URBAN REDEVELOPMENT AUTHORITY (AMENDMENT) BILL

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URBAN REDEVELOPMENT AUTHORITY (AMENDMENT) BILL: Order for Second Reading read.

3.27 pm

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

The main purpose of this Bill is to update the Urban Redevelopment Authority's function in the Act to reflect its role as the national land use planning authority and as land sales agent for the State and other Statutory Boards for purposes of national development. This updating of URA's function is to formally recognise URA's contribution in these two key areas of national development. Sir,

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let me explain the background of URA's role in undertaking these functions.

The present URA was formed in September 1989 with the enactment of the current Urban Redevelopment Authority Act, which effected the merger of the old Urban Redevelopment Authority with the former Planning Department and the former Research and Statistical Unit of the Ministry of National Development. As a result of this merger, URA took over from the old Planning Department the overall task of control and management of land planning and development control as well as advising the Government on these matters. These planning functions were not explicitly included in the URA Act at that time. Today, it is well-established that URA is the statutory authority charged with the responsibility of land planning and development control. As such, it is timely to recognise this key responsibility as part of URA's functions.

The amendments provide that the URA shall (a) undertake land planning and manage and control the development of land in Singapore; and (b) inform and advise the Government on matters related to land planning and the development of land in Singapore. In addition, the Bill updates URA's role as a land sales agent for the State and other Statutory Boards.

URA has since the middle of 1980s been one of the main agents that sells state land on behalf of the Government for the purpose of development under the Government land sales programme. This function has enabled URA to better realise the land use planning objectives of sites slated for development. The development of Marina Centre as a major business, hotel and convention area,

the development of Tanjong Rhu for quality private housing and the revitalisation of the conservation districts and the China Square area are all examples of successful implementation of land use planning

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objectives through URA's land sales activities.

Apart from the Government land sale programme, URA has, on occasions, sold land for development on behalf of other statutory boards or Government departments. The amendment recognises URA's function in selling land as agent for the State and other statutory authority for purposes of development.

Sir, I shall now move on to the other amendments in the Bill.

Clause 2 of the Bill raises the maximum number of URA's Board members (excluding the Chairman) from 8 to 12. This will allow more URA Board members with different expertise and qualifications to be appointed to help URA to address the needs and concerns of the various sectors of the economy and of the public.

Clause 4 of the Bill seeks to remove the constraint of the Trustees Act on URA's investment powers. Today, URA may invest its funds in securities in which trust funds may, under the Trustees Act, be invested. The amendment will allow URA, with the Minister's approval, to invest its funds in such manner as it thinks fit and to manage or hedge against financial risks involved in such investments. The removal of the constraint will enable URA to adopt more optimal risk-return investment portfolios.

Finally, clause 5 introduces the power to compound offences under the URA Act and its regulations. This is to give URA the discretion to compound offences under the URA Act where it is not sufficiently serious to warrant prosecution. The power to compound offences shall only be exercisable in relation to offences which are prescribed by URA, with Minister's approval, as a compoundable offence.

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Sir, I beg to move.

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

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PLANNING (AMENDMENT) BILL: Order for Second Reading read.

3.35 pm

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

The current Planning Act came into effect on 1st April 1998. This Bill is to introduce some amendments to the existing Act to enable a more equitable sharing of any value enhancement arising from the alteration of the Master Plan for sites in the future. The amendments will also strengthen the legal framework to facilitate development control and to make the current process more pro-business. I shall now explain the rationale for the main changes.

Revised definition for Development Baseline

One of the main changes to the Planning Act is the redefinition of the development baseline to make it more relevant to today's context.

The Development Baseline refers to the base value above which Development Charge is payable. The Development Charge (or DC) is a tax levied when the value of land, resulting from the State

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authorising a development proposal on it, exceeds the base value of the land. The current Development Charge rate is 50% of this land enhancement value.

Under the current Planning Act, the base value of a piece of land, ie, the Development Baseline, is determined by comparing the values of the following three items:

(a) the 1958 Master Plan baseline;

(b) the 1980 Master Plan baseline; or

(c) the approved development baseline.

The highest of the three values derived will be the Development Baseline.

The Master Plan 58 and Master Plan 80 baselines have been included in the baseline definition due to historical reasons. The proposed amendment in clause 12 is to delete the first two items in the definition, ie, the 1958 and the 1980 Master Plans.

With this amendment, the Development Baseline is the value of the approved development for the site for which Development Charge was paid, exempted, or not required to be paid. Any enhancement in value arising from redevelopment would be that above this base, and not that above a historically prescribed base that has no direct link with the actual development history of the site.

Better reflect the intentions of the DC System

The revised Development Baseline will better reflect the intentions of the Development Charge as a tax on land value enhancement.

