JURONG TOWN CORPORATION (AMENDMENT) BILL

Order for Second Reading read. 3.48 pm

The Minister for Trade and Industry (Mr Yeo Cheow Tong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Jurong Town Corporation has over the years built up an excellent international reputation as a developer of top class industrial estates. It is not unusual now for MNCs and industrialists in the region to use Jurong Industrial Estate as a benchmark when they assess the suitability of a particular location for their new investment.

It is therefore not surprising that when our own businessmen started to venture into the development of industrial estates in the region, some of them turned to JTC for services ranging from consultancy to project development and management. Just as our private sector has found that the rapid economic growth in the region has created many attractive business opportunities, so too has JTC as it ventured abroad in support of the private sector and the Government's efforts to create an external economy.

In the process, JTC has found that, for it to perform efficiently and to be able to add greater value as a partner to the private sector in their overseas ventures, its statutory powers would have to be enlarged. This is not surprising, as the JTC Act was enacted at a time when we were just embarking on our own industrialisation programme, and few could have dreamt of the drastically changed circumstances prevailing in the East Asia region today.

This Bill aims to rectify the situation by seeking to amend the JTC Act to:

(i) widen JTC's overseas charter; and

(ii) give JTC greater flexibility in financial matters.

We have also taken this opportunity to amend certain provisions in the existing Act to give JTC greater flexibility in its daily administration and operation, and to bring the JTC Act up to date.

Let me now brief Members on the key provisions in the Bill.

The functions of JTC, as provided for in the current Act, are to develop and manage industrial estates and sites in Singapore or overseas, and to provide supporting facilities and social amenities. However, JTC has found that, for larger scale projects abroad, the scope of work extends beyond just developing and managing an industrial estate. For such project to be feasible and successful, the developer may also have to develop and manage infrastructural facilities such as bridges, warehouses, ports, power supply networks and commercial and residential properties.

Clause 4 of the Bill re-enacts with amendments section 12 of the JTC Act which sets out the functions and powers of JTC. The new section 12 enlarges the functions of JTC and gives it additional powers for the carrying out of those functions. This amendment will enable JTC to provide the full range of services needed in its regional activities.

Sir, for JTC to carry out its functions more effectively in today's competitive environment, it is also necessary to provide JTC with greater financial flexibility.

For instance, from time to time, JTC and its subsidiaries have been approached by various Singapore companies to participate in their projects as an equity partner. The companies would be able to spread the project risks and financial commitment, and the projects themselves would benefit from the good reputation of JTC. However, even though these projects may be commercially viable and attractive, the current Act does not allow JTC to participate in ventures in which it has a minority shareholding. There may also be occasions when JTC, having identified a project on its own, would not want to be a majority shareholder but still would like to participate in the project, or may want to divest part of its shares to other Singapore partners.

The Act also requires these JTC subsidiaries to share the functions of JTC as set out in the existing Act. There is also no reason to compel JTC's subsidiaries to share the functions of JTC itself as long as the activities they engage in are commercially viable and fit in with JTC's long-term corporate strategies.

The Act also does not allow JTC to grant loans to companies in which its subsidiaries have an equity stake. Neither does it allow JTC to stand as a guarantor for loans to these companies or its own subsidiaries. JTC, therefore, faces severe constraints in providing financial support to its subsidiaries in their local and overseas ventures.

To give JTC more financial flexibility, clause 4 of the Bill seeks to amend section 12 of the JTC Act to allow JTC, with the Minister's approval, to:

(a) participate as a shareholder in companies for both local and overseas ventures without setting any conditions on the extent of its shareholding; and

(b) grant loans or stand as a guarantor for loans to its subsidiaries and the companies in which the subsidiaries have equity participation.

These amendments will give JTC the flexibility to participate as a shareholder in any project which is commercially attractive and viable, and fits in JTC's corporate strategies, and which can benefit from JTC's expertise and experience.

To give JTC access to more sources of funds to support its local and regional activities, clause 5 of the Bill seeks to amend sections 14 and 15 of the JTC Act to allow JTC, with the Minister's approval, to raise funds using financial instruments other than mortgages, stocks and bonds as stated in the current JTC Act.

Sir, JTC is now allowed to only invest in trust funds, as provided by section 4 of the Trustees Act. Clause 10 re-enacts with amendments section 26 to allow JTC to invest in trust funds and, with the approval of the Minister, in any other securities. This change is in line with the Government's call for statutory boards to tap the capital markets for funding activities and to seek fund management services to invest their cash surpluses.

Section 5(1) of the present JTC Act states that the JTC Board must comprise a Chairman, Deputy Chairman and seven members. This means that JTC cannot vary the size of its Board according to its needs. Clause 2(a) of the Bill amends this section to give JTC more flexibility by stipulating the composition of the Board as a Chairman and not less than 4 but not more than 11 members, one of whom may be appointed as the Deputy Chairman.

