HEAD W - MINISTRY OF TRANSPORT

Head W - Ministry of Transport

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The Chairman: Head W - Ministry of Transport. Mr Ong Kian Min.

Land Transport Strategies

Mr Ong Kian Min (Tampines): Mr Chairman, I beg to move,

That the total sum to be allocated for Head W of the Estimates be reduced by $100.

Sir, 2004 was a remarkable year for our transport sectors. Passenger traffic at Changi Airport rose to an all-time high of 30.4 million, a 4.7% increase over the previous high in 2002. Changi Airport received 19 best airport awards and accolades from major international publications and organisations. In the maritime sector, due to the brisk growth in global trade led by China, Singapore handled 20.6 million TEUs, a leap of 16% over 2003, and PSA was stretched to work flat out at 105% of its capacity. In the area of land transport, COE prices dropped significantly and public transport operators, SMRT and SBS Transit, reported healthy profits.

I wish to congratulate the Minister and all his staff at the Ministry of Transport and its related agencies for their commendable efforts in building and maintaining our world-class transport systems in air, land and sea. Our transportation systems have gone through the slow years when we were hit by regional competition and SARS, and the years of frenzied activities with high demand and strong traffic. In both situations, the highs and the lows, our transport systems and transport workers have not only withstood the tests but also rose to the challenges and performed remarkably. This was possible due mainly to far-sighted planning, sound policies, prudent management and agility in making adjustments.

It is therefore fitting that Minister Yeo Cheow Tong is a joint winner of the 2004 Minister of the Year award, given by the

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Centre for Asia Pacific Aviation for the national government minister contributing most to the progress of aviation in the region. We would like to place on parliamentary records our heartiest congratulations to Minister Yeo.

Land transport - Sir, I would like to deal with issues relating to land transport first.

Fare review mechanism - among all the transport issues, the most sensitive one would probably be public transport fares. Obviously, nobody likes a fare increase. On the other hand, the operators should not operate at a loss. Otherwise, they would have no money to reinvest in service improvements, and no investor would want to continue putting money in these companies.

Today, fare increases

have to be approved by the Public Transport Council (PTC). The PTC has the unenviable task of balancing the affordability of fares with the commercial viability of the operators. While the PTC has been doing a reasonable job in ensuring that fares remain affordable, it is also evident that it is increasingly difficult for them to implement fare increases without attracting a public outcry. It was with this in mind that last year, the Minister for Transport appointed a GPC-led committee to review the fare review mechanism.

My GPC took up the challenge and formed the committee, with members from the academia, the Public Transport Council, the Consumers Association of Singapore (CASE) and NTUC, and conducted a fundamental review of the mechanism. As part of the process, we held focus group discussions with grassroots members and representatives of student unions and CASE. To get a better sense of the alternative models that can be adopted, we consulted transport

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experts and academics and studied the models adopted in other countries. The Committee also met with public transport operators to have a better understanding of the challenges and constraints that they face.

One of my key takeaways from the study is that fare review is a subject that is poorly understood by the public. Throughout all the feedback sessions that I attended, the common feedback was that fares keep going up and up. Initially, I had the same impression as well, that fares can only go up regardless of the economic situation. However, after studying the facts, I realise that this is not true and that fares have indeed not gone up in the last two years. In fact, data show that fares had increased only in three of the last seven years.

Hence, I concluded that the impression must have been created partly by the public outcry which followed the last fare increase in 2002 which came after two straight years of fare increases, and amidst deteriorating economic conditions. Yet, this was not entirely PTC's fault because throughout this period, the CPI + X formula had continued to turn out a positive figure. It then became apparent that the formula was not responsive to economic considerations.

It was with this in mind that the Committee decided to recommend that the CPI + X formula be replaced by a more responsive formula, namely, price index -0.3%. The price index aims to reflect the cost pressures faced by the operators. Based on their current cost structure, we propose to set it as 0.5 CPI + 0.5 wage index. Instead of compensating operators for their full cost increases, the Committee feels that a principle of sharing of the productivity gains should be adopted so that commuters also benefit from these gains.

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Based on the operators' average productivity gain of 0.6% over the last seven years, we propose a fixed reduction of 0.3%, as set in the formula. This is to incentivise the operators to continue to strive to be more efficient.

The new formula is more responsive because it takes into account the latest national wage trends, rather than lock in a value of X derived from outdated data. If economic conditions were poor and wages had declined the year before, there is a good chance that the formula will turn out a negative number and this would alert the PTC to consider a price reduction. This is an improvement over the CPI + X formula which has turned out fare caps averaging 2.4% over the last seven years since it was implemented in 1997. In comparison, if the new formula had been applied over the same period, the applicable fare caps would have been lower at an average of 1.9% per year. More importantly, it would have turned out negative numbers in three of the last seven years.

To make sure that the formula remains current, we have also recommended that the price index be reviewed and the productivity sharing of 0.3% be updated after three years.

In addition to the formula, my Committee has also recommended that the PTC takes into consideration the prevailing economic conditions as well as the affordability of the fares to the commuters. This is especially important during times when economic conditions have changed rapidly and significantly, so much so that even the latest available wage figures do not truly reflect the actual feelings on the ground, like in 2002 where the prevailing economic climate was very different from the good times of CPI and wage increases in the previous year. We have recommended a closer tracking of affordability levels rather than rely on the Household Expenditure Survey

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data which is available only once in every five years.

In addition, my Committee has recommended that the PTC should also check on Return on Total Assets (ROTA) of the operators to ensure that they are not making excessive profits at the expense of commuters. We feel that these additional checks would serve as useful tools to assist PTC in carrying out its function. This is because, ultimately, PTC still has to decide how much fares should be adjusted within the boundaries of the cap and defend its decision to the public. In this regard, my Committee feels that PTC should be more transparent in explaining its decision process. However, we also feel that this task should not be left to the PTC alone. The operators should also play a more active role in explaining their justifications to the commuters, whether in the areas of operating cost increases, new capital expenditure, service improvements or productivity gains. Only then will the public have an understanding that the fare increase is painful but necessary for the continued provision of a sustainable service.

My Committee believes that our recommendations will help improve the current fare review mechanism and look forward to a favourable response from the Minister for Transport.

Taxi liberalisation - Sir, given the limited time, I would just move on to taxis. Even with the full liberalisation of the taxi industry, commuters are still unhappy with the severe mismatch of supply and demand of taxis during the peak periods, especially wet ones, where it is impossible to catch a taxi from the roadside or even taxi ranks. Taxi-drivers are accused of hiding round the corner, popping up almost instantaneously only when passengers make a call booking. Further, although taxi companies are now free to set their own fares and service

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offerings, there appears to be little or no differentiation among the operators, and the smaller companies are happy to follow the fare structure adopted by Comfort, the largest operator.

Taxi-drivers, on the other hand, lament that their taxi companies have not reduced rental rates despite the steady decline in taxi-drivers' daily takings over the years. They would like to increase the fares they charge but are fearful that this would drive away passengers, hence resulting in a further decline in income. I would like to ask the Minister whether the objectives of the liberalisation have been met and what his Ministry intends to do to further improve the industry.

Mdm Cynthia Phua: Sir, with the liberalisation of the public transport industry, at the moment, there are two public rail and bus operators. I would like to ask the Ministry what is its long-term strategy in terms of public transport provision and what is the relative emphasis between the different modes, namely, buses, rail and even taxis.

The Ministry should perhaps take a leaf from the low cost air carriers to ensure a low cost provision of service as it formulates the long-term strategy on the land public transport. In the last budget, the Ministry has acknowledged that because of the size of commuters in Singapore, direct competition of the rail system does not make sense. Why has it not actively persuaded the operators? Because, in this case itself, economies of scale would ensure that the general public has a lower cost of transport. It is to the public interest that the Ministry should act, similarly as it has liberalised the transport industry when it believed that competition would enhance the land transport service and cost.

It is obvious that, with the two different rail and bus operators, many intervening inefficiency and high transport

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costs for the public arise in physical areas, especially in between the two rail systems. The transport company would evaluate the routes on a commercial basis, ie, definitely on profitability. This brings me to the role of the Public Transport Council (PTC) in that matter. Currently, they only review proposals by the operators for new routes and amendments to routes. Should not the PTC independently initiate a study of the whole system in particular areas to see if it is truly efficient and cost-effective?

We should not look at the cost of transport alone for a train ride or bus ride but the total cost, including the feeder services one has to take and also the cost of time one has to walk. This would ensure a fair and affordable transport cost to the people.

As for accessibility, our buses are still not friendly to the less mobile. Much more can be done for the rail system as well.

The Senior Parliamentary Secretary to the Minister for Information, Communications and the Arts (Encik Yatiman Yusof): Sir, during my MPS, I came across an increasing number of parents in Tampines who complained that their children have to spend almost one hour to reach their school in Bedok, thus forcing them to spend almost two hours daily in travelling to and from school. One of them said that his child has to take a feeder bus to the MRT station in Tampines, hop into the MRT train to Bedok before taking another feeder bus to the school. I could not believe that. I thought that with the linking up of the bus and MRT services by the respective operators, commuters have benefited from the through-ticketing offered by the operators. Such benefit should also include shorter travelling time. Alas, I was wrong. I found out how close to the truth the complaint was one day when I decided to take the same bus

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routes mentioned by them. The problem lies with the poor and slower feeder services. Sir, I am sure this problem is not confined to Tampines area but it is an islandwide problem.

The question of efficiency and cheaper feeder services in housing estates has long remained a thorn in the flesh for both the operators and the commuters. On the part of the operators, they are unable to overcome the supply and demand problems. Due to wider areas to be covered and the manner in which the commuters are distributed, the number and frequency of services could not be increased as they are said to be not cost-effective. So the bus operators resort to routing and re-routing the feeder services to meet the other changing demands. But this is acting like what a Malay saying of a person with short sarong : If you pull down your sarong , you expose your top. When you pull it to your top, you expose your bottom!

Sir, at one stage, the construction of the LRT at Bukit Panjang, Punggol and Sengkang had given a glimmer of hope that there would be a better and cheaper alternative to the intra- and inter-housing estate transportation service for the heartlanders. However, the announcement that there is no plan to build a LRT in other housing estates after the two above has brought the question of feeder services back into the forefront.

Sir, we know that in most cases the feeder service by itself is not profitable. We also know that the operators are cross-subsidising the feeder or the LRT services from profit made from the trunk route services and the main MRT lines. The question is: can the operators not do more?

Sir, in the light of this situation, may I ask the Minister whether there are other ways of achieving an efficient integrated public transportation service in these HDB

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towns, especially in the area of feeder services?

Assoc. Prof. Chin Tet Yung (Sembawang): My colleagues in the GPC have already pointed out several points that I was going to raise and, therefore, I should be taking less time than I have been reserved for.

First of all, may I just say that if you look at the MRT website, there are four objectives that public transport is regulated to ensure. The first, is that public demands in terms of coverage are met. We have already heard from Mr Yatiman that there are serious problems relating to feeder services and the like. I share his concerns. All MPs I know have this problem, especially in big towns, for example, Woodlands, where there are very difficult problems of navigation in the smaller ring roads, and so on. So feeder services to interchanges have been a problem. To follow that up, we also need to have school children and so on going into MRT trains, taking them to even neighbourhood schools

near Yishun or Marsiling.

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Fares remain affordable is another objective of public transport. We find that in this particular case, we have a few problems to look at. First of all, the deregulation of taxis and the increase in the number of taxi companies, for example, we now have seven taxi companies, and we were hoping that with the deregulation, which was, I think, in 1998, to allow for better fares, differential pricing, better quality services and so on, seems not to have worked out. And, as was pointed out earlier, most of the taxi fares remain more or less the same. The suggestion, therefore, is that is it likely there is a cartel operating among the taxi companies to make sure that the fares do not differ so much so that everybody could have a bigger piece of the cake.

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The net result is that the cost of transport in taxis, for example, is not any lower.

Thirdly, the public transport industry is regulated by MOT to ensure that service is efficient and of a high quality. Sometimes, I am told by passengers that the service is of too high a quality. For example, the installation of TVs in the buses has made people miss their stops, difficulties in thinking what is it that is keeping everybody so engrossed on the TV that they did not want to leave the bus. And, as a result, the people getting off the buses are slower and all sorts of problems come up. Additionally, the bus fares go up.

While I welcome, of course, the GPC's move to regulate public transport fares and to peg it to economic performance, there is a very real perception that a particularly big group of passengers would be adversely affected. These are the structurally unemployed, the persons who have not been able to find jobs so far even though the economy might have improved. I wonder whether the Ministry could look into this problem seriously, with the CDCs, who are the front line for determining what sort of help we could give the unemployed and the chronically unemployed, to see whether we could actually offer them concessionary rates or some way of identifying cheaper cost for them because, even with the improvement of our economic performance, this group is unlikely to be helped.

Finally, we have the objective that the public has a wide range of transport choices. This is true, in the sense that we have more taxi and bus companies now. We also have two companies running MRT trains. But the essential point, Mr Chairman, is that even with all these various additions to the public transport system, somehow passengers still feel that the buses are not coming frequently enough, and taxis are not available especially when you needed

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them. There seems to be integration, but not from the customer's point of view, in the sense that, as Mr Yatiman has already pointed out, people have to change from bus to train to bus again. I wonder whether the Minister could brief us as to how the integration of these land transport services could be improved.

Finally, Sir, I believe that the White Paper on Public Transport to make us have a world-class system was in 1995. In it, the Report said that it would take 10-15 years to come up with a world-class system. I do think that we have moved somewhere along there, but I wonder whether the Minister could update us as to how far we have moved and how far we have to go.

Public Transport Cost

Mr Gan Kim Yong (Holland-Bukit Panjang): Sir, many Singaporeans today are concerned with the cost of public transport and, in particular, trains and buses. Their concerns are not without reason. Firstly, public transport services are an essential service. More than half of the population relies on public transport to commute. It is a service that we cannot do without. Secondly, transport cost constitutes quite a significant portion of household expenditures. And, thirdly, fuel cost makes up about one-quarter of overall operating cost of public transport companies. With oil prices exceeding $50 a barrel, people's concerns are well-justified. It is, therefore, important for us to manage the public transport cost to ensure it remains affordable and that it does not impose an undue burden on our commuters.

I applaud the move by the Ministry of Transport to review the fare adjustment formula that determines the cap on fare increases. The purpose was to make fare adjustments more responsive to changes

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in the economy. However, being more responsive means greater volatility as well. Introducing this formula at this point in time, when the economy is recovering, would mean that we are starting from a low base and there is greater likelihood for the fare cap to go up than to go down. Is this the right time to change the formula? Although the economy is recovering and the unemployment rate falling, the benefits have not fully filtered down to the ground. I think it is not time yet to consider fare increases, especially given that the public transport companies are turning in healthy profits last year. Therefore, I would like to urge the Minister and the Public Transport Council not to allow fare increases this year. I would also like to ask the Minister whether measures have been put in place to manage the fuel cost.

Dr Wang Kai Yuen: Mr Chairman, Sir, during the debate on the Budget Statement I circulated the survey results of our Feedback Unit's survey on the challenges facing Singaporeans. This survey was conducted scientifically involving in-depth interviews with 1,064 respondents, thereby truly reflecting the population profile of Singapore. There are five issues where there exist a significant gap in public perception of the seriousness of the issue versus the confidence that we as a people would be able to overcome these problems. Sir, keeping public transport affordable is one of these five issues.

72.8% of the respondents consider this a serious matter affecting their lives. On the other hand, only 46.3% of the same respondents consider that we will be able to contain the increase in public transport costs and keep them affordable. Then there exists a gap of close to 26.5%. I would like to find out from the Minister whether he will address this gap in public perception. What contributes to this gap? Mr Ong Kian Min has earlier talked at length about the new transport

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fare adjustment formula. Does the Minister think that by adopting this formula we would be able to change the public's perception of keeping public transport cost affordable? If not, what else would he need to do to address this?

Mr Andy Gan Lai Chiang (Marine Parade): Sir, public transport is a very important aspect of a country's growth. As the economy and people of Singapore grow in wealth and in numbers, commuting becomes a very important part of everybody's life. Improvements in public transport vehicles, together with the increase of communication technology, have made travelling a breeze for all. However, the fares commuters are willing to pay for, for using the modern transport system that our country has, still remain as one of the most emotional issues in modern-day Singapore.

Transport fare adjustments have to go hand-in-hand with the affordability of the masses and are cost-sensitive to the public. Under the present system, before any fare adjustments could take place, bus and train operators, such as SMRT and SBS Transit, must first apply to the Public Transport Council for approval. PTC will then review the proposal in the light of the fare review mechanism and deliberate further before making their recommendations to the Ministry of Transport.

The fare review mechanism is, therefore, critical in its decision to set the maximum level that fares are allowed to go up. Currently, the Fare Review Mechanism Committee, which Mr Ong Kian Min has elaborated just now, has made recommendations to the Minister for Transport for a new formula to be used in calculating the level that fares should be set. The proposed formula of price index minus X as compared to the previous one, that is, CPI plus X, is more responsive to economic conditions as the price index takes into account the CPI and prior

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changes in wages, which is the average monthly earnings or the annual national average of the preceding year, adjusted for any change in employer's CPF contribution rate. In addition to the formula, the PTC is further encouraged to track the annual change in the percentage of household income set on public transport by a typical family. The price index derived is then further reduced by half the amount of productivity gain by transport operators. Thus, the maximum fare adjustment formula is a useful tool that the Public Transport Council could use to apply to the process of determining the level of fare increases or decreases. It could also be used by the PTC to make fare adjustments more transparent to the public.

On the other side of the coin, we have also to take into consideration improvements made by the transport operators in the level of comfort and reliability of the transport system. This would involve capital enhancement programmes such as improvements to existing buses and trains and the cost of maintaining them. These are costs that have to be recovered by the transport operators in order to remain in business. The question then is how much can the commuters afford for these advancements in public transport. The Fare Review Mechanism Committee has been aware of such matters and so recommended to the Minister for Transport to take these points into account so as to ensure a fair return on assets used by the transport operators. The Committee recommends that the transport operators' ROTA be compared to other industries with similar risk profiles to make sure that the returns on assets are not excessive. Thus, this procedure puts another level of protection for commuters while fares are being reviewed. The task of maintaining a fair level of transport fares to commuters, however, should be shared between the Government and the transport operators.

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Another factor to consider would be on subsidies or rebates on fares for senior citizens and students. This should be forthcoming from transport operators instead of from the Government only. If the transport operators are proactive in their community outreach through transport fare subsidies for senior citizens and students, then the perception and emotions of fare increases may be mitigated.

In order to promote this approach, perhaps the Government could consider giving tax concessions to transport operators for every dollar of subsidy contributed as an incentive for their contribution to society. Thus, with a combination of efforts from the Government and the private sector and a transparent approach to setting public transport fares, future adjustments to the public transport fares could be less controversial. Even with the best intention, any upward revision in transport cost would somehow not be met with understanding from the public, and the more frequent the adjustment of the fares is, the greater the chances of affecting even non-commuters. So I would urge the Public Transport Council to look at the possibility of matching the expectation of the public through constant feedback from users against the result of transport fares through the application of the new formula. Whatever the final adjustment is decided upon, it should preferably be applicable for a long time.