Sir, as this is a rather technical matter, please allow me to clarify the issue by referring Members to the handout* on the

*Cols. 3553-8

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Planning (Amendment) Bill which has been distributed. If Members look at Figure 1(a), today, the baseline for a site would be the highest of the three values, either MP 58 or MP 80 or the approved development value. In Figure 1(a), the highest value would be in column 1, the MP 58 or 80 baseline. When the site is redeveloped up to the use and intensity allowed under the prevailing Master Plan (known as the Development Ceiling), the value enhancement will be that between the MP 58 or MP 80 baseline and the Development Ceiling. A Development Charge will be payable for this enhancement.

With the removal of the MP 58 and MP 80 values from the definition of baseline, the Development Baseline becomes the approved use for the site, ie, column 2 of Figure 1(a). If the land is developed up to the prevailing Master Plan, the enhancement of land value will be measured from this revised baseline in column 2, instead of the higher Development Baseline in column 1.

A second situation is illustrated in Figure 1(b). Here, the MP 58 and MP 80 values of a site, as shown in column 1, exceed not only the value of the approved development in column 2, but also exceed the value of the development potential allowed by the prevailing Master Plan in column 3. In this case, the prevailing Master Plan will be the Master Plan 2003, which will be enacted by the end of this year. With the removal of the MP 58 and MP 80 baselines, the value of the approved development will become the baseline instead, ie, column 2 of Figure 1(b).

Achieve a fairer and more effective Development Charge tax system

Let me now explain the purpose of the proposed amendment. In Figure 1(b), where sites have very high MP 58 or MP 80 baseline that exceed the value of the

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development potential under the MP 2003, no Development Charge is payable if they undergo redevelopment, because the MP 58 or MP 80 baseline exceeds the Development Ceiling. In other words, the benefits of the value enhancement arising from the redevelopment cannot be shared between the land-owner and the State.

Furthermore, if the Government upgrades the development potential for these sites in future, the enhanced land value will not be subject to Development Charge as long as the MP 58 or MP 80 baseline is higher than the new Development Ceiling. [See column 4 of Figure 1(b)]. Development Charge is payable only for the portion of the new Development Ceiling which exceeds the MP 58 or MP 80 baseline. [See column 4 of Figure 1(b)].

Sir, with the proposed amendment, a Development Charge has to be paid once the value of the "approved development" is exceeded. This allows for a more equitable sharing of the enhancement in value arising from an upgrading of the Development Ceiling in future Master Plan Reviews. It results in a fairer and more effective tax system for the redevelopment of sites.

Simplify Development Baseline and make it more transparent

The change would also simplify and standardise the process of establishing the Development Baseline and improve transparency of the system, as the outdated MP 58 and MP 80 are not easily understood and often require interpretation by URA planners.

Advance notice period and auto lock-in of historical baseline

Sir, the deletion of references to MP 58 and MP 80 from the definition of

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Development Baseline, though a necessary and desirable move, will affect those landowners who have sites with MP 58 and MP 80 baselines that are higher than their approved Development Baseline. These landowners would be subject to a higher Development Charge upon rezoning or redevelopment of their sites.

To mitigate the impact on these landowners, and to give ample time for landowners to adjust to the revised baseline definition, my Ministry intends to effect the revised baseline definition only in 4 years' time, ie, on 1st January 2008. During this period, landowners who intend to redevelop their lands can submit development proposals and they can still make use of their historical baselines up to the MP 03 intensity for the purpose of computing Development Charge.

For landowners who have no intention or are unable to redevelop their lands within this advance notice period, my Ministry will take a further step to safeguard and lock-in the historical baseline in MP 58 and MP 80 that is applicable to their site under the current legal provisions. This is capped at the maximum use and intensity allowed under MP 03 if the MP 58 or MP 80 baseline value is higher than the MP 03. In other words, the URA will preserve the value of historical baseline up to the development potential of the Master Plan 2003. Landowners will thus not be worse off than they are presently. The historical value locked-in will continue to be applicable after 1st January 2008. Any development proposal on these lands after 1st January 2008 will be exempted from Development Charge payment up to the difference between the locked-in value and the new Development Baseline, if the locked-in value is higher.

Once again, because the matter is complicated, let me refer Members to the handout. If Members look at Figure 2(a),

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before the revision, the MP 58 or MP 80 baseline is the Development Baseline, as I explained earlier, because it

is the higher value of all the three, higher than the approved development. However, it is below the MP 2003 value, and therefore Development Charge (DC) is payable. After the revision, Figure 2(b), the Development Baseline is now the value of the approved development (column 1 figure). Strictly speaking, DC payable would now be higher. However, URA will preserve the baseline up to the value of the MP 58 or MP 80 baseline. Value enhancement above the approved development up to the MP 58 or MP 80 value will be exempted from Development Charge. If you look at column 2 of Figure 2(b), that portion of it from the new Development Baseline to the original MP 58 or MP 80 baseline will be exempted from DC. Development Charge is payable only when the locked-in MP 58 or MP 80 value is exceeded. With the lock-in, there will essentially be no change in the DC payable before and after the revision.

