IMPORT OF GRANITE FROM ALTERNATIVE SOURCES AND ESCALATION OF CONSTRUCTION COSTS

IMPORT OF GRANITE FROM ALTERNATIVE SOURCES AND ESCALATION OF CONSTRUCTION COSTS: 2.

Dr Lily Neo asked the Minister for National Development whether his Ministry is importing granite from alternative sources and, if so, when will these arrive.

3.

Ms Denise Phua Lay Peng asked the Minister for National Development what are the specific steps the Government is taking to prevent unjustified escalations of overall construction costs by parties who give the high price of sand as the reason for increasing prices.

The Minister of State for National Development (Ms Grace Fu Hai Yien) (for the:

Minister for National Development: Mr Speaker, with your permission, I would like to answer Question Nos. 2 and 3 together.

Mr Speaker: Please do so.

Ms Grace Fu Hai Yien:

Mr Speaker, Sir, Dr Lily Neo asked whether we are importing granite from alternative sources and whether shipments have arrived. The answer is “Yes”. When the supply of granite from Indonesia was disrupted in

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late February, we immediately released granite from our stockpile to make up for the supply shortfall.

We have activated various alternative granite supply sources from countries in the region. These measures have helped to minimise the disruption to construction activities. Shipments of granite from the alternative sources have started to arrive in Singapore and the supply is proceeding smoothly. We will continue to work with our granite importers to maintain the flow from these sources. We will also look for more sources to ensure that the supply line is further diversified.

Diversifying supply sources is part of our total approach to enhance resilience for our construction industry. The general approach adopted under this plan is this - keep all our options open, and plan for all contingencies. This is our best defence against the risk of a future supply disruption, whatever the reasons and whenever it happens. So we buy from as many different countries as possible, continue to keep a sizeable stockpile and work with the industry to switch to more sustainable methods of construction. One additional option is to tap on our local granite sources, should the need arise. Thus, it is necessary to carry out some limited quarrying to understand the issues involved in reactivating quarries, such as the preparatory works and time involved, and the mitigating measures to put in place. HDB will look into restarting one of its former quarries in Pulau Ubin.

Ms Denise Phua is concerned about the impact of higher sand and granite cost on overall construction cost and has asked about steps taken to prevent unjustified increases. Let me just explain that construction cost may change because of many factors, not just the prices of construction materials. For example, the increased demand for skilled manpower as a result of higher construction volumes will have an impact

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on overall construction cost. Similarly, we do expect the major adjustments that the industry is making, following the disruption in supplies of concreting sand and granite from Indonesia, to cause construction cost to rise. The Government is monitoring the situation closely and will look into specific complaints on cases of unjustifiable increase in prices.

In addition, in response to requests by some contractors who want to produce their own ready-mixed concrete, we are releasing suitable sites for the setting up of new batching plants. Others who are interested to produce concrete are also welcome to bid for these sites.

Meanwhile, as a developer and an owner of projects, the Government will help the contractors by co-sharing up to 75% of the price increases in sand and granite. Public agencies have started to make progress payments. I urge the private sector developers to follow suit. All stakeholders in the construction industry - developers, contractors and concrete suppliers - must work together to cope with this short-term disruption to the industry and to move towards a more sustainable position in the longer term.

Dr Lily Neo: Sir, may I ask the Minister of State whether the increasing prices of sand and granite will put a dampener on our presently booming construction industry and what are the steps taken to prevent this effect?

Ms Grace Fu Hai Yien: The impact of the price increases in sand and granite, we estimated, would be about 2% of the overall project cost. I think that is not a very significant proportion and definitely in this current state of the market, we believe that it is still in a very good position to benefit from the upswing.

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**Mr: Charles Chong (Pasir Ris-Punggol): ** Mr Speaker, Sir, the Minister of State mentioned that we may restart limited granite quarrying in our offshore island of Pulau Ubin. Could the Minister of State confirm that should we restart this granite quarrying, all environmental protection measures will be taken not only

to protect our environment but also to demonstrate to some of our neighbours that granite quarrying can be achieved without damage to the environment, without the outer islands disappearing, and without compromising our maritime boundaries?