Mass Rapid Transit

Mr Charles Chong: Some of the points have already been raised by the speakers before, and so I would not repeat them.

Sir, the Third and Fourth Schedules of the Competition Act that Parliament passed not so long ago excluded rail services, amongst some other essential services, from the need to have competition. Sir, was this the realisation

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that having two or more train operators in Singapore for the sake of competition was not such a good idea after all? The second train operator operating the North-East Line, despite raising productivity by using state-of-the-art equipment and driverless trains, eliminating bus routes that could provide competition to its train routes and cutting cost by not opening, at least, one very important station, is still losing money on its train operations.

Besides the lack of population catchment, a contributory factor must surely be the lack of economies of scale in such a small area of operation. Would the Minister consider facilitating a consolidation of the train operators so that better economies of scale could be achieved for the benefit of commuters, as well as the single operator?

Sir, I do realise that SMRT and SBS Transit are public listed companies and it may not be appropriate for the Minister to tell these companies what they should do. However, I am sure that the Minister is ingenious enough to be able to come up with incentives for them to do the right thing and, at the same time, with disincentives if they continue to do the wrong thing.

One final point, Sir. Could the Minister also give us an update when Buangkok Station will be opened?

Mini-buses

Prof. Ivan Png Paak Liang (Nominated Member): Sir, I believe that our transport system over-emphasises private transport, by which I mean private cars and taxis. I have a suggestion to offer which addresses also a concern raised by hon. Members Mdm Cynthia Phua and Mr Yatiman Yusof, and that is, to introduce mini-buses.

Mini-buses carry more passengers than taxis. They are both socially and

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environmentally more friendly. Hong Kong is on the front page of our newspapers today. We have something to learn from Hong Kong, that is, how to use mini-buses. The Hong Kong land transport system is based on sound transportation economics, that is, hub and spoke. Subway trains connect the hubs, mini-buses provide the feeder. Mini-buses are better than feeder buses, addressing Mr Yatiman's complaint, mini-buses could run more routes, shorter routes and, above all, they could provide more frequent services. So, in this way, it will help to reduce the overall travel time and improve the service to our commuters.

Finally, let me add that if the Ministry accepts this suggestion, the mini-buses routes be awarded not to SMRT, SBS or some large corporation, but to another "S" - SMEs. Let this be another avenue for our local entrepreneurship. Let us award the individuals and, if need be, on an auction basis.

School Buses

Dr Mohamad Maliki Bin Osman: Sir, the safety of school children travelling to and from school is very important to parents like myself.

There have been cases of road accidents involving children, causing some deaths.

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Sir, there is another issue that needs to be addressed, ie, the use of seat belts in our school buses. It was drawn to my attention recently that, unlike passenger cars, there is no legal requirement for school buses to be fitted with seat belts. Also, even if there are seat belts, drivers are not required to ensure that the children actually put on these seat belts while travelling in those buses. I asked the bus operators why. Their answer is rather alarming. They said that there are many children in the buses. Often-times, they have to put three children per seat, when

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the seats are actually made for two. As such, even if there are seat belts, the children will not be able to use them.

Sir, I do not think this reason is acceptable. The operators do this because they want to reduce the fees to charge parents. I do not think Singaporeans are willing to compromise the safety of their children because of cost. More fundamentally, if it is true that there are no such regulation, it may seem that the Government is also willing to compromise the safety of our children when they travel on school buses.

Sir, I find it hard to explain to my children that whenever they are in my car, I will insist that they buckle up for their safety and also that it is required by the law. But the same message cannot be transmitted when they go on board the school buses. It is as though we are sending conflicting messages that seat belts are only important in daddy's car. Sir, I do not think this is right. We must be consistent in our message to our children. If the Traffic Police tagline is that seat belts save lives, then how can we promote this to our children when the requirement is not put in place?

Sir, I would like to ask whether indeed the Ministry does not have a policy of requiring school buses to be fitted with seat belts and, more importantly, to require the children to buckle up when they travel in school buses. If so, I urge the Ministry to study this matter seriously and act on it urgently.

Taxi Operation

Mdm Cynthia Phua: Sir, with the liberalisation of the taxi industry, the number of taxis has increased. This increase in supply has made it more difficult for the drivers to sustain their earning level which has, in fact, taken a dip. Many of our grassroots leaders have affirmed this fact, ie, the income has

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dipped from about $1,600 to $1,200 a month. From the transport companies' perspective, is there any room for them to lower rentals? What are the operating costs and profit levels of these companies?

One other solution is to raise fares so that taxi drivers can increase their income. With the deregulation of fares by the PTC in 1998, the Government can say that this is something that should be left to the market forces. There is clearly a market failure here, given that one company dominates the industry. I understand that this company alone owns 80% of the taxis in Singapore. There is distortion in the market where the price of the taxi ride cannot be determined by the normal market demand and supply forces. What are the measures put in place to help these taxi operators, especially the smaller operators to overcome the distortions of the market place?

In terms of safety standards, while it is important to set a high standard to protect the interest of the commuters, this must be reasonable. With the current situation where there are many taxis, many have to work much harder and longer. Fatigue sets in and this may have led to their poor safety record. What are the measures in place to help these drivers and operators to meet the safety standards set by the authorities?

Taxi Diesel Tax

Mr Seng Han Thong (Ang Mo Kio): Sir, the Government has liberalised the supply of taxis and deregulated the taxi meter fare. Hence, the development of the taxi industry is subject to the demand and supply of taxi services. Based on the latest statistics released by LTA, the demand for taxi services has reduced, but the supply of taxis on the road continues to increase. Taxi drivers' incomes are

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adversely affected as a result. They either have to drive longer to maintain the same level of income or suffer a reduction of income at around 10%-20%, based on feedback from the taxi drivers.

The recent surge in diesel pump price has worsened the situation. From March to December last year, the pump price had increased from 44 cents per litre to 90.2 cents per litre, a 123% hike in price. Sir, I am heartened to see that many taxi companies have come up with several temporary measures to help their drivers. More could be done to help taxi drivers by further reducing the taxi rental or other operating cost.

On the part of Government, I see the need to review taxi diesel tax. It is a right move on the part of Government to liberalise the taxi industry. We expect the industry to be market driven and competition will drive the cost down and stimulate better taxi services. However, we should also look at the unusually high cost structure of the taxi business. As we all know, high cost will prohibit the development of any industry in a market driven economy. I therefore urge the Government to review the high upfront statutory cost imposed on the taxi industry, in particular, the taxi diesel tax.

So far, there are two rationales on the imposition of taxi diesel tax. The first rationale was spelt out in 1985 - that the taxi occupies the same road space as a private car. The taxi should therefore bear the same amount of tax as private cars. Hence, the taxi diesel tax was steadily increased to $6,600 per taxi per year in 1989 and remained at that level till 1998.

The second rationale was the need to equalise the fuel tax imposed on private cars and taxis. Based on this reasoning, if fully implemented, the taxi diesel tax on each taxi could be as high as $9,200 per taxi per year. In 1998, Singapore was hit by the Asian financial crisis. As a result of

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the recommendation by the Committee on Singapore's Competitiveness, a review was done on the land transport cost structure, and the taxi diesel tax was reduced from $6,600 to $5,100 per taxi per year.

Sir, the high diesel tax imposed on the taxi industry was done when the supply of taxis and meter fares were controlled by the Government. Now that the taxi industry is liberalised, I urge the Government to take a fundamental policy shift on taxi diesel tax from an ownership-based traffic management tool to taxi industry development.

Sir, the most vulnerable group of people are the taxi drivers. High business cost means high taxi rental they have to pay daily. On top of that, they are also at the forefront to face the uncertainty of the demand for taxi services and, therefore, they can do nothing on the increasing supply of taxis on the road.

I strongly urge the Government to consider reducing the taxi diesel tax which will be crucial in smoothening out the transition from a highly regulated taxi industry to one that is responsive and market driven. This is particularly so for the taxi drivers who eventually have to bear all the costs imposed on the taxi business by paying their daily rental.

The Minister for Transport (Mr Yeo Cheow Tong): Sir, first, let me thank Mr Ong Kian Min for his kind remarks on the recent award which I received. In reality, the award is a recognition for all the right things that we have been doing in Singapore over the past years, and which have led to our development as an aviation hub.

On the issue of the cost of public transport and the Fare Review Committee's recommendations, first, let me thank Mr Ong Kian Min and his committee members for the recommendations that

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they have submitted on how to improve the fare review mechanism. Public transport fares have always been a very sensitive issue as it affects almost every Singaporean.

The Committee, in its proposed fare review mechanism, has done a commendable job in taking care of both commuters and the viability of the public transport operators (PTOs). In arriving at the recommendations, the Committee consulted a wide range of interested parties, which I think is very good, and it set out clear principles on which fare adjustments should be based, and recommended a formula that is more responsive to prevailing economic situations and conditions.

More importantly, it has also recommended additional ROTA and affordability checks which the PTC can use to ensure that the interests of the commuters are protected.

One important outcome for commuters from the recommendations of the Committee is the possibility of fare reductions and rebates when economic conditions are poor, and therefore resulting in pay cuts and negative inflation. This is very fair, since a responsive formula should mean that when wages and costs go up, the fares also go up. And the fares should have a downward adjustment when these factors decline.

The recommendation for PTC to conduct a comparison check on the PTO's Return on Total Assets (ROTA) against that of operators overseas and other companies with similar risk profiles, will help ensure that the PTOs are not profiteering, which is another concern of Singaporeans.

This is important as the absolute level of profit per se does not meaningfully indicate if the PTOs are charging excessively or not. The level of profit has

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to be compared against the amount of investment that the operators have put in. For example, if the investment involved amounted to $1 billion, a profit of $10 million, in fact, only represents a very meagre 1% return on the investment. But a $10 million profit made on an investment of $20 million would mean a very huge return of 50%.

Sir, I would like to inform the House that my Ministry has carefully studied the Committee's report, and I am pleased to announce that the Committee's recommendations have been accepted in full. There have also been some questions as to how a downward fare adjustment will be effected if the fare review formula comes up with a negative outcome. This is because in such a situation, few people will expect the PTOs, on their own, to apply for a fare revision. Sir, I am happy to inform Members that we will be amending the PTC Act later this year to empower PTC to determine if a fare reduction or rebate is warranted and, if so, to direct the PTOs to do so, even though the PTOs may not have applied for a fare revision. My Ministry will be working out the implementation details with the PTC over the next two months to put in place the new mechanism for this year's fare review exercise should the operators submit an application.

Sir, on the issue of affordability, I agree with Mr Andy Gan that commuters have to be realistic. They cannot expect fares to remain unchanged over time as costs increase and the service levels improve. But because public transport is used every day by a large spectrum of the population, it is understandable for the general public to worry about any fare increase, no matter how small. And hence the feedback received by Dr Wang Kai Yuen's Feedback Unit.

Sir, I would like to take this opportunity to correct any wrong

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impression about the affordability of our public transport system. Since we implemented the CPI + X formula in 1998, the actual increase in public transport fares averaged only about 0.7% per year. This is significantly lower than the average increase in wages of 3.4% per year over the same period. And if we compare over the last 15 years, the picture remains very similar, with our wages going up very much faster than fare increases. And this is well reflected in the proportion of monthly household income that is spent on public transport. The Household Expenditure Survey shows that the percentage of income spent on public transport has gone down from 3.6% in 1988 to 2.8% in the year 2003. This represents a 20% drop.

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

4.30 pm

At the family expenditure level, the average household expenditure on public transport has also declined. The survey shows

that the public transport expenses accounted for 5.1% of monthly household expenditure in 1988 and only 4.1% in 2003, also a 20% drop.

Sir, this clearly shows that our public transport fares have become more affordable, not less affordable, over the years. As Dr Wang Kai Yuen has pointed out, there is a perception gap in the minds of the public, in terms of the trend of public transport fares. The perception is that fares have been going up very fast and becoming less affordable. I think this is also partly due to the failure of the PTC to properly communicate the situation each time there is a fare adjustment and we have worked out with the PTC a mechanism to ensure that there is a proper explanation on the basis of any fare revision and to do a comparison in the affordability as well.

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Sir, if we compare against other developed cities like Hong Kong, the average bus and MRT fares for an 8-km trip in Singapore are also definitely much lower. This is due to the very commendable efforts put in by the PTOs over the years to increase productivity and to reduce their cost. Sir, the PTOs have also been pursuing non-fare revenue streams, such as the development of commercial spaces within the MRT stations, to help offset any increases in operating costs. The recent opening of the revamped Raffles Xchange at the Raffles Place MRT station is a good example of the operators' effort and what can be achieved.

Sir, the new mechanism requiring PTC to also review affordability of public transport will further safeguard the public. PTC will now be empowered to not approve any fare increase should there be significant deterioration in affordability.

While the vast majority will find public transport fares affordable, I think there will always be a small minority who will find it difficult coping with the cost of everyday living, and not just the cost of transport, but also the cost of basic necessities like food, utilities, transport and housing. This has also been recognised by Prof. Chin. Sir, I think that help for the needy, the unemployed and the people who are structurally affected by the reforms in the economy, all these will have to be helped through a wide range of financial assistance schemes provided by MCYS, CDCs, VWOs and others, as well as the ComCare Fund which was announced by the Prime Minister in his Budget Speech.

Sir, let me once again thank Mr Ong Kian Min, his predecessor, Mr Chay Wai Chuen, and his committee members for their painstaking efforts in coming up with the very commendable set of recommendations.

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Sir, let me now touch on the points brought up by Mr Gan Kim Yong who expressed his concern that public transport fares may go up on account of fuel price hikes. He also asked for assurance that there will be no fare revision this year.

The Fare Review Mechanism Committee has recommended that the cost conditions facing public transport operations be captured in the formula, by the CPI and the Wage Index components. However, in times of significant structural changes in fuel prices, the fuel cost increase is likely to outstrip the increase in CPI. I think this is especially crucial because fuel costs make up a very major part of the cost operation of the public transport operators. Hence, the composite CPI may not adequately capture the inflation of this single cost component. There could then be a case for the PTC to consider a one-off fare adjustment. Nonetheless, as in all fare adjustments, I am sure the PTC, as the gate-keeper, will carefully consider the merits of the case and the impact on commuters before granting any such increase if the PTOs should apply for one.

On the other hand, Members should also be further assured that, before this takes place, we would first use the Fuel Equalisation Fund, or FEF. The aim of the FEF is to help operators mitigate the impact of sharp and temporary increases in fuel and electricity prices. Let me explain the FEF mechanism. For periods when fuel and electricity prices are lower than a reference price level, the operators are required to contribute a portion of their profits into the Fund. They can then subsequently draw from the Fund if they need to cushion spikes in fuel or electricity prices. The Fund mechanism therefore provides a buffer against volatile fuel or electricity prices, which would otherwise have to be translated into fare adjustments.

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Mr Gan Kim Yong asked if it is desirable to implement the formula at this stage when the economy is recovering since there is a greater likelihood for the fare cap to go up. Sir, this is a valid observation. In fact, it is for this very reason that the Committee has recommended several levels of checks, ie, the ROTA and affordability checks to be undertaken by the PTC before it approves a fare revision. This is to ensure that the interest of the commuters will continue to be protected.

Sir, he also urged the Minister and the PTC not to allow a fare increase this year. As to whether there will be a fare increase or a fare revision this year, that is a question that only the PTC can answer. As Members know, the PTC is a fully autonomous and independent body. The usual process is for the PTOs to submit their applications, if any, to the PTC around the end of April. The PTC would then deliberate carefully and announce the outcome in June. I am sure that the PTC will continue to safeguard the commuters' interests and ensure that the fares remain affordable, especially now that we have a more responsive fare adjustment formula.

Sir, let me now move on to the issue of land transport strategy and the integration of the bus and MRT systems. Mdm Cynthia Phua asked about the long-term strategy for our public transport system, and in particular about the need for better integration between the various modes of transport.

Our public transport strategy is to establish a well-integrated public transport system. The rail system forms the backbone of our public transport network, serving the key corridors between major residential areas and activity centres. Buses complement the rail system by serving the less-heavy corridors and

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linking commuters to the stations. Taxis, on the other hand, provide a personalised, door-to-door service which is more akin to private transport.

Sir, as the MRT system involves huge investments by the Government, PTC aims to ensure that the bus and rail systems are well integrated to optimise the use of the expensive MRT system. The PTC achieves this by setting out Quality of Service Standards (QoS) for bus services. For example, PTC requires that the first feeder buses from all HDB neighbourhoods must leave the interchange before 6.00 am to facilitate connection with the early MRT train or trunk bus service. The operators are also required to provide direct feeder bus connections from all HDB neighbourhoods to the town's bus interchange, which is usually co-located with the MRT station.

While there may be some concern about the duplication of resources, I would like to highlight that, whenever a new train line is opened, the operators are required to re-route some bus services to strengthen the bus connections to the rail line and to avoid duplication of routes. However, it is inevitable that there will still be short incidental stretches where the buses run parallel to the rail system. This is due to the need to serve short-distance travel and provide local connectivity within the rail corridor. In other cases, two points may be connected by both the bus and rail lines. For example, in the case of Tampines, the MRT and bus service No. 10 connect Tampines to Raffles Place. However, there is actually very little duplication because bus service No. 10 primarily serves to provide local links to the Katong and East Coast areas which are not served by MRT. The travel times are also very different. The MRT ride to Raffles Place takes only 27 minutes, compared to the 68-minute bus ride! I do not think they really compete with each other for passengers.

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Mdm Phua also asked PTC to evaluate bus routes independently to ensure that the bus network is efficient. I want to assure Mdm Phua that PTC does consider the efficiency of the entire bus network and the potential impact on commuters when reviewing any changes to the bus routes. For example, when the NEL line was opened, we had to do the bus rationalisation exercise, and the two operators, SBS and MRTC, together engaged an independent consultant to study and propose changes to the bus routes and, after the proposal was completed, PTC would then review the entire proposal to make sure that the entire system is rational. So it is not something that is done at the whim and fancy of any operator. But PTC takes a very active role in making sure that the bus network is rational and efficient.

Sir, Prof. Chin Tet Yung and Mr Charles Chong commented on the structure of the rail system and asked whether we should continue to have two rail operators. Let me assure them that while the two operators do not directly compete, there are still benefits to the current structure. First, it promotes integration of services as we have seen, and allows benchmarking between the operators. Second, the two operators will still have to compete to have the best approach to a safe, efficient and productive operation. In doing so, each will have lessons for the other, and the improvements that are gained will ultimately also benefit the commuters.

Sir, on the merger of the rail operations of SMRT and SBS Transit, as observed by Mr Chong, this definitely is a matter of commercial decision for the two operators to make, as I have also informed this House before. Given that they are both publicly-listed companies, it would be difficult for the Government to intervene to direct them to merge the rail operations. I do not think we are in a position to give any operator any

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subsidies just to effect the transfer. So far, we have not received any proposal from them. However, we would not object to a merger if the operators wish to do so to achieve better economies of scale, which I think there is, and better operational efficiency.

