between 2010 and 2014, what are the number and percentage of HDB BTO flat applicants who (i) gave up their units before collecting their keys though they have selected their flats; and (ii) appeal to delay the collection of their keys, broken down by year, room type and whether they are first-time applicants.

(for the Minister for National Development): Mdm Speaker, for the sales launches from 2010 to 2014, there were about 113,000 new flat bookings as at 31 January this year. Of these bookings, about 10,000, or 9% of the applicants, did not complete the purchase.

The number of appeals to delay key collection totalled about 460: 30 in 2010, followed by 50 in 2011; 90 each in 2012 and 2013; and 200 in 2014. The increase in appeals corresponded with the increase in the number of flats completed over the years.

Out of the 460 appeals, about 180 appeals were from first-timer applicants. Generally, 4- and 5-room flat types had more appeals from first-timers, while the smaller flat types had more appeals from second-timer applicants. About three in four of them have since collected the keys.

I thank the Minister of State for the reply. I was asking about the percentage and number of applicants who gave up their flats from 2010 to 2014, broken down by year, to see whether there is an increasing trend of residents who are not able to collect their keys due to financial problems, that is, those who have booked the flat but could not collect the keys because of financial problems.

Madam, for the figures as of now, if the Member could file a written request, we could put up a table for him. But my sense is that HDB will look at the individual circumstances of the applicants. If they face, for example, financial hardship that the Member spoke of, we will see how best we can assist them.

8 Mr Ang Wei Neng askedthe Minister for National Development in 2013 and 2014 (a) what is the number of Singaporeans and Permanent Residents who have appealed to HDB to purchase a HDB flat whilst holding (i) private property in Singapore (ii) overseas property;

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and (b) how many of them have been successful in their appeals.

(for the Minister for National Development): Madam, in 2013 and 2014, a total of 1,587 Singapore Citizens and Singapore Permanent Residents appealed to buy a Housing and Development Board (HDB) flat while holding on to their private property. Among them, 486 owned a local private property, while 1,101 owned an overseas private property. Six hundred and six of the appeals were approved. All approved cases were appeals from Singapore Citizens.

I thank the Minister of State for the reply. For those appeal cases involving Singapore Citizens owning overseas properties and yet could buy an HDB flat, what are the criteria that HDB uses to evaluate these appeals?

Mdm Speaker, HDB will assess each appeal on a case-by-case basis. For example, if a resident was under extenuating circumstances, such as financial hardship, and needed to buy an HDB flat while the private property was undergoing mortgage sale, this could be some of the circumstances that we will look into. But each case is different. We assess them individually.

9 Mr David Ong asked the Minister for Transport (a) what are the guidelines for erecting covered pedestrian overhead bridges; and (b) whether the Ministry will review these guidelines for existing pedestrian overhead bridges that span across major expressways connecting residential estates to make it more convenient for residents.

(for the Minister for Transport): Mdm Speaker, 84% of pedestrian overhead bridges are covered. Over time, the Land Transport Authority (LTA) plans to provide cover for the rest, including those that span across expressways. Those that have higher pedestrian usage and are connected to a transport node or facility will be accorded higher priority.

Madam, a couple of supplementary questions. Working towards an enhanced pedestrian walking experience, would the Ministry consider incorporating standard shelters across all its overhead bridges connecting housing precincts other than meeting the criteria of connecting transport nodes, schools or even public institutions? Because I have two such bridges across the PIE in Bukit Batok for which many residents have made appeals. So, I hope that the Ministry can consider that.

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The second question: since we are on the issue of overhead bridges, can the Ministry also update us on the status of LTA's efforts in making our overhead bridges more accessible to our elderly, wheel-chair bound commuters, cyclists and parents with prams?

Madam, I would like to thank the Member for the questions. Essentially, as I have mentioned earlier, we would cover all the overhead bridges and we would give priority to those which have higher pedestrian flow as well as those which are connected to the Walk2Ride programme or are within 400 metres of a rail station. With regard to the standard, I would like to clarify what is meant by "standard".

Secondly, it is about the facilities for the elderly. In fact, we have started a long while ago to provide such facilities and we are continuing our efforts to do so, as part of these plans for an ageing society. It is not only done by LTA or the Ministry of Transport; it is an inter-Ministry effort. And I would like to assure the Member that it is something that is a high priority on our agenda as part of the process of providing for an inclusive society.

