MARITIME AND PORT AUTHORITY OF SINGAPORE BILL

Order for Second Reading read. 2.03 pm

The Minister for Communications (Mr Mah Bow Tan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the purpose of this Bill is to seek Parliament's approval to set up a new statutory board called the Maritime and Port Authority of Singapore, or MPA for short. I would like to take this opportunity to describe the background for the setting up of the new Authority.

Singapore is a major maritime nation. The Port of Singapore has been the world's busiest port in terms of shipping tonnage since 1986. Last year, more than 100,000 vessels called at Singapore.

Singapore also operates one of the world's busiest container ports. Last year, our container terminals handled more than 11 million Twenty-Foot Equivalent Units. With a vast catchment area stretching from the east coast of Africa to the shores of Australasia, Singapore is one of the major hub ports of the world.

As a hub port, the Port of Singapore plays a significant role in enhancing the economic competitiveness of the region. Because Singapore has a high frequency of shipping connections, exporters find it more convenient and cheaper to ship their precious cargo through Singapore. Deliveries can be made on time because our port works smoothly. These factors contribute to the competitive edge of exporters which use Singapore to tranship their goods.

These achievements have been made possible largely through the untiring efforts, foresight, dedication and innovation of the staff and management of the Port of Singapore. It has won customers by providing highly efficient and cost-competitive container-handling and marine services. Ships are turned around quickly which is particularly important in an era of increasingly expensive mother container vessels. This contribution to our competitiveness was recognised when Singapore was placed first among 42 economies in 1994 in the "World Competitiveness Report".

However, PSA cannot rest on its laurels. It must keep improving in the face of increasingly fierce competition from regional ports for a share of the booming container business. Regional ports are expanding. There are plans to build new ports.

To stay ahead, the Government has decided to corporatise the Port of Singapore Authority in the next few years to better enable PSA to face the challenges which it will meet in the next century. PSA's commercial activities in cargo terminal operations as well as in marine services will be corporatised.

As a corporatised entity, PSA will have more flexibility to operate and invest in the region. And this together with private sector discipline and greater market orientation will sharpen PSA's competitive edge as it faces growing regional competition in the container-handling business. Corporatisation will also put PSA in a stronger position to operate a hub port that will continue to contribute to the economic development of Singapore and the surrounding region.

The corporatised PSA will subsequently be listed on the Stock Exchange of Singapore. This is part of the Government's plan to enhance the assets of our citizens and to give them a stake in our country's wealth.

The corporatised PSA will have to be regulated to ensure that there is no abuse of its market dominance. One of the key lessons in privatising a statutory board is that the regulator should be established before corporatisation takes place. We therefore propose to set up the MPA to license and regulate the port industry before PSA is corporatised. Setting up MPA ahead of PSA's corporatisation will give it sufficient time to work out a good regulatory system as well as to build up the necessary expertise and standing to regulate the post-corporatisation port industry. There will also be more time to sort out any grey areas that may arise as we embark on this corporatisation exercise.

Since it would not be correct for a private company to have statutory powers, such as control over navigational safety in the port, the Government has decided to transfer PSA's powers to MPA even while PSA remains a statutory board. At the same time, the Government will revamp the structure of port and maritime administration in Singapore by incorporating the National Maritime Board (NMB) and the Marine Department into MPA.

MPA's mission is to protect our strategic maritime interest and to promote Singapore as a major port and an international maritime centre. As the sole agency responsible for all port and maritime issues in Singapore, MPA would be expected to monitor and to assess the impact of regional as well as international developments in the port and maritime world on our port and to take appropriate measures.

MPA will be a self-funding statutory board. It will have a staff strength of about 500 personnel, 350 of whom will come from PSA with the rest coming from the NMB and Marine Department. Although smaller than the PSA, the new Authority will be no less important than PSA in terms of the scope of its duties and functions.

MPA will perform the roles of the National Maritime Board and Marine Department as well as license and regulate PSA when PSA is corporatised. As soon as MPA is set up, it will also take over statutory functions from PSA, such as ensuring navigational safety in our port waters and drawing up the port masterplan.

MPA will look at sea transport issues from a national viewpoint. The issues will include wide-ranging and global issues, covering important strategic issues such as the Malacca Straits, which is our economic lifeline to the Middle East and the West. MPA will seek to cooperate with other countries and international organisations to develop a framework in which Singapore's position as a global maritime centre will be enhanced.