Sir, Mr Charles Chong also asked when Buangkok station will be opened. I want to assure him that LTA monitors very closely the developments around the area. Once there is an adequate population catchment around the station, LTA will arrange for the station to be opened as soon as possible. The breakeven point, based on the calculation, is that once there are about 2,000-3,000 housing units available in the immediate vicinity of the station, we should be able to ask the operator to open it. So we will continue to monitor and work with Mr Charles Chong.

Sir, Prof. Chin Tet Yung asked about the achievements versus the White Paper, and how far have we gone and how much more catching up we have to do. I am happy to tell Prof. Chin that there is no catching up to do, because we have already more than exceeded the targets set under the White Paper. Let me give him an example. In the White Paper, there was a target that we should add another 225 kilometres of road network at the cost of $1.1 billion over the next five years,

ie, the first five years after the White Paper was published. I am happy to inform Prof. Chin that the road network has actually exceeded the target by about 84%, ie, we have added a total of 415 kilometres versus the target of 225, and we did it at a lower cost of $916 million, compared to the $1.1 billion budgeted.

4.45 pm

Sir, in terms of the rail system too, under the White Paper, we had a target to expand the rail system from 67 kilometres

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to 160 kilometres over the long term, which is really year "x". I am happy to inform him that we have already reached about 130 kilometres now, and the whole system will total 175 kilometres with the completion of the Circle Line and the Boon Lay extension, which is by the year 2010. That means, by the year 2010, we would have exceeded the long-term target of 160 kilometres.

Sir, let me now move on to the point about feeder services. Mr Yatiman Yusof described the woes of his Tampines residents with regard to the feeder services. Sir, I think the transport needs of the HDB towns in many ways exemplify the complexities of planning a public transport system and network. For example, in a single precinct, there may be 2,000 people living there who need to travel to 1,000 different points in Singapore. How do we provide a system that will efficiently and cost effectively link them to those points that they want to go to? I think there are two extremes.

The first is to provide a very personalised service where each of them can have a door-to-door service. In fact, this is available today. The taxi service provides that but, of course, at a very much higher cost than what the bus and MRT would cost. The other way is, of course, through private transport.

The other extreme, the cheapest way, is to have one trunk route which will link that precinct to every point in Singapore. Of course, the last passenger to get off the bus may have to suffer a three or maybe four-hour bus journey. So, that again is not viable.

The most efficient, cost effective and prudent model is the hub-and-spoke system which is used in most, if not all, countries. In Singapore , I think our feeder services are in fact very efficient, with the headways during the peak hours

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averaging between five to maybe six or seven minutes at the very most. And off-peak, the headways are only about 10 to 15 minutes. So, in actual fact, we have a very efficient feeder bus network. Of course, how long a commuter needs to ride on the feeder bus will depend, firstly, on how far away he lives from the interchange or the MRT station and, secondly, once he gets off the trunk bus or the MRT train, how far away is his destination from the station. If the destination is far away, then of course he may have to have another 20-minute ride by bus. So, the one-hour ride that Mr Yatiman Yusof mentioned also depends very much on where those two points are. I think our system is fairly optimal. It is not perfect. But I think it has met the needs of most people, which is really the aim of a mass public transport system.

Sir, but if Mr Yatiman, or for that matter Prof. Ivan Png - because he did also ask for other operators to be allowed to operate a feeder bus system - if any MP is able to locate a private operator who is prepared to run another feeder service, he is free to go to the PTC and submit an application, because this is available under the competition framework that we established in August 2002. Under this competition framework, any interested party can apply to provide a comprehensive feeder service, ie, he cannot just go in and cherry pick and say "I am going to run this particular service for two hours" because, if that happens, then who is going to run the services off-peak? The residents will have to walk from their home to the MRT station. So, whoever wants to run a competitive service is allowed to do so, but it must be a comprehensive service, it must serve the whole estate, and they must operate within the Quality of Service standards established by LTA, and which are applicable to all public transport operators. And if these operators wish to use mini-buses and the larger buses, they are free to do so.

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Sir, with regard to Prof. Png's points about the Hong Kong model of using mini-buses, first, let me clarify the situation in Hong Kong . There are two types of mini-buses, the red mini-buses and the green mini-buses. The red mini-buses are unregulated, and are free to choose their own routes. But these are all the legacies of the 1960s. The Hong Kong government has stopped expanding this fleet, and they charge more than the regular buses.

Sir, let me now move on to taxi services.

First, let me explain why we have fully deregulated the taxi industry. Prior to 2003, the taxi industry was a closed market, with a limited group of taxi companies. LTA determined the number of taxis they could operate. And it was really a very arbitrary decision by LTA, as it had no means of really knowing how many taxis we should have in Singapore . Deregulation has injected competition and will enable the market forces to address the challenges faced by the industry. And to safeguard commuters, LTA introduced a set of Quality of Service Standards (QoS) to ensure that the taxi service levels are not compromised.

Our assessment is that deregulation has worked well. First, the number of taxis has increased by about 1,300 to a total of 20,400. Second, three new companies have entered the market. And third, competition has given both commuters and taxi drivers more choices, and better services from the taxi companies.

Sir, the industry now has full flexibility to determine whether the supply and demand problem mentioned by Mr Ong can be resolved by either increasing the supply of taxis, or, as mentioned by Mdm Phua, through price differentiation through some of the operators increasing their taxi

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fares. Of course, this is contrary to what Prof. Chin Tet Yung is looking for, which is lower taxi fares. I think this shows that this is indeed a very complex situation and a very complicated situation too, affecting both the drivers and commuters. As such, the taxi companies will have to consider very carefully before deciding on what is the best way to resolve the demand and supply situation, especially during the peak hours.

I would therefore urge Mr Ong to be patient for a little while, because deregulation is still fairly new, and I am sure with more players in the market, the cartel which Prof. Chin suspected, if it is there, will surely have to contend with the fact that the marketplace is now totally different.

Sir, Mdm Phua mentioned that the competition in the industry is being distorted by the presence of a dominant player. I agree with her. This is certainly true. But this was already so even before we deregulated. Having decided to deregulate, it is better for LTA to let the market develop further, and take stock of the situation. At that time, if Mdm Phua is still not satisfied, she can of course resurface her suggestion that we look at ways on how to deal with a dominant player.

Sir, the other issue raised by both Mdm Phua and Mr Seng Han Thong is the plight of taxi drivers. Mdm Phua mentioned that the increase in the supply of taxis has reduced the income of the drivers, and so did Mr Seng Han Thong. The data collected by LTA showed that the earnings of the taxi drivers did drop during the SARS outbreak in 2003. However, they recovered very strongly last year, with the average gross income of taxi drivers even slightly higher than pre-SARS in 2002. This shows that the general demand has kept pace with the increase in the overall taxi fleet. And, in fact, I do not know where Mr Seng got

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his data from, but I checked the data because LTA gives me data every month, and I recall that the last time I saw the data, the ridership last year was definitely higher than 2002. I am not comparing against 2003 because that was the SARS year. So, I would suggest that Mr Seng review his figures again.

Sir, but it is true that the net income of taxi drivers has dropped, and it dropped by between 12% and 14% last year versus 2002. The question is why. If ridership has remained fairly constant, fares have not dropped, why have the earnings dropped? The answer is a very simple one, ie, higher fuel prices. I am glad that the taxi companies have come forward to provide some help. For example, Comfort, CityCab and Yellow Top Cab have provided a special one-time bonus to their drivers, ranging from $240 to $360 per driver, according to the number of years of service. And all SMRT taxi drivers will receive a $380 diesel relief package. So, all this is meant to help reduce the impact of the huge increase in the fuel price.

Mdm Cynthia Phua also asked, since the taxi companies are highly profitable, whether they should lower their rentals. It is true, because I have looked at the financial reports published by SMRT and ComfortDelgro that the taxi companies are in fact doing well. But how the good corporate financial performance should translate into rental reductions, that I think is a commercial decision for the taxi companies to make. However, with increased market competition, they would need to price their taxi rentals attractively, in order to minimise the number of unhired taxis, because it is very expensive for taxis to be sitting unhired. Perhaps, Mr Seng, as Advisor to the Taxi Operators' Association, may have to work very hard to persuade his member companies to do something about the taxi rentals.

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Of course, the other way, as Mdm Cynthia Phua has pointed out, is for fares to be adjusted. Again, that is something which we will have to leave to the companies, because fares are deregulated. But whatever it is, if taxi drivers' incomes drop and the job no longer becomes attractive, they will look for other jobs. And I think the taxi companies will be in trouble. So, either way, the companies will have to find an appropriate solution.

Sir, Mr Seng also suggested that the Government reduce the taxi diesel tax as a means to help the taxi industry. He also said that the taxi companies have difficulties renting out their fleet. This latter point is not true because, again, my monthly data shows me that, as at last month, only 1% of the entire taxi fleet is unhired, and sometimes it could be due to the fact that the taxis are not being serviced, etc. But the 1% vacancy rate shows that the taxi driving profession is still a reasonably attractive one.

5.00 pm

Sir, let me now clarify the tax treatment for taxis. The diesel tax has always been part of the Government's policy measures to equalise the tax

treatment of taxis with that of petrol-driven cars. Sir, after all, taxis provide a personalised door to door service, very akin to that provided by private transport. And taxis should therefore be taxed similarly.

Sir, in line with this policy, the diesel tax was introduced in 1985 for all taxis. But even with the diesel tax, the tax structure for taxis was still not fully equalised with that for private cars because some of the taxes payable for taxis, for example, ARF, were still much lower.

Hence, the Government revised the vehicle tax structure in early 1998 for taxis, to equalise the tax structure for

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taxis with that of cars. To soften the impact of the ARF increase, we reduced the diesel tax from $6,600 to $5,100 per year. This was to ensure that the annualised fixed cost of taxis remained generally unchanged after the ARF adjustment. This enabled the taxi companies to maintain the rental rates. This helped to protect the taxi drivers, which is what Mr Seng was worried about.

But even today, taxis still enjoy some tax concessions. If we were to fully equalise the diesel tax with the petrol duty, it would have to be increased from the current $5,100 to $6,150. Taxis also pay a flat road tax of $1,200 a year, compared to $3,050 for a petrol-driven car of equivalent engine capacity. Sir, while it is the intention of the Government to equalise the tax treatment of taxis and cars, Members would have seen that we have adopted a cautious approach.

Let me now move on to the issue of safety. Mdm Cynthia Phua expressed her concerns about the safety records of taxi drivers.

Sir, to ensure that taxi drivers drive carefully, LTA has imposed a QoS on the taxi accident rate. The current QoS of not more than two accidents per 10 million kilometres is based on what the taxi companies had actually achieved from 1999 to 2001. And for computing the rate, the LTA only includes the accidents that involved injury or fatality based on the assessment of the Traffic Police. Therefore, if the taxi drivers were assessed not to be at fault by the Traffic Police, the accidents would not be included in the calculation of the accident rate.

Sir, unfortunately, the taxi companies have generally failed the QoS over the past two years. Fortunately, they have put in more effort to train and educate the drivers. As a result, for the last quarter,

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most taxi companies showed some improvement.

Sir, Mdm Phua asked how the Government can help the taxi drivers meet the safety standards. Our approach is to provide targeted assistance to help improve drivers with poor safety records. In line with this, LTA will contribute a seed fund of $100,000 to the Singapore Taxi Academy to set up a safety training course for drivers who have poor safety records. The Academy will develop the training course with the Traffic Police, the driving centres and the taxi companies.

Sir, on whether the increased competition has led to driver fatigue as mentioned by Mdm Phua, this is not very conclusive because fatigue is just one contributory factor to traffic accidents. Nevertheless, this is something which the taxi companies, STA and the LTA should look into. If it is shown that fatigue is indeed a factor, we would need to do something to put in place the necessary measures to address this problem.

Sir, Mdm Phua has also asked us to make the public transport system more accessible. She had suggested during the Budget debate that we put a sound-emitting device in the train to guide the visually handicapped.

Sir, while it is desirable to make the public transport system accessible to less ambulant commuters, we need to study the issue and proceed very carefully as the public transport system is a means of mass transport in Singapore. It is essential that we balance the efficiency required and expected by commuters, with the special access required by the disabled. Sir, we will have to take into account not just the costs involved but, more importantly, the impact on the efficiency of the bus services and the road network. This is because at peak hours, eg, for buses, it is common to see long queues of buses at the bus stops.

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With regard to the visually handicapped, the experience of the transport operators has been that most passengers on trains or buses do come forward to help them, and I think that is very important that Singaporeans, by and large, are very helpful to the disabled.

The operators have also trained their station operation staff to assist those who require additional help. For example, for wheelchair users who call up in advance, SMRT's station staff will receive them at the entrance and accompany them to the lift and to the train. On board the trains, the customer service officers will also look out and help those in need, including those who are visually impaired.

Sir, let me move on now to the point made by Dr Maliki Osman. Dr Maliki spoke on the need to have seat belts on school buses. Sir, I can assure him that I share his concerns about safety of children travelling in school buses too.

In reviewing the need for seat belts, LTA has to balance a range of factors such as effectiveness, operational impact and the cost of implementation. LTA has already in place many measures to improve the safety of school buses. For example, they are required to undergo regular compulsory inspections to ensure road-worthiness and are subject to a speed limit of 60 kilometres per hour. LTA also requires the school buses carrying more than 30 children to have a licensed attendant to look after the children. An attendant is also compulsory for buses carrying kindergarten-level children.

These safety measures have resulted in a consistently low accident rate for school buses. They also help reduce the severity of injury in the event of accidents. Indeed, I am happy to inform Members that there have been no cases of children suffering serious or fatal

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injuries while travelling on a school bus in the last few years. Nevertheless, LTA will continue to review and introduce additional safety measures that are shown to be useful and cost-effective.

Sir, making seat belts compulsory would impose substantial costs on school bus operators and users. Retrofitting seat belts and their anchorages will require the seats and their supports to be modified and this will reduce seating capacity. Based on the estimates by the bus operators, having seat belts can increase the school bus fares by as much as 40%. Contrary to Dr Maliki's view, parents are very concerned about how much they have to pay for the school bus fares. I think an increase of 40% would be something that most parents would be alarmed about. However, if the schools prefer the buses serving them to have seat belts attached, I think they are free to impose this requirement on the buses that serve them. LTA will be very happy to agree to it.

Let me assure Dr Maliki that LTA will continue to work closely with the Traffic Police and the Ministry of Education and the school bus associations to ensure that the school buses continue to be safe for our school children.

Mr Seng Han Thong: Sir, I would like to seek one clarification. The Minister asked me where did I get the figure of the taxi drivers' income from. In my speech, I mentioned that they have to drive longer to maintain the same level of income or they will suffer a reduction of income of 10%-20%. The reality is that they have to drive longer to maintain the same income. If not, they suffer a loss of income of 10%-20%. I mentioned that the feedback from the taxi drivers is that they now have to drive longer because they do not have relief drivers.

My second point is that the Minister asked me to work harder. Yes, my NTUC

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colleagues and I will work harder to enhance the benefits for taxi drivers and, at the same time, we will convince the companies to give better rebates to the taxi drivers.

Mr Yeo Cheow Tong: Sir, I was responding to his point that the ridership has gone down. My point was, in fact, ridership has gone up. But the net income has gone down because the costs have increased. And to compensate for the drop in income, they may have to drive more. That I do not disagree with.

Mr Seng Han Thong: Sir, I did not mention about the ridership. I just mentioned the income of the taxi drivers. It has dropped by 10%-20%.

Encik Yatiman Yusof: Sir, I would like to seek clarification from the Minister. Earlier in my speech, I have said that the feeder bus service is a non-profit making effort. No company will be set up just to provide feeder services anywhere in Singapore. I think it is unfair of him to ask an MP to set up a company to provide the service.

But, Sir, if you look at the SBS' and TIBS' annual returns, you will see that there are sufficient profits made by them. If you look at the profit made by these companies, it is not unreasonable to ask them to do a small public service by improving the feeder service.

Mr Yeo Cheow Tong: Sir, I do not know where Mr Yatiman got his figures from. But it is not true that the feeder service is losing money. If they are, today, they would be in an even worse shape. The fact is that most of the feeder services in the HDB estates are profitable, except for a few in the new towns.

Mr Yatiman is the MP of a very well-developed estate, Tampines. The feeder services there are profitable. He should have no difficulty finding someone to run

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a competitive service and do it in a better way at a lower cost.

The fact remains that there is a trade-off. If you want to have even closer headways - at the moment, as I have said, it is five to eight minutes - like what the trains are having, four minutes, it can be done, but there is a cost to be paid, and the cost must eventually be paid for by the commuters. If the cost has to be paid by those commuters on the trunk routes, I think they will be very upset about having to subsidise commuters on the feeder routes who are already paying a very low feeder fare because today, the feeder fare is only 63 cents, regardless of how many fare stages the commuter rides. In many ways, the feeder services are being run very well. But if there are others who can run it better, we will be very happy to hear from them.

Mr Ong Kian Min: Sir, I would like to seek a clarification from the Minister regarding the increase in fuel cost for the public transport operators. The new fare adjustment formula just accepted by the Government, ie, price index minus 0.3%, does not include a separate component to track fuel cost. I would like to ask: if the operators are allowed to pass through any fuel cost increases to the commuters by increasing fares, would there not be less reason for the operators to proactively manage their fuel cost, for example, by hedging, long-term supply contracts or by other measures?

Mr Yeo Cheow Tong: Sir, if the price of fuel were to increase even more significantly, hedging will not help because, if it is a structural change, the hedging will again be at the higher structural price. If this is the case, it will be up to the PTOs to come to PTC to say that their costs have gone up very significantly and, what they can do to offset that. If they can make up a strong case, PTC would probably listen to them.

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But as to PTC's ultimate decision, I cannot second-guess them. They are independent, they are autonomous, they have to make up their minds based on the facts given to them.

Prof. Ivan Png Paak Liang: I thank the honourable Minister for responding to my suggestion. I only ask that the Minister agree that when routes are awarded, they will not be on this comprehensive basis which is so large that no small independent person can afford to bid for them. Let us offer these routes on a single basis so that small time businessmen can bid on an individual basis.

Mr Yeo Cheow Tong: Sir, a reliable public transport system is not one which a small operator, with very limited resources, could afford to operate. He must have enough resources to operate a system which is reliable, because that is what we are promising commuters. The public transport system is a very basic system for those people without private transport and, therefore, reliability must be a given. If we give out only route by route, I think we are going to have a very fragmented system, with very low economies of scale, which is why we have to-date, two operators.

5.15 pm

As I have mentioned just now, our competition framework would allow a third operator to come in at the town level. I think the town level does not require as much an investment as a country-wide system. So, if an entrepreneur wants to go into public transport system, I would say, "Yes, look at one of the small towns and provide a service for the whole town." If he wants to provide only one route, then the question is which route? Do we give him the most profitable or the least profitable route? The reason why we package it as one town is that

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there would be some routes where the flats are fully occupied, and there would be other routes, which are perhaps further away, where the flats are only half full. That part of the town, which is fully occupied, in a way helps to offset the service to the other part of the town which is not fully occupied. That is why we could not afford to just give one route away. It has to be a system.