Maybe the Member could share with me about the "standard" that he mentioned.

Madam, allow me to clarify. The "standard" which I referred to is to provide shorter pedestrian overhead bridges (POBs), that is, for any POB that connects a housing estate to another housing estate. I have two POBs in Bukit Batok that are not covered yet. I also know that one of the criteria is to have high pedestrian traffic. But for some bridges, they do not have high traffic but they do give tremendous convenience to our residents who want to connect from one estate to another estate.

Again, I would like to reiterate that we will cover all POBs over time. With regard to his covered linkways, maybe if he could share the specific details with me, I am sure our staff at LTA will work closely with him with regard to the POBs in question. So, I look forward to receiving details from him.

10 Mr Gan Thiam Poh asked the Minister for Transport whether the Ministry will continue with the free pre-peak travel scheme for the MRT and make it a permanent scheme.

(for the Minister for Transport): Mdm Speaker, the free pre-peak travel trial was extended until 23 June 2015. The ratio of morning peak commuters to pre-peak commuters heading to the city has been sustained at around 2.1, compared to 2.7 prior to the trial. This translates to a 7%-8% shift since the trial started. A survey by the Land Transport Authority (LTA) showed that the lack

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of flexible work arrangements may be a reason why the shift has not been more pronounced.

To address this, we have been working with employers in the city through the Travel Smart programme since July last year. Forty-three companies have joined the programme so far. We will continue to evaluate the free pre-peak trial, along with the Travel Smart programme, before deciding if the scheme should be extended or made permanent.

2.13 pm

Order. End of Question Time.

[Pursuant to Standing Order No 22(3), provided that Members had not asked for questions standing in their names to be postponed to a later Sitting day or withdrawn, written answers to questions not reached by the end of Question Time are reproduced in the Appendix.]

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[(proc text) Order read for Resumption of Debate on Question [12 February 2015] (proc text)]

"That this Parliament:

notes with concern the Auditor-General's Report on the Audit of Aljunied-Hougang-Punggol East Town Council (AHPETC) (Paper Misc 1 of 2015), specifically its findings on:

the deficiencies in AHPETC's financial and accounting systems, record-keeping and safeguards;

the uncertain accuracy and reliability of AHPETC's accounts;

the lack of proper disclosure and oversight by AHPETC's Town Councillors, especially over related-party transactions and conflicts of interest; and

the risk that AHPETC has not properly managed and spent public funds;

calls on all Town Councils to uphold high standards of accounting, reporting and corporate governance so as to safeguard residents' interests; and

supports strengthening the legislative framework for Town Councils, in order to hold those responsible for their good management to proper account. – [Minister for National Development]."

[(proc text) Question again proposed. (proc text)]

Minister Shanmugam.

Mdm Speaker, I said that I would come back to clarify if necessary on Annex 3. Ms Lim asked me yesterday whether the table, which I circulated showing AHPETC paying FMSS significantly more per unit, is correct. I have verified the rates in the table that I gave, in Annex 3, are correct. These are the rates in the management agency contracts that the Town Councils have signed with their respective

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Managing Agents.

AHPETC is the only Town Council where the Managing Agent charges differential rates for residential and commercial units. Some Town Councils, in the past, charged differential rates, but all the Managing Agents have since done away with those and applied a fixed rate for both. Ms Lim may have been mistaken and confused the Managing Agent rates with the service and conservancy charges (S&CCs) paid by commercial units which may differ from the S&CCs paid by residential units.

So, the calculation that I have put out is correct and, on a weighted average basis, AHPETC pays $1.6 million more, compared with other Town Councils. Thank you.

Ms Sylvia Lim, you wish to make a clarification?

Yes, Madam, and also to clarify to what the Minister has just clarified, if I could.

Yes, not a speech, please, Ms Lim.

No.

Just a clarification.

Yes, Mdm Speaker. I would like to respond to what the Minister mentioned. I was not confused about whether it was S&CC rates or Managing Agent rates. My response was based on documents that we had seen from PAP Town Council Managing Agents stating very specifically that they charged a higher rate for commercial units compared to residential units. So, that is my clarification.