PSA will become a pure service provider once MPA is formed - it will provide cargo-handling services and supporting marine services such as pilotage and tugboat services. Within the context of the MPA's port masterplan, PSA will continue to develop additional cargo terminal facilities. So, in essence, PSA will become a cargo terminal developer and operator once MPA is formed. And this will enable PSA to focus on its commercial role.

Let me now address the key provisions of the MPA Bill.

The Bill sets out the functions and duties of the Authority. The key functions of the MPA, as I said, are to promote the use, improvement and development of the port; control vessel movements and ensure navigational safety; license and regulate marine services and facilities, such as pilotage services, tugboats and waterboats, as well as port services and facilities, such as container and conventional cargo terminals, and also to regulate the port industry's economic behaviour. The MPA will train seafarers and promote the development of merchant shipping. The MPA will also advise the Government on matters relating to sea transport, marine and port services and facilities, and represent Singapore internationally on these matters.

With the Minister's approval, the Authority may levy rates, charges, dues and fees for the use of services and facilities provided by MPA, as well as levy the maritime welfare fee, port dues and goods dues. The annual tonnage tax currently collected by the Marine Department will continue to be paid into the Consolidated Fund.

The MPA Bill provides for the transfer of assets from the PSA, NMB and Marine Department to MPA. The staff working in these organisations will be transferred to the Authority at terms no less favourable than those that they enjoyed immediately prior to their transfer. Pension rights of existing pensionable officers will be preserved.

The Authority is empowered to regulate the employment of seamen. This is a function transferred to MPA from the National Maritime Board.

The Bill enables MPA to make regulations for the control and management of the port. MPA will have the power to declare any area in the port to be a pilotage district. It can regulate pilotage in the port. It can also regulate and control certain activities, such as dredging within the port and territorial waters. Again these are powers which are being transferred from PSA to MPA.

The Bill states that no person shall provide marine or port facilities without a public licence or exemption from MPA. The Authority may put into a public licence a provision to control or fix the tariffs charged by the licensee in respect of the handling and storage of cargo other than transhipment cargo. Transhipment cargo will not be regulated because the transhipment business is an international one in which the local terminal operator competes with other ports in the region and competition will provide the necessary checks in the system.

As for local cargo, the Bill provides a safeguard against exploitation of market power by enabling MPA to regulate the tariffs charged for the handling of local cargo.

The MPA Bill provides that the Minister may make a special administration order in relation to a licensee operating a container terminal directing the affairs, business and property of such a licensee to be managed by the Authority. The reason why this power is needed is to ensure the uninterrupted movement of cargo into and out of Singapore. Since the container terminals handle most of Singapore's exports and imports, any disruption in terminal operations could cause the economy to grind to a halt.

Consequential amendments will be made to several Acts. The main Act affected, of course, will be the PSA Act. Many of its provisions will be repealed and transferred to the MPA Act.

Sir, the formation of MPA is a significant step forward in Singapore's maritime development. It represents several months of intensive work by officers of my Ministry who have come up with a framework which lays much of the groundwork for PSA's impending corporatisation, and it also incorporates the necessary powers and mechanisms for the effective functioning and regulation of a post-corporatisation port industry.

As we approach the beginning of a new millennium, important challenges lie ahead of us as we strive to improve Singapore's position as a hub port and a major international maritime centre. We will need the right institutional framework to steer us through uncharted waters. I believe that this is provided by the MPA Bill.

Sir, I beg to move.

Question proposed.

Dr Arthur Beng Kian Lam (Bedok GRC): Mr Speaker, Sir, with the impending corporatisation of PSA in 1997, it is now timely and correct to separate the operator (PSA) from the regulator (MPA). The reasons for corporatisation of PSA have been explained by the Minister. The MPA will be formed by merging the Maritime Department, the National Maritime Board and the parts of PSA which undertake statutory functions.

Sir, with increasing competition to provide equally good if not better port services in the region, it is timely that the MPA is formed. Besides its regulatory function, there must be a central agency like the MPA which has the resources and will effectively monitor events regionally and globally to protect our maritime interests and to ensure that we remain an efficient and competitive port. Our long-term strategic maritime interests must be continually updated so that we will remain a major port and an International Maritime Centre.

