Hawker Stall Rental

Mr Lim Biow Chuan asked the Minister for the Environment and Water Resources whether the NEA will review the policy of pegging hawker stall rentals to market rates.

The Minister for the Environment and Water Resources (Dr Vivian Balakrishnan): Mr Speaker, Sir, our hawker centres actually originated from the programme in the 1970s and 1980s when we cleared street hawkers. These street hawkers who were, in a sense, resettled from the streets, therefore, enjoyed subsidised rentals. Currently, to date, the National Environment Agency (NEA) manages about 15,000 cooked food and market stalls. Of these 15,000 stalls, about 42% of them are paying subsidised rentals. So, these would be, in a sense, a legacy from the original clearance programme. For the remaining stalls, the rentals are pegged at the market rate. But having said that, these rentals are still lower than those paid in cooked food centres in private food courts.

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New operators who enter the trade pay market rates, as assessed by professional valuers appointed by the NEA. These assessed market rentals are generally in the range of $100 to $1,500 for a market stall, and from $400 to $3,000 for a cooked food stall. The variation would take into account the characteristics of the centre and the popularity of the location.

We recognise that these market rates can fluctuate according to demand and supply and prevailing business conditions. My Ministry recently announced plans to build more hawker centres and this will inject a greater supply of both cooked food and market stalls into the overall equation. And I expect that this will have a downward pressure on market rentals. We are committed to ensuring that hawker centres continue to provide cheap, affordable and accessible food to all Singaporeans.

Mr Lim Biow Chuan: Sir, may I ask the Minister a few questions? As many Singaporeans buy their market produce from hawker centres, perhaps the Minister can clarify what is the Government's social policy of having such hawker stalls and food stalls.

Secondly, is the Government able to consider allowing the use of hawker stalls as a means to help the lower income residents operate their own small-scale businesses, so that they can become financially independent?

Thirdly, may I ask the Minister whether he would agree that a possible result of pegging rental of stalls to market rate is likely to cause hawkers to increase their food and market produce prices, and this may have an unintended effect of increasing the cost of living?

Finally, if a hawker in a hawker stall is unable to pay the increased rental, what is NEA's policy if he falls into arrears? Would it be to evict the hawker and repossess his stall or is there a way that we can allow the hawker some degree of indulgence and flexibility?

Dr Vivian Balakrishnan: On the first supplementary question on social policy, as I explained earlier in my reply, our hawker centres came about because we were trying to clear the streets of mobile hawkers. The reason for that clearance was to first ensure public safety and hygiene, because clearly street hawkers would not have access to clean running water and would not be able to maintain the cleanliness of their used utensils, plates, forks and spoons. So the plan was to relocate all of them into a proper hawker centre. It will improve hygiene, it will also centralise the infrastructure, facilities and supplies that they need, and it will also be more convenient for the public because they will know where to go for their regular fix of hawker food.

I explained all this so that Members understand that it did not originate from a social policy. It originated from a public hygiene, safety and convenience point of view. But having said that, hawker stalls then took a life of its own and, today, they have become almost an icon of Singapore life in that you cannot imagine a Singapore without hawker centres, without access to freshly cooked food at a very affordable rate, in which people from all walks of life can get together, whether you are wearing a jacket or a tie, or in shorts, tee-shirts and slippers. That is where the social dimension came in. It did not necessarily start, nor is it even today, as an option for providing jobs for people who have no other occupations available. That almost, in a sense, is an incidental effect. In the earlier years – I think you have to go back to before the 1990s – there was a programme for people who had difficulty in making ends meet and could not find any other job, they would be allocated a stall. I think that policy was discontinued more than 20 years ago.

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So, what we have today, if you look at the mix, half of them are enjoying subsidised rentals. As I said, these were legacy issues, people who previously enjoyed subsidised rentals were also allowed to transfer their entitlement to subsidised rentals to their family members. In a sense, they were the second generation hawkers. But for all the others, the Ministry at that point in time decided that it would be best and fair to allocate the stalls according to market demand. These stalls, you would have realised, do have a market value because they generate income for the operator. The fairest way of doing it was to let the market price discovery mechanism occur. And that explains the way it has worked since then. But even with that in place, because of the way our hawker centres are structured, you will find that the market rentals paid in a hawker centre are still significantly lower than that in a private food court or certainly in any restaurant. So, there is a clear difference.