Madam, may I proceed to clarify something I said in my speech yesterday?

Yes, please.

Yesterday, in response to the Minister's mention of cyclical information reports being late from AHPETC, I said that in terms of replacing lift parts, the ropes and sheaves were on time and that lift batteries were being scheduled in accordance with the schedule by the Ministry of National Development (MND). What I should have said was that the replacement of the ropes and sheaves was on schedule, and that the replacement of lift

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batteries is being done in accordance with the schedule that we have given to MND.

Mr Liang Eng Hwa.

Mdm Speaker, thank you for the opportunity to join in the debate.

What was revealed in the Auditor-General's Office (AGO) report went beyond what many had imagined. It is like reading an extreme negative case study in a text book on corporate governance. The only difference is that this is real. It is a live example and, sadly, something that will bring disrepute to many of our elected Members here.

Glaring lapses that are most disturbing to me and many others are the mismanagement of the Sinking Funds, the disregard for the governance of related party transactions and conflict of interest, the shocking lack of internal control, the mishandling of S&CC arrears and several instances of amounts collected and paid out that were not properly recorded, to name a few.

It gave the impression of a house in disarray and also, critically, the absence of leadership to ensure governance, transparency and accountability.

The financial affairs for the Town Council were in such a shambles that both AGO and, earlier, the AHPETC independent auditors, were unable to draw any meaningful opinion on the Town Council's state of affairs and transactions. AGO said that due to the inadequacies in the accounting system and procedures, the financial statements prepared were inaccurate and not reliable. And, hence, they were unable to establish if public funds were properly spent, accounted for and managed.

AHPETC's independent auditor had not once but twice and, in fact, two years in a row, stated that they were not able to obtain sufficient appropriate audit evidence to provide the basis for an audit opinion. In the 2012/2013 report, its independent auditor issued a qualified opinion stating 13 issues of concern over the Town Council's account.

I know this was talked about at length yesterday by Minister Khaw and Minister Shanmugam, but it is worth reiterating again to remind all in this Chamber of the seriousness.

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Qualified opinions from independent auditors are about the most disapproving opinion you can get from an auditor. And it usually suggests material discrepancies that compromise the accuracy and integrity of the financial statements. Any companies receiving a qualified opinion would almost drop everything to immediately address the issues raised and would expeditiously act to rectify the concerns raised as well. However, in the case of AHPETC, its response to the adverse audit report was surprisingly one of sloppiness and lack of urgency, with a number of audit issues not rectified thereafter.

The public has no access to the Town Council's state of finances and processes. Hence, they will have to depend on independently audited statements to know if things are in order. In the last three years, the public and Parliament were denied the right as there were no credible and unqualified financial reports available that can be used as a basis to scrutinise them.

So, yesterday, Ms Sylvia Lim told the House that many committees had been formed by the Town Council, and of how she chaired her chairman's committee meetings, the various measures she has put in place, the Members of Parliament's estate visits. They were all mentioned in the annex that she presented. Well, form without substance is meaningless. What really matters to the public are results and desired outcomes, in the sense that funds are well-spent and accounted for. Clearly, in the case of AHPETC, the outcomes are a let-down.

The Town Council was set up to manage the Housing and Development Board (HDB) estates and entrusted with the responsibility to manage very large sums of public money, money from residents in the form of S&CC and from the Government in the form of grants from MND.

Town Councils are not part of the Singapore Public Service. Therefore, the Ministry of Finance (MOF)'s Instruction Manual (IM) does not apply here. Instead, the Town Councils Act was crafted to give the Town Councils financial autonomy and devolved powers to manage their own businesses, including procurement and financial management. The elected Members of Parliament of the Town Councils are empowered to appoint key appointment holders and council members.

Clearly, there are significant powers and autonomy given to the Town Councils. But it does come with accountability and responsibility as well.

Given the political nature of Town Councils, the issue of governance and accountability should rightly be dealt with in Parliament, the highest political institution of the land. It is the duty of every one of us here in this House to resolutely uphold the high standards of

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governance in Town Councils, certainly no worse standards than any companies or charitable organisations. We must not let any errant practices erode public confidence and trust in the integrity of the finances of Town Councils. We, the elected representatives, are the guardians of governance, transparency and accountability. And it cannot be just form without substance, talk without actions.