In the same way, sites where the MP 58 or MP 80 baseline is higher than the MP 2003 value will also not be affected if they redevelop their site up to the MP 2003 value. Please refer again to the handout, and this time to Figure 3. Before the revision, Figure 3(a), no DC is payable when the site redevelops up to the value allowed under MP 2003. Why? Because the MP 58 or MP 80 baseline is higher than the MP 2003 value. With the revision, Figure 3(b), the value of the approved development becomes the Development Baseline. Enhancement in value above the approved development up to the MP 2003 will now be liable to Development Charge. However, URA will preserve the value of the historical baseline up to the development potential of the MP 2003. This is shown in column 2 of Figure 3(b). Owners of these sites will not need to pay DC for developments up to the value of the MP 2003. This is no different from the position before the

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baseline revision, where DC is also not payable.

However, the revision will allow enhancement gains to be shared in future when the Development Ceiling is raised beyond the MP 2003 value. This is shown clearly in the third column of Figure 3(b) where we show a new Development Ceiling beyond the current Development Ceiling and the DC is payable on the difference. When the Development Ceiling is raised in future Master Plan Reviews, redevelopment can take place beyond the MP 2003. The enhancement in value beyond the MP 2003 will be liable to Development Charge. What this means is that it will bring these sites in line with other sites after 2008. Development Charge will now be payable for all sites which have their Development Ceiling raised beyond the MP 2003 value. URA will release more details on how the historical baseline will be safeguarded at a later stage.

With the deferred implementation and safeguarding of historical value up to the allowable uses under the prevailing Master Plan, the impact of the redefinition of baseline will be minimal. However, it will allow a more equitable sharing of the value enhancement for redevelopment and Master Plan alteration in future Master Plan Reviews. After 2008, the Development Charge system will be fairer and more effective.

Temporary Permission

Sir, let me move on to explain the changes to be made to facilitate the grant of temporary planning permission.

Under the Planning Act, the Competent Authority is required to act in conformity with the Master Plan. When a proposal conforms to the Master Plan, permanent permission is usually granted. However, when a proposed use does not conform to the Master Plan, but can be

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supported on planning grounds, the Competent Authority may approve the use for a limited period on temporary permission. Some examples of non-conforming use on temporary permissions could be the conversion of the upper storey of a shophouse to office use or the conversion of a residential house to a childcare centre.

The power to grant temporary permissions for non-conforming uses is not explicitly provided for under the present Act. Clause 6 in the current amendment will enable the Competent Authority to grant temporary permissions not exceeding 10 years for non-conforming uses.

The next amendment is the introduction of the temporary development levy.

Temporary Development Levy

Currently, the Competent Authority collects full Development Charge upon grant of a permanent permission for conforming uses when there are enhancements in land value. URA has received feedback that the Development Charge, if it is a significant amount, could pose a major hurdle to entrepreneurs who want to try out new business ideas. To reduce the entry barrier for businesses, clause 15 introduces a Temporary Development Levy scheme to tie the amount of levy to the period of the temporary permission. This will allow new business start-ups to choose either to apply for a permanent permission (in which case they would have to pay full Development Charge), or to apply for a temporary permission not exceeding a period of 10 years with payment of a levy. The levy will be based on the period of use according to a prescribed table, but it will be lower than the full Development Charge they would otherwise have had to pay if permanent permission had been issued.

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The Temporary Development Levy will apply for temporary permissions for both conforming and non-conforming uses, as long as there are enhancements in value. This system will benefit applicants for conforming uses who wish to try out their development ideas before applying for permanent permission. However, I must point out that it will be a new levy for those who are on temporary permissions for non-conforming uses. Today, the Competent Authority allows such non-conforming uses on a temporary basis without any levy. However, since the operators and owners benefit from the higher value use from Government's approval, it is reasonable that part of the value enhancement is taxed through the levy and then redirected back for public use. However, we will only impose the Temporary Development Levy for non-conforming uses from 1st January 2008 when the revised Development Baseline definition, which I elaborated earlier, comes into effect. This will provide sufficient notice to operators and owners.

Sir, I shall now move on to the determination of Development Baseline for hotels that were approved under the Hotel Concession Policy.

Sites with approval granted under the hotel concession policy

Between 18th April 1968 and 31st December 1969, a hotel concession policy was in effect. Under this policy, special concessions were given to developers to encourage hotel developments. Development Charge, which was otherwise payable for the hotel development, was not levied. A total of 25 hotels were approved under this policy and enjoyed Development Charge concessions. Examples of such hotels include Shangri-La Hotel, Hilton Singapore, Orchard Parade Hotel.

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There could be the mistaken impression by hotel owners that the concession floor area will continue to form part of their Development Baseline upon redevelopment to non-hotel use. This was not the intent of the hotel concession policy. As the Development Charge was not levied on hotel developments during that period, the Development Charge concession should cease to apply once the hotels redevelop to other development types.

