Adjournment of Debate

7.37 pm

The Senior Minister of State for Digital Development and Information (Mr Tan Kiat How): Mr Speaker, I move that the debate be now adjourned.

Resolved, "That the debate do now adjourn." – [Mr Tan Kiat How].

Mr Speaker: Senior Minister of State Tan, resumption of debate what day?

Mr Tan Kiat How: Tomorrow, Sir.

Mr Speaker: So be it. Leader.

ADJOURNMENT MOTION The Leader of the House (Ms Indranee Rajah): Mr Speaker, I move, "That Parliament do now adjourn."

Question proposed.

Saving Our Local Food and Beverage Businesses Mr Speaker: Assoc Prof Jamus Lim.

7.38 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Many, if not most, of us think of local food as a defining part of our national identity and one of the things we crave most when we venture abroad. Unlike much of the world that eats to live, Singaporeans often live to eat. We routinely stand in line for hours if a place has a reputation for good food. We have even elevated our hawker culture to world heritage status.

It is clear that food and beverage (F&B) has a unique place in our hearts as well as our stomachs. For this reason, I believe it is also worthy of a special place in our economy.

Moreover, the sector warrants consideration based on its unique and challenging economics alone. Unlike manufacturing or other tradeable services, like finance or software, productivity gains are generally much lower for non-tradable services like F&B. Think about how much cheaper it is to produce a highly sophisticated computer or washing machine today, compared to 50 years ago; and contrast that to how little a concert or college experience has changed relative to a half century past, even as prices have consistently crept up.

This is inherently the case with F&B, too. After all, the last thing we want when we pay for a fancy meal is to feel like we are being herded through and rushed to pay, just so that the restaurant may turn the table over – all in the name of efficiency.

Nor is it easy to defray costs by either relocating preparation to cheaper locales or simply scaling up operations. Most ingredients must be freshly prepared daily and do not suffer travel well. And any Singaporean will tell you that franchised businesses, or those reliant on central kitchens for supply, often sacrifice quality when they expand their footprint.

Furthermore, the sector is almost entirely comprised of small and medium enterprises (SMEs), many of which are wholly Singaporean-owned. This has, historically, also been a source of innovation and pride. Think about our adaptation of Hainanese chicken rice, Katong-style laksa, chilli or black pepper crab and the world-famous Singapore Sling. Yet, the sector's already razor-thin margins have been forced to confront the double whammy of rising rent and costly labour more directly than most.

And finally, it has probably not escaped this Government that many, many Singaporeans are essentially coping with nosebleed housing prices and the planet's dearest private transportation costs by relying on affordable local food, especially from coffee shops and hawker centers. Protecting local F&B amounts to keeping one of the remaining few outlets where we can credibly claim we are not among the most expensive in the world.

Sir, the ingredients – pardon the pun – that any F&B operator must deal with are well known. To price competitively enough while eking out a profit after accounting for the costs of ingredients, workers and rent.

As a country, we are almost entirely price-takers when it comes to importing all our raw materials. But land and labour are amenable to policy direction and that is what I will focus the rest of the speech on.

Manpower is the most common pain point faced by F&B operators. In my conversations with those in the sector, I repeatedly heard about how costly it is to hire cooks, dishwashers and wait staff. This is unsurprising, given how expensive average wages are in Singapore, which is significantly higher than most other neighbouring countries.

Operators also share that it is difficult to attract and retain locals in the sector. This is the case even when salaries are reasonably attractive. I have been told of positions at $4,000 or $5,000 that can go unfilled and how, even after hiring, retention is a constant headache, with many choosing to quit after just a few weeks on the job.

To meet these local needs, many turn to foreign staff. But even this faces problems. Hiring is constrained by the dependency ratio ceiling (DRC), set at a ceiling of 35% foreigners, with an additional requirement of nine locals for every one S Pass, which is the most restrictive of any sector. Atop this is layered the Local Qualifying Salary and minimum wages in the sector's Progressive Wage Model, along with a foreign worker levy – all of which further push up the wage bill.