The Member's other supplementary question was about the impact of market rentals on the final prices that hawkers charge their customers. I think we should acknowledge that the rental that a hawker pays in a hawker centre is one component but it is not the only factor that determines the final price that a hawker charges. This is a free market and we do not control the prices that hawkers set. Therefore, it is a combination of what the market can bear − the competition, the traffic, the number and the fame of that individual hawker – which allows him to set a price, and then determine the viability of his business. I am not convinced that we should change that free market model. But having said that, there is a supply and demand equation, and I believe that by increasing the supply, we will put downward pressure on the market rentals. But, ultimately, whether hawkers lower their prices in response to that is a market test which time will prove one way or the other. So, it is not a simple equation where I can offer a subsidised rental, control the price that he charges and ensure a social policy of ensuring that there will always be cheap food freely available to everyone. That is not the business model for the hawker centres. It has never been that, and I do not believe that will be a viable model for the future.

His final point was on arrears. NEA would obviously work with the hawker to find out why he is having difficulty coping with the rental. For instance, if he fell ill or, for some reason, his business went down because of local factors, then, of course, NEA will exercise forbearance. But, in the long run, this is a business and the revenues must be sufficient to cover the cost of doing a business, including rentals, paying for ingredients, manpower, utilities, water, etc. So, we have to be clear that this particular hawker is viable in the long term and if he is, of course, we will do our best to help him. If he is not, then, perhaps, that is not necessarily the wisest business enterprise for him and we will have to look for ways for him to exit and to look for alternative jobs or avenues, or even an alternative venue to go to where the rentals may be lower, and maybe for someone else with perhaps better business model or more tasty food or a more loyal clientele to replace him in that particular centre.

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Ms Denise Phua Lay Peng: I just want to ask the Minister a supplementary question. I do not intend to haunt him like the way I haunted him in MCYS. Just building on the Member, Mr Lim Biow Chuan's concern about the cost of food in food centres, beyond market rate for the rental of food stalls in food centres, I believe that there is this practice of allowing a COV, sometimes of up to as high as $300,000. That is the transaction happening on the ground, when stalls are transferred. I believe this practice further pushes up the cost of food in food centres. This has probably taken on a life of its own. It is very unlike the HDB rental flat policy which stipulates that when there is a transfer of ownership, the HDB actually takes back the rental flat when the tenant quits. I am sure he does not approve of the additional transfer cost that is happening on the ground and I wonder what the Minister would do about this.

Dr Vivian Balakrishnan: Sir, it is a peculiar, almost unique, feature of doing business in Singapore, in hawker centres and sometimes in coffee shops. Whenever you have this phenomenom of "coffee money" or you hear this exorbitant sum of $300,000, in fact, it should make you pause and understand that what is really happening from an economic point of view is arbitrage because of regulatory mismatch. The fact that someone else is willing to pay $300,000 in order to receive the assignment for the stall for which NEA is probably collecting a few hundred dollars or maybe $1,000 a month, illustrates precisely why we should not blindly go into artificially pegging prices in the name of subsidies. The point I am trying to make is that, in fact, subsidies distort the market and do not necessarily lead to optimal outcomes.

The policy position of the Ministry is that our hawker centres should:

(1) be in the heartlands;

(2) reflect tropical architecture, that means, no air-conditioning;

(3) be operated by Singaporeans or Permanent Residents with a Singaporean dependant;

(4) be operated by the person who has tendered or rented the stall, and this should be the hawker business and not the rental arbitrage business.

So, I am aware of these practices and we will look at how best to address these in order to take the arbitrage out of this and to focus on the business of hawking rather than the business of selling and trading and assignment of subsidised privilege which they have enjoyed for legacy purposes. But as I said, if we come back to fundamentals, there is a market price for any stall. And if the rules are applied and applied fairly, uniformly and tightly, I think we can squeeze out some of this arbitrage.

Mr Speaker: Mr Liang Eng Hwa, last question.

Mr Liang Eng Hwa: Sir, in view of the overwhelmingly positive response to the Government's announcement to build 10 new hawker centres, I would like to ask the Minister whether the Government would now look at building more than the 10 that was announced. And maybe even within a shorter time frame, say, five years instead of 10 years, and to use the supply to eliminate the rental arbitrage that the Minister has mentioned, as we are still seeing an upward pressure on rentals.

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Dr Vivian Balakrishnan: So far, I have only announced 10. Another general rule in politics is always under-promise. I hear the Member's request and will consider it. I am not going to make any promises at this point.