LAND ABOVE OR NEAR MRT STATIONS (Development by Land Transport Authority)

Mr Chiam See Tong asked the Minister for Communications whether he will consider introducing legislation to amend the Land Transport Authority of Singapore Act and other relevant laws to allow the Land Transport Authority to develop land above or near MRT stations.

Mr Mah Bow Tan: Sir, section 6 of the Land Transport Authority of Singapore Act spells out the functions and duties of the Land Transport Authority. In addition, it provides for the Authority to undertake such other functions as the Minister may assign to it. The Government can decide whether to allow the Authority to develop land above or near MRT stations under this section of the LTA Act.

Mr Chiam See Tong (Potong Pasir): Sir, is the redevelopment at the bus interchange near the Toa Payoh MRT station undertaken by the LTA?

Mr Mah Bow Tan: Sir, the redevelopment of land around bus interchanges at the moment is undertaken as part of a comprehensive redevelopment scheme carried out primarily by the HDB in conjunction with other relevant agencies.

Mr Chiam See Tong: The Minister has said that section 6 of the LTA Act covers areas in which the Minister will assign to the LTA. But does the Minister agree with me that such provisions are too wide? Would it not be necessary to have an amendment to specifically say that the LTA has the authority to develop land near or at MRT stations? At present, if there is any development, it will probably be done by the HDB.

Mr Mah Bow Tan: Sir, it is not necessary for the LTA to develop every single piece of land around every MRT station. Neither is it wise to do so, because obviously the expertise that is vested in the LTA is not primarily concerned with land development. There are many other agencies in Singapore which are probably better placed, including the private sector. Therefore, it is not necessary for us to specifically require the LTA under the Act to develop land around the stations. Nevertheless, we recognise that the LTA has a useful role to play in this regard. And this is why the Act has been worded in such a way that it does not exclude the LTA from performing this function if we feel that it is advantageous for the LTA to do so, rather than making the Act narrow. By making it more flexible, we are able to make use of LTA's expertise as and when it is necessary.

Mr Chiam See Tong: If the LTA is allowed to develop land at or near MRT stations intensively, would the Minister not agree with me that, in fact, massive profits will be made from the development of land, especially if it is intensive development of land? Would the Minister allow the LTA to use the profits to keep MRT fares low, in particular, the new MRT stations on the North-East line.

Mr Mah Bow Tan: Sir the financing of the MRT lines is something that we debated in Parliament earlier. I think it was made very clear at that time that the Government is prepared to pay for the MRT lines, including the North-East line. The financing of these MRT lines would then have to come from the Consolidated Fund. In the course of the development of MRT lines, it is prudent for the Government, where possible, to intensify development around MRT stations. When I say "where possible", what I mean is that it is not possible for us to immediately overnight redevelop every single piece of land around MRT stations. There has got to be some phasing. There has got to be some planning involved in it. And these decisions are taken by agencies other than the LTA. What the LTA is charged to do is to study and look into the feasibility of possible MRT extensions, and now LRT extensions as well, to make a recommendation to Government whether or not this is a feasible or viable project. It is not in the business of developing or redeveloping land around MRT stations. But having said that, we do recognise that, in some instances, there may be a role for the LTA to play. These instances are primarily where there are technical or engineering difficulties involved in building around the station. Because LTA is the builder of the MRT lines, it is prudent for us, in some cases, to actually involve the LTA in the redevelopment around some of these stations which require a little bit more inputs from the original builder of the stations. This is where the LTA's expertise comes in and this is where we would involve the LTA in the redevelopment.

Apart from that, we should leave the redevelopment of land to the people who are better placed, in other words, planning agencies like URA, development agencies like HDB and, as I said earlier, the private sector.

Mr Chiam See Tong: Sir, I have two supplementary questions to follow up from what the Minister has just said. One, would the Minister not agree with me that if the LTA is allowed to source for new funds through the development of property at or near MRT stations, it would have more income other than running the MRT lines? And it can use this income or profits to keep the fares down. This is one way. As it is, the Minister has said that the commuters of the North-East line are going to pay higher fares. Because for the next four years after development, the SMRT is going to lose money. So if new funds are coming in from the development of land, then the fares could be kept down. This is one question.