Let me declare I fully understand the motivation behind the local quotas and minimum wages for locals. I have, after all, previously argued for such very policies in this House and in general, I remain in favour of them.

That said, the constraints faced by the F&B sector appear to be very binding, despite the best efforts of our establishments to recruit Singaporeans.

This has led to perverse outcomes, with reports of how certain operators have resorted to paying the Central Provident Fund share of friends and family, just to register them into their local quotas. Or how restaurants may hire on an Employment Pass, which is not subject to the same quota, only to claw back excess salary thereafter.

While I am uncertain of how pervasive such practices are, the sense that F&B operators need to skirt the edges of the law just to keep their business running helps nobody.

One wonders, therefore, if the Government has any plans to review DRCs in the sector. After all, the principle of sector-specific quotas is not novel. Indeed, while manufacturing and services are bound by DRCs of 60% and 35%, respectively, those in the construction and process sectors have a higher ratio of 83%, as do marine shipyards, at 75

%. Backbenchers from the ruling party have also asked the very same question: has the Ministry conducted any investigations as to how pervasive contorted reporting or creative accounting, just to ensure paper compliance, actually is?

In hawker centers, where foreigners are almost entirely shut out, the Government has also relaxed its rules to allow Long-term Visit Pass (LTVP) and LTVP+ holders to work as stall assistants. And there are currently around, by the Government's reporting, 300 such individuals. While I agree with the premise that only Singaporeans and Permanent Residents (PRs) be allowed to operate stalls, a helpful step would be to allow operators to hire Malaysians, who clearly share a similar hawker culture, as stall assistants.

In exchange for this targeted flexibility, operators could commit to certain targets, such as productivity improvements, workforce deployment and fair employment practises. This ensures that the sector remains sensitive to local manpower objective pursued by the Ministry of Manpower (MOM) in the absence of a blanket relaxation of rules.

In my consultations with representatives from the F&B sector, I also heard of other manpower problems which appear more systemic than idiosyncratic. More than a few lamented about how difficult it was to send employees for SkillsFuture training. They shared that the typical training window of one to two days was hardly sufficient to adequately prepare new workers for the sector. This is exacerbated by how those that have undergone more formal training at, say, our Institutes of Technical Education (ITEs) or SHATEC Institutes tend to gravitate toward hotels and western cuisine, rather than local ones.

Some have questioned why subsidised SkillsFuture courses are not made available to their staff on a Work Permit, given how the Skills Development Levy is paid per worker, whether local or foreign. Given how cash strapped the typical reimbursement model for grants is, they hope that this model is revised with invoicing directly between the training provider and the SkillsFuture office.

The other major challenge for F&B operators has to do with escalating rents. The Government often appeals to the free market, insofar as rents are concerned. Yet this stands in curious contrast to how the same Government approaches manpower issues, where constraints and regulations abound.

There are two major classes of landlords in the F&B rental scene. The first is, of course, the Government itself, agencies, such as National Environment Agency (NEA) for hawker centres, the Housing and Development Board (HDB) for coffee shops, JTC for canteens in industrial estates, and the Singapore Land Authority (SLA) for restaurants in conservation sites. The second are technically private, although many have close links to the state, CapitaLand and Mapletree, which are owned by Temasek, operate commercial food spaces in malls, business parks and offices, and the National Trades Union Congress (NTUC) owns or operates food courts, like Kopitiam and Food Republic.

The bottom line is that the arm of the state already runs through the beating heart of most landlords in F&B. By extension, it would be naive to believe that the Government has little influence on the evolution of rents in the sector. These public agencies and Government affiliates can take the first step in bringing alternative tenancy arrangements, such as adopting tender criteria that place a greater weight on food offerings, business quality, innovation and productivity plans, rather than raw bid prices alone.