Ms Grace Fu Hai Yien: Thank you very much, hon. Member, for raising this issue. We are definitely doing with all the mitigating factors considered in totality. Starting from dewatering of the quarry, we will make sure that the marine life in the surrounding area is well taken care of. We will measure the content that is being discharged and we will also manage the discharge rate at which the water is being released into the surrounding area. We are very mindful of the marine life in the neighbourhood. We are also mindful of the safety issue. So, we want to make sure that, for example, in the immediate surrounding area, safety precautions are taken, that we do sound a siren before blasting takes place and that we will cordon off the area with barricades when the blasting takes place. And, of course, dust generated as a result of blasting will also be monitored and managed.

We have chosen the Kekek Quarry in Pulau Ubin because it is far away from the residential area. So, we make sure that the impact on the residents of the island is also minimised. And, most importantly, the transportation leg is closest to the sea, to a barge, and therefore it minimises disruption to the island life as well. Definitely, we want to keep the island as it is as much as possible. It is a place for leisure which we will continue to maintain it to be. Blasting and mining activities will

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not take place over the weekends and not at night. On an overall basis, we will also rehabilitate to make sure the quarried area is well taken care of at the end of the process. So, these are all the various mitigating factors that we will consider. And we have also made sure that the plants and the nature life are well protected on the island.

Er Lee Bee Wah: Mr Speaker, Sir, I would like to ask MOS whether the Ministry will adjust the price of sand and granite from HDB's stockpile downwards as there are more and more alternative sources available. Can the Ministry please also update the House on the state of the cost-sharing in private projects due to this sand and granite issue?

Ms Grace Fu Hai Yien: Mr Speaker, Sir, we are monitoring the prices. The price of the HDB's stockpile is released at the replacement price. And that is the only sustainable way for us to both replenish stockpile and, at the same time, release it for the use of the construction industry. It is actually benchmarked using our replacement price from purchasing from various sources. As much as the Member has said, if the prices would come down, we would be monitoring it. Also, we would like to say that at this point in time, while we are releasing the stock from our stockpile, the private sector actually has the ability, and they have in fact done so, to import sand and granite on their own. So, if there are alternative sources at better prices, we actually encourage the private sector to do so and import by themselves.

On the Member's second question, it is not something that we would get involved in the private sector, as far as cost-sharing is concerned. Because we understand that they have their commercial arrangements which we are not in a position to dictate or regulate. But the Government has taken steps. For example, the Ministry of Home Affairs (Singapore Prisons Service) has started to

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make monthly progress payments for the cost-sharing arrangement that I have mentioned earlier on. So, that has already taken place. We are not waiting to the end of the project. We are already making progress payments to help the contractors to meet the higher cost of sand and granite at this point in time. We hope that the private sector will follow suit, and we encourage all parties to look at the issue in totality and work together as an industry to overcome the problem.

Mr Speaker: Ms Irene Ng, last question.

Ms Irene Ng Phek Hoong (Tampines): Can I ask the Minister of State, rather than hike up the price three times from its original price of $20 per tonne of sand to $60 per tonne, whether we can just bring down the price so that we do not have to think of cost-sharing? In other words, rather than you hike up the price and then you give back in terms of subsidies, why not just bring down the price to the level that we can afford so that construction can go on, and there will be stability in prices in the market and there will be a steady supply of sand that contractors can be assured of?

Ms Grace Fu Hai Yien: Mr Speaker, in reply, the prices are not hiked up. It is the actual replacement price that we have to pay. The primary reason is because of transportation cost. The cost compared to importing from Indonesia and a country that is further afield would involve greater transportation needs and therefore the landed cost has actually gone up. So the price at which we are releasing the stockpile is really the cost to the Government. Of course, there is this issue about cost-sharing for existing projects. But for new project, it will be a different matter. The contractor, the developer, and the owner will then be able to discuss cost issues in a different manner because they are not bound by existing contracts. Contractors will price their construction cost at the new cost of

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sand and granite. So, it is really not tenable for the Government to subsidise across the board, because there are projects, for example, which will enter into a new phase of awarding contractors and we definitely want these contracts to reflect the replacement cost, which is the current market price of sand and granite.