INDONESIA'S EXPORT BAN ON SAND AND SOIL PRODUCTS

INDONESIA'S EXPORT BAN ON SAND AND SOIL PRODUCTS:

(Impact on Singapore):

* 1. *Mr Charles Chong asked the Minister for National Development (a) what is the impact of Indonesia’s export ban on sand and soil products on Singapore’s construction industry and land reclamation works; (b) what alternative sources will be tapped to ensure that Singapore’s development will not be slowed by the export ban on sand by both Malaysia and Indonesia; and (c) what measures are being taken to diversify our supply of construction materials and encourage the use of alternative materials.

* 2. *Mdm Cynthia Phua asked the Minister for National Development (a) what is the long-term plan to help the construction industry overcome the issue of the import of sand; (b) how will the shortage of sand supply affect Singapore’s building programmes; and (c) was there any pre-warning before Indonesia decided to ban the export of sand to Singapore.

3.

Mdm Ho Geok Choo asked the Minister for National Development (a) if his Ministry was forewarned of the move by the Indonesian government to stop exports of sand to Singapore; (b) if his Ministry made any representations to the Indonesian government to reconsider the ban; (c) what other sources of supply has his Ministry identified for imports of sand; and (d) how much more will these new supplies cost.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, may I have your permission to take Question Nos. 1 to 3 together?

Mr Speaker: Yes.

Mr Mah Bow Tan: Thank you. Sir, let me begin by clearing up a possible confusion concerning sand. Broadly, there are two types of sand - land sand and sea sand. Land sand, otherwise known as concreting sand, is used to produce concrete for construction purposes. It is mined from inland quarries and riverbeds. Sea sand, on the other hand, is dredged from the sea and is used in reclamation works.

Singapore has not imported sea sand from Indonesia since it banned the export of sea sand in February 2003. Since then, our reclamation works are carried out using sea sand from other sources as well as other suitable fill materials.

The recent export ban imposed by Indonesia is on land sand. As such, the ban affects construction, not reclamation works.

We are disappointed with Indonesia’s decision to ban the export of land sand. We were aware that various quarters in Indonesia had been calling on their government to ban land sand exports because of their claims of environmental damage and the potential impact on Indonesia’s boundaries. These claims are not justified. Our ministers had, on several occasions, offered to discuss this issue with their Indonesian counterparts, and expressed Singapore's willingness and preparedness to work with Indonesia to address its concerns. We regret that Indonesia did not take up our offer.

We do not expect the Indonesian ban on land sand export to have any major impact on the construction industry, as there are various alternatives available. The industry will have to make some adjustments, and we have put in place measures to facilitate the transition and to minimise short-term disruption to construction activities.

Since 1st February, the Government has released sand from our national stockpile to meet any interim shortfalls in land sand supply. Our objective is to provide stability and certainty in the supply of sand to allow the industry to make the necessary adjustments over the next few months. These adjustments include the procurement of sand from alternative sources and working out arrangements to co-share the increased cost burden for existing contracts by developers, contractors and concrete suppliers.

As a major developer of public sector works, the Government has taken the lead in sharing part of the cost increase in sand for existing public sector projects. We have had several dialogues with the industry associations, and they have agreed to adopt the principle of cost sharing for existing projects, and are working together to work out arrangements for their ongoing projects.

Going forward, the industry will procure land sand from alternative sources. HDB, as part of its on-going effort to diversify its supply of basic construction materials, has already procured sand from various sources in the region. Several shipments of sand from alternative sources have arrived in Singapore early this month. We will continue to work with the industry to diversify our supply sources. Although the price of sand from alternative sources is expected to be higher due to the higher transportation cost, it would only increase the overall project development cost by about 1%. This is manageable.

For the longer term, we are working with the industry to adopt sustainable construction to reduce our reliance on land sand. This includes the use of steel, dry walls, glass and metal claddings. We have been promoting such construction practices for some time. The Indonesian ban on land sand export provides a timely opportunity for the industry to accelerate the switch to sustainable construction methods. Based on the experience of countries like the UK, US and Japan, the use of concreting sand could be reduced by as much as 60% to 70%, through the adoption of non-concrete based construction.