Dr Mohamad Maliki Bin Osman: I just want to make a point with regard to the seat belts again. The Minister mentioned that right now we have a good record and we do not have accidents involving school buses. But I just want an assurance that we do not want to wait until accidents happen before we act on it.

Mr Yeo Cheow Tong: Sir, the system has worked very well. Of course, it could be further improved. I do not doubt that, which is why I said that if any parent or any school wants to have an even safer system, they are free to do so. But I do not think we should impose on all parents the ultimate, when it is something which I think most parents may baulk at in terms of the fare increase.

Dr Lily Neo (Jalan Besar): Mr Chairman, the Minister said earlier that SMRT offers help to the physically challenged residents. May I ask him whether there are any plans to also make our public buses more friendly to the physically challenged residents, in view of our ageing population, to give them independence? Also, are there feasibility studies done so far on the cost to make our public transport more friendly to this group of people?

Mr Yeo Cheow Tong: Sir, as I mentioned in my reply earlier, our public transport system and the bus and MRT systems are mass transport systems and, therefore, the efficiency and effectiveness of the systems must be our priority goal. In terms of making the buses friendly to

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the physically challenged, yes, I think we have already done something. For example, all new buses now have low floor-boards so that commuters do not have to climb up two to three steps to get on to the bus. The floor-boards are also at almost the same level as the kerb, so that the commuters could step off the kerb on to the bus without too much trouble. The pavements also have ramps which allow the physically challenged to get on at traffic junctions without having to step up the kerb. I think we have already done quite a fair bit to help them. If there are any other suggestions, we would be very happy to take a look at them. But the key point, as I said just now, must be whatever we do must not affect our ability to move large numbers of people, especially during peak hours, when traffic conditions are already very, very tough.

Mdm Cynthia Phua: Mr Chairman, Sir, I just want to appeal to the Minister for the visually handicapped. They are really mobile. They just need to have the sound at the door to guide them, while they are in the train.

Mr Yeo Cheow Tong: Sir, I think we have another feature on the trains which Mdm Phua may be interested in. The seats directly next to the door of each train have stickers marking them out as being seats that are reserved for those who are handicapped. So if a visually impaired commuter gets on to the train, all he needs to do is to go to the nearest seat, and if it is occupied, requests for the passenger to get up. I am sure most Singaporeans are civic-minded enough to do so because it is very obvious that the person is visually impaired. In any case, as the operators have said, they have not encountered any problem so far because, whether it is on the bus or on the train, the visually impaired normally would ask a passenger close by to alert him or her when the destination is getting close. And there is no trouble getting assistance from fellow passengers.

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Mr Ang Mong Seng: Mr Chairman, may I ask the Minister, when the PTO invests overseas and makes a profit, is it considered as part of the company's profit when it submits its report to the PTC?

Mr Yeo Cheow Tong: Sir, the operations overseas are ring-fenced from the local operations, so that whether they make or lose money, it would not have any impact on the viability of the local operations.

Road System and Traffic Management

Mr Ong Kian Min: Mr Chairman, Sir, the question I wanted to raise about speed limits of our roads has earlier been answered by the Senior Minister of State for Home Affairs. So I shall not delve on it except to say that with the tough enforcement action taken by the Traffic Police, nowadays when a driver zooms past me at excessive speed, I say to myself, "MOT". It does not mean "Ministry of Transport", but taking reference from the story told by Minister Lim Swee Say in this House, "MOT" stands for "matter of time". If a driver speeds excessively often enough, it is "MOT" or a matter of time before he gets caught, fined or even suspended from driving.

Sir, now I would like to touch on the speed limit of light goods vehicles, which is presently set at 60 kph. I think this is rather low, especially on expressways where cars are travelling at 80-90 kph. I would like to advocate that this be reviewed and increased from the present 60 kph maybe to 70 kph.

Sir, moving on to our road system and traffic management, I would like to suggest some improvements. First, in the course of designing and planning for new large-scale property developments, I think the LTA should be closely involved at an early stage to work with the property developers with regard to traffic flow

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management. This could be planned, as I find that the main culprit for congestion around property developments of a large-scale are the drop-off points and the ingress and egress from carparks of these buildings. Once developments, such as Takashimaya Shopping Centre or Tampines Regional Centre, become operational, the vehicular traffic in that vicinity would rise appreciably and create a strain on traffic flow, which would have widespread impact. As an example, take the roads around Ngee Ann City/Mandarin Hotel junction. The area has become a traffic nightmare at times. This could convince people to avoid the area. With the plans to turn Orchard Road into a more attractive tourist spot, I would like to ask the Minister whether the Ministry or LTA has any plans to streamline traffic flow around this area so that congestion could be lessened.

Secondly, the LTA introduced the left-turn on red sign at some signalised junctions. I believe this has proven to be very welcomed. I would like to ask the Ministry to consider having this at more junctions. Along any stretch of road, there may be side-roads joining it. If there are no signal lights, the driver can merge and turn left with caution, after giving way to traffic on the main road. Hence, I do not see why, maybe 100 metres down the same road, the driver should not be allowed to turn, with caution and proper lookout, if the junction is signalised. In the United States where they drive on the other side of the road, motorists could turn right on red light at signalised junctions, unless specifically prohibited. More turn left on red signs would also mean that we may be able to do away with separate slip-roads at appropriate junctions, thus freeing up valuable pieces of land which could be put to better use.

Sir, my next point is regarding vehicle population. Over the decades, we have

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invested billions of dollars in our road system and made much improvement in traffic flow. We enjoy a superb road network, but there would be congestion from time to time, especially during peak hours along certain stretches of roads. But with the successful introduction of the ERP system, congestion could be evened out, and I may say, even bearable. Even if there is a jam, it is a moving jam. Generally, travelling times are predictable to the dot. We do not experience the kind of gridlock traffic jams seen commonly and regularly in other big cities. In fact, during certain off-peak periods, our roads are very pleasant to drive on, but do watch out for the Traffic Police's speed enforcement officers and their portable radar guns. I believe there is room to increase the private vehicle population, and I would like to ask the Minister whether his Ministry would be reviewing the planned vehicle growth rate.

Speed Limit for Private and Light Commercial Vehicles

Mr Ang Mong Seng (Hong Kah) (In Mandarin) : Sir, at present, the speed limit for the small and medium-size commercial vehicles is 60 kph on all roads. However, the general speed limit on our highways is 90 kph. May I suggest that the speed limit for such commercial vehicles be raised from the present 60 kph to 70 kph because, to the businessmen, time is money.

May I also suggest that the right lane on our highways be confined to vehicles whose speed limit is not less than 90 kph. In other words, vehicles whose speed limit is less than 90 kph should be banned from travelling on the fast lane as they would either hog the road or exceed their speed limit. I believe this is being practised in Japan.

In the United States, the speed limits on freeways are categorised into peak hours and non-peak hours. May I therefore suggest that the speed limit on

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our highways be raised to 110 kph during non-peak hours.

Scrapping of Vehicles

Mr Lawrence Leow Chin Hin (Nominated Member) : Mr Chairman, Sir, the early scrapping of vehicles, primarily passenger cars, is quite prevailing in recent years. It reached its peak in 2001 as prices of new models plunged when the ARF was cut from 140% to 130%. The ARF is now 110%. Excise duty was also cut from 31% to 20% in 2002 and has since remained at that rate. Since 2000, an average of 95,000 vehicles have been taken off the road each year, many of them before five years. With these cars intended to be on the road for 10 years, this rather premature scrapping of cars is quite alarming. While car buyers are quite happy with the lower prices of new cars, and many have taken the opportunity to switch to newer and bigger models, I am not sure if this early scrapping of cars could lead to an economic loss for us as a whole. The benefits, as I see it, ultimately flow to the car manufacturers, all of whom are offshore operations that do not offer any direct contribution to our economic activities, despite a rise in car sales. Putting an asset, in this case, a car to rest, when it is still in good working condition and with more than half its useful life to run, does seem rather wasteful. Sir, I am just concerned about this trend and implication. Hence, I would like to know if LTA has looked into this matter and whether there are any adverse implication arising from such early scrapping of cars. And, if there are adverse implications, is LTA taking steps to fine-tune the current system?

Pedestrian Overhead Bridges

Prof. Ivan Png Paak Liang : Sir, last month, on my way to this House at Holland Road, I observed an old woman crossing the road from one side to

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another. In line with our objective to leave no one behind, I suggest that the Ministry please build all new overhead pedestrian bridges and retrofit existing bridges to make the staircases more gentle and to include a ramp. This would benefit the elderly as well as couples with babies.

I did suggest this idea of ramps to LTA but their reply, in part, said that they were bound by building codes and barrier-free accessibility guidelines which make it difficult to build these. I believe this should not be an all-or-nothing issue. We do not need first class or even business class ramps. I believe most of our citizens would be quite happy with economy class ramps. Could the Ministry please work with the Ministry of National Development for an exemption, if necessary? Let us help all our families with babies and our older compatriots.

5.30 pm

The Minister of State for Finance and Transport (Mrs Lim Hwee Hua): Sir, first, I would like to thank Members for raising the different cuts.

Several Members have raised issues relating to our transport and road infrastructure policies. First, let me address Mr Ong Kian Min's point about the vehicle population growth rate. Since the introduction of the Vehicle Quota System in 1990, our vehicle population growth rate has been set at 3% per annum. When the growth rate was subsequently reviewed in 1999, it was decided that the growth rate could be sustained at 3% till 2005, which is this year. LTA is currently reviewing the allowable growth rate from Quota Year 2006 and beyond. It expects to complete the review by the end of this year.

When deciding on a sustainable growth rate, we need to consider several factors. These factors include how fast

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we can expand our road network to support the growing vehicle population. As an indication, the annual growth rate of 3% in the past 14 years was supported by a period of rapid road network expansion. Between 1990 and 2004, the road network grew by 15%.

Sir, given that roads already take up 12% of our total land space, we will have to study, firstly, the pace at, and extent to which our road network can continue to be expanded to support the growth in the vehicle population. Secondly, the extent of road charging needed to manage the potentially higher usage levels lest crippling congestion sets in. And, thirdly, if the additional demand for parking spaces can be met in land-scarce Singapore.

Given that this is a multi-dimensional issue, it is important for us to study the medium and long-term implications carefully before we decide on the vehicle population growth rate for the coming years. In assessing the different factors, the Government is also mindful of the aspirations of Singaporeans to own cars and the impact of the vehicle population growth rate on COE prices. At this juncture, I am pleased to announce that the total COE quota for 2005 is 132,581. This is a small decrease of 1.2% from last year's quota. However, the quota for cars is about the same as last year's. LTA will be releasing the detailed breakdown of the 2005 quota later today.

Sir, Mr Ong Kian Min has also raised a few traffic-related issues. Let me take them in turn. Firstly, he asked if the left-turn on red scheme would be expanded to other locations. The left-turn on red scheme allows a vehicle to turn left at a particular traffic light junction even when the traffic light is not in its favour. It requires motorists therefore to be extra careful of pedestrians and other vehicles.

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For this reason, not all junctions are suitable for the implementation of this scheme because of traffic and safety considerations.

To-date, LTA has implemented the scheme at some 39 junctions. It has, in fact, received some adverse feedback from pedestrians, who feel threatened by motorists who do not give way to them at these junctions. Therefore, LTA will have to carefully study the traffic conditions before extending the scheme to more locations.

Mr Ong also asked whether there could be better road and traffic planning around new developments to avoid traffic congestion. Today, developments that are expected to have a significant traffic impact in their vicinity are required to submit what we call a Traffic Impact Assessment as part of their planning application. The objective of the assessment is to ensure that these developments do not create traffic problems that spill over to the main road. Any foreseeable problems will be addressed at the outset by mitigating measures to be implemented by the developers.

Under the current practice, LTA works with the developer's representative or traffic consultant to determine the scope of, and the issues to be addressed in the assessment. LTA will also furnish relevant information and liaise with the traffic consultant to facilitate their assessment. With this framework in place, the traffic in the vicinity of developments would be hopefully better managed.

Sir, even with a comprehensive framework in place, the traffic in the vicinity of a development can sometimes be affected by changes in the environment a few years after it is opened. LTA monitors all traffic situations carefully. Where there are situations of localised congestion detected for any development, LTA will look for ways to improve the traffic

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conditions. The specific example of the roads around Ngee Ann City and Mandarin Hotel, as mentioned by Mr Ong, is one such challenge. As this involves the Orchard Road tourist area, LTA has been working in consultation with the other agencies to improve the traffic conditions in that area. Details of this study will be announced in due course.

Let me now, Sir, move on to Mr Lawrence Leow's question on the scrapping of vehicles. He asked whether economic loss will result from the early scrapping of cars due to the existing PARF structure and COE prices. Early deregistration of cars may give the impression that we are not utilising our resources in the most efficient manner. However, for the individual car owner, he may be indifferent or even welcome it, since the outcome is that, for a similar car model, he may now need to pay less monthly instalment and yet be able to enjoy driving a new car.

The decision to purchase a car is a complex issue and is not merely driven by our policy on fees and charges. Economic conditions, rising affluence and the availability of new car models all play a significant part as well. At the end of the day, it is a choice exercised by the consumer himself based on what is important to him, including the intrinsic value of driving a new car. Notwithstanding this, we do review our policies regularly to minimise any impact on consumption patterns. One good example is the review of the PARF rebate system in 2002.

Let me just explain briefly. In recent years, arising from our efforts to lower the upfront ownership cost of cars by reducing the ARF for new cars, the sale prices of new cars have fallen quite significantly. Coupled with the lower COE prices due to dampened consumer sentiments and the higher PARF provided to cars under the old PARF regime, this

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has contributed to more early deregistrations. This is because car owners find it more attractive to cash out on the higher COE rebates and PARF to offset the purchase of a new car at lower taxes and COE premiums.

Such a trend has an impact on the used car market which is why the ARF reductions have been incremental and measured. In addition, the PARF scheme has been modified since May 2002 to link the rebate amount to a percentage of the ARF paid, rather than a percentage of the OMV. As the new PARF rates decrease proportionately with the age of the car, this should dampen the propensity to deregister relatively new cars, ie, cars less than five years old. We should have a better sense of the impact of this new PARF scheme in 2007 when all cars registered under the old regime would have crossed the 5-year threshold. As the full effect of the new scheme has yet to be realised, let me assure Members that my Ministry will monitor this issue closely and, if necessary, we will make further refinements to it.

Mr Leow may also wish to note that the high deregistration does not mean that all the vehicles are wastefully scrapped. In 2004, only 9% of the deregistered vehicles were scrapped. Of these, 68% were at least eight years old. The bulk are in fact exported because they can attract higher resale values overseas. This has actually become a flourishing trade of late with many used car dealers. In fact, the LTA has facilitated this process by creating what we call Export Processing Zones where the cars can be held before export. The number of these zones has grown from the initial three to 12 today.

Let me now take the issue of speed limits raised by Mr Ang Mong Seng. He asked if the practice in the US of applying variable speed limits on their highways in order to optimise the usage of roads could be implemented in Singapore. Indeed,

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variable speed limit signs are used in cities in the US, UK and Australia. The purpose of such variable speed signs is to reduce the posted speed limits at certain times of the day in order to improve road safety and traffic efficiency. I wish to explain that our current paradigm is to set the maximum allowable speeds which motorists can travel at. When there are time- or incident-specific safety concerns, such as when there is road maintenance taking place or where there has been an accident, motorists are warned to slow down. The other approach is to set a lower limit and then vary it at certain times of the day to allow a higher speed limit when conditions permit. Our current approach of setting the maximum speed is preferred to introducing variable speed signs as it allows us to maximise the capacity of the roads while requiring users to vary their speeds according to their own assessment of safety considerations.

As regards his suggestion on dedicating one lane for the fast-moving traffic, there is currently no compelling reason to do so. As mentioned earlier, it could reduce our road capacity. Nevertheless, I wish to thank Mr Ang for his suggestion.

Sir, on his comments on the speed limits for commercial vehicles, which was also raised by Mr Ong Kian Min, they have asked whether the speed limits of light commercial vehicles, which refer to light goods vehicles and small buses with seating capacity of up to 15 passengers, can be increased. As we heard earlier in this House, the Land Transport Authority and the Traffic Police regularly review vehicle speed limits taking into consideration the advancements in vehicle technology, geometry of the roads, and the prevailing traffic conditions.

I am pleased to inform Members that the review of the vehicle speed limits for

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light commercial vehicles has been completed. The review found that the accident statistics involving such vehicles on expressways were consistently lower compared to cars. It concluded therefore that the speed limit of such vehicles can be increased by a further 10 km per hour, from the current 60 km per hour to 70 km per hour.

The increase in the speed limit will not compromise the safety of such vehicles and other road users. In fact, safety will be further enhanced as the speed differential now between light commercial vehicles and the other vehicles is narrowed. However, to address the safety concerns for some groups of passengers, LTA will continue to subject light commercial vehicles carrying workers on the vehicles' decks as well as small buses without seat belts, to the current speed limit of 60 km per hour. The LTA will be providing the details next week.

Finally, let me take the cut by Prof. Ivan Png on pedestrian overhead bridges. He suggested that, ideally, staircases for all pedestrian overhead bridges should be made gentler and that ramps be included as a standard feature. I agree with the Member on the need for transport infrastructure to evolve with changing demographics. Since year 2000, LTA has revised its design of staircases of new pedestrian overhead bridges to be in line with the BCA's Code of Practice on Barrier-Free Accessibility in Buildings for the design of staircases. This includes the gradient, the height, the width of the steps, the number of landings, etc.

The improvements include reducing the step height from 175 mm to 150 mm and increasing the step width from 288 mm to 300 mm to better serve the elderly and the very young. However, it will be very costly to reconstruct all existing staircases of the pedestrian overhead bridges to meet these new design standards. Some 380 of such bridges

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would need to be reconstructed at a cost of around $60 million, and this excludes the costs associated with diverting utilities. Therefore, the LTA has taken the prudent approach of applying the new standards to new bridges and to old ones when they are due for replacement.

5.45 pm

As for adding ramps to existing

bridges, I agree it makes the bridges more accessible for the elderly and for those using strollers. However, the additional land take would be significant, at least 200 square metres per bridge. Aside from this additional land requirement, in most cases, this is not even possible given that the bridges are located in built-up areas. Where there is sufficient space, for example, along the expressways and major arterial roads, LTA will continue to provide ramps for the bridges. In fact, at-grade crossings are more accessible than bridges and are the preferred form of crossing for the elderly and the less mobile. Therefore, to better meet the needs of this group, LTA would try to provide more at-grade crossings at suitable locations wherever possible.