The proposed amendment will make this clear. Provision is now made in clause 11 to make it explicit that the floor area of the hotels approved between 18th April 1968 and 31st December 1969 under the hotel concession policy will be disregarded for the purpose of Development Baseline if the hotel use ceases, or if there is redevelopment to other non-hotel use.

Sir, I shall now go through the amendments relating to the responsibilities of Qualified Persons in making development applications.

Making Qualified Persons responsible for declarations

Currently, the URA administratively requires Qualified Persons (QPs) to submit and certify planning information in a development application, which a lay person would not have the technical competence to handle. The Competent Authority would also check the proposal plans to ensure that the planning requirements are complied with. In a move towards greater self-regulation within the industry, and to accord industry professionals a greater role in the development process, the Competent Authority intends to place greater reliance on the QP's declaration of compliance with development control guidelines and/or any proposed deviations from these guidelines in their development applications. This will have the added

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advantage of speeding up the approval process.

Clause 7 inserts a new section 14A to provide that the Competent Authority may grant written permission on the basis of a certification or declaration by a QP if it is required to be submitted together with an application.

However, in order that development control is not compromised, there would be a need to put in place a robust control mechanism to discourage errant QPs from making false declarations. Therefore, it is necessary to strengthen the current legal framework to make QPs more responsible for their declarations. Clause 17 amends section 61 to empower the Minister to make rules to:

(a) Prescribe the submission requirements for various applications and the type of applications that require QP's declaration, and

(b) State the duties, responsibilities and liabilities of a QP in relation to making a declaration.

For proposals affecting conserved buildings, the controls are on architectural details. QPs are to ensure that these controls continue to be complied with during construction stage. Clause 8 provides that the QPs would now be required to declare that the building plans that were submitted to the Building and Construction Authority are in accordance with conservation plans approved by the Competent Authority.

Finally, Sir, there are three other changes that I would like to quickly explain.

Remission of Development Charge

Currently, the Planning Act only has provisions to grant exemptions from payment of DC and to refund DC. There is no provision to allow partial reduction of the amount of DC payable, even in

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situations where it is reasonable for the Government to do so. Provision is now made in clause 13 to allow the Minister the flexibility to consider such requests in future and to remit the DC payable where it is just and equitable to do so.

Authorisation of subdivision

Currently, owners of certain multi-unit developments such as commercial, non-landed residential and flatted factory/warehouse buildings are required to apply for strata subdivision approval if they want to sell or grant leases for more than a specified number of years.

There has been feedback from the Economic Review Committee's Land Working Group to grant greater flexibility to enable longer leases of multi-unit developments. The Government

has responded to this call by extending the maximum duration of lease from 14 to 21 years, beyond which strata subdivision permission is required.

In the current amendment, the Government has gone one step further to make it easier for owners to obtain approval for strata subdivision. Clause 9 amends section 21 of the Planning Act to enable the Minister to authorise, by notification in the Gazette , the subdivision of land and buildings. With this amendment, strata subdivision for certain types of developments approved for multi-units can be authorised. These building owners will no longer need to apply for strata subdivision approval by the Competent Authority, and therefore help them save time and cost.

Making it explicit that the use and operation of certain developments

as 2 or more separate entities would require planning permission

Finally, it will be made clear in clause 3 that for hotel, boarding house, service

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apartments, workers dormitory, student hostel and place of worship developments, having more than one operator would constitute a material change of use and thus require planning permission.

The requirement for planning permission gives the Competent Authority a chance to evaluate and decide on any proposal to have multiple operators in such developments based on planning and other considerations. This is to ensure that amenity issues, such as spillover effects of business rivalry or deterioration of common areas, can be addressed.

Sir, in summary, the amendments will simplify and strengthen the legal framework to facilitate planning and streamline the development application approval process, making it more pro-business and in line with present needs.

Sir, I beg to move.

Question proposed.

Dr Teo Ho Pin (Holland-Bukit Panjang): Mr Speaker, Sir, I rise in support of the Bill.

The Bill will provide more flexibility and allow more opportunities for alternative use of land in Singapore. In today's fast changing business environment, we need to inject more adaptability capabilities in our land use planning system so that we can better respond to changing business needs.

The Master Plan provides comprehensive land use planning of our limited land resource. But it has certain rigidities, which sometimes do not facilitate change of land use to meet business demands or changing market conditions. It also increases business costs drastically when permission to change of use is approved.

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Clause 6 of the Bill provides that the Minister can grant temporary permission to a particular application or a class of application non-conforming to the Master Plan for up to 10 years. This provision will facilitate the setting up of businesses or business expansion for firms. This flexibility will also hopefully add more vibrancy to our living and working environment.

But it is not clear in the Bill that what are the likely changes of use which the Minister would approve. As the change of use of any land parcel or building has an impact on the property value and business activities of the surrounding area, I hope the Minister can provide more details on the types of change of use that are likely to be granted approval.