I had previously explained in this House why the current model of land pricing, which infers its value from transacted prices in HDB resale markets, may potentially give rise to excessive valuations. Without more proactive policy to contain price increases, unabated price appreciation in that market will inexorably pass through to land valuations, which in turn, will pass through to rental prices, including those in the F&B sector.

I had also previously explained why we need not be bound by the "straitjacket" of having land valuations tied to those handed down by the Chief Valuer, because we already depart from market pricing for transport infrastructure, community facilities and places of worship. But if we believe that hawker centres constitute essential infrastructure, we can impose valuation discounts on land that subsequently enable the rationalisation of lower rental rates.

This will be an important step, but not the only one. Landlords presently have strong incentives to inflate rents, also for valuation reasons, since property values depend not just on land prices, but also the expected stream of rental income. Landlords may choose to set rent at an unsustainably high price, perhaps even going as far as to leave storefronts empty, as anecdotal evidence suggests, because the potential capital gains outweigh any short-term foregone rental.

To short-circuit this pathology, we can target the rate of rent increases directly, by capping the maximum quantum that may increase every single year. As I had suggested in this House previously, such controls on rental rate increases is practised in other jurisdictions, such as Australia, Canada, China, France, Germany and many states within the United States.

The specific percentage increase can be calibrated for our own local markets based on average historical rate increases, and possibly further adjusted by property location and lease duration. Doing so will avoid situations, such as those widely reported in the press, where landlords hike rents as much as 30% to 50% in a single year. This will allow tenants time to react to a rental rate increase, but in a manner that does not inhibit rents from eventually reaching their long-run market rate.

It will also have the additional benefit of dampening rental volatility, where landlords that overstretch a given contract are forced to sharply slash rates thereafter, which contributes to the health of the overall market too. It is also a structural solution, as opposed to the ad hoc corporate tax rebates that while undeniably appreciated, are inherently temporary in nature.

In fact, the Ministry of National Development (MND) has implicitly recognised that rental rates set by private landlords are not always justified. In response to a Parliamentary Question filed two years ago, then-Senior Minister of State Sim Ann explained that HDB strives to keep rents stable in its role as a landlord by not increasing the rent for virtually all of its coffee shops in recent years, and by ceiling the sale of coffee shops to private owners since 1998, it is also conceded that a purely privately-owned coffee shop landscape is inherently undesirable.

I am therefore unconvinced by claims, sometimes made by this Government, that rental costs are secondary to the F&B business, just because they are a small and falling share of total business costs and do not directly affect food prices. After all, rents, which are signed for contractual terms of several years, represent a clear fixed cost. Even if they constitute a small part of overall cost, they remain a real and present hurdle that must be overcome, month after month, regardless of economic conditions.

This is even more so for small single-store operators, who are unable themselves to make ends meet, but cannot bear the brunt of a non-negotiable spike in rent.

That said, capping rents would in and of itself likely be inadequate if not matched by corresponding legislation that better protects against abuse. A recalcitrant landlord may simply choose to terminate the lease and secure a new tenant, if it cannot increase it as much as they would like. Tenants are then told to "suck up the rent hike or vacate", as there are other potential tenants in line. But we can learn from jurisdictions, like Australia, Japan, South Korea and the United Kingdom, which offers statutory renewal rights for leases held by small commercial tenants, although the conditions to ensure extension vary.

This has often been the case of late, as chain concepts from foreign shores, especially China, have barged into the local market. These brands have deep pockets, which not only allow them to offer low and possibly predatory rental bids. Some enjoy subsidies from their home states, which allow them to bid very aggressively. In extreme cases, they may even be willing to treat a Singapore-based operation as a loss leader to establish the brand in the Southeast Asian market.

When these operators fail to gain traction, they simply close, which is not an issue, given their motivations and loss absorbing capacity. But they leave in their wake, an otherwise sustainable local restaurant, who may have been the mainstay of the neighbourhood for years and years. To be fair, not all hawker centre and mall operators subscribe blindly to just profit. Many make a reasonable attempt to curate a tenant mix and apply price quality methods to place weight on non-price elements in their tenders, but the bottom line almost always end up dominating the decision and the proof is in the pudding.