The other matter is that there is already redevelopment around the Toa Payoh MRT station and I think the Minister is probably looking for other sites where intensive developments can be carried out. Can the Minister tell us which are the possible existing MRT stations where such intensive development could be carried out?

Mr Mah Bow Tan: Sir, let me take the second question first. The comprehensive redevelopment around the current Toa Payoh MRT station is undertaken, as I said, by the HDB in conjunction with other relevant agencies. Whether such redevelopments can take place around other MRT stations is a question for the Ministry of National Development to address. It will have to take into consideration many other issues including, I suspect, the overall redevelopment plans for Singapore.

In so far as the lowering of MRT fares by ploughing back revenues from redevelopment is concerned, I think the two are quite separate matters. We have, in the course of our discussions on the MRT lines, made it very clear that the users of the MRT are not going to pay for the capital cost. In fact, all the capital cost will be borne by Government. But the commuters will have to pay for the replacement cost of the trains as well as the running cost of the line including manpower cost, electricity cost and so on. So the question of ploughing back revenues from redevelopment around MRT stations does not arise. In other words, we have not factored in the cost of building the MRT. We have not factored in the depreciation of the viaducts, etc, into the running cost. What we have done is only to include the direct operating cost as well as the capital cost of the first set of trains. What the Government is doing is to only assess the overall viability of the project, whether it is worthwhile, whether it brings benefits to the people in the region that the MRT serves, as well as whether the people are prepared to pay fares that will cover the running cost. In fact, the running cost for the North-South-East-West line, the Woodlands line and the North-East line in future is sufficient only to cover the direct operating cost as well as the cost of replacement of trains. It does not cover the capital cost of building the system. It does not cover the amortisation of building the MRT line.

If, for example, we were to ask a private operator to build the system and it has to recover the direct operating cost as well as the capital cost of building, then it is an entirely different matter. But as it stands at the moment, Government policy is to pay for the total cost of the system, $5 billion in the case of the North-East line. If we were to amortise $5 billion and include it in the cost of the fares, I think the whole project would be a non-starter, because the fares would be so high. The Government has not done that and this is the reason why fares are kept at the affordable levels that they are today.

The reason why the North-East line fares will be slightly higher is, as I have explained many times, because the operating cost as well as the projected ridership does not make the line viable at the current fares. That is all. But if we consider the additional fares that are required of the commuters of the North-East line in future, it is insignificant compared to the overall cost of building the line. So the Member is quite wrong in assuming that if any part of the redevelopment funds goes to the LTA it will be able to lower the fares. The fares are already low under the financing regime that we have adopted. Therefore, the proposal that the Member has raised is not workable.

Mr Chiam See Tong: Mr Speaker, Sir, I do not think the Minister should have a policy that is so rigid. The present policy is that the Government will pay for the capital cost and the replacement and running costs will be the resonsibility of the MRTC. Of course, the capital cost is very high - $5 billion, as the Minister has said.

Mr Speaker: Order. Mr Chiam, this is not a debate. Could you ask your question? We have to proceed as we have other Questions.

Mr Chiam See Tong: Sir, I am coming to my question. I think the Government should have a more flexible policy. Would the Government allow the LTA to develop land near MRT stations so that it could have more revenues and source for more funds, not to pay for the capital cost but to pay for the running cost, as the Minister has said that the North-East line would be losing money for the next four years? What is wrong with changing the policy a bit and allow land to be developed? The LTA would get more income and cover up for the losses in the running cost. We leave the capital cost aside. Is the Minister willing to do that? In fact, I believe this is done in Hong Kong. I stand corrected. I believe that this question is a follow up from the last debate when it was mentioned that in Hong Kong, laws were made to allow the company there to develop land, obviously to recover some running cost and capital cost.

Mr Mah Bow Tan: Sir, the Member has taken part of the Hong Kong example and tried to extrapolate to Singapore. Let me explain what happens in Hong Kong.