I also wish to ask the Minister whether there are measures in place to make sure that fair practices are adopted to protect the interests of other existing users surrounding the designated change of use land parcel or building. In a competitive business environment, like Singapore, the planning authorities must ensure that there is fair competition among businesses when allocating land use. The granting of temporary permission may encourage unfair competition, thus affecting businesses.

As the time-based enhancement levy for temporary permission is lower, it may impose unfair competition to existing businesses, which have paid full Development Charge for permanent permission. While it is important that we keep our business cost competitive, we should also be mindful not to cause any closure of businesses due to the approval of such temporary permission.

Sir, I would like to suggest that the Minister should only approve temporary

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permission for developments, which will complement their surrounding developments. The land use mix in any area is a key attribute to the success of the development in that area. The temporary permission should also increase activities in the area, thus bringing more benefits to its building owners and users.

Clause 3 of the Bill amends section 3 of the Planning Act and makes it explicit that leasing out of certain developments to two or more operators will require planning permission. Sir, I am concerned with this amendment as it affects the viability of this group of "one single entity" developments, such as hotel, service apartment, workers' dormitory, boarding house, student hostel and place of worship. Very often, these developments have various ancillary facilities, such as kiosks, clinics, retail shops and laundry, to provide convenience to its users.

With the amendment, there is now a requirement for planning permission for every single operator of these ancillary facilities. The need for planning permission will increase business costs and slow down the process to commence business. It will also provide hindrance to the subletting of these developments, and thus affecting the range of services provided. The new requirement may also cause inconvenience to the users of these developments. I wish to seek clarifications from the Minister to explain the rationale for amending section 3. I would like to suggest that certain capping or quota system, such as 20% of built up area, could be allocated to these developments instead to allow them to provide for such facilities. May I ask the Minister how many existing developments are affected by this amendment and what are the costs involved in obtaining such planning approvals?

I support the Bill.

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Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.30 pm.

Sitting accordingly suspended

at 4.08 pm until 4.30 pm.

Sitting resumed at 4.30 pm

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[Mr Speaker in the Chair]

PLANNING (AMENDMENT) BILL: Debate resumed.

Dr Amy Khor Lean Suan (Hong Kah): Mr Speaker, Sir, as highlighted by the Minister, the two key changes effected by the Bill are a change in the basis of calculating the Development Baseline, which determines the amount of levy the Government charges a landowner for any approved change of use, re-zoning or enhancement of plot ratio, and the introduction of a Temporary Development Levy. I would like to comment on each of these main changes in turn.

As explained by the Minister, before the amendment, a landowner who wishes to develop his land can, under the Act, use the highest of the three methods prescribed in the Act to compute the Development Baseline. A higher Development Baseline means a lower Development Charge or no Development Charge, if the baseline is higher than the ceiling. These are as illustrated in Figures 1(a) and (b) of the handouts given by the Minister.

Again, as noted by the Minister, two of these existing methods for calculating the baseline take reference from the 1958 and 1980 Master Plans. For some sites, due to various historical reasons, the 1958 Master Plan and the 1980 Master Plan may prescribe higher plot ratios and more valuable land use and density parameters than later Master Plans. This means that some landowners pay little or

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no Development Charge to develop his land, while other owners of neighbouring land with less generous provisions in the 1958 or 1980 Master Plan may pay more for the same or similar development rights granted by the URA.

From the Minister's speech, I am given to understand that one of the rationale for the first change is to correct such an anomaly, as the one that I have just described. As the Minister clearly highlighted in his speech, after the amendment, if the Government upgrades the development potential of these sites in the future over and above what is currently allowable in the 2003 Master Plan, the enhanced land value will be subject to Development Charge. Whereas if the Act remains status quo, then no Development Charge will be payable for the future enhanced land value, as long as this is below what is allowable under the 1958 Master Plan.

On the surface, this sounds very reasonable and equitable. Indeed, from a socio-economic perspective, since it is the State that has created value through its action of zoning, re-zoning or enhancement of land use intensity, it is perfectly legitimate to require landowners who so benefit from such positive externalities to give back a portion of the realisable gains to the State by way of the Development Charge. So, the State should have the prerogative to change the rules of the game and shift the basis of the Development Baseline calculation from time to time where circumstances so dictate.

One wonders how many plots of land in Singapore would fall under this category to warrant such an amendment to the Act. I would like to ask the Minister whether, before deciding to amend the Act, the URA has undertaken a study to determine how many plots of land in Singapore would fall under this "anomaly" category and what percentage

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is this of all privately-held land in Singapore.

Whatever the case, landowners of affected sites will most surely feel aggrieved by this change even if the higher plot ratio and/or use accorded in the historical 1958 or 1980 Master Plan is not realisable under current planning parameters. Even if they have not suffered a direct loss but merely a reduction in potential gains, in effect, this change can be construed as a form of "value" destruction directed at a group of unfortunate land owners in which the Government planners have stapled higher value planning provisions on their land at one time, but have since reversed this. And, from their perspective, this has happened through no fault of theirs.