Prof. Png has also asked for a more flexible approach to be adopted in applying the guidelines so as to make it less costly and onerous to provide the ramps. Let me just clarify here that the BCA Code was formulated based on international standards and adapted to our local conditions. It was developed through a consultative process involving the key stakeholders like the VWOs and other Government agencies. The mandatory requirements are the minimum standards required in order to meet the special needs of users. For example, a steeper ramp would be difficult for the elderly and the physically challenged, while a narrow one would limit accessibility. Hence, I would like to assure the Member that LTA does not build "business class" ramps and

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the standards took into account factors of accessibility and safety.

Mr Ong Kian Min: Can I seek a clarification, Sir?

The Chairman : **** Yes.

Mr Ong Kian Min: I would like to seek a clarification on the statement that our roads take up 12% of our land space. When you have a piece of land, one kilometre square, and if you want to build roads to serve it, let us say you build around the borders, that would take four kilometres of road. But you want to subdivide the land into four pieces and serve the four components, then you have to build two additional stretches of roads and that would take the roads to six kilometres. So it is not necessarily a bad thing because it is the function of our urban development. In the context of our city state, I would like to ask the Minister of State how do we compare to other cities, in terms of our road space and the utilisation of these roads.

Mrs Lim Hwee Hua: Sir, I do not have details of the comparison with other city states, except to mention that at 12% and in view of all the competing land uses, such as nature reserves, we are actually running pretty close to what is physically possible. Besides, those who are campaigning for the environment would probably tell you that 12% is a little too high. My point in raising this 12% is really to highlight that the 15% growth, or the expansion in the road network that we have done over the past 14 years, is unlikely to be repeated. Therefore, the scope for expanding the road network further is likely to be very limited and measured.

Sea Transport

Mr Ong Kian Min : PSA Singapore Terminals operate the world's busiest transshipment hub, handling about one-fifth of the world's total container

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transshipment throughput. We are also the top bunkering hub in the world. Our port is an important lifeline to Singapore and there is much to be proud of in our maritime industry. But many Singaporeans have only a distant appreciation of PSA's capabilities and development as compared with their appreciation of Changi Airport as a Singapore icon. In a survey where Singaporeans are asked what about Singapore that they are proud of, a good number answered "Changi Airport". My question is: how can we give Singaporeans a better appreciation of the importance of our sea port, its scale and its complexity of operations?

Sir, I would also like to ask what strategies MOT has for improvement of our port infrastructure. Our sea port is similar to our Changi Airport in that it requires huge capital investment in land, infrastructure and heavy equipment. At our port, large land areas are required for the movement and storage of container boxes. Long stretches of coastline and large parcels of land have to be set aside and dedicated for ship dockings, loading and unloading, and container storage.

However, unlike Changi Airport, where the decisions to invest heavily in infrastructure and facilities in anticipation of demand rest with the Government, PSA Singapore Terminals is owned by PSA Corporation. Will there be a situation where PSA Corporation, when it becomes a corporatised public-listed entity, decides in the interests of its shareholders that the rate of return does not justify the capital investment to expand its facilities in a particular way? For example, in a situation where PSA needs additional land for expansion, what direction will MOT take if PSA is of the opinion that the land value set by the Chief Valuer is too high? Such a situation is evident in the gateway ports of the United States, where low rates of returns, high cost of operations and union

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problems have hindered further investment and expansion of their existing port facilities, leading to severe bottlenecks and insufficient capacity.

How does the Ministry intend to deal with situations where PSA Corporation decides to base its decision on commercial interests rather than national interests? Will MOT consider bringing in other port operators, like Hutchison?

Sir, new regulations, which take effect from 2008, will require bunker barges to be doubled-hulled. Hence, all present single hull barges would no longer be able to operate and would have to be replaced. As the cost of replacement runs into millions of dollars, these new regulations may drive some operators to exit the business altogether as they cannot secure new capital or financing. As we pride ourselves as the top bunkering port, I would like to ask the Minister whether Government assistance or funds have been provided to help the industry with this replacement cost.

Developing an International Maritime Centre

Mr Andy Gan Lai Chiang: Sir, in November 2001, the Economic Review Committee proposed a vision to develop Singapore into a leading global, integrated logistics hub with robust maritime aviation and land transport capabilities supporting the global economy. The Committee had also recommended a review of all fees and regulations administered by the MPA.

It was also pointed out that Singapore's aspiration to be a global centre for maritime law challenging London and New York was hampered by protectionist barriers in the legal services sector. Recent reforms have seen the emergence of joint law ventures, formal law alliances and strategic alliances between local law firms and foreign law firms, the objectives of such alliances

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were to make Singapore comparable with traditional legal services provided such as those in the UK and the United States. In Singapore, we have a handful of local major shipping and maritime law firms with international experience and expertise and about five international law firms with good shipping expertise having a presence in Singapore.

Singapore has thrived as a major port since its early days. And the British Empire, in the 19th century, had even found it worthwhile to protect the port of Singapore against foreign intruders. Maritime activities are the mainstay of the island state and the first generation Singaporeans had made their livelihood through maritime trade.

Singapore has made its mark as a premier port in Southeast Asia. We have to promote the maritime industry to more people. It can be an additional engine of growth for our economy. It can be shown to be an attractive and rewarding sector to the Business Inc and, thus, creates job opportunities. Tied to the insurance service providers for the maritime industry, a question remains as to what measures have been implemented to make Singapore a more attractive base for specialist insurers to take root in Singapore, for example, regulatory changes and specific GST and tax incentives, to make it conducive for specialist classes of underwriters to be based here. While it is noted that the Ministry of Finance has introduced the Approved Marine Field Traders Scheme with easy cashflow and business processes upon successful fulfilment of qualifying criteria set by the Inland Revenue Authority, what other measures can the maritime industry expect that would help boost Singapore's position? Singapore is central to maritime routes. And I urge the Ministry of Transport to promote Singapore as an international maritime centre.

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Maritime Security

Encik Yatiman Yusof: Sir, since I broached the subject on maritime security last year, there had been a number of positive developments taking place. I would like to follow up on this issue because maritime security is critical to Singapore.

Sir, I am assured on learning that Singapore takes the question of maritime security very seriously. It must be so. Just one terrorist attack near here or in the Straits of Malacca would trigger massive, if not tsunamic, reactions. The ship and cargo insurance rates would go up, and shippers would start looking for alternative routes. Not only our position as a major sea port and a maritime hub would be threatened, the entire region would be affected too. An article in the Straits Times today even went to the extent of saying that commercial confidence in Asia would be shaken, at least for a short term.

For these reasons, Sir, we have initiated and participated in a number of initiatives at international, regional and bilateral levels in order to forge greater and closer cooperation to protect the shipping lanes in the Straits of Malacca. As late as yesterday, our Minister for Defence, Mr Teo Chee Hean, in addressing the issue on maritime security in Southeast Asia, said that, in addition to working closely with international maritime organisations and enhancing regional security cooperation, Singapore is putting armed security teams on high-risk ships passing through our waters. This must be seen as a clear signal of our strong commitment to contribute towards ensuring maritime security in this part of the world.

Sir, in addition to that, the replies made by the Minister for Home Affairs in this Chamber, just two hours ago, on steps taken for homeland security is a further testimony to our unflinching

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commitment on this issue. Sir, our maritime security objective could only be achieved through collective efforts. No single country in the world could protect ships passing through its own waters. All interested parties, big or small, must be part of an anti-terrorist network, sharing information, technology and cost of these efforts. Sometime ago, the USA had come up with a specific proposal regarding how it could contribute towards ensuring security in the Straits of Malacca. But some of the littoral states in the area are not in favour of it, at least at the moment. Meanwhile, major international shipping countries have requested for countries involved in export to share the burden of checking the transported goods, including those in the containers. Singapore has done its part on this matter.

Sir, in view of all these developments, I would like to find out the progress made in this area and what else can the Ministry of Transport do to ensure the security of our ports. What are the challenges the Ministry foresees in protecting our ports and sea lanes?

Mrs Lim Hwee Hua: Sir, let me first thank Members for their interest in our plans for the maritime sector.

Mr Ong Kian Min and Mr Andy Gan asked about MOT's plans to develop Singapore as an International Maritime Centre, or IMC. The maritime industry in Singapore is an important pillar of our economy. Mr Gan is right to say that the maritime sector represents good growth prospects, and will continue to create and provide jobs for Singapore. Today, the sector contributes about 7% of our GDP, and provides some 120,000 jobs. This number is expected to increase to 200,000 by 2019.

While Singapore is already well established as a major port, our vision is

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for Singapore to become a comprehensive hub for all maritime, shipping and port-related activities. We want to develop our maritime services as another engine of growth to complement our port and shipyards. The maritime ancillary services that we are actively developing cover a wide range - from the traditional vessel registration, ship financing, marine insurance, ship management, maritime legal and arbitration services and ship broking, to newer offerings like freight derivatives and other risk management activities.

The Government is working very closely with industry players and industry associations to grow these sectors. At the same time, the Government actively consults with international players to better understand global trends in shipping-related developments so as to meet evolving needs.

Sir, the need to track developments closely is underpinned by a few major trends - firstly, the emergence of economic powers in the fast-growing China and India markets; secondly, the increasing shift in the centre of gravity of shipping activity towards Asia. Singapore is indeed well placed to tap these trends and the growth of these services sectors will create many high value-add and exciting jobs for Singaporeans.

6.00 pm

Within the context of burgeoning trade flows globally and the concomitant growth potential, the Government is, however, cognisant of the well-established position of key maritime centres, particularly London. Singapore is behind London in several areas, most noticeably the conventional areas of financial and legal services. And this view was echoed in a report by the Corporation of London

in August 2004, which showed that London is way ahead in many of the maritime services. The report also

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indicated that Singapore could become a serious contender in this area, now that the centre of shipping has shifted to Asia . Sir, due to our proximity to Asian shipowners, Singapore has good potential to develop this sector to meet the needs of these market participants.

The Government is also directing efforts at developing Singapore as a maritime legal services hub. And this is one area which we are developing with other Government agencies, as it is a critical supporting pillar for the IMC development. This area is still very much work in progress, but let me briefly highlight some of our key milestones.

In 1991, we set up the Singapore International Arbitration Centre to serve as a professional and reliable dispute resolution institution for the international business community. We followed up in 2002, with the setting up of a dedicated Admiralty Court , the first of its kind in Asia , which was established to build up our expertise in this area and to ensure the speedy and fair resolution of maritime cases in Singapore .

To develop Singapore 's maritime legal expertise, MPA has set aside S$4 million to establish a Professorship in Maritime Law at the National University of Singapore and established postgraduate scholarships in maritime law as well. Most recently, we have launched the Singapore Chamber of Maritime Arbitration, which will further promote and profile Singapore as Asia 's centre for maritime legal expertise and dispute resolution.

Let me now address the challenge of developing our own source of maritime manpower. Sir, this is an important area to focus on, if we want to become a leading IMC. The strong growth in shipping activity and in new buildings will continue to outstrip the increase in available manpower resources. Singapore

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is open to allowing foreigners to come in to supplement our maritime workforce, but we also want to encourage more Singaporeans to take up careers in the maritime sector. In this regard, the agencies have stepped up our efforts in supporting the various maritime education and training programmes.

To encourage more Singaporeans to take up maritime and maritime-related careers, MOT, MPA and the Singapore Maritime Foundation (SMF) have launched the "Maritime Now" publicity campaign in October last year. There will also be outreach programmes targeted at students, teachers and career counsellors to raise their awareness of the opportunities available in the maritime sector.

Sir, let me now move on to Mr Ong's comments on the role of PSA. Although PSA has been corporatised, its shares are currently still totally held by the Government. As such, the interests of PSA and the Government are largely aligned. Both PSA and the Government want to grow Singapore as a hub port by attracting more shipping lines to Singapore , enhancing our connectivity, keeping our costs competitive, and providing excellent service to our customers. For example, MOT and MPA have been working with PSA and other agencies to keep the cost of port land competitive. We also work with PSA on port infrastructure developments to ensure that they have sufficient berths to meet their growing demand.

Although the interests are largely aligned, it is still useful to have some check and balance in the system. As the port authority, MPA monitors PSA's service standards. We also keep in close contact with the shipping lines to get feedback from them regularly, so that we know if they are satisfied with PSA's services. Shipping and port operations are essentially regional, if not global, businesses. Hence, regional competition

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will also serve as a useful check to ensure that PSA is kept on its toes and stays competitive.

During last year's Budget speech, then-DPM Lee said that the MPA has not granted PSA a monopoly on container operations in Singapore , nor will it do so. If and when industry conditions make greater local competition necessary, and new operators judge it viable to enter the business, the Government will not stand in the way. This position was also articulated by then-PM Goh in June 2002, when he said that the Government is open to having more players participate in the Singapore port sector.

Let me now briefly move on to the point of single hull tankers.

Sir, the International Maritime Organisation (IMO) has revised its regulations under the Marine Pollution (MARPOL) Convention to phase out single hull tankers and ban the carriage of heavy grade oil by such tankers. This is a positive development in the area of safety and pollution prevention.

To bring Singapore 's licensing requirements in line with those of the IMO, the MPA has launched a "Gate System�? this year for licensing bunker tankers operating in our port. This system, amongst other things, sets age limits and other conditions for the issuing of new bunker tanker licences, and will require owners to progressively phase out their single hull tankers and replace them with double hull vessels.

To ease the burden on the industry, I am pleased to announce that the Ministry of Transport will be introducing measures to lower the operational cost of new double hull tankers. For a start, MPA will waive port dues for new double hull bunker tankers that are licensed from

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15th March 2005 to 31st March 2008 for a period of five years from the licensing date. This works out to a savings of about $1 million to the industry. In addition, MPA will also consider raising the pilotage exemption limit to cover bunker tankers above 5,000 gross tons, as well as providing pilotage training rebates for them. This will result in a further $2 million savings to the industry. These measures will assist bunker tanker owners to renew their fleet early and encourage the operation of more environment-friendly double hull tankers in our port.

Let me now finally move quickly to the issue of maritime security.

Sir , Singapore adopts a comprehensive and multi-agency approach to maritime security. One critical aspect of this is to ensure that international waterways, such as the Straits of Malacca and Singapore , remain safe, secure and open to shipping. We have been working closely with our neighbours, Malaysia and Indonesia , as well as other stakeholders, including regional and international organisations like ASEAN, IMO and the UN, on various measures to enhance the security of the Straits.

As hon. Members may know, one such initiative is the Trilateral Coordinated Patrols involving Indonesia , Malaysia and Singapore , which was launched in July last year. This involves ships from the littoral states patrolling their respective waters as well as enhanced information sharing. We are also working with other countries in this region to set up an Information Sharing Centre under the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP). The centre will be located in Singapore and will facilitate information exchange so as to enhance cooperation in the fight against piracy.

Sir, closer to home, we have worked with the industry to ensure that all

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Singapore port facilities and Singapore-flagged vessels are fully compliant with the IMO's International Ship and Port Facility Security Code or more commonly referred to as the ISPS Code. We will closely monitor the movements of sensitive vessels within our waters, such as LPG, LNG, chemical and oil tankers.

Within the Singapore territorial waters, the Police Coast Guard (PCG) would undertake law enforcement and security policing. Since 911, as Members would know, PCG has stepped up its patrols, as well as checks on suspicious activities. From April this year, the Republic of Singapore Navy will deploy armed security teams onboard some merchant ships. The Accompanying Sea Security Teams (ASSeT) will escort vessels entering or leaving the port within Singapore waters.

Sir, let me, finally, just say briefly on how we deal with congestion in the Malacca Straits. Singapore , Indonesia and Malaysia have worked closely and increased efforts and cooperation to maintain adequate navigational safety mechanisms within the Straits. And we have implemented various safety measures, such as the Traffic Separation Scheme as well as a mandatory ship reporting system known as STRAITREP. We also collaborate with other Straits stakeholders on initiatives, such as conducting joint hydrographic surveys of the Straits, and installing and maintaining aids to navigation.

Sir, I believe I have answered the questions.

Air Transport

Mr Ong Kian Min: Maintaining Changi Airport's competitiveness - Sir, although 2004 was an excellent year for Changi Airport, we must not rest on our laurels, as many countries in the region have the same aspirations to upgrade their airports

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and develop their aviation business. Construction of the third passenger terminal building at Changi Airport began in October 2000, way ahead of demand. This new terminal, scheduled for completion in 2008, will provide Changi Airport with an additional handling capacity of 20 million passengers. This will bring the total handling capacity of Changi Airport to 64 million passengers a year, compared to the 30.4 million passengers for 2004.

Sir, staying ahead of the competition requires more than just the latest and largest in hardware, although size does matter. Can the Minister give an update on what are the prevailing circumstances affecting our position as an aviation hub and the other measures that we are taking to maintain the competitiveness of Changi Airport?

Facilitating the growth of the low-cost travel market - As low cost carriers (LCCs) have the potential and means to bring large numbers of passengers into and out of Changi Airport, they can be a real boost to our travel and tourism industry. LCCs now fly out of Singapore directly to eight destinations, ie, Hong Kong, Taipei, Pattaya, Bangkok, Phuket, Hat Yai, Jakarta and Perth. I think, potentially, all major cities in China and India with international airports can be added to this list, as we tap into the growing affluence and purchasing power of Chinese and Indian tourists. As an encouraging start, I am pleased to note that JetStar is eyeing Shanghai, Chennai and Mumbai, while Tiger Airways has announced plans to fly to Chengdu and Guangzhou. I would like to ask whether this is purely a private sector initiative where the LCCs are left to negotiate the air links themselves, or whether the Government can step in to help them to establish these direct air links.

Notwithstanding their initial positive reception and success, some people are wondering, looking at the low fares that

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they charge, whether they can be viable long-term businesses, or they are just a flash in the pan. LCCs depend on low operational costs and high passenger volume because of their low profit margins per fare. As such, LCCs are more vulnerable to over-capacity, higher fuel and other operating costs and any downturn in the air travel industry. As we are investing in a new dedicated low cost terminal at an estimated cost of $45 million to facilitate the operations of LCCs, we must play an active role to nurture the healthy growth and necessary survival of the LCCs. If they fail and close shop, the terminal building would be wasted and be left as a white elephant. I would like to ask the Minister whether the Ministry has any plans to help sustain LCCs in times of difficulties.

Changi Airport

Mr Wee Siew Kim (Ang Mo Kio) : Mr Chairman, Sir, Changi Airport faces increasingly tough competition. The Dubai International Airport's Terminal 3 and Bangkok's new airport will be ready next year. Changi's Terminal 3 will also increase the airport's capacity to 64 million passengers per year and will be completed in 2008.

Besides greater competition from other airports, new developments in aircraft technology and Singapore's attractiveness as a business and tourism centre, as well as competition from regional carriers and new aviation growth markets, such as China and India, will have an impact on Changi Airport's position as an international air hub. I would like to know how we are addressing the above developments and what strategies do we have currently to capitalise upon them.

The Ministry introduced a $210 million Air Hub Development Fund in 2003, and a $40 million Growth Incentive Scheme for

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airlines in 2004 which rewards each airline based on its passenger growth, and it is in addition to other incentive schemes and rebates. Would the Minister tell us if these schemes are yielding the expected results, and what other measures do we have in store?