Currently, we have to amend the JTC Act each time JTC changes its corporate logo. This is rather cumbersome and inefficient. Clause 12 of the Bill amends section 35 to allow JTC to change its logo by notification in the Gazette.

Sir, this Bill also amends certain provisions in the JTC Act to bring them up to date. These are mainly administrative in nature. They include submission deadlines on JTC's budget and annual report to the Minister and JTC's audited financial statements to the President.

Sir, I beg to move.

Question proposed.

Dr Lee Tsao Yuan: Mr Speaker, Sir, this amendment to the Jurong Town Corporation Act is a timely one for several reasons. Apart from the administrative amendments such as the number of Board members, submission of the annual report, etc, the main thrust of the amendment is to empower JTC to carry out functions which are better suited to the current and future development needs of Singapore.

First, the amendment empowers JTC to develop and manage not only industrial estates but also parks and estates for industries as well as businesses. In Singapore itself, the regionalisation of plant line operation has converted the Singapore operations into headquarter activities involving marketing, procurement, technical and administrative support. Manufacturing functions are increasingly becoming blended into R&D and producer services in one continuous spectrum; as such, business parks of the 1990's version of the industrial estate of the 1960s. In addition, more capital and technology intensive manufacturing sites such as for wafer fabrication are required.

Second, the amendment Bill provides for the participation of JTC in overseas ventures and development. One key regionalisation thrust has been the development of industrial estates and townships outside Singapore such as in Batam and Suzhou. This is a win-win situation. The host country benefits in the technology transfer, both in terms of the hardware and the software of Singapore's successful experience in the development and management of industrial townships. The window of opportunity is now at this crucial stage of industrialisation in the emerging economies of China, India, Vietnam and, possibly, Myanmar later on. Foreign investors, including Singapore-based companies, likewise benefit because of the ease of establishment of their operations in the host country. There are also returns to Singapore from the development and operation of the industrial park itself.

Third, the amendment allows JTC to "act in combination or association with other persons or organisations for the discharge of any of its functions" (clause 4(2)(a)); and "to form or participate in the formation of a company or companies or enter into any joint venture or partnership in Singapore or elsewhere" (clause 4(2)(j)). This enables JTC itself to enter into joint ventures with local and foreign companies in a consortium approach to the development of industrial parks abroad.

I would like to add a number of footnotes which constitute qualifiers and these observations come from a study of infrastructure development in Singapore which I did a year ago. JTC not only has got to watch out for its own bottom line but has a role to fulfil as a key public sector agency. I see three major developmental roles for JTC.

The first developmental responsibility is domestic. The stated objective of the Government is to sustain the manufacturing sector - at least 25% of GDP. JTC has a key role to play in helping to fulfil this objective.

I wholeheartedly agree with the statement in JTC's Annual Report 1993/94 that there is a new resolve in JTC to become more customer focused. The report goes on to add that JTC carried out a review of land pricing and leasing policy to ensure that they are relevant in today's context. Specifically, the cap on annual rent escalation was reduced from 10% to 7.6%, and rentals of standard and flatted factory space were frozen for the second year in 1994, even in spite of these rents being at least 15% lower than comparable private sector rates.

Land pricing and rentals as well as the entire building regulatory framework do affect the competitiveness of Singapore's manufacturing. It is a difficult and sensitive task to balance excess demand induced price increases due to land scarcity on the one hand, and the need to price land in order to offer investors a competitive package on the other. This involves more agencies than just JTC. I would therefore urge the Government to initiate a comprehensive study of land pricing, land usage and the associated regulatory framework in Singapore involving all the relevant agencies in consultation with key private sector companies in order to facilitate the implementation of appropriate policies in this area.

The second developmental responsibility is in the area of human resources development. I see JTC as a training ground for the building up of a core of engineering, managerial and specialist staff, which constitute a valuable asset to Singapore, both domestically and overseas. Some of these expertise can, over time, be released to the private sector to the benefit of the country at large.

The third developmental responsibility is the nurturing of local companies. In the many projects that JTC handles domestically and abroad, it is important that JTC considers how it can help local companies establish track records and broaden their job experiences. The consortium approach is one way. Sub-contracting out certain tasks such as waste management is another. JTC already incorporates some or all of these measures. It should continue to do so as an integral part of its mission.

In conclusion, the Jurong Town Corporation (Amendment) Bill enables JTC to deepen and broaden its functions in response to Singapore's own current and future development needs as well as the opportunities in the rapidly growing Asia-Pacific region.

With these footnotes in mind, I support the Bill.

Mr Chng Hee Kok: Mr Speaker, Sir, I rise to support the Bill which gives JTC some flexibility in its operations. But I would like the Minister to exercise some caution in allowing JTC subsidiary companies to invest abroad.