Sir, I think the outcome resulting from the changes made to the Act is rather odd, given that the Government has been preaching the virtues of value creation as part of our overall economic strategy. The analogy is compulsory land acquisition which does not offer any choice to the affected landowners. The State gazettes land to be acquired for some public purpose and dictates compensation which, for all practical purposes, is statutorily pegged at historical values, although ex-gratia payments are often made for some deserving cases to make up the compensation to full current market value.

The change in the baseline definition is a case of someone being theoretically made worse off without anyone being made better before the change. This is because the transitionary provisions of a historical lock-in baseline essentially means that the baseline for all other cases would remain the same, except for the "anomaly" cases. There is a potential lowering of overall private gains, although some of these will flow back to the State.

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Sir, the present system of determining the Development Baseline is well understood and accepted by the industry. Why does the Government want to deny the original "gains" accruing to these landowners, even if these may be unrealisable under current planning parameters?

As the Government is now preaching enterprise and flexibility, and with foreseeable future increases in population, the higher plot ratio or use accorded in the 1958 or 1980 Master Plan which may be unrealisable now, may well be appropriate in the future when the plot ratio may be increased or the use of the land enhanced in view of changed circumstances. This is already clearly shown in Figure 3 of the handouts provided by the Minister.

The transitionary provisions allowed until 31st December 2007 will not address the sense of injustice felt by such affected landowners since they will only be allowed to preserve the baseline for their properties in the Historical Lock-in Register to be set up by the authority, up to what is currently allowable in the prevailing Master Plan, and not the highest allowed in the 1958 or 1980 Master Plan.

They would have to pay Development Charge, if in future the URA were to increase the plot ratio and/or use in the Master Plan over and above what is currently permissible in the prevailing Master Plan, and they wish then to redevelop their land to the stipulated intensity. Under the current rules, they would not have to pay Development Charge or pay a much lower Development Charge.

As regards the proposed Historical Baseline Register, which I understand the authority would set up during the 4-year transitionary period, it is presumed that

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the URA will publish the baseline applicable to every development site in Singapore. While this can be construed as a good idea to provide more transparency and reduce confusion as regards the applicable Development Baseline, especially during the transitionary period, I hope that the cost of developing this Register, which is initiated solely on the part of the authority, would not be unfairly passed on to users in the form of higher search fees or development application fees.

Again, Sir, one wonders about the amount of manpower that would have to be put in to determine the Development Baseline of every plot of land in Singapore, if this task were to be carried out. Also, landowners should be allowed to check and challenge the Development Baseline published in the Register within a stipulated timeframe since the authority cannot be assumed to be infallible.

The second major change in the Bill is the introduction of the Temporary Development Levy intended to lower costs for entrepreneurs seeking to use land on a temporary basis for a period not exceeding 10 years. The motivation for this change came from the ERC Land Working Group which examined ways to lower the cost barriers for doing businesses, thus encouraging entrepreneurship. I think this is clearly a positive step and I commend the authority for being proactive and pro-enterprise in accepting and implementing this ERC recommendation.

Businesses, such as those setting up kiosks at places like Orchard Road, would benefit from this scheme, as the building owners now only need to pay Development Charge for the duration of the intended use and not based on the property's freehold value.

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However, as a member of the Land Working Group, I feel that the ERC's recommendation on this matter is a pay-as-you-go arrangement, which is far more flexible than what the amendment Bill envisages. Thus, I fear that while the intention of the temporary levy is laudable, the change does not go far enough. For instance, why only 10 years as a maximum length of time for the temporary permission? To cater to a potentially large pool of businesses, perhaps a longer fixed period should be prescribed, or more generous extensions be allowed. After all, the landowner is not getting a free lunch here. His Temporary Development Levy is pegged to the length of the term. Moreover, he bears the risks of future increases in Development Charge rates. Furthermore, I understand that the temporary levy is not applicable for new erections of buildings. Again, I think this could unnecessarily restrict the type of businesses that can benefit from this scheme. There could be businesses which require custom-built premises and yet such premises may suffer from functional and economic obsolescence very quickly even if the building is physically sound.

I would like to urge the Minister to consider widening the scope under which temporary levy is applicable to make this initiative truly helpful to aspiring entrepreneurs.

With these comments, Sir, I support the Bill.

Mr Mah Bow Tan: Mr Speaker, Sir, I thank the two Members who have spoken. Both Dr Teo and Dr Amy Khor have supported the changes in the Bill, but they have asked relevant questions and I would like to take this opportunity to address them.

First of all, Dr Teo asked what are the likely changes when we talk about giving

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temporary approval. I have mentioned some examples in my speech. For example, when we allow the living quarters above a shophouse to be used for office space and it is zoned residential, we allow it to be used for office space because there is deemed to be little or no disamenity to the surroundings. Another example I cited was childcare centres in residential estates. I could give a few other obvious ones, such as car-polishing stations in car parks. Members will notice that there are many car parks which have been designated for car-polishing stations. Again, that is a conversion from a car park use to a commercial use. There is also quite a lot of requests for eating houses in areas which are normally zoned residential. A good example is Jalan Merah Saga in the Holland Village area.