Look around hawker centres and malls, and it is clear that the deck is stacked in favour of the larger chain vendors rather than new start-ups. I believe that we cannot allow our local F&B scene to be a guinea pig for the market share aspirations of such foreign chain restaurants, lest we inevitably surrender a core part of our intangible cultural heritage. We should hold more coffee shop and hawker centre operators to a tenant mix that explicitly includes a minimum share of halal nusantara options and local cuisine, failing which, an additional tax can be applied to non-conforming operators. This will serve as a break on the speed of absorption of foreign tenants in F&B without imposing a hard quota.

Sir, I open with a vision of how we can transform our SME sector. Let me close with another thought experiment.

Imagine how we want our F&B landscape to look like in a decade or two. We will walk into the food section of a mall in the future. What do we want to see? Big-box stores and large chains, peddling foreign brands and cuisines? Row upon row of only McDonald's, Subways, Jollibees, Haidilaos and Genki Sushis? Or do we also want to see local brands and local foods, our Ya Kuns, Old Chang Kees and Paradise proudly alongside? Do we hope to enjoy the serendipity of stumbling into a niche restaurant run by a local couple, based on recipes passed down from their grandparents? Or do we want our meals to always be the result of reheated food prepared by anonymous cooks, solely from central kitchens?

This is why the time is right to adopt F&B as a pilot for widescale reform of our SME landscape. Such businesses are an excellent case study, because the pressures they face are so familiar across SMEs – rising rent, labour shortages, increasing input costs and intense competition.

Some have argued that what is dragging down our F&B is anaemic productivity. I hope I have made it clear that the end game to the pursuit of scale and efficiency will be a narrower menu and a diminished experience, which is the last thing folks hope for when they take their lunch breaks or head out for a family dinner.

And even the most cautious realist can must acknowledge that productivity alone cannot outrun structural increases in business costs. The sector's thin margins offer little room for experimentation or investment, because errors are costly. That is a strong case for policy intervention. F&B also reveals both sides of Singapore's SME challenge. Existing operators struggle with business costs, yet, would-be entrepreneurs struggle to enter the formal market altogether, since the scaling up of home-based efforts to commercial operations is often insurmountable without deep pockets.

Successful interventions in F&B will not only help existing operators become more productive, it will also create a more graduated pathway for new entrepreneurs to enter the market, test ideas and grow, without taking excessive fixed costs on from the start.

To be clear, there are already existing initiatives that have been rolled out to provide explicit support to the sector, including FoodEx, the F&B Process Optimisation Programme and the Food Services Industry Digital Plan. These programmes are undeniably valuable, but they do not fully address the structural challenges that smaller operators face.

A dedicated F&B transformation pilot, bringing together these productivity improvement programmes, but also seriously tackling business costs will offer the best opportunity for a real-world test of a more integrated approach. I am ending. A business-as-usual approach to policy in the F&B sector will all but guarantee that otherwise viable businesses will no longer be able to conduct business as usual. We must be more proactive in tackling business costs for our beleaguered hawkers, "zichar" and small restaurant owners, or risk losing the soul of our delicious and precious local food.

Mr Speaker: Senior Minister of State Low.

7.58 pm

The Senior Minister of State for Energy, Trade and Industry (Ms Low Yen Ling): Mr Speaker, I thank Assoc Prof Jamus Lim for raising this topic. Food has always been close to the hearts of Singaporeans. It forms part of our social fabric. So, keeping our F&B sector vibrant and thriving is key to our unique local food culture and our way of life.

It is therefore more than just about businesses. We have an important stake in supporting our local F&B enterprises, and we are dedicated to ensuring that they have every opportunity to thrive, to transform, especially amid rising challenges.