The debate in this House is also necessary because, in the area of financial management, payments and procurement procedures and processes, it is not often obvious to the general public as to whether public monies are properly managed and clearly accounted for.

Mdm Speaker, I want to record my concerns with regard to the lapses in the Sinking Fund raised by AGO.

In AGO's report, it flagged that AHPETC had failed to make the required transfers of the conservancy and service fees and the Government grants into the sinking fund accounts for the last three quarters of FY2011/2012, in non-compliance with the Town Councils Financial Rules. It later transferred a $2.7 million and an additional amount of $1.2 million only after being queried by AGO.

Monies in the sinking fund are set aside for future cyclical maintenance, such as repainting of common areas, replacing water tanks and pipes, re-roofing and electrical rewiring, upgrading of lifts, which is a costly item, replacing rubbish chutes and water pumps and so on. These are the real things that need to happen with money from the Sinking Fund.

The consequences of having insufficient money in the Sinking Fund are that many of these essential maintenance works may not be done and, hence, resulting in poorer living conditions, living environment, frequent breakdowns and repair disruptions and even compromising the safety of residents. These consequences may not be seen in the initial few years but, as the estates ages, residents will soon be at the short end of the stick and suffering. And the Town Council may have to levy more S&CC to pay for the maintenance costs. And, of course, there is also this risk of inflation that you have to take into consideration.

It is for this reason that Sinking Funds are segregated and ring-fenced so that Town Councils cannot dip into these funds for other operating and routine uses. If there are no regular and diligent contributions to the Sinking Fund, it will soon run out of money and there will be no cyclical maintenance to talk about.

Like the reserves that the country builds up over the years for our long-term security, the accumulation and disciplined contribution to the Sinking Fund are at the core of the type

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of government that we want in Singapore, which is, to do whatever is right and in the long-term good of Singapore and our people. In contrast, mismanagement and the wrong use of Sinking Funds tell a different set of value system – that of a short-sighted and populist government.

I am very concerned that AHPETC took such a lax attitude towards the Sinking Fund. If AGO had not pointed out this lapse, it is only common sense to expect that the Town Council Sinking Fund would soon be running short of funds to maintain the estates. Then, we will see the estate deteriorating and the quality of life worsening for the residents.

Also of particular concern is another related lapse pointed out by AGO with regard to the Goods and Services Tax (GST) input tax claimed from the Inland Revenue Authority of Singapore (IRAS). In this case, Sinking Fund expenditures were paid from the Sinking Fund's bank accounts for two financial years. However, the two amounts claimed – $643,000 and $888,000 – were not returned to the Sinking Fund and ended up in the operating account. This, again, will deplete the Sinking Funds which are for longer-term use. Instead, the funds were transferred to the operating account which is for short-term use.

In another instance, maturing deposits of $5.49 million intended for the Sinking Fund were not credited into the Sinking Fund bank account. Again, it went into the operating fund account. According to the AGO's report, even after restoring the full amount, the Sinking Fund is still short of the missing $490,000.

These and other lapses related to the Sinking Fund pointed out by the AGO will seriously undermine the adequacy and sufficiency of the Sinking Fund, and this is not unacceptable.

The Workers' Party (WP) is not new in running a Town Council, having run Hougang Town Council for more than 20 years. Hence, it surprised me why AHPETC did not transfer the money, as required, to the Sinking Fund bank accounts. It is not about whether you have a good IT software system or not. It is simply about whether the management is conscious of the importance of the Sinking Fund and the presence of mind to see that this is adhered to.

The previous People's Action Party (PAP)-run Town Council for Aljunied left a healthy reserve of about $90 million to the current WP-run Town Council. It is only right that the current leadership of the Town Council ensured that the long-term funding needs of the Town Council are safeguarded and the hard-earned monies of the residents are properly and fairly spent.

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The AGO's report also pointed out the serious conflict of interest issues and the disregard for related party transactions, which were well-covered by Minister Shanmugam and Minister Khaw yesterday.