So, these are some of the temporary permissions that are granted. They do not conform with the Master Plan as it is currently gazetted, but URA planners look at the applications and, if the applications do not create much disamenity, permission would be granted and they are called non-conforming uses, for which this Temporary Development Levy would have to be paid.

However, let me say that it does not follow that all such temporary permissions will attract this levy. The levy would only be paid in cases where there is an enhancement in land value. So, a comparison would have to be made, the application would have to be assessed: is there an enhancement in land value as a result of this change? If there is, there will be a Temporary Development Levy paid. If not, then it would continue to be given this temporary permission free of charge. Combing through some of the current examples, if we took this system and applied it to them, the indication is that very few of the temporary permissions granted would attract such a

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levy. So, in terms of impact on businesses, I think the impact would be minimal. However, it is something that is fair, equitable and needs to be done, because there is an enhancement in land value. There is no reason why a temporary permission granted should not attract a levy when there is an enhancement in land value, whereas a permanent permission granted attracts such a levy. So, it is really addressing an anomaly.

Dr Teo also asked how do we protect the interests of other users. This again is a valid question, because every time URA planners or the Competent Authority allows a change of use, there is inevitably the question raised: what is the impact of this change of use on the surrounding areas? So, planners always need to look at amenity issues, whether such a change of use would create disamenities to the surrounding areas. Again, I cite the example I quoted earlier on childcare centres. Childcare centres which are sited in residential areas are given very close scrutiny. Why? Because, at first glance, you think that they would create traffic and noise problems and so on. Yet, at the same time,

we know that there is such a demand for childcare centres in residential areas. We have to balance this need for operators to satisfy this demand and yet, at the same time, make sure that when they do so, they do not create excessive noise and traffic problems to the surroundings and their neighbours. This is a fine balance and each case is assessed on its own merits. But the reason why they are granted temporary permission is precisely that if they do, in the course of their operation, create such problems, the Competent Authority can withdraw that permission. When Dr Teo asked how do we protect the interests of other residents around the area, this is one way. The very fact that we grant it on a temporary basis, and not a permanent basis, is one way to make sure that the operator keeps to his

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promise to make sure that the nuisance is minimised.

Dr Teo also asked why is it that we are requiring in this Bill to have two or more operators come to URA for planning permission. Why not just allow them to continue? The answer lies in the original planning permission. The original planning permission for such developments usually takes into account a single operator, whether it is a boarding house, a hotel, a childcare centre, whatever. All the planning considerations are based on such a single operator. When you have more than one operator, inevitably, problems do arise. The situation on the ground has shown that, for example, if you have multiple operators in a building operating boarding houses, you have lots of problems - business rivalry, touting and deterioration of the common corridors, etc. Our experience has been that multiple operators, operating in a single environment, do create problems, and that is the reason why we are requiring in this amendment in clause 3 to make sure that whenever there is more than one operator, it immediately constitutes a material change of use. And as a material change of use, they have to go back for temporary planning permission, in order for the planners to look at the issue, consider the potential problems and then decide whether or not they want to approve. That is the reason why this particular amendment in the clause has been enacted. I hope I have answered Dr Teo's questions.

I turn now to Dr Amy Khor's questions. I think she has raised some very fundamental questions pertaining to the Development Baseline. She asked, first of all, why are we doing this. How many sites are there that have this anomaly, and is it worth our while to comb through all the sites in order to just correct a very small anomaly. I go back

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to the very principle of the Development Charge. The Development Charge is really a tax. It is levied where the value of land is enhanced as a result of some actions of the State, whether this is in the building up of infrastructure that would allow land to be used more intensively, or whether this is some change in planning parameters, or some change of policy regarding land use. All these are actions of the State which have created value in the land. The principle is, as first mooted when Development Charge was implemented in 1964, that where there are enhancements in land value, the State should share with the landowner in that enhancement. That is the first principle.

In this particular case, we have situations where pieces of land with high baselines, historically derived in 1958 and 1980, would actually result in no sharing of enhancement between the State and the landowner, if such lands were to be redeveloped in future whenever the Master Plan allows. Where such an anomaly exists, we should correct it. It does not matter whether there are many pieces of land or not. The point is that this is an anomaly that has to be corrected because, if it is not corrected, we are not able to apply this principle. Having said that, of course, I can inform the Member that there are quite a few of these sites in the central area. URA has combed through the various sites and they have estimated that there are over 1,000 such sites, mainly in the central area, where there are such high baselines and which, if this Act is not amended, would result in the State not having the ability to share in any enhancement in land values in the future. So that is the reason behind this change. It is not an administrative issue. It is not an issue where we are doing this just because we happen to go through and we see this anomaly and, therefore, we want to change it. I think there is a fundamental principle involved.

