SINGAPORE TOURISM BOARD (Special allowance for hotel refurbishment scheme)

Mr Low Thia Khiang asked the Minister for Trade and Industry whether he will disclose the details of the Singapore Tourism Board's special allowance for hotel refurbishment scheme.

The Minister for Trade and Industry (Mr Lee Yock Suan): The Special Allowance for Hotel Refurbishment is a scheme introduced in July 1998 as part of the Government's $2 billion package of off-budget measures.

The scheme incentivises the industry to refurbish the hotels during the current downturn, in preparation for the upturn in tourist arrivals when the regional economies recover.

The scheme allows hotels to apply for tax allowance of up to 150% of the qualifying refurbishment expenditure. Hotels must spend a minimum of $3 million on such expenditure to be eligible for this scheme.

Mr Low Thia Khiang: Sir, what are the criteria for the assessment of the hotels which would qualify for funds under the scheme? So far, how many and which hotels have been given funds?

Mr Lee Yock Suan: The hotels interested in refurbishing their premises should apply to the Singapore Tourism Board which will evaluate their proposals. The allowance of up to 150% is available to hotels which are within the safeguarded area. There are certain areas within the Orchard Road corridor which we have safeguarded for hotels. They are not allowed to convert to other uses. So these hotels are allowed to apply up to 150% of the Special Allowance. For other hotels, the Special Allowance could go up to 130%. They have to apply within the period. The refurbishment project must commence not earlier than 1st July last year, which was the starting date for the scheme, and finish not later than 30th June 2003. This means it is a 5-year period in which they must refurbish, and each project must not take longer than three years. The first hotel to qualify for the scheme is Marina Mandarin Hotel, as reported in the papers. There are several other applications in the pipeline.

Mr Low Thia Khiang: Sir, I would like to know what are the criteria for evaluation and it seems to me that priority will be given to hotels in the safeguarded area. Besides Marina Mandarin, which has been given the funds, are there any other hotels which would be given the funds?

Mr Lee Yock Suan: The idea of the scheme is to make use of this downturn, when tourist arrivals are lower, to upgrade the premises. I think some of the premises may be lacking, for example, IT facilities, or maybe they are a bit old. So the general idea is to be generous so long as they meet certain minimum criteria. The intention is to support them. So what I have mentioned just now is to distinguish between the safeguarded area and the areas outside. The reason is that within the safeguarded area, which is the main tourism belt, we are limiting their use of the land. In the past, when the property market was hot, they wanted to convert to condominiums. The Government said no. So for that reason, I think they deserve somewhat more favourable treatment. But otherwise, the intention is to be generous and where they meet the minimum criteria, the likelihood is that we will support them.

Mr Low Thia Khiang: Sir, my question just now was whether any other hotels were given the funds besides Marina Mandarin. The Minister says that they will be generous. How generous are they? What is the budget? Does it mean whatever amount that they have applied for? Is this scheme also applicable to small hotels?

Mr Lee Yock Suan: The scheme is applicable to gazetted hotels, that means, they must be within a certain definition to be classifed as "hotels". I cannot remember the actual figures. It is $1 million expenditure, or something like that, but I cannot remember the exact numbers. The first hotel to qualify is Marina Mandarin. But as I said, there are several other hotels in the pipeline. I do not want to mention their names because this is a private matter with them. But they are still being processed and the likelihood is that we will put up a few more for approval. This is in the nature of incentives. We want to be as generous as possible. It depends on how much they want to spend on their refurbishment.

Mr Low Thia Khiang: How about the Government's part? What is the budget allocated for this?

Mr Lee Yock Suan: There is no Government budget for this because we are forgiving certain tax. Unless these are in the nature of machinery or equipment, hotels could not qualify in fact to deduct this against their taxable income. But when they get approval, then the amount that is approved up to the approved percentage could be offset against their taxable income. This is like giving pioneer status and investment allowance to manufacturing projects. So there is no fixed budget, in the sense that it does not come out of tax already collected. It is forgiving future taxes.

Mr Low Thia Khiang: In other words, may I confirm with the Minister that there is no commitment of Government funds or giving out Government funds under the scheme?

Mr Lee Yock Suan: It is forgiving of future taxes. In other words, for their future expenditure, they will be allowed certain tax exemption to help them pay for their project.