I have a contrary view on this. I am not sure whether the JTC has the culture, manpower or the expertise to invest abroad. The conditions in countries overseas are quite different. Our laws are very definite. Our people in JTC know what they are doing in Singapore. But in China or in India, the rules and laws are not that precise.

Here, we have a situation where the JTC is allowed, of course, with the Minister's approval, not just equity participation but also allowed to guarantee loans. This is a very serious matter. Because in the case of a major political upheaval, the Government could be placed in a very embarrassing position. I would prefer a provision to allow JTC to set up subsidiaries which will work in conjunction with Government-linked companies as an investor, and provide the expertise, rather than be a direct investor and guaranteeing loans in the development projects. I would like the Minister to keep that in mind and give this House a suitable response.

Mr Yeo Cheow Tong: Sir, first of all, I would like to thank the two Members for their support of the Bill.

Dr Lee has made three points. Firstly, that the pricing of land is a very complex and sensitive issue and that we should have a multi-agency to do a comprehensive study of the situation and see how we can ensure that the land pricing is in line with Government policies. I agree with her that this is a highly complex issue. On the one hand, we are faced with the problem of having very limited land and therefore it is inevitable that land prices in Singapore will always be high. On the other hand, we have the important task of ensuring that our manufacturing sector will be responsible for no less than 25% of our GDP. So how do we ensure that the prices of industrial land do not cause our key export industries to become non-competitive?

Sir, in land-scarce Singapore, we will always have to ensure that land is used efficiently, optimally and that wastage is minimised. One method for ensuring this is, of course, having proper planning procedures. This is being done. Another essential method is to ensure that the pricing is correct, so that the owners and lessees make full use of every square metre of land that they lease.

Sir, there are ways for establishing the correct market price. For commercial and private residential properties, we have a very vibrant private sector. Transactions are done almost every day. The market price is fairly well established. Also, the URA periodically tenders out Government land. I think that sets another benchmark for the price of such land. For industrial properties, we have a small proportion of industrial land held by the private sector. These are mainly in the MacPherson area and along certain parts of Bukit Timah Road.

In the last two years, URA has also tendered out some plots of land for industrial use. This gives us a rough indicator of what should be the market price for industrial land. I would also like to assure Dr Lee that we do monitor the prices of industrial land in Singapore as well as the prices of industrial land in our key competitive countries such as Malaysia, Thailand, Indonesia, China, India and even in America. But we must always recognise that land prices in Singapore can never be as cheap as land prices, including industrial land prices, in those countries with much bigger land areas. Because land is such a vital resource, I am happy to inform Dr Lee that we already have a multi-agency committee that plans land usage in Singapore. For example, in a particular area, what sort of land usage should be allowed and also the intensity of the land usage. The planning process ensures that the land is utilised properly and it also ensures that if a particular land has been gazetted or master planned for industrial uses, then the land pricing there would be different from land which has been master planned for residential or commercial development.

As JTC has stated in its annual report, they do try to ensure that their land prices are competitive. But at the end of the day, we will never be close to the land prices in our surrounding countries. The challenge to us, therefore, is to ensure that we are able to make that higher price bearable for the private sector, by making the infrastructure efficient so that the industries have a lower cost of operation.

The other matter is that we have to continue attracting investors who bring in efficient productive operations and who are carrying out high value-added activities. So MTI will continue to monitor, together with JTC and EDB, the various prices to make sure that we are actually competitive.

As regards her other point on the release of JTC expertise to the private sector, I totally agree with her. Actually, JTC is working very actively with the private sector on various projects in the region, offering their consultancy services and they also have been losing their professionals to the private sector. The private sector realises that there is expertise in JTC and they have not hesitated to poach from JTC when the need arises. In a way, JTC is also performing some national service.

In terms of nurturing local companies by sub-contracting more work to them, JTC is already doing so. I can assure Dr Lee that it will continue to review and see what else can be sub-contracted out.

Mr Chng Hee Kok advises that with the very complicated operating environment abroad, he is not too sure whether JTC has the corporate culture and expertise to invest abroad. I wish to assure Mr Chng that, in the first place, JTC has already been operating abroad through its subsidiaries and directly as a statutory board for many, many years. It has been involved in providing consultancy services in the development of industrial estates in Indonesia, Malaysia, Vietnam, China and now India as well. So they do have the expertise. But having said that, I do agree with him that we need to be cautious. I can assure him that we will definitely exercise caution when reviewing requests from JTC to participate as equity partners in the projects.

The amendments that I have moved today are to ensure that JTC can actually participate as a minority partner, ie, the projects would be driven by either the private sector companies or GLCs, and JTC is there with a small stake, but more in its role as a consultant to the project. I agree with him that we should be cautious.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Yeo Cheow Tong].

Bill considered in Committee; reported without amendment; read a Third time and passed.