Sustainable construction practices are not entirely new to our local industry. Glass and metal claddings are commonly used for the facades of buildings. Dry wall systems are gaining popularity in residential projects. In recent years, we have seen an increasing number of buildings being constructed with steel structures, such as the National Library, Supreme Court, Changi Terminal 3, One Raffles Quay and Fusionopolis.

Nevertheless, given that concrete-based construction has been the predominant form of construction, BCA will work with the industry to ensure that the construction workforce has the necessary skill sets in sustainable construction, in particular, structural steel works. The architects and structural engineers are already trained in steel design and construction as part of their professional training. BCA will conduct training courses to equip the existing pool of technical and supervisory staff as well as workers with the relevant skill sets in steel construction. In addition, BCA will certify and facilitate the entry of new foreign workers skilled in steel construction.

I am confident that with the cooperation of the industry, we will successfully implement these measures, so that the Indonesian ban on land sand export will not have any significant impact on our construction activities and our economy.

Mdm:

Ho Geok Choo (West Coast): Sir, I would like to ask the Minister given the current state of activity in construction which includes both private and public housing, public works and other public infrastructure projects, how long does MND expect our current stockpile of sand to last. Will the existing stockpile help to cushion any short-term increase in cost of sand? How much did the Government pay for the existing stockpile and how much will the Government be charging for any new release?

Mr Mah Bow Tan: Sir, the Government has been building up its stockpile of sand over the last many years precisely to prepare for situations like this when there are short-term disruptions in sand supply. I want to assure the industry that the stockpile is sufficient. There are also new sources of supply being found with new supplies coming in, as I have explained in my answer.

As far as the industry is concerned, whether it is for public sector projects, like the HDB, or for private sector construction projects, there will be sufficient supply of sand for the short term arising from release of sand from the stockpile. For the immediate and long term, I expect that, with the other measures that I have elaborated on just now, ie, diversification of sources of supply as well as reduction in the reliance on sand in the long term, we will have sufficient supply of sand for all our projects.

Dr Lily Neo (Jalan Besar): Sir, could I just re-emphasise on the question earlier and ask whether the stockpile can ameliorate the inflationary effect on the shortage of sand presently for construction cost? My other question is: could the Minister consider rebates for construction companies that substitute sand for more sustainable and cost-effective materials for construction? Lastly, will this ban on export of sand to Singapore put a dampener on Singapore's economy?

Mr Mah Bow Tan: Sir, as far as the cost is concerned, even if we factor in the higher cost of sand as a result of higher transportation cost, we have estimated that the overall increase in the cost of construction will be somewhere between 1% and 3%, taking into account the new cost of sand. That, in turn, will translate into an overall increase in the project development cost of about 1% or less. In terms of the overall impact on the industry, as far as cost is concerned, I think it will be manageable.

As for rebates for alternative construction methods and materials, obviously, the cost-benefits of using alternative materials will have to be assessed. So long as there is a cost-benefit, both in sourcing of the materials as well as in the overall cost in terms of time and labour usage, if that makes economic sense, then the industry will switch. I foresee that, with this current development, the cost-benefit analysis for alternative materials will be more favourable. BCA will, of course, facilitate this. They will take whatever measures that are necessary to provide assistance to the industry. Whether there will be rebates or not, it is left to the specific industry concerned.

Finally, will it be a dampener on our economy? No, I do not think so. Critical projects are going on and we will make sure there is sufficient sand for these projects. Public infrastructure projects are being rolled out. HDB flats will continue to be built and all the major projects, like the IRs and other housing projects, will also continue. Because of the measures that we have put in place, I expect that there will not be significant short-term disruptions. But I am more optimistic that, over the long term, we will also be able to reduce our dependence on sand and have a more sustainable construction industry, such that any future disruptions will not have any impact.

Ms Lee Bee Wah (Ang Mo Kio): Sir, I would like to ask the Minister whether the concreting work at all the construction sites is back to normal. Are sand-related businesses profiteering by deliberately disrupting supply, not honouring contracts, negotiating new prices, and what is the Ministry doing about it?