Again, I want to record my serious concern over this situation where the "Group of Four" or the "Gang of Four" sit as key appointment holders of AHPETC and yet are also the owners and directors of the company that render for-profit services to the Town Council. And most amazingly, notwithstanding the related party transactions and the fit and proper issues, they were given the job of certifying work done and approving cheque payments from the Town Council to their own company.

So, again, the common sense question is: how can that be allowed to be passed by the Councillors of the Town Council? Are the stewards of the Town Council not supposed to discharge their fiduciary duties and responsibilities?

Again, were these lapses due to ignorance, or were they incompetent? Or is it a case of the Town Council taking advantage of the financial autonomy granted to the Town Councils?

It is also amazing to see how AHPETC has flip-flopped and reported wide swings in the S&CC arrears numbers. The arrears report to MND and to AHPETC's Finance and Investment Committee was unreliable and not aligned. More than three years into running the Town Council, AHPETC still does not have a system that can generate reliable arrears data. This is unsustainable and unfair to residents who duly pay their S&CC.

Mdm Speaker, we are all really shocked and at the same time saddened to read observations in the AGO report and the AHPETC's Independent Auditor's report. The systemic breakdown of internal controls as well as the messiness and the sloppiness in the way the Town Council operated are the consequences of incompetent management, to say the least.

As of now, we are not even sure if the financial statements tabled are correct and reflect the true state of affairs at AHPETC. In other words, we do not know what we do not know. Listening to the speeches of the WP Members of Parliament yesterday, I am not sure if they have come to grips with these serious lapses.

Last night, at a coffee shop dinner, an auditor friend of mine told me an interesting comment. He said, "Why is the PAP doing WP a favour by helping them to get their house in order, and yet being accused of bullying the WP?" He said that the way things are going, the Town Council is clearly down on a slippery slope and, in no time it will turn into a monster

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and collapse on its own weight.

So, I had to explain to him that as a responsible political party, we cannot allow such poor management of public funds and public money to occur and impacting the lives of our citizens, even if it means hurting us politically, and also the perception that the PAP bullies WP. In any case, we are more concerned whether WP is bullying their own residents with these malpractices. From the numbers that Minister K Shanmugam just clarified, obviously the Managing Agent is charging the Town Council a lot more than the other Town Councils, and, from the other numbers that have been reviewed, it is quite clear that FMSS has short-changed the Town Council. In other words, the Town Council paid more and the residents got less.

Mdm Speaker, what we have learnt from the AGO report is far from the best practices that we expected from a political-linked organisation like Town Councils, funded by public money and run by elected Members. These are worst practices that may not even find its place in a Third World parliament.

Finally, I want to quote a comment made by Mr Zulkifli Baharudin in Wednesday's Straits Times. He said, "It shouldn't be that if you're from a smaller party, your standards are lower. If someone votes for opposition, it is because he thinks they can do a better job. You cannot join politics and say that you are inexperienced."

Our politics must not be about accepting mediocre performance and sub-standard practices. Singaporeans deserve better. AHPETC has to rectify these serious shortcomings and accurately restate and present their financials expeditiously.

Madam, I support the Motion in the name of the National Development Minister. Given the seriousness of the issue, at the time of voting, and with your consent, I would like to call for a Division.

Mdm Speaker, we all know what the AGO is known for and the values they represent. In every report that came out of AGO since time immemorial, entities under its scrutiny had to go through a baptism of fire whenever the AGO came knocking. I have full respect for their work.

Over the years, the AGO has found sad instances of over payments, payments without evidence that goods and services were delivered, duplicate payments and, in one instance,

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amounting to $18.6 million, and so on in many Ministries and Organs of State it audited.

One agency was found to have called for a quotation instead of a tender for a project that exceeded $70,000 in the 2010/2011 AGO report. Another agency was cited to have issued purchase orders to the term contractor only after the contractor has started the work.

AGO also revealed that 10 Statutory Boards did not present their FY2006/2007 annual reports to Parliament within the six-month time frame and three of these boards had also been late the previous two years. One of them did not even present its audited financial statements to Parliament for the previous two financial years.

Awarding the contract to the sole tenderer despite the offer not meeting technical requirements specified in the tender and paying more than the contract price for extension of the contract were all flagged. Even the agencies under MND were cited for over-payment, late payment, mistaken use of waiver of competition.