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The other major point that she raised is whether, in this particular amendment, we are actually destroying value. Is it akin to, say, compulsory acquisition of land, where we are actually taking land and compensating based on a certain formula in the Act? Are we destroying value in this? Let me say that when we talk about destroying value, the Member is assuming that the high baselines in the 1958 and 1980 Master Plans are actually legal entitlements to the value of the land. In other words, you were given a high baseline, you are entitled to this value for eternity. The answer is no. It is not a legal entitlement. What is it? It is an expectation that you can develop these lands up to that particular value subject to what is stipulated in the current Master Plan. So even if the Master Plan 1958 or 1980 stipulates a very high baseline exceeding the current Master Plan - in this case, we are talking about Master Plan 2003 - it does not follow that that high baseline is what they are legally entitled to. They can only develop up to Master Plan 2003. This is the main point that I would like to make. Historical baselines are not legal entitlements to land value. They are expectations of enhancements of development potential in the future. They are actually parameters in the Development Charge tax formula. We can change this parameter from time to time. I do not agree that there is a destruction in the value of the land in this particular case. As I have said, the proposal is to refine the tax formula to make it more in line with the principle of collecting Development Charge as and when lands are redeveloped and value is enhanced.

Why are we doing this? We are doing this simply because when value is enhanced as a result of State actions, particularly through the building of infrastructure, it is only fair that some of the benefits accruing from this enhancement in land value be channelled back to the State for public infrastructure

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works, for building of roads, building of MRTs, sewer lines, etc. The proposed revision in the baseline merely re-establishes this principle of sharing of enhancement gains for those sites which may have fallen through the system. Let me say once again that I do not agree with the Member when she said that this particular change is destroying land values.

She has also asked whether the baseline register will actually add cost to landowners. Let me assure her that we will be very mindful of the cost associated with creating this register. I have, in fact, made this point to the officers that we will find an administratively simple way to implement this particular amendment so that costs are kept to a minimum. Definitely the impact of this change, at least in terms of maintaining the register, will not be felt by the landowners.

On Temporary Development Levy, the issue is whether we have gone far enough or whether we should actually apply that to permanent structures, new erections or whether we should apply that to structures on a longer term basis. As the name suggests, the Temporary Development Levy is really meant for temporary permission for temporary structures. One can argue that something that has been erected for 10 years cannot be construed to be temporary but, nevertheless, the sense is that 10 years is a reasonably long time to allow a business to recover its costs and yet, at the same time, the Government allows the State to bring down the barrier to entry. If we are talking about a structure which is, say, 20 years, for longer term use, perhaps we could look at some other mechanisms to also allow for the cost of doing business to be brought down. I think the sentiment behind the Member's question is a sound one.

What I am saying is that perhaps this is not the right mechanism for us to do so. What we can do is to look at, say, shorter term leases. By shorter term

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leases you automatically attract a lower Development Charge, albeit not a directly pro-rated Development Charge, but it is a lower development. So, perhaps we can look at that.

[Mr Deputy Speaker (Mr Chew Heng Ching) in the Chair]

5.00 pm

Twenty years, again as I said, may not be a very short time. It may well be that the structure that is erected for 20 years cannot be considered a temporary structure, and for that reason it does not fall under the ambit of this Bill. But I take her point that we should continue to look at how we can refine this system even further. And, if there is a market demand to apply this temporary levy scheme to other development types, we can look at it and we will review the policy as we go along. But, bear in mind that the purpose of this change is really to help businesses start their operations without too much upfront costs in order to lower barriers to entry. If we can do that, then it has served its purpose.

I believe I have answered all the questions, Mr Deputy Speaker, Sir.

Dr Amy Khor Lean Suan: First, I would like to thank the Minister for his comprehensive reply. On a point of clarification as regards the legal entitlement, my point is that, from the landowner's perspective, based on the current legislation, he would be entitled, if in future there is an increase in plot ratio. So it is from the landowner's perspective.

The second point relates to Temporary Development Levy. My understanding would be it is temporary as the Development Charge payable is for a temporary period of time. It is not necessarily related to the length of the

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structure. So the idea would be that you may have a privately-held freehold land, but you want a temporary use, so short leases may not be applicable. But I appreciate the Minister's point that we could use some other mechanism.

Mr Mah Bow Tan: Yes, it is true that a landowner with a very high baseline would think that with this change his value has been destroyed. But, that is "if", and the operative word is "if" the Master Plan is changed, such that he is able to develop beyond what his high baseline entitles him to. So, the question is that if there is no approval given for him to change his use beyond that particular baseline that he enjoys, he actually does not enjoy any enhancements at all. So really, as I explained earlier, it is a reasonable expectation perhaps, but it is certainly not an entitlement.

On the second point, I would repeat my assurance that we will continue to look at how we can refine the Temporary Development Levy scheme to make sure that we continue to make it business-friendly.

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