In Hong Kong, the MTR, the company which runs the mass rapid transit rail system, also develops land and revenues accrue to the company. But that company also pays for the capital cost of building the system. It does not have sufficient revenues from the redevelopment proceeds. So what it does is that it goes out and borrows money to build the system. This is an alternative model. We have decided not to follow the Hong Kong model because it has got other implications. But you cannot take part of the Hong Kong model and apply it to Singapore. In Singapore, what we have done is for the Government to undertake to build the whole system. If we want to follow the Hong Kong model and we allow the company to redevelop land around the MRT stations and to keep the proceeds, then we must also require that the company pay for the total cost of building the system. In other words, pay $5 billion. If you do not have enough, go out and borrow, which is what Hong Kong has done. Is this a better model? We do not think so. But we cannot be taking part of the Hong Kong model and apply it to the Singapore model and say, "Government pays for the total cost of building the system but, at the same time, you allow the company that is running it to redevelop land and keep the proceeds." You cannot have the cake and eat it!

Mr Chiam See Tong: First, developing land near MRT stations by the LTA is not to keep the profits, but to keep the fares down. The Minister has said that after developing the North-East line, it will be making a loss for the next four years at, I believe, $250 million a year. If there is development of land by the LTA, such profits can be used to cover the $250 million loss, so that commuters need not bear the brunt of higher fares. At the same time, there will be development of good high-rise buildings. Does the Minister agree with me that this is a good scheme to make sure that fares are kept down? In fact, from what the Minister has said about the Hong Kong case, they can even pay for the capital cost. I think it will be easier if the LTA develops land just to pay for the running cost. Should the Minister not consider this proposal?

Mr Mah Bow Tan: Sir, if we adopt the Hong Kong model, let me say that the fares for the MRT system will not be lower than what they are today. In fact, I dare say that they will be higher because there will be additional cost involved and also there will be borrowings that would be required of the company. We have structured the financing of the MRT line by having two components - capital cost and running cost. Government undertakes to bear the capital cost. We will build but, at the same time, the Government will keep the proceeds from redevelopment of land. Commuters and the company running it will undertake to pay for the operating cost. This is the way that we have structured the financing. The Member says no, we should now take some of the money from the development of land and use it to subsidise the operating cost. As I have explained, this is not how Hong Kong does it. What Hong Kong does is to put the two together into one, ie, undertake to build as well as to run the system. If we want to follow the Hong Kong model, we can. What the Member is proposing is to take part of the Hong Kong model and part of the Singapore model, but the answer is that it is not a prudent way to do things because it opens up all the problems that we have highlighted earlier. In other words, by not covering the operating cost, we actually do not know whether we are building a line that is needed or not. You do not know because you are subsidising the running cost of the line and there is going to be no end to such lines.

Therefore, the acid test of whether a line is viable or not is really whether the line is able to meet its operating cost. We have gone through this debate many times. We have used this same acid test for the existing lines as well as for the new lines, the North-east line as well as future lines. If what the Member proposes is to change this formula, then I think we can reopen the debate that we had when we debated the White Paper on a World-Class Land Transport System. But we cannot be taking part of what Hong Kong is doing and bring it to Singapore and say, "Look, this is what Hong Kong is doing." I think that is looking at it from a very narrow point of view.

Mr Chiam See Tong rose ---

Mr Speaker: Mr Chiam, I suggest that if you want to pursue this point further, you raise it in the coming Committee of Supply and you can have a debate on it. Do you have any new questions to ask?

Mr Chiam See Tong: Does the Minister agree with me that no model is sacrosanct? It does not mean that we have to apply the Hong Kong model or the Singapore model.

Mr Speaker: Mr Chiam, do you have any questions?

Mr Chiam See Tong: Are there any plans to have intensive developments near or at future stations along the North-East line? If so, which are the stations?

Mr Mah Bow Tan: Sir, I am not in a position at this stage to answer that question. I think this is all part and parcel of the study that is going on in relation to the North-East line. It is better for me to hold my answer on this question until such time as the agencies have finalised the details of the North-East line.

Mr Chiam See Tong rose ---

Mr Speaker: I think you have taken enough time on this question. We have many other questions. 1.30 pm [After Question No. 2]

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Question Nos. 6 to 12 have been postponed to the sitting of Parliament on 11th March, 1996.]