Lastly, could the Ministry give an update on our progress in our development as an International Aviation Centre, an initiative that was launched in 2003 to provide another engine of growth for our aviation sector and help ensure that Changi retains its competitive position in the long run?

Mr Charles Chong:

6.15 pm

Sir, I would like to, first of all, declare my interest as an employee of a service provider at Changi Airport.

Sir, the Minister for Transport had previously announced that the aviation sector contributed as much as 9% of Singapore's GDP. In order to retain our aviation hub status,

Singapore must continue to attract more airlines to Changi Airport by facilitating their operations here and ensuring our charges are competitive. But cost alone cannot be the only consideration. If we were only to rely on lower cost, we will always be at a disadvantage, compared to countries with more abundant land and manpower resources.

Sir, I am aware that CAAS is trying to impose performance indicators on service providers to meet that of the Changi Airport. Could the Minister provide an assurance that should such performance indicators be imposed, it will be done equitably to ensure a level playing field for all service providers? And like my parliamentary colleagues before me, Mr Ong Kian Min and Mr Wee Siew Kim, I would also like to ask the Minister to tell us what strategies his Ministry intends to

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implement to ensure that Changi Airport maintains its aviation hub status.

Sir, in our efforts to grow traffic at Changi Airport, we have always welcomed foreign carriers. However, in the past one year alone, three new Singapore carriers - Valuair, Jetstar Asia and Tiger Airways - have emerged. Could the Minister tell us if this proliferation of new Singapore carriers inadvertently discourage foreign carriers from operating in Changi Airport and cause them to consider operating in other regional hubs?

Low-cost Airlines

Mr Wee Siew Kim : Sir, last year saw intense activity in the field of low-cost carriers (LCCs). Not unexpectedly, the competition to attract these LCCs by competing airports in the region has heated up. Last month, Malaysia announced that it would fast track the construction of a purpose-built $43 million terminal for LCCs at the KLIA so that it would be operational by the first half of 2006. At Changi Airport, a similar $45 million LCC terminal would also be completed in early 2006.

On the other hand, neighbouring governments have been slow in dismantling the restrictive regimes that control the distribution of air traffic rights to carriers. As this has a direct impact on the viability of the LCC terminal and even LCCs as a whole, may I ask the Minister to give an update on the measures the Ministry will be implementing to ensure that as many LCCs as possible use Changi Airport as a hub, especially, as I understand it, one of the key success factors for a LCC is intensive asset utilisation. What is being done to ensure that LCCs come to Singapore because we offer them the fastest turnaround on the ground, coupled with an extensive network to fly?

Mdm Cynthia Phua: While many Singaporeans are pleased to read about

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the mushrooming of low-cost carriers and how they have made travelling across boundaries at a fraction of their original cost, the underlying question is: what is the current market share of low-cost carriers at the moment? What long-term strategies does the Ministry have in respect to budget airlines so that they do not cannibalise the profits of other local airlines?

The drastic cutback in fares from these airlines also raises more than just eyebrows. It raises the question: how do these budget airlines balance their sums to remain profitable without sacrificing on maintenance to the aircraft to ensure their airworthiness and without compromising on safety standards? How is the Ministry monitoring the airworthiness of the aircraft owned by these budget airlines to protect the interests of the travelling public? I know they talk about no frills and no thrills, such as on-board entertainment, good meals and quick turnaround time at the airport. But are these all there is to it to be able to cut air fares more than 50%? Is what is cheap just as good as what is not cheap? Is travelling on low-cost carriers riskier than on the regular airlines?

Air Services Agreement

Mr Wee Siew Kim : Sir, Singapore has always maintained a liberal aviation policy to strengthen our air hub status. Presently, we have open skies deals which do away with all restrictions for airlines flying between and beyond signatory countries. We must get more airlines to fly here and encourage existing carriers to operate more flights in order to boost Changi Airport's air hub status. Currently, we are in the process of negotiating open skies deals with Australia and within our 10-member ASEAN group.

At a conference in Singapore in January, there were calls for a single open skies in Asia. May I ask the Minister if

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there are any updates on the current developments on our Air Services Agreements and what can we expect to happen in the near future. And beyond air services liberalisation, what other measures, be they creative or liberating in nature, are being taken to ensure that our air hub status grow from strength to strength?

Workload and Performance Indicators

Prof. Ivan Png Paak Liang : Mr Chairman, the Ministry of Transport has only one performance indicator in the Budget book. This is, amongst all Ministries, probably the shortest list. May I suggest that the Ministry adopt some of the following indicators:

(1) average travel speed on Singapore roads;

(2) for buses and MRT trains, average journey time, including both waiting and travel, per kilometre of journey;

(3) number of passengers and flights at airports; and

(4) number of containers and tonnes of non-containerised freight handled at ports.

Mr Yeo Cheow Tong: Sir, as Mr Ong Kian Min, Mr Wee Siew Kim and Mr Charles Chong have pointed out, the global aviation landscape is evolving and changing very rapidly. Airport competition has intensified, with the opening of many new airports, as pointed out by Mr Wee. The emergence of low-cost travel and new aircraft technology are also key trends affecting our position as an air hub. Let me share with Members our three key strategies to enhance Changi Airport's competitiveness, as asked by some of the Members.

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Sir, the first priority is to strengthen our partnership with the airlines by facilitating their growth and reducing their operating costs here. As mentioned by Mr Wee, we had a three-year, $210 million Air Hub Development Fund and a two-year, $40 million Growth Incentive Scheme, which incentivised airlines to carry more passengers to Changi. Sir, our airline partners greatly appreciated these two schemes. They have worked very well and they have helped Changi achieve a record 30.4 million passengers and 1.8 million tonnes of cargo last year. Changi's network was also expanded to more than 170 cities, making Changi one of the best connected airports in the region.

Sir, as both schemes will expire at the end of this year, we will launch a new three-year, $300 million fund to succeed them. About $100 million will be set aside each year to fund traffic development and cost reduction initiatives. The new fund will further facilitate the growth of our airline partners at Changi and position us for the long haul. We will release details of the new fund later this year.

Secondly, we will continue to upgrade Changi Airport, in both hardware and software. We have started infrastructure works to enable Changi to welcome the new Airbus A380s when they start flying next year.

We will also further improve the "Changi Experience" for passengers as well as airlines. T3 will be completed in 2008 while upgrading of T1 will begin once the upgrading of T2 is completed next year. In addition, training for frontline staff will be stepped up to improve service levels. To better meet the needs of our diverse passengers, CAAS will enhance its services by introducing multilingual signages and having more multilingual staff.

Sir, Changi's hallmark has always been its high standards of service. This

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includes services provided by various companies operating at Changi. I can assure Mr Charles Chong that we will continue to review and maintain high performance standards on all service providers at Changi, for the benefit of our airlines and passengers.

Sir, the third strategy is that we will continue to liberalise our Air Services Agreements with other countries. This will enhance Changi's connectivity and boost our hub status.

We have always welcomed foreign carriers to operate here in open competition with Singapore carriers. Last year, we facilitated the formation of three new Singapore airlines, namely, Valuair, Tiger Airways and Jetstar Asia. They will expand Changi's network and give passengers greater choice and more affordable fares. Their entry has increased competition, and further enhanced Changi's hub status.

Without a liberal aviation policy, we would have lost out on the wider economic benefits that competition brings. More airlines would mean more business for ground handlers, in-flight caterers, maintenance companies and other aviation-related companies. The economy also benefits from the expenditures from more visitors on hotel accommodation, shopping, food, ground transportation, and so on.

Sir, increased competition therefore helps to grow the market, and brings win-win benefits to the economy and the man-in-the-street. I am hopeful that other countries would also come to realise the wider benefits of competition, and a more open aviation regime.

Sir, let me move on to the specific case of the LCCs.

Mr Wee, Mdm Phua and Mr Ong commented on the contribution of low

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cost carriers, or "LCCs", to Changi Airport, and asked about our strategy to facilitate their growth.

Sir, the LCCs serving Changi have grown rapidly in their first year. They now account for 7% of Changi's weekly flights and 5% of Changi's overall traffic. More significantly, traffic growth on key routes served by LCCs exceeded Changi's overall traffic growth.

For example, on the Singapore-Bangkok route, year-on-year traffic for the last quarter of last year grew 18%, much higher than Changi's overall growth of 11%. The growth on the Singapore-Hong Kong route is even more impressive at 26% over the same period.

Mr Charles Chong asked if the LCCs will discourage full service airlines from either coming here or expanding their services here. Sir, let me take the example of Hong Kong. Today, two of our new carriers, Valuair and Jetstar Asia, operate 14 weekly services each to Hong Kong. Have their entry discouraged the airlines? Sir, I do not think so. Not only have SIA and Cathay Pacific maintained their services, Cathay Pacific has, in fact, recently added another seven weekly services, an increase of 20%. I think this shows that increased competition has also grown the overall pie for all the players.

We also recognise that the operating model of LCCs is different from the full service carriers. Many charge low fares by doing away with "frills" such as aerobridges, in-flight meals, and assigned seating. And as Mr Wee mentioned, by having faster turnaround of aircraft, I am happy to inform Mr Wee that we have been able to satisfy the LCCs in terms of aircraft turnaround time. And to meet the more basic needs of LCCs, we are building a "no frills" low-cost terminal, which will be completed early next year. The new terminal will also allow for even quicker embarkation and disembarkation

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of passengers, and even faster aircraft turnaround times. So this will definitely help anchor us as a LCC hub in the region.

Sir, Mr Ong Kian Min asked what assistance we will give to the LCCs should they face problems. Sir, our aim is to work with our airline partners, whether they are full service or LCCs, to anchor their growth and position here, and make sure that they are here for the long term. And as we have shown during the SARS crisis, if and when there are new crises which result in a drop in business, we will step in with temporary relief measures to help all our partners, whether they are LCCs or full service.

Sir, Mr Ong also asked whether the airlines and the LCCs negotiate new air links on their own. Let me clarify that it is the job of the Government to negotiate Air Services Agreements with other countries. But before we do so, we will consult our carriers, both full-service and low-cost, about their future plans. And once we have obtained the additional air rights, the carriers will have to make their own commercial calculations as to which specific route to apply for. I believe our holistic approach will enable us to also develop into a key hub for regional LCC operations.

6.30 pm

Sir, Mdm Cynthia Phua asked how do we avoid cannibalisation of businesses by the LCCs. Sir, the LCCs are here to stay. They are a fact of life. If we do not have our LCCs, the LCCs of other countries will fly here and they will take the business. So it is better that we have our own LCCs and we work with them and the other LCCs of other countries to further grow the market. This way, the pie will grow and, in the process, our economy will benefit greatly from such growth.

Mdm Cynthia Phua also was worried about the safety of the LCCs and asked

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whether, basically, they are riskier. Sir, CAAS adopts a stringent safety regime in the interest of the safety of the travelling public. Our safety standards are in line with international standards established by the ICAO. All Singapore-registered carriers, whether they are full-service or low-cost carriers, are subjected to thorough inspections, audits and safety oversight. CAAS conducts comprehensive and systematic evaluation on our carriers before issuing them the operating licences, and it also carries out periodic safety inspections thereafter.

Sir, with regard to the foreign carriers, the airworthiness of foreign carriers operating in Singapore, including LCCs, is certified by their own national civil aviation authorities. CAAS only conducts initial checks on new foreign carriers, such as the verification of relevant documents issued by their national regulators. Nevertheless, as an added safety measure, periodically, CAAS will visually conduct safety inspections on foreign aircraft arriving at Changi.

Sir, Prof. Ivan Png commented that we only have one work performance indicator and he asked for a few of them to be included in the Budget book. Sir, let me explain to him that my Ministry and our statutory boards do, in fact, routinely monitor the performance indicators that he mentioned, as well as many other key indicators. The key performance indicators for our land transport, airport and port are presented on the websites of MOT, LTA, CAAS and MPA to allow the public and interested parties convenient access to the up-to-date data. So, instead of once a year, we have the data there and we update them. The information is also available in various public domains, for example, the annual reports of the statutory boards and the Annual Economic Survey published by MTI.

The performance indicators of CAAS and MPA are not included in the Budget book as they are self-funding statutory

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boards. So, in any case, there is no way that we can put them there. For land transport, I will definitely ask MOT to consider including some of the indicators currently displayed on the website in the Budget book as well.

The Chairman: We have some time for clarifications. No clarification. Mr Ong, can you withdraw your amendment?

Mr Ong Kian Min: I would like to thank the Minister and the Minister of State for their comprehensive replies to the matters raised and for clarifying the Ministry's position on transport issues. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn .

The sum of $290,418,390 for Head W ordered to stand part of the Main Estimates.

The sum of $1,776,154,600 for Head W ordered to stand part of the Development Estimates.

Mr Seng Han Thong: Sir, I would like to seek one clarification. The Minister asked me where did I get the figure of the taxi drivers' income from. In my speech, I mentioned that they have to drive longer to maintain the same level of income or they will suffer a reduction of income of 10%-20%. The reality is that they have to drive longer to maintain the same income. If not, they suffer a loss of income of 10%-20%. I mentioned that the feedback from the taxi drivers is that they now have to drive longer because they do not have relief drivers.

My second point is that the Minister asked me to work harder. Yes, my NTUC

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colleagues and I will work harder to enhance the benefits for taxi drivers and, at the same time, we will convince the companies to give better rebates to the taxi drivers.

Mr Yeo Cheow Tong: Sir, I was responding to his point that the ridership has gone down. My point was, in fact, ridership has gone up. But the net income has gone down because the costs have increased. And to compensate for the drop in income, they may have to drive more. That I do not disagree with.

Mr Seng Han Thong: Sir, I did not mention about the ridership. I just mentioned the income of the taxi drivers. It has dropped by 10%-20%.

Encik Yatiman Yusof: Sir, I would like to seek clarification from the Minister. Earlier in my speech, I have said that the feeder bus service is a non-profit making effort. No company will be set up just to provide feeder services anywhere in Singapore. I think it is unfair of him to ask an MP to set up a company to provide the service.

But, Sir, if you look at the SBS' and TIBS' annual returns, you will see that there are sufficient profits made by them. If you look at the profit made by these companies, it is not unreasonable to ask them to do a small public service by improving the feeder service.

Mr Yeo Cheow Tong: Sir, I do not know where Mr Yatiman got his figures from. But it is not true that the feeder service is losing money. If they are, today, they would be in an even worse shape. The fact is that most of the feeder services in the HDB estates are profitable, except for a few in the new towns.

Mr Yatiman is the MP of a very well-developed estate, Tampines. The feeder services there are profitable. He should have no difficulty finding someone to run

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a competitive service and do it in a better way at a lower cost.

The fact remains that there is a trade-off. If you want to have even closer headways - at the moment, as I have said, it is five to eight minutes - like what the trains are having, four minutes, it can be done, but there is a cost to be paid, and the cost must eventually be paid for by the commuters. If the cost has to be paid by those commuters on the trunk routes, I think they will be very upset about having to subsidise commuters on the feeder routes who are already paying a very low feeder fare because today, the feeder fare is only 63 cents, regardless of how many fare stages the commuter rides. In many ways, the feeder services are being run very well. But if there are others who can run it better, we will be very happy to hear from them.

Mr Ong Kian Min: Sir, I would like to seek a clarification from the Minister regarding the increase in fuel cost for the public transport operators. The new fare adjustment formula just accepted by the Government, ie, price index minus 0.3%, does not include a separate component to track fuel cost. I would like to ask: if the operators are allowed to pass through any fuel cost increases to the commuters by increasing fares, would there not be less reason for the operators to proactively manage their fuel cost, for example, by hedging, long-term supply contracts or by other measures?

Mr Yeo Cheow Tong: Sir, if the price of fuel were to increase even more significantly, hedging will not help because, if it is a structural change, the hedging will again be at the higher structural price. If this is the case, it will be up to the PTOs to come to PTC to say that their costs have gone up very significantly and, what they can do to offset that. If they can make up a strong case, PTC would probably listen to them.

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But as to PTC's ultimate decision, I cannot second-guess them. They are independent, they are autonomous, they have to make up their minds based on the facts given to them.

Prof. Ivan Png Paak Liang: I thank the honourable Minister for responding to my suggestion. I only ask that the Minister agree that when routes are awarded, they will not be on this comprehensive basis which is so large that no small independent person can afford to bid for them. Let us offer these routes on a single basis so that small time businessmen can bid on an individual basis.

Mr Yeo Cheow Tong: Sir, a reliable public transport system is not one which a small operator, with very limited resources, could afford to operate. He must have enough resources to operate a system which is reliable, because that is what we are promising commuters. The public transport system is a very basic system for those people without private transport and, therefore, reliability must be a given. If we give out only route by route, I think we are going to have a very fragmented system, with very low economies of scale, which is why we have to-date, two operators.

5.15 pm

As I have mentioned just now, our competition framework would allow a third operator to come in at the town level. I think the town level does not require as much an investment as a country-wide system. So, if an entrepreneur wants to go into public transport system, I would say, "Yes, look at one of the small towns and provide a service for the whole town." If he wants to provide only one route, then the question is which route? Do we give him the most profitable or the least profitable route? The reason why we package it as one town is that

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there would be some routes where the flats are fully occupied, and there would be other routes, which are perhaps further away, where the flats are only half full. That part of the town, which is fully occupied, in a way helps to offset the service to the other part of the town which is not fully occupied. That is why we could not afford to just give one route away. It has to be a system.

Dr Mohamad Maliki Bin Osman: I just want to make a point with regard to the seat belts again. The Minister mentioned that right now we have a good record and we do not have accidents involving school buses. But I just want an assurance that we do not want to wait until accidents happen before we act on it.

Mr Yeo Cheow Tong: Sir, the system has worked very well. Of course, it could be further improved. I do not doubt that, which is why I said that if any parent or any school wants to have an even safer system, they are free to do so. But I do not think we should impose on all parents the ultimate, when it is something which I think most parents may baulk at in terms of the fare increase.

Dr Lily Neo (Jalan Besar): Mr Chairman, the Minister said earlier that SMRT offers help to the physically challenged residents. May I ask him whether there are any plans to also make our public buses more friendly to the physically challenged residents, in view of our ageing population, to give them independence? Also, are there feasibility studies done so far on the cost to make our public transport more friendly to this group of people?

Mr Yeo Cheow Tong: Sir, as I mentioned in my reply earlier, our public transport system and the bus and MRT systems are mass transport systems and, therefore, the efficiency and effectiveness of the systems must be our priority goal. In terms of making the buses friendly to

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the physically challenged, yes, I think we have already done something. For example, all new buses now have low floor-boards so that commuters do not have to climb up two to three steps to get on to the bus. The floor-boards are also at almost the same level as the kerb, so that the commuters could step off the kerb on to the bus without too much trouble. The pavements also have ramps which allow the physically challenged to get on at traffic junctions without having to step up the kerb. I think we have already done quite a fair bit to help them. If there are any other suggestions, we would be very happy to take a look at them. But the key point, as I said just now, must be whatever we do must not affect our ability to move large numbers of people, especially during peak hours, when traffic conditions are already very, very tough.