The F&B industry has always been highly competitive and the pressure has intensified. Today, consumers have more choices than ever. Consumers' preferences are changing rapidly. They have become more discerning, demand quality, convenience and even unique experiences. Digital platforms have also transformed how customers discover, order and enjoy food. Social media has hastened the speed and the pressure for eateries to constantly thrill with new dining concepts and offerings. This is true not only in Singapore, but in every major city in the world.

Furthermore, like their counterparts globally, Singapore's restaurants are contending with persistent inflation and rising costs, intense competition, changing post pandemic dining habits, and the urgency to adapt to technology and automation. We are determined to ensure that our local F&B businesses can adapt successfully to all these changes.

Our F&B industry has long shown its dynamism and resilience, continually adapting and finding new ways to thrive. Despite thin margins and operating challenges, new businesses continue to enter the market even as others exit. For example, between 2015 and 2025, the number of F&B entities grew by a net of 42%, with more businesses opening than closing in most years.

Let me assure the Member that more than 90% of the registered F&B entities in Singapore continue to be Singapore-owned. This reflects the strong presence of local businesses in our Singapore F&B landscape.

We are heartened that many of our F&B businesses are pursuing transformation with determination. They are redesigning their operations, embracing technology, centralising food preparation – and it does not mean the taste is being compromised – adopting AI, improving productivity to serve their customers better. And we not only in the Ministry of Energy, Trade and Industry (METI), the Enterprise Singapore, but whole-of-Government, are supporting these efforts with practical assistance to helping our businesses and local F&B companies to raise productivity, stay competitive and build resilience.

Against this backdrop, the Member earlier raised concerns about rentals and manpower that the sector is grappling with. He has suggested measures such as limiting rental increase. We understand the concerns behind the suggestions. However, imposing rental controls is not straightforward and could have far-reaching consequences. Allow me to explain very quickly.

First, commercial properties operate under different market conditions. Businesses also vary widely in their operating models, locations and customer profiles. Imposing rental caps would require the Government to intervene directly in private commercial lease negotiations. This could distort market pricing and prevent rents from reflecting actual demand and supply conditions.

Rental controls could also discourage landlords from making space available for F&B businesses. So, then, over time, landlords may choose to put their premises to other uses. And over time, it could well mean that it reduces the supply of F&B space and creating further market distortions.

In addition, rent control weakens the incentive for landlords to maintain their properties, potentially leading to poorer building conditions.

Furthermore, during our regular engagements with the F&B businesses, several of them have told me that they value greater certainty over occupancy costs and lease arrangements that allow them to plan for the longer term.

With all these factors in mind, the Government has focused our efforts on improving the overall leasing environment and fostering fairer landlord-tenant relationships. For example, HDB allows their tenants to renew their leases every three years at market rents assessed by a valuer based on comparable properties, without having to go through a re-tender. This has provided greater rent stability for existing tenants.

HDB does not seek to maximise rental revenue or maintain high rental benchmarks. In fact, tenders are not always awarded to the highest bidder. HDB adopts the Price-Quality Method (PQM). For example, for coffee shops, where 60% of the evaluation score is based on factors such as affordability, good track record and community-centric initiatives.

And I want to assure the Member where the Government has direct oversight, other than HDB, JTC premises and hawker centres, we will continue to review the framework to keep the rent fair and competitive.

In addition, the Member will remember the Government has also worked with the industry to develop the Fair Tenancy Industry Committee's (FTIC's) Code of Conduct for Leasing of Retail Premises in Singapore. And the 13 key leasing principles promote fair and balanced lease negotiations between tenants and landlords.

In fact, since 2024, when the law came into effect, all qualifying retail lease agreements must comply with the Code.

I want to assure the Member that we will continue to monitor the rental landscape closely and work with industry stakeholders to promote a fair and transparent leasing environment through the FTIC's Code of Conduct for Leasing of Retail Premises.

Many F&B businesses have shared with us their manpower challenges. And we, together with the trade associations and chambers, like Restaurant Association of Singapore, together with the business advisers in the 10 SME centres, together with Enterprise Singapore, we engage our local F&B establishments very regularly.

