PROTECTION FOR REMITTING MONEY OVERSEAS

Mr Steve Chia Kiah Hong asked the Minister for National Development, with NTUC FairPrice planning mega stores in Housing and Development Board (HDB) estates, what will be the impact on small HDB shop owners in these affected areas, especially those who have just bought their shops from HDB.

Mr Mah Bow Tan: HDB shops have not been spared the problems that the local retail sector has faced over the past few years. HDB shop-owners are today faced with keen competition, not just locally but also overseas. Since the eighties, new suburban shopping malls and mega stores have entered the local retail scene, and NTUC Fairprice's mega stores are but the latest. These stores provide the convenience of one-stop shopping, usually in air-conditioned comfort, within HDB estates, and are hence popular with HDB residents. Many Singaporeans also travel to Johor Bahru, Kuala Lumpur and other nearby destinations to shop for their groceries, personal wear and other items at lower prices. In the current economic downturn, domestic demand has also been depressed by wage cuts and fear of job losses.

Against such a backdrop, it is inevitable that some HDB shop-owners and tenants will see a drop in their business. To assist them to tide through their current difficulties, HDB has implemented various assistance measures, including rental rebates, passing on property tax savings to them, exercising greater flexibility in granting approval for change of use and trade, and allowing shop-owners to convert to shorter leases or sublet their shops. But in the longer-term, HDB shop-owners and tenants will have to continually upgrade their business operations and adapt to lifestyle changes and consumer preferences to survive. They need to focus on areas such as the use of IT, customer service management, inventory control management and cashflow management in their business operations. The Standards, Productivity and Innovation Board (SPRING) and the Retail Promotion Centre have in place various schemes to help them. Ultimately, whether a shop survives and thrives depends not on how much assistance the Government gives, but whether the shop can attract and retain its customers.

Fortunately, not all is gloom and doom. It is not difficult for HDB shops to find their own niche and develop a base of loyal customers, because there will always be residents who, for reasons of convenience or familiarity, still prefer to patronize HDB shops rather than large shopping malls and mega marts. Due to the size of their operations, it is also easier for HDB shopkeepers to provide personalized services to their customers. Sheng Siong Supermarket is an example of a HDB shop which has upgraded its business operations and done very well, despite keen competition from bigger players like NTUC Fairprice and Cold Storage. HDB shops should also consider banding together to form "commercial streets" to attract shoppers. The shopkeepers in Marine Parade Town Centre, Chong Pang City and Toa Payoh Town Centre who have worked so, have demonstrated that this is a worthwhile and workable idea.

Mr Chiam See Tong asked the Deputy Prime Minister and Minister for Finance (a) how his Ministry intends to protect the interest of the public when they remit their money overseas through licensed remittance companies and (b) whether his Ministry will review the existing rules with a view to bring those rules in line with those made for banks.

Mr Lee Hsien Loong: The Monetary Authority of Singapore (MAS) took over the licensing of remittance agents from the Controller of Exchange Control in 1971. When exchange controls were lifted in 1978, remittance agents continued to be licensed by MAS under a new Money-Changing and Remittance Businesses Act (MCRBA). The object of the licensing regime is aimed at excluding undesirable persons from conducting these businesses.

The remittance industry has grown over the years, but it remains a traditional business, with many small players operating on the basis of relationship and trust. Many are sole proprietorships or family-owned partnerships which cannot institute the same degree of internal controls that larger financial institutions like banks insist upon. Also, remittance houses often use parties such as friends, relatives, employees and unregulated overseas agents instead of banks to deliver funds to designated beneficiaries overseas. Such is the nature of the remittance business. This is why it is difficult to introduce measures to enhance significantly the safety and soundness of remittance houses. Many countries have chosen not to regulate this type of business.

After careful study, MAS has concluded that introducing new measures or raising the statutory deposit could give the public a false sense of confidence in remittance houses without significantly improving their safety and soundness. In the event of losses, a higher statutory deposit would not guarantee recovery of a significantly larger proportion of the losses. It is therefore important for the public to understand the nature and process of the remittance business, and weigh the benefits and risks of using remittance houses against safer but perhaps less convenient channels provided by banks.

MAS will continue to conduct background checks on applicants before it grants them remittance licences. MAS will also continue to monitor remittance houses' compliance with existing rules and regulations, and, where justified, will impose fines on errant licensees. In serious cases of irregularities or non-compliance, MAS will consider revoking or not renewing licences. MAS will also refer cases where fraud occurs or is suspected to the Police for investigation.

Being a cash business, the remittance industry should ideally be required to have control structures similar to banks. As far as is practicable, the MCRBA does require remittance houses to institute some basic control features, eg, audits performed by an external auditor, submission of audited accounts and auditors' findings to MAS, and separation of remittance funds from other accounts of licensees. However, it is not feasible to require these often small, one-man or family-owned operations to adopt most of the important control features found in banks, including corporate governance structures or sophisticated internal control systems.

For the reasons cited earlier, MAS has, after a review, decided not to amend the MCRBA. Nonetheless, MAS will continue to review its regulations on an ongoing basis.