Mdm Cynthia Phua: Mr Chairman, Sir, I just want to appeal to the Minister for the visually handicapped. They are really mobile. They just need to have the sound at the door to guide them, while they are in the train.

Mr Yeo Cheow Tong: Sir, I think we have another feature on the trains which Mdm Phua may be interested in. The seats directly next to the door of each train have stickers marking them out as being seats that are reserved for those who are handicapped. So if a visually impaired commuter gets on to the train, all he needs to do is to go to the nearest seat, and if it is occupied, requests for the passenger to get up. I am sure most Singaporeans are civic-minded enough to do so because it is very obvious that the person is visually impaired. In any case, as the operators have said, they have not encountered any problem so far because, whether it is on the bus or on the train, the visually impaired normally would ask a passenger close by to alert him or her when the destination is getting close. And there is no trouble getting assistance from fellow passengers.

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Mr Ang Mong Seng: Mr Chairman, may I ask the Minister, when the PTO invests overseas and makes a profit, is it considered as part of the company's profit when it submits its report to the PTC?

Mr Yeo Cheow Tong: Sir, the operations overseas are ring-fenced from the local operations, so that whether they make or lose money, it would not have any impact on the viability of the local operations.

Road System and Traffic Management

Mr Ong Kian Min: Mr Chairman, Sir, the question I wanted to raise about speed limits of our roads has earlier been answered by the Senior Minister of State for Home Affairs. So I shall not delve on it except to say that with the tough enforcement action taken by the Traffic Police, nowadays when a driver zooms past me at excessive speed, I say to myself, "MOT". It does not mean "Ministry of Transport", but taking reference from the story told by Minister Lim Swee Say in this House, "MOT" stands for "matter of time". If a driver speeds excessively often enough, it is "MOT" or a matter of time before he gets caught, fined or even suspended from driving.

Sir, now I would like to touch on the speed limit of light goods vehicles, which is presently set at 60 kph. I think this is rather low, especially on expressways where cars are travelling at 80-90 kph. I would like to advocate that this be reviewed and increased from the present 60 kph maybe to 70 kph.

Sir, moving on to our road system and traffic management, I would like to suggest some improvements. First, in the course of designing and planning for new large-scale property developments, I think the LTA should be closely involved at an early stage to work with the property developers with regard to traffic flow

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management. This could be planned, as I find that the main culprit for congestion around property developments of a large-scale are the drop-off points and the ingress and egress from carparks of these buildings. Once developments, such as Takashimaya Shopping Centre or Tampines Regional Centre, become operational, the vehicular traffic in that vicinity would rise appreciably and create a strain on traffic flow, which would have widespread impact. As an example, take the roads around Ngee Ann City/Mandarin Hotel junction. The area has become a traffic nightmare at times. This could convince people to avoid the area. With the plans to turn Orchard Road into a more attractive tourist spot, I would like to ask the Minister whether the Ministry or LTA has any plans to streamline traffic flow around this area so that congestion could be lessened.

Secondly, the LTA introduced the left-turn on red sign at some signalised junctions. I believe this has proven to be very welcomed. I would like to ask the Ministry to consider having this at more junctions. Along any stretch of road, there may be side-roads joining it. If there are no signal lights, the driver can merge and turn left with caution, after giving way to traffic on the main road. Hence, I do not see why, maybe 100 metres down the same road, the driver should not be allowed to turn, with caution and proper lookout, if the junction is signalised. In the United States where they drive on the other side of the road, motorists could turn right on red light at signalised junctions, unless specifically prohibited. More turn left on red signs would also mean that we may be able to do away with separate slip-roads at appropriate junctions, thus freeing up valuable pieces of land which could be put to better use.

Sir, my next point is regarding vehicle population. Over the decades, we have

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invested billions of dollars in our road system and made much improvement in traffic flow. We enjoy a superb road network, but there would be congestion from time to time, especially during peak hours along certain stretches of roads. But with the successful introduction of the ERP system, congestion could be evened out, and I may say, even bearable. Even if there is a jam, it is a moving jam. Generally, travelling times are predictable to the dot. We do not experience the kind of gridlock traffic jams seen commonly and regularly in other big cities. In fact, during certain off-peak periods, our roads are very pleasant to drive on, but do watch out for the Traffic Police's speed enforcement officers and their portable radar guns. I believe there is room to increase the private vehicle population, and I would like to ask the Minister whether his Ministry would be reviewing the planned vehicle growth rate.

Speed Limit for Private and Light Commercial Vehicles

Mr Ang Mong Seng (Hong Kah): (In Mandarin) : Sir, at present, the speed limit for the small and medium-size commercial vehicles is 60 kph on all roads. However, the general speed limit on our highways is 90 kph. May I suggest that the speed limit for such commercial vehicles be raised from the present 60 kph to 70 kph because, to the businessmen, time is money.

May I also suggest that the right lane on our highways be confined to vehicles whose speed limit is not less than 90 kph. In other words, vehicles whose speed limit is less than 90 kph should be banned from travelling on the fast lane as they would either hog the road or exceed their speed limit. I believe this is being practised in Japan.

In the United States, the speed limits on freeways are categorised into peak hours and non-peak hours. May I therefore suggest that the speed limit on

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our highways be raised to 110 kph during non-peak hours.

Scrapping of Vehicles

Mr Lawrence Leow Chin Hin (Nominated Member): Mr Chairman, Sir, the early scrapping of vehicles, primarily passenger cars, is quite prevailing in recent years. It reached its peak in 2001 as prices of new models plunged when the ARF was cut from 140% to 130%. The ARF is now 110%. Excise duty was also cut from 31% to 20% in 2002 and has since remained at that rate. Since 2000, an average of 95,000 vehicles have been taken off the road each year, many of them before five years. With these cars intended to be on the road for 10 years, this rather premature scrapping of cars is quite alarming. While car buyers are quite happy with the lower prices of new cars, and many have taken the opportunity to switch to newer and bigger models, I am not sure if this early scrapping of cars could lead to an economic loss for us as a whole. The benefits, as I see it, ultimately flow to the car manufacturers, all of whom are offshore operations that do not offer any direct contribution to our economic activities, despite a rise in car sales. Putting an asset, in this case, a car to rest, when it is still in good working condition and with more than half its useful life to run, does seem rather wasteful. Sir, I am just concerned about this trend and implication. Hence, I would like to know if LTA has looked into this matter and whether there are any adverse implication arising from such early scrapping of cars. And, if there are adverse implications, is LTA taking steps to fine-tune the current system?

Pedestrian Overhead Bridges

Prof. Ivan Png Paak Liang: Sir, last month, on my way to this House at Holland Road, I observed an old woman crossing the road from one side to

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another. In line with our objective to leave no one behind, I suggest that the Ministry please build all new overhead pedestrian bridges and retrofit existing bridges to make the staircases more gentle and to include a ramp. This would benefit the elderly as well as couples with babies.

I did suggest this idea of ramps to LTA but their reply, in part, said that they were bound by building codes and barrier-free accessibility guidelines which make it difficult to build these. I believe this should not be an all-or-nothing issue. We do not need first class or even business class ramps. I believe most of our citizens would be quite happy with economy class ramps. Could the Ministry please work with the Ministry of National Development for an exemption, if necessary? Let us help all our families with babies and our older compatriots.

5.30 pm

The Minister of State for Finance and Transport (Mrs Lim Hwee Hua): Sir, first, I would like to thank Members for raising the different cuts.

Several Members have raised issues relating to our transport and road infrastructure policies. First, let me address Mr Ong Kian Min's point about the vehicle population growth rate. Since the introduction of the Vehicle Quota System in 1990, our vehicle population growth rate has been set at 3% per annum. When the growth rate was subsequently reviewed in 1999, it was decided that the growth rate could be sustained at 3% till 2005, which is this year. LTA is currently reviewing the allowable growth rate from Quota Year 2006 and beyond. It expects to complete the review by the end of this year.

When deciding on a sustainable growth rate, we need to consider several factors. These factors include how fast

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we can expand our road network to support the growing vehicle population. As an indication, the annual growth rate of 3% in the past 14 years was supported by a period of rapid road network expansion. Between 1990 and 2004, the road network grew by 15%.

Sir, given that roads already take up 12% of our total land space, we will have to study, firstly, the pace at, and extent to which our road network can continue to be expanded to support the growth in the vehicle population. Secondly, the extent of road charging needed to manage the potentially higher usage levels lest crippling congestion sets in. And, thirdly, if the additional demand for parking spaces can be met in land-scarce Singapore.

Given that this is a multi-dimensional issue, it is important for us to study the medium and long-term implications carefully before we decide on the vehicle population growth rate for the coming years. In assessing the different factors, the Government is also mindful of the aspirations of Singaporeans to own cars and the impact of the vehicle population growth rate on COE prices. At this juncture, I am pleased to announce that the total COE quota for 2005 is 132,581. This is a small decrease of 1.2% from last year's quota. However, the quota for cars is about the same as last year's. LTA will be releasing the detailed breakdown of the 2005 quota later today.

Sir, Mr Ong Kian Min has also raised a few traffic-related issues. Let me take them in turn. Firstly, he asked if the left-turn on red scheme would be expanded to other locations. The left-turn on red scheme allows a vehicle to turn left at a particular traffic light junction even when the traffic light is not in its favour. It requires motorists therefore to be extra careful of pedestrians and other vehicles.

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For this reason, not all junctions are suitable for the implementation of this scheme because of traffic and safety considerations.

To-date, LTA has implemented the scheme at some 39 junctions. It has, in fact, received some adverse feedback from pedestrians, who feel threatened by motorists who do not give way to them at these junctions. Therefore, LTA will have to carefully study the traffic conditions before extending the scheme to more locations.

Mr Ong also asked whether there could be better road and traffic planning around new developments to avoid traffic congestion. Today, developments that are expected to have a significant traffic impact in their vicinity are required to submit what we call a Traffic Impact Assessment as part of their planning application. The objective of the assessment is to ensure that these developments do not create traffic problems that spill over to the main road. Any foreseeable problems will be addressed at the outset by mitigating measures to be implemented by the developers.

Under the current practice, LTA works with the developer's representative or traffic consultant to determine the scope of, and the issues to be addressed in the assessment. LTA will also furnish relevant information and liaise with the traffic consultant to facilitate their assessment. With this framework in place, the traffic in the vicinity of developments would be hopefully better managed.

Sir, even with a comprehensive framework in place, the traffic in the vicinity of a development can sometimes be affected by changes in the environment a few years after it is opened. LTA monitors all traffic situations carefully. Where there are situations of localised congestion detected for any development, LTA will look for ways to improve the traffic

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conditions. The specific example of the roads around Ngee Ann City and Mandarin Hotel, as mentioned by Mr Ong, is one such challenge. As this involves the Orchard Road tourist area, LTA has been working in consultation with the other agencies to improve the traffic conditions in that area. Details of this study will be announced in due course.

Let me now, Sir, move on to Mr Lawrence Leow's question on the scrapping of vehicles. He asked whether economic loss will result from the early scrapping of cars due to the existing PARF structure and COE prices. Early deregistration of cars may give the impression that we are not utilising our resources in the most efficient manner. However, for the individual car owner, he may be indifferent or even welcome it, since the outcome is that, for a similar car model, he may now need to pay less monthly instalment and yet be able to enjoy driving a new car.

The decision to purchase a car is a complex issue and is not merely driven by our policy on fees and charges. Economic conditions, rising affluence and the availability of new car models all play a significant part as well. At the end of the day, it is a choice exercised by the consumer himself based on what is important to him, including the intrinsic value of driving a new car. Notwithstanding this, we do review our policies regularly to minimise any impact on consumption patterns. One good example is the review of the PARF rebate system in 2002.

Let me just explain briefly. In recent years, arising from our efforts to lower the upfront ownership cost of cars by reducing the ARF for new cars, the sale prices of new cars have fallen quite significantly. Coupled with the lower COE prices due to dampened consumer sentiments and the higher PARF provided to cars under the old PARF regime, this

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has contributed to more early deregistrations. This is because car owners find it more attractive to cash out on the higher COE rebates and PARF to offset the purchase of a new car at lower taxes and COE premiums.

Such a trend has an impact on the used car market which is why the ARF reductions have been incremental and measured. In addition, the PARF scheme has been modified since May 2002 to link the rebate amount to a percentage of the ARF paid, rather than a percentage of the OMV. As the new PARF rates decrease proportionately with the age of the car, this should dampen the propensity to deregister relatively new cars, ie, cars less than five years old. We should have a better sense of the impact of this new PARF scheme in 2007 when all cars registered under the old regime would have crossed the 5-year threshold. As the full effect of the new scheme has yet to be realised, let me assure Members that my Ministry will monitor this issue closely and, if necessary, we will make further refinements to it.

Mr Leow may also wish to note that the high deregistration does not mean that all the vehicles are wastefully scrapped. In 2004, only 9% of the deregistered vehicles were scrapped. Of these, 68% were at least eight years old. The bulk are in fact exported because they can attract higher resale values overseas. This has actually become a flourishing trade of late with many used car dealers. In fact, the LTA has facilitated this process by creating what we call Export Processing Zones where the cars can be held before export. The number of these zones has grown from the initial three to 12 today.

Let me now take the issue of speed limits raised by Mr Ang Mong Seng. He asked if the practice in the US of applying variable speed limits on their highways in order to optimise the usage of roads could be implemented in Singapore. Indeed,

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variable speed limit signs are used in cities in the US, UK and Australia. The purpose of such variable speed signs is to reduce the posted speed limits at certain times of the day in order to improve road safety and traffic efficiency. I wish to explain that our current paradigm is to set the maximum allowable speeds which motorists can travel at. When there are time- or incident-specific safety concerns, such as when there is road maintenance taking place or where there has been an accident, motorists are warned to slow down. The other approach is to set a lower limit and then vary it at certain times of the day to allow a higher speed limit when conditions permit. Our current approach of setting the maximum speed is preferred to introducing variable speed signs as it allows us to maximise the capacity of the roads while requiring users to vary their speeds according to their own assessment of safety considerations.

As regards his suggestion on dedicating one lane for the fast-moving traffic, there is currently no compelling reason to do so. As mentioned earlier, it could reduce our road capacity. Nevertheless, I wish to thank Mr Ang for his suggestion.

Sir, on his comments on the speed limits for commercial vehicles, which was also raised by Mr Ong Kian Min, they have asked whether the speed limits of light commercial vehicles, which refer to light goods vehicles and small buses with seating capacity of up to 15 passengers, can be increased. As we heard earlier in this House, the Land Transport Authority and the Traffic Police regularly review vehicle speed limits taking into consideration the advancements in vehicle technology, geometry of the roads, and the prevailing traffic conditions.

I am pleased to inform Members that the review of the vehicle speed limits for

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light commercial vehicles has been completed. The review found that the accident statistics involving such vehicles on expressways were consistently lower compared to cars. It concluded therefore that the speed limit of such vehicles can be increased by a further 10 km per hour, from the current 60 km per hour to 70 km per hour.

The increase in the speed limit will not compromise the safety of such vehicles and other road users. In fact, safety will be further enhanced as the speed differential now between light commercial vehicles and the other vehicles is narrowed. However, to address the safety concerns for some groups of passengers, LTA will continue to subject light commercial vehicles carrying workers on the vehicles' decks as well as small buses without seat belts, to the current speed limit of 60 km per hour. The LTA will be providing the details next week.

Finally, let me take the cut by Prof. Ivan Png on pedestrian overhead bridges. He suggested that, ideally, staircases for all pedestrian overhead bridges should be made gentler and that ramps be included as a standard feature. I agree with the Member on the need for transport infrastructure to evolve with changing demographics. Since year 2000, LTA has revised its design of staircases of new pedestrian overhead bridges to be in line with the BCA's Code of Practice on Barrier-Free Accessibility in Buildings for the design of staircases. This includes the gradient, the height, the width of the steps, the number of landings, etc.

The improvements include reducing the step height from 175 mm to 150 mm and increasing the step width from 288 mm to 300 mm to better serve the elderly and the very young. However, it will be very costly to reconstruct all existing staircases of the pedestrian overhead bridges to meet these new design standards. Some 380 of such bridges

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would need to be reconstructed at a cost of around $60 million, and this excludes the costs associated with diverting utilities. Therefore, the LTA has taken the prudent approach of applying the new standards to new bridges and to old ones when they are due for replacement.

5.45 pm

As for adding ramps to existing

bridges, I agree it makes the bridges more accessible for the elderly and for those using strollers. However, the additional land take would be significant, at least 200 square metres per bridge. Aside from this additional land requirement, in most cases, this is not even possible given that the bridges are located in built-up areas. Where there is sufficient space, for example, along the expressways and major arterial roads, LTA will continue to provide ramps for the bridges. In fact, at-grade crossings are more accessible than bridges and are the preferred form of crossing for the elderly and the less mobile. Therefore, to better meet the needs of this group, LTA would try to provide more at-grade crossings at suitable locations wherever possible.

Prof. Png has also asked for a more flexible approach to be adopted in applying the guidelines so as to make it less costly and onerous to provide the ramps. Let me just clarify here that the BCA Code was formulated based on international standards and adapted to our local conditions. It was developed through a consultative process involving the key stakeholders like the VWOs and other Government agencies. The mandatory requirements are the minimum standards required in order to meet the special needs of users. For example, a steeper ramp would be difficult for the elderly and the physically challenged, while a narrow one would limit accessibility. Hence, I would like to assure the Member that LTA does not build "business class" ramps and

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the standards took into account factors of accessibility and safety.

Mr Ong Kian Min: Can I seek a clarification, Sir?

The Chairman: **** Yes.

Mr Ong Kian Min: I would like to seek a clarification on the statement that our roads take up 12% of our land space. When you have a piece of land, one kilometre square, and if you want to build roads to serve it, let us say you build around the borders, that would take four kilometres of road. But you want to subdivide the land into four pieces and serve the four components, then you have to build two additional stretches of roads and that would take the roads to six kilometres. So it is not necessarily a bad thing because it is the function of our urban development. In the context of our city state, I would like to ask the Minister of State how do we compare to other cities, in terms of our road space and the utilisation of these roads.

Mrs Lim Hwee Hua: Sir, I do not have details of the comparison with other city states, except to mention that at 12% and in view of all the competing land uses, such as nature reserves, we are actually running pretty close to what is physically possible. Besides, those who are campaigning for the environment would probably tell you that 12% is a little too high. My point in raising this 12% is really to highlight that the 15% growth, or the expansion in the road network that we have done over the past 14 years, is unlikely to be repeated. Therefore, the scope for expanding the road network further is likely to be very limited and measured.

Sea Transport

Mr Ong Kian Min: PSA Singapore Terminals operate the world's busiest transshipment hub, handling about one-fifth of the world's total container

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transshipment throughput. We are also the top bunkering hub in the world. Our port is an important lifeline to Singapore and there is much to be proud of in our maritime industry. But many Singaporeans have only a distant appreciation of PSA's capabilities and development as compared with their appreciation of Changi Airport as a Singapore icon. In a survey where Singaporeans are asked what about Singapore that they are proud of, a good number answered "Changi Airport". My question is: how can we give Singaporeans a better appreciation of the importance of our sea port, its scale and its complexity of operations?