And they understand that with a fast-ageing population, manpower will continue to be limited. So, we must find ways to get around this constraint.

Some businesses have been able to adapt and find new ways to grow despite the constraints faced. For example, they have shown very good proof points, successful stories of redesigning job, leveraging technology to increase productivity, reduce their reliance on manpower, redesigning such that their older workers can have better jobs and better wages. And we have many success stories. I had shared that two months ago in this House.

We want to assure the Member and the House that where there is a clear need, the Government does provide targeted manpower flexibilities. For example, MOM currently allows businesses to hire Work Permit holders from Non-Traditional Sources for selected roles on the Non-Traditional Sources Occupation List, such as Cooks, which the Member raised earlier.

Mr Mark Lee is not in the House. I remember two years ago, both Mr Mark Lee and myself, we co-chaired the Alliance for Action (AfA) on Business Competitiveness, and we engaged the trade associations and chambers widely, especially our F&B and the retail sectors. We heard this feedback from them. This is one of the key recommendations that was submitted to the Government. And during the MOM Committee of Supply, this was announced.

I am happy to share with the House. I think you would know that from September this year, that means last month, MOM have expanded this list to include four more F&B roles, including kitchen assistants and waiters. The Member mentioned cooks and waiters. So, all these now, our local F&B companies can now tap on the Non-Traditional Sources for five of these F&B roles. This certainly will help our local F&B address manpower needs in roles with low take-up by locals.

Earlier, the Member has suggested introducing a higher DRC for F&B. This may not be sustainable because being a small country with finite land and resources, Singapore has infrastructure constraints. We have to continue to manage the size of our foreign workforce carefully.

I think we all recall, as Prime Minister highlighted in the recent National Day Rally, Work Permit holders are the largest group of foreign pass holders. We cannot successfully compete by relying on ever more manpower, whether foreign or local. Really, our long-term competitiveness must come from creating better jobs, boosting higher productivity and gaining stronger business capabilities.

We understand that rising business costs, such as rent and manpower are real concerns. The Government will continue to provide support where needed to help our businesses manage these immediate challenges.

That is why, three months ago, we announced a second tranche of support measures of close to $300 million to provide relief to our SMEs facing immediate cost and cash flow pressures due to the impact of the Middle East crisis.

Besides financial support, Enterprise Singapore has also rolled out targeted programmes that the Member has talked about. I am happy that he remembers that for the F&B sector, over the last 18 months, METI as well as Enterprise Singapore, we curated sector-specific programmes like F&B Process Automation Programme, FoodX, as well as more recently, the F&B AI and Digital Integration Programme, to support our F&B sector to raise productivity, redesign the workflow so that they can do more with less.

Mr Speaker: Senior Minister of State Low, you might want to quickly round up. Your time is coming up.

Ms Low Yen Ling: Thank you, Mr Speaker. Mr Speaker, our culinary heritage, distinct food culture and local F&B businesses that contribute to our F&B scene, form part of our Singapore Story.

I want to assure the Member and the House, across the entire Government, it is not just only METI and Enterprise Singapore, but including other agencies, such as National Heritage Board, through the Organisation Transformation Grant, the National Arts Council, the Ministry of National Development, HDB and MOM and many others are working hand in hand with the trade associations and chambers, with the F&B sector, to support our local F&B companies.

From targeted programmes that I talked about to broad-based funding, from capability building to work redesign and more. We will spare no effort to continue finding ways to support and future-proof our local F&B businesses to adapt, to gain new capabilities and to compete successfully. [ Applause .]

Question put, and agreed to.

Resolved, "That Parliament do now adjourn."

Mr Speaker: Pursuant to Standing Order 2(3)(a), I wish to inform hon Members that the Sitting tomorrow will commence at 10.30 am. Order. Order.

Adjourned accordingly at 8.09 pm.