IMPORT DUTY ON REFINED SUGAR (Rationale)

Mr Chng Hee Kok asked the Minister for Trade and Industry if he will explain the rationale for retaining the import duty on refined sugar after abolition of the excise duty.

The Minister of State for Trade and Industry (BG Lee Hsien Loong) (for the Minister for Trade and Industry): Mr Speaker, Sir, I am answering on behalf of my Minister.

Before the 1st September of this year the Sugar Industry of Singapore (SIS) was the sole supplier of refined sugar to the domestic market. SIS concluded favourable long term contracts with Australia and Fiji for the supply of raw sugar. In the last 10 years, world sugar prices fluctuated widely but the long term contracts guaranteed us regular supplies of sugar at stable and comparatively low prices.

This situation has now changed. There is a world sugar glut, as governments in Europe and the United States are subsidizing their sugar growers. Prices have fallen drastically and do not appear likely to recover to the 1970s levels in the foreseeable future. It is no longer worthwhile to pay a high premium for sugar supplied under the long term contracts. The Ministry of Trade and Industry (MTI) has therefore decided to liberalize the sugar trade in Singapore. However, this has to be done in stages, as the long term contracts will last till 1987.

The first steps were to remove the excise duty on refined sugar and to allow traders to import sugar from overseas, if they preferred, rather than to buy from SIS by removing the requirement for import licences. The excise duty on raw sugar and sugar syrups will also be removed shortly. As a result of these steps, both wholesale and retail prices of refined sugar have fallen by about 15%. Our sugar prices are about the lowest in the region. Firms producing sugar-based products for the local market are now in a better position to compete with imports. Manufacturers who produce for export markets have all along been exempted from the import duty on sugar. The Government's intention is to eventually free the sugar trade completely and abolish the import duty on sugar.

Mr Chng Hee Kok (Radin Mas): Notwithstanding those long term contracts, the published figures show that the imported raw sugar has dropped by over 30 cents per kilogram. Will the Minister please encourage SIS to pass its savings on to the consumers?

BG Lee Hsien Loong: Indeed, SIS's practice has been to pass these savings on to consumers but, as things stand, anybody who wishes to import raw sugar or refined sugar at world prices is free to do so provided he pays the import duty. And, as I have said, the import duty will in due course be removed.

Mr Tan Soo Khoon (Alexandra): Sir, will the Minister of State state specifically when the import duty will be removed?

BG Lee Hsien Loong: Mr Speaker, Sir, without giving any hostages to fortune, I may say that the long term contracts expire in 1987 and it is our objective to have the sugar trade liberalized by then, if not before then.