Sir, as a port industry regulator, the MPA will have to ensure that the providers of services to our ports, eg, pilotage, will be of high standard, especially when issues of safety are concerned. The privatisation of pilotage is especially of concern to the GPC, as this is linked to safety in a very crowded port. I am sure that the Minister would like to reassure the House that this is an area that will be under careful scrutiny. Furthermore, to maintain competitiveness, service standards must be set by the MPA and must be met by the operator. In this context, I would like to ask the Minister whether it is his intention to have more than one operator, ie, besides PSA, will there be other operators?

Sir, I would also like to ask the Minister whether it is also timely to have a forum under the MPA whereby the operators, the port users and the port regulators can meet and share their common worries and make strategic plans ahead. This is similar to the Public Transport Council for land transport. This group should not only discuss money matters but also plan strategically together for the future to ensure that Singapore maintains its competitive edge as the number one port.

Finally, Sir, as in all exercises of this sort where several existing bodies are amalgamated into one, I would like to seek an assurance from the Minister that the interests of the staff have been fairly looked into. Furthermore, the National Maritime Board which looks after our seafarers now comes under the MPA. Although the MPA has a very large charter and the number of Singapore seafarers is not large, it is important that the interest of our seafarers deserves careful monitoring by the MPA.

Mr Mah Bow Tan: Mr Speaker, Sir, I would like to thank Dr Arthur Beng for supporting the Bill. He asked several questions. I would like to take this opportunity to clarify the issues involved.

A very important question is whether there will be other cargo terminal operators in Singapore after PSA is corporatised. Whether the Government will introduce one or more cargo terminal operators after corporatisation of PSA depends on several factors. First of all, we would have to look at the overall level of competition that is faced by PSA. As I indicated in my speech just now, the transhipment business is an international business. And as an international business, PSA actually does face competition. So we must take this into account.

There are other transhipment centres which compete with PSA. For example, on the trans-Pacific route, PSA competes with Kaohsiung in Taiwan. On the European route, competition comes from Colombo. That is the first issue we will have to tackle.

Secondly, we have to be mindful of the fact that a port depends very heavily on economies of scale. Overhead costs involved in building a port and in running a port are very high - gantry cranes, land reclamation, etc. And if these overhead costs can be spread over larger and larger volumes of containers handled, the unit cost will come down and economies of scale will set in. But we must also recognise that at some stage, diseconomies of scale will also be possible. At this stage, I believe that this has not yet happened with PSA, but this is something that we have to be mindful of. So I cannot say with certainty whether there will be a second or even a third cargo terminal operator in Singapore. But I can say that we are not closing the door to such a possibility of domestic competition. We should leave our options open and my Ministry, together with the MPA and, of course, in discussion with PSA as well, will consider all these factors carefully before we decide. The overriding consideration, of course, is what is in the best interest of Singapore and the Singapore economy.

As far as the interests of staff are concerned, the Bill specifically provides that all the staff from PSA, Marine Department and the National Maritime Board will be transferred to MPA and they will enjoy terms that are no less favourable than those currently enjoyed by them. Indeed, the various unions that are representing these staff members have been briefed on the MPA's terms and conditions of service and I am pleased to see that they are agreeable that these terms and conditions are fair.

Dr Beng also asked about protection of seafarers' interests. The seafarers' interests are currently being handled by the National Maritime Board (NMB). And when the MPA is set up, this function will be transferred from the NMB. The new Authority will continue to train seafarers to promote their welfare as well as to develop, promote and regulate their employment. Again, the relevant staff unions have been consulted. In this case, the Singapore Organisation of Seamen (SOS) as well as the Singapore Maritime Officers' Union (SMOU) have been briefed on the setting up of the MPA and they have been assured that the MPA will continue to discharge effectively the functions of the NMB.

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 Mah Bow Tan].

Bill considered in Committee.

[Mr Speaker in the Chair]

Clause 1 -

The Chairman: In page 1, line 6, the citation year "1995" will be changed to "1996". This will be done.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 121 inclusive ordered to stand part of the Bill.

First to Third Schedules inclusive ordered to stand part of the Bill.

Fourth Schedule -

The Chairman: The citation year "1995" wherever it occurs will be changed to "1996". This will be done.

Fourth Schedule ordered to stand part of the Bill.

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

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 2.55 pm.

Sitting accordingly suspended at 2.28 pm until 2.55 pm. Sitting resumed at 2.55 pm