Mr Mah Bow Tan: Sir, the construction activities at various sites in the first few days were disrupted as a result of the shortage. With the release of sand, I am told that most of the construction activities have come back to normal. There are a few exceptions and this is because the various parties concerned are still negotiating on the price. But as far as the delivery and availability of sand is concerned, yes, that is already ongoing. What they are doing now is to agree on the price.

As far as the individual contracts are concerned, there are contractual obligations among the various parties - the developers, contractors and the suppliers. The Government recognises that for the public sector projects, such contractual obligations cannot be fully complied with, given the exceptional circumstances and given the fact that this is not a matter of supply and demand imbalance, but there has been a sudden and precipitate decision to stop the supply. As a result, the Government has agreed that, for all its existing public sector projects, it will co-share the cost of the increase due to the increase in price of sand with the various parties - the contractors as well as the suppliers. We have announced this and explained to the industry associations, and the Ministry of Finance is issuing a circular to this effect.

I have also urged the developers who are part of this value-added chain to similarly take a sympathetic and fair view as far as their own contracts are concerned. Between the suppliers and the contractors, there are also contractual obligations and the Government is obviously in no position to examine each and every contract. However, we have moved and freed up the supply of sand, and we have got the sand to flow. It is now a question of them agreeing on the price that they are prepared to pay and this we will leave to the individual parties concerned. But if there is a need to, BCA will step in to try and facilitate a solution or an amicable resolution.

I want to emphasise that it is not possible for the Government or BCA or MND to step in to referee each and every single situation. If there is evidence of somebody taking advantage of the situation, we would like to know about it and I would be grateful if the Member could enlighten the Ministry about those situations.

Mr Sin Boon Ann (Tampines): Sir, is it true that the Indonesians are very concerned over the significant impact on the environment arising from our purchase of sand from them? And, if it is so, can we not impress upon Indonesia to be equally concerned about the haze problem which is also an issue of the environment?

Mr Mah Bow Tan: Sir, I am sure the Minister for Foreign Affairs would be able to better answer this question. But I can tell the Member that as far as the environmental impact is concerned due to sand, based on what we know, the Indonesian sand suppliers, who are licensed by the Indonesian government, are obliged to plough some of the proceeds that they get from the sale of sand into environmental reconstruction, and that is already built into the price of the sand. We obviously share with Indonesia their concern about any environmental degradation, and we have already expressed our willingness to cooperate and work with them to see how we can further address these concerns. However, this offer was not taken up. Obviously, we are still prepared to do so.

Mr Speaker: Last question. Dr Teo Ho Pin.

Dr Teo Ho Pin (Bukit Panjang): Sir, I understand that the Ministry has fixed the price of sand to about $25 so as to stabilise the situation. But I understand from industry sources that the ready-mix concrete price has gone up by over 50% to about $100. So, it is the ready-mix concrete which will affect the construction cost. May I just ask the Minister whether the Ministry has plans to fix the ready-mix concrete price?

Mr Mah Bow Tan: Sir, yes, the Ministry has decided to fix the price of sand at a rate which is slightly below the current market rate. The reason why we have decided to do so is because we want to ensure not just stability of supply but also price stability for one month, so that all the various parties can come together and renegotiate and redo their sums in order to get the work going. The work on the ground can proceed, but the price for ready-mix concrete is still being negotiated in some instances.

Can the Government fix the price of ready-mix concrete? The answer is that it would be difficult for us to do so. We can only fix the price of one of the components in ready-mix concrete. The other components, eg, granite, etc, are matters which are outside the purview of this particular situation. So, it is not possible for the Government to fix the price of concrete and at the same time force the concrete suppliers to adhere to that price. We are not a party to the contract. We are not able to fix the price of all the other raw materials that go into concrete. We have brought the supplier industry's associations, the contractors' associations and the developers' associations together to make them all understand that, as far as this particular disruption is concerned, there are measures to mitigate and resolve this problem but, in the short term, they would have to get together and renegotiate some of the pricing and their contracts.

The Government is giving them some time to do so by ensuring some stability and, if it is necessary, the Government will also help to facilitate these negotiations. But we are not in a position to fix the prices of all the materials that go into the construction process.