The Ministry of Foreign Affairs was cited for not having complied with Government procurement principles of transparency, open and fair competition and value for money when an overseas mission was audited.

The Public Service Division was also flagged for informing a bidder that it had secured a contract worth $455,000, 13 days before the Tender Board made the award decision.

Some of these lapses were small in financial values while others were serious and the list goes on. Like what the Ministers said yesterday, in some countries, the CEO would have taken a deep bow, apologised, and resigned, but I guess this is not in our culture.

Madam, AHPETC is also found by AGO to have erred in some of these areas and I am certain AHPETC will not be the last as well because good corporate governance is a work in progress.

The WP takes the AGO findings very seriously. We have acknowledged our shortcomings in certain areas as well as defended our actions in others. On any other given day, this report may read like a typical AGO report on any entity under audit but, today, the spotlight is on AHPETC and we will explain the issues to the public.

First, I would like to specifically address one of the major lapses mentioned by AGO under para 3.2(c) of the main report which states that AHPETC does not have "a system to monitor arrears of service and conservancy charges accurately and hence there is no

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assurance that arrears are properly managed."

We have explained to AGO that AHPETC does have a system to track every financial transaction in a resident's account, including HDB grants, monthly S&CC payments, penalties, legal costs, and interests, if any, dating back to 1996 if the residents are from Hougang.

We have also explained how these S&CC payments are collected and uploaded into our financial and accounting system. Every transaction via cash, credit card, cheque, NETS, Internet banking and inter-bank GIRO is identified and posted into the respective residents' record in the Accounts Receivable and General Ledger at the end of the day or whenever the collection agencies inform us. This has allowed AHPETC to monitor the arrears situation of an individual account "live", up to date and on demand.

AHPETC is able to account to residents as to whether they have paid their S&CC or whether they are in arrears, if they were to enquire at the any of our branches across our town.

Madam, what AHPETC does not have is a programme to generate aggregated S&CC data in the format requested by MND and to monitor them in that specific format. The computer system currently in use at AHPETC was an upscaled version of the system from Hougang Single Member Constituency (SMC) and it was put into operation within a short span of one month. A lot of the features required to handle the operation of a Group Representation Constituency (GRC) were not implemented then.

As we have mentioned in our media release, all reports submitted to MND up to April 2013 were prepared by staff based on data generated by the IT system and extracted through manual sorting and counting. AHPETC also acknowledges that this manual process is not ideal and efficient as the data set is huge. It is also tedious and subject to reporting and human errors.

AHPETC has made incremental improvements to the computer system over the years. Our system may be rudimentary in features compared to what was available before 2011, but it is certainly robust in keeping a reliable database. We took time to have the data and process reviewed internally and externally before we released our S&CC arrears rate of 5.66% as at 30 September 2014 a few weeks ago. In short, we were not evasive when we said we would address the issue in due course. We will work towards providing timely data to MND in the coming weeks, albeit not in the format the Ministry requires, but, nonetheless, relevant enough to take a snapshot of the arrears situation at AHPETC.

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Next, I want to highlight the challenging environment AHPETC is working in, some of which relate to the 13 points of disclaimers highlighted by the auditors of AHPETC for FY2012/2013.

In Part 1 of the AGO report under one of the disclaimers on Receivables from Sundry Debtors, AGO revealed that AHPETC did not monitor and take timely follow-up action on its receivables.

In para 2.34 of the report, it was stated that most of the outstanding receivables as at 1 July 2014 were amounts due from HDB and the National Environment Agency (NEA). While there were invoices under dispute, there were also instances where HDB was reviewing claims dating back to May and November 2012.

In subsection (ii) of the same para, NEA rejected four invoices from AHPETC because they were wrongly sent to one of the regional offices. NEA further explained that by the time the invoices were received by the relevant division, the period provided for payments or the credit period, had lapsed and NEA was unable to process the invoices for payment. The agency then requested AHPETC to re-issue the four invoices.

Madam, invoices do not carry expiry dates. The 30-day credit term listed on an invoice is to let the debtors know that they have to pay within the stipulated period or the creditors will reserve the right to impose penalties. It is common to replace a missing invoice under the same invoice number and date, or to re-issue an invoice due to amendments but to request for new invoices due to expired credit terms is highly unconventional.