HDB SHOP/COMMERCIAL PROPERTIES TENDER SYSTEM (Disclosure of bids)

[Mr Speaker in the Chair]

Mr Heng Chiang Meng asked the Minister for National Development (a) why does the Housing and Development Board only disclose the winning bid in its shop/ commercial properties tender system and not all the bids; and (b) what is the rental index or the rate of increase (decrease) in rents for HDB shop and/or commercial properties based on average winning tender bids for the quarters from 1981 to 1984.

The Minister for National Development (Mr Teh Cheang Wan): Mr Speaker, Sir, the Housing and Development Board normally accepts the highest tender for its commercial premises, placing the second and third highest tenders as reserves should the highest tenderer not take up the premises.

The HDB is of the view that disclosure of all tenders may lead to manipulation of the tender system. Tenderers, particularly family members or business partners, may be encouraged to submit multiple tenders in collusion with one another. If all bids are disclosed, they will know whether they have been placed as a reserve. Should they also submit the highest bid, they may reject the offer made to the highest tenderer and accept the premises at the lower rental offered by the reserve. The only penalty suffered by the rejecting tenderer is a forfeiture of the tender deposit. This is insignificant compared to the higher rents which may have to be paid over the years.

Full disclosure of all bids may also encourage more non-bona fide tenders. If the gap between the winning tender and the reserve tender is wide, the successful tenderer may reject the unit and repeat the practice for another shop.

An analysis of tenders received for HDB's commercial properties between 1981 and 1983 indicates that rentals offered increased by approximately 30% to 40% in town centres, and by about 30% in neighbourhood centres. Rentals in the Central Area increased by approximately 20%.

In 1984, rentals remained stable in town centres and neighbourhood centres but declined by approximately 10% to 15% in the Central Area.

Mr Heng Chiang Meng (Jalan Kayu): Sir, is the Minister aware that it is precisely because of this closed system and the fact that the HDB is the monopolist of these estates that has led to this increase? Is the Minister also aware that, in fact, from 1981 until the present time, rentals for commercial properties all over Singapore, as published in the Monthly Digest of Statistics which shows only sale prices but presumably would also reflect the rental prices, have decreased from 1981 until the present time?

Mr Teh Cheang Wan: I am really a bit puzzled. Are you of the view that non-disclosure has led to higher tenders? Is that what you mean?

Mr Heng Chiang Meng: Yes, that is what I am saying - that the disclosure of only the winning bid will lead the next tenderer to go for a still higher bid, regardless of whether or not there is a market for such HDB shop space.

Mr Teh Cheang Wan: Mr Speaker, Sir, I do not think that is the case. Anybody who submits a tender for HDB commercial premises is a serious tenderer, and he would have made his calculations: what is the potential of the business, how much profit he can make, before he submits his tender. This is not a guessing game. It does not necessarily follow that where one tenderer bids at a certain sum for a rental shop, the other tenderers will bid higher than him. Because the tenderer first makes his own calculations. If he finds that his business does not allow him to make a profit if he tenders too high, he will not tender at that rate.