Sir, I would also like to ask what strategies MOT has for improvement of our port infrastructure. Our sea port is similar to our Changi Airport in that it requires huge capital investment in land, infrastructure and heavy equipment. At our port, large land areas are required for the movement and storage of container boxes. Long stretches of coastline and large parcels of land have to be set aside and dedicated for ship dockings, loading and unloading, and container storage.

However, unlike Changi Airport, where the decisions to invest heavily in infrastructure and facilities in anticipation of demand rest with the Government, PSA Singapore Terminals is owned by PSA Corporation. Will there be a situation where PSA Corporation, when it becomes a corporatised public-listed entity, decides in the interests of its shareholders that the rate of return does not justify the capital investment to expand its facilities in a particular way? For example, in a situation where PSA needs additional land for expansion, what direction will MOT take if PSA is of the opinion that the land value set by the Chief Valuer is too high? Such a situation is evident in the gateway ports of the United States, where low rates of returns, high cost of operations and union

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problems have hindered further investment and expansion of their existing port facilities, leading to severe bottlenecks and insufficient capacity.

How does the Ministry intend to deal with situations where PSA Corporation decides to base its decision on commercial interests rather than national interests? Will MOT consider bringing in other port operators, like Hutchison?

Sir, new regulations, which take effect from 2008, will require bunker barges to be doubled-hulled. Hence, all present single hull barges would no longer be able to operate and would have to be replaced. As the cost of replacement runs into millions of dollars, these new regulations may drive some operators to exit the business altogether as they cannot secure new capital or financing. As we pride ourselves as the top bunkering port, I would like to ask the Minister whether Government assistance or funds have been provided to help the industry with this replacement cost.

Developing an International Maritime Centre

Mr Andy Gan Lai Chiang: Sir, in November 2001, the Economic Review Committee proposed a vision to develop Singapore into a leading global, integrated logistics hub with robust maritime aviation and land transport capabilities supporting the global economy. The Committee had also recommended a review of all fees and regulations administered by the MPA.

It was also pointed out that Singapore's aspiration to be a global centre for maritime law challenging London and New York was hampered by protectionist barriers in the legal services sector. Recent reforms have seen the emergence of joint law ventures, formal law alliances and strategic alliances between local law firms and foreign law firms, the objectives of such alliances

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were to make Singapore comparable with traditional legal services provided such as those in the UK and the United States. In Singapore, we have a handful of local major shipping and maritime law firms with international experience and expertise and about five international law firms with good shipping expertise having a presence in Singapore.

Singapore has thrived as a major port since its early days. And the British Empire, in the 19th century, had even found it worthwhile to protect the port of Singapore against foreign intruders. Maritime activities are the mainstay of the island state and the first generation Singaporeans had made their livelihood through maritime trade.

Singapore has made its mark as a premier port in Southeast Asia. We have to promote the maritime industry to more people. It can be an additional engine of growth for our economy. It can be shown to be an attractive and rewarding sector to the Business Inc and, thus, creates job opportunities. Tied to the insurance service providers for the maritime industry, a question remains as to what measures have been implemented to make Singapore a more attractive base for specialist insurers to take root in Singapore, for example, regulatory changes and specific GST and tax incentives, to make it conducive for specialist classes of underwriters to be based here. While it is noted that the Ministry of Finance has introduced the Approved Marine Field Traders Scheme with easy cashflow and business processes upon successful fulfilment of qualifying criteria set by the Inland Revenue Authority, what other measures can the maritime industry expect that would help boost Singapore's position? Singapore is central to maritime routes. And I urge the Ministry of Transport to promote Singapore as an international maritime centre.

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Maritime Security

Encik Yatiman Yusof: Sir, since I broached the subject on maritime security last year, there had been a number of positive developments taking place. I would like to follow up on this issue because maritime security is critical to Singapore.

Sir, I am assured on learning that Singapore takes the question of maritime security very seriously. It must be so. Just one terrorist attack near here or in the Straits of Malacca would trigger massive, if not tsunamic, reactions. The ship and cargo insurance rates would go up, and shippers would start looking for alternative routes. Not only our position as a major sea port and a maritime hub would be threatened, the entire region would be affected too. An article in the Straits Times today even went to the extent of saying that commercial confidence in Asia would be shaken, at least for a short term.

For these reasons, Sir, we have initiated and participated in a number of initiatives at international, regional and bilateral levels in order to forge greater and closer cooperation to protect the shipping lanes in the Straits of Malacca. As late as yesterday, our Minister for Defence, Mr Teo Chee Hean, in addressing the issue on maritime security in Southeast Asia, said that, in addition to working closely with international maritime organisations and enhancing regional security cooperation, Singapore is putting armed security teams on high-risk ships passing through our waters. This must be seen as a clear signal of our strong commitment to contribute towards ensuring maritime security in this part of the world.

Sir, in addition to that, the replies made by the Minister for Home Affairs in this Chamber, just two hours ago, on steps taken for homeland security is a further testimony to our unflinching

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commitment on this issue. Sir, our maritime security objective could only be achieved through collective efforts. No single country in the world could protect ships passing through its own waters. All interested parties, big or small, must be part of an anti-terrorist network, sharing information, technology and cost of these efforts. Sometime ago, the USA had come up with a specific proposal regarding how it could contribute towards ensuring security in the Straits of Malacca. But some of the littoral states in the area are not in favour of it, at least at the moment. Meanwhile, major international shipping countries have requested for countries involved in export to share the burden of checking the transported goods, including those in the containers. Singapore has done its part on this matter.

Sir, in view of all these developments, I would like to find out the progress made in this area and what else can the Ministry of Transport do to ensure the security of our ports. What are the challenges the Ministry foresees in protecting our ports and sea lanes?

Mrs Lim Hwee Hua: Sir, let me first thank Members for their interest in our plans for the maritime sector.

Mr Ong Kian Min and Mr Andy Gan asked about MOT's plans to develop Singapore as an International Maritime Centre, or IMC. The maritime industry in Singapore is an important pillar of our economy. Mr Gan is right to say that the maritime sector represents good growth prospects, and will continue to create and provide jobs for Singapore. Today, the sector contributes about 7% of our GDP, and provides some 120,000 jobs. This number is expected to increase to 200,000 by 2019.

While Singapore is already well established as a major port, our vision is

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for Singapore to become a comprehensive hub for all maritime, shipping and port-related activities. We want to develop our maritime services as another engine of growth to complement our port and shipyards. The maritime ancillary services that we are actively developing cover a wide range - from the traditional vessel registration, ship financing, marine insurance, ship management, maritime legal and arbitration services and ship broking, to newer offerings like freight derivatives and other risk management activities.

The Government is working very closely with industry players and industry associations to grow these sectors. At the same time, the Government actively consults with international players to better understand global trends in shipping-related developments so as to meet evolving needs.

Sir, the need to track developments closely is underpinned by a few major trends - firstly, the emergence of economic powers in the fast-growing China and India markets; secondly, the increasing shift in the centre of gravity of shipping activity towards Asia. Singapore is indeed well placed to tap these trends and the growth of these services sectors will create many high value-add and exciting jobs for Singaporeans.

6.00 pm

Within the context of burgeoning trade flows globally and the concomitant growth potential, the Government is, however, cognisant of the well-established position of key maritime centres, particularly London. Singapore is behind London in several areas, most noticeably the conventional areas of financial and legal services. And this view was echoed in a report by the Corporation of London

in August 2004, which showed that London is way ahead in many of the maritime services. The report also

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indicated that Singapore could become a serious contender in this area, now that the centre of shipping has shifted to Asia . Sir, due to our proximity to Asian shipowners, Singapore has good potential to develop this sector to meet the needs of these market participants.

The Government is also directing efforts at developing Singapore as a maritime legal services hub. And this is one area which we are developing with other Government agencies, as it is a critical supporting pillar for the IMC development. This area is still very much work in progress, but let me briefly highlight some of our key milestones.

In 1991, we set up the Singapore International Arbitration Centre to serve as a professional and reliable dispute resolution institution for the international business community. We followed up in 2002, with the setting up of a dedicated Admiralty Court , the first of its kind in Asia , which was established to build up our expertise in this area and to ensure the speedy and fair resolution of maritime cases in Singapore .

To develop Singapore 's maritime legal expertise, MPA has set aside S$4 million to establish a Professorship in Maritime Law at the National University of Singapore and established postgraduate scholarships in maritime law as well. Most recently, we have launched the Singapore Chamber of Maritime Arbitration, which will further promote and profile Singapore as Asia 's centre for maritime legal expertise and dispute resolution.

Let me now address the challenge of developing our own source of maritime manpower. Sir, this is an important area to focus on, if we want to become a leading IMC. The strong growth in shipping activity and in new buildings will continue to outstrip the increase in available manpower resources. Singapore

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is open to allowing foreigners to come in to supplement our maritime workforce, but we also want to encourage more Singaporeans to take up careers in the maritime sector. In this regard, the agencies have stepped up our efforts in supporting the various maritime education and training programmes.

To encourage more Singaporeans to take up maritime and maritime-related careers, MOT, MPA and the Singapore Maritime Foundation (SMF) have launched the "Maritime Now" publicity campaign in October last year. There will also be outreach programmes targeted at students, teachers and career counsellors to raise their awareness of the opportunities available in the maritime sector.

Sir, let me now move on to Mr Ong's comments on the role of PSA. Although PSA has been corporatised, its shares are currently still totally held by the Government. As such, the interests of PSA and the Government are largely aligned. Both PSA and the Government want to grow Singapore as a hub port by attracting more shipping lines to Singapore , enhancing our connectivity, keeping our costs competitive, and providing excellent service to our customers. For example, MOT and MPA have been working with PSA and other agencies to keep the cost of port land competitive. We also work with PSA on port infrastructure developments to ensure that they have sufficient berths to meet their growing demand.

Although the interests are largely aligned, it is still useful to have some check and balance in the system. As the port authority, MPA monitors PSA's service standards. We also keep in close contact with the shipping lines to get feedback from them regularly, so that we know if they are satisfied with PSA's services. Shipping and port operations are essentially regional, if not global, businesses. Hence, regional competition

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will also serve as a useful check to ensure that PSA is kept on its toes and stays competitive.

During last year's Budget speech, then-DPM Lee said that the MPA has not granted PSA a monopoly on container operations in Singapore , nor will it do so. If and when industry conditions make greater local competition necessary, and new operators judge it viable to enter the business, the Government will not stand in the way. This position was also articulated by then-PM Goh in June 2002, when he said that the Government is open to having more players participate in the Singapore port sector.

Let me now briefly move on to the point of single hull tankers.

Sir, the International Maritime Organisation (IMO) has revised its regulations under the Marine Pollution (MARPOL) Convention to phase out single hull tankers and ban the carriage of heavy grade oil by such tankers. This is a positive development in the area of safety and pollution prevention.

To bring Singapore 's licensing requirements in line with those of the IMO, the MPA has launched a "Gate System�? this year for licensing bunker tankers operating in our port. This system, amongst other things, sets age limits and other conditions for the issuing of new bunker tanker licences, and will require owners to progressively phase out their single hull tankers and replace them with double hull vessels.

To ease the burden on the industry, I am pleased to announce that the Ministry of Transport will be introducing measures to lower the operational cost of new double hull tankers. For a start, MPA will waive port dues for new double hull bunker tankers that are licensed from

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15th March 2005 to 31st March 2008 for a period of five years from the licensing date. This works out to a savings of about $1 million to the industry. In addition, MPA will also consider raising the pilotage exemption limit to cover bunker tankers above 5,000 gross tons, as well as providing pilotage training rebates for them. This will result in a further $2 million savings to the industry. These measures will assist bunker tanker owners to renew their fleet early and encourage the operation of more environment-friendly double hull tankers in our port.

Let me now finally move quickly to the issue of maritime security.

Sir , Singapore adopts a comprehensive and multi-agency approach to maritime security. One critical aspect of this is to ensure that international waterways, such as the Straits of Malacca and Singapore , remain safe, secure and open to shipping. We have been working closely with our neighbours, Malaysia and Indonesia , as well as other stakeholders, including regional and international organisations like ASEAN, IMO and the UN, on various measures to enhance the security of the Straits.

As hon. Members may know, one such initiative is the Trilateral Coordinated Patrols involving Indonesia , Malaysia and Singapore , which was launched in July last year. This involves ships from the littoral states patrolling their respective waters as well as enhanced information sharing. We are also working with other countries in this region to set up an Information Sharing Centre under the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP). The centre will be located in Singapore and will facilitate information exchange so as to enhance cooperation in the fight against piracy.

Sir, closer to home, we have worked with the industry to ensure that all

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Singapore port facilities and Singapore-flagged vessels are fully compliant with the IMO's International Ship and Port Facility Security Code or more commonly referred to as the ISPS Code. We will closely monitor the movements of sensitive vessels within our waters, such as LPG, LNG, chemical and oil tankers.

Within the Singapore territorial waters, the Police Coast Guard (PCG) would undertake law enforcement and security policing. Since 911, as Members would know, PCG has stepped up its patrols, as well as checks on suspicious activities. From April this year, the Republic of Singapore Navy will deploy armed security teams onboard some merchant ships. The Accompanying Sea Security Teams (ASSeT) will escort vessels entering or leaving the port within Singapore waters.

Sir, let me, finally, just say briefly on how we deal with congestion in the Malacca Straits. Singapore , Indonesia and Malaysia have worked closely and increased efforts and cooperation to maintain adequate navigational safety mechanisms within the Straits. And we have implemented various safety measures, such as the Traffic Separation Scheme as well as a mandatory ship reporting system known as STRAITREP. We also collaborate with other Straits stakeholders on initiatives, such as conducting joint hydrographic surveys of the Straits, and installing and maintaining aids to navigation.

Sir, I believe I have answered the questions.

Air Transport

Mr Ong Kian Min: Maintaining Changi Airport's competitiveness - Sir, although 2004 was an excellent year for Changi Airport, we must not rest on our laurels, as many countries in the region have the same aspirations to upgrade their airports

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and develop their aviation business. Construction of the third passenger terminal building at Changi Airport began in October 2000, way ahead of demand. This new terminal, scheduled for completion in 2008, will provide Changi Airport with an additional handling capacity of 20 million passengers. This will bring the total handling capacity of Changi Airport to 64 million passengers a year, compared to the 30.4 million passengers for 2004.

Sir, staying ahead of the competition requires more than just the latest and largest in hardware, although size does matter. Can the Minister give an update on what are the prevailing circumstances affecting our position as an aviation hub and the other measures that we are taking to maintain the competitiveness of Changi Airport?

Facilitating the growth of the low-cost travel market - As low cost carriers (LCCs) have the potential and means to bring large numbers of passengers into and out of Changi Airport, they can be a real boost to our travel and tourism industry. LCCs now fly out of Singapore directly to eight destinations, ie, Hong Kong, Taipei, Pattaya, Bangkok, Phuket, Hat Yai, Jakarta and Perth. I think, potentially, all major cities in China and India with international airports can be added to this list, as we tap into the growing affluence and purchasing power of Chinese and Indian tourists. As an encouraging start, I am pleased to note that JetStar is eyeing Shanghai, Chennai and Mumbai, while Tiger Airways has announced plans to fly to Chengdu and Guangzhou. I would like to ask whether this is purely a private sector initiative where the LCCs are left to negotiate the air links themselves, or whether the Government can step in to help them to establish these direct air links.

Notwithstanding their initial positive reception and success, some people are wondering, looking at the low fares that

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they charge, whether they can be viable long-term businesses, or they are just a flash in the pan. LCCs depend on low operational costs and high passenger volume because of their low profit margins per fare. As such, LCCs are more vulnerable to over-capacity, higher fuel and other operating costs and any downturn in the air travel industry. As we are investing in a new dedicated low cost terminal at an estimated cost of $45 million to facilitate the operations of LCCs, we must play an active role to nurture the healthy growth and necessary survival of the LCCs. If they fail and close shop, the terminal building would be wasted and be left as a white elephant. I would like to ask the Minister whether the Ministry has any plans to help sustain LCCs in times of difficulties.

Changi Airport

Mr Wee Siew Kim (Ang Mo Kio): Mr Chairman, Sir, Changi Airport faces increasingly tough competition. The Dubai International Airport's Terminal 3 and Bangkok's new airport will be ready next year. Changi's Terminal 3 will also increase the airport's capacity to 64 million passengers per year and will be completed in 2008.

Besides greater competition from other airports, new developments in aircraft technology and Singapore's attractiveness as a business and tourism centre, as well as competition from regional carriers and new aviation growth markets, such as China and India, will have an impact on Changi Airport's position as an international air hub. I would like to know how we are addressing the above developments and what strategies do we have currently to capitalise upon them.

The Ministry introduced a $210 million Air Hub Development Fund in 2003, and a $40 million Growth Incentive Scheme for

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airlines in 2004 which rewards each airline based on its passenger growth, and it is in addition to other incentive schemes and rebates. Would the Minister tell us if these schemes are yielding the expected results, and what other measures do we have in store?

Lastly, could the Ministry give an update on our progress in our development as an International Aviation Centre, an initiative that was launched in 2003 to provide another engine of growth for our aviation sector and help ensure that Changi retains its competitive position in the long run?

Mr Charles Chong: 6.15 pm

Sir, I would like to, first of all, declare my interest as an employee of a service provider at Changi Airport.

Sir, the Minister for Transport had previously announced that the aviation sector contributed as much as 9% of Singapore's GDP. In order to retain our aviation hub status,

Singapore must continue to attract more airlines to Changi Airport by facilitating their operations here and ensuring our charges are competitive. But cost alone cannot be the only consideration. If we were only to rely on lower cost, we will always be at a disadvantage, compared to countries with more abundant land and manpower resources.

Sir, I am aware that CAAS is trying to impose performance indicators on service providers to meet that of the Changi Airport. Could the Minister provide an assurance that should such performance indicators be imposed, it will be done equitably to ensure a level playing field for all service providers? And like my parliamentary colleagues before me, Mr Ong Kian Min and Mr Wee Siew Kim, I would also like to ask the Minister to tell us what strategies his Ministry intends to

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implement to ensure that Changi Airport maintains its aviation hub status.

Sir, in our efforts to grow traffic at Changi Airport, we have always welcomed foreign carriers. However, in the past one year alone, three new Singapore carriers - Valuair, Jetstar Asia and Tiger Airways - have emerged. Could the Minister tell us if this proliferation of new Singapore carriers inadvertently discourage foreign carriers from operating in Changi Airport and cause them to consider operating in other regional hubs?

Low-cost Airlines

Mr Wee Siew Kim: Sir, last year saw intense activity in the field of low-cost carriers (LCCs). Not unexpectedly, the competition to attract these LCCs by competing airports in the region has heated up. Last month, Malaysia announced that it would fast track the construction of a purpose-built $43 million terminal for LCCs at the KLIA so that it would be operational by the first half of 2006. At Changi Airport, a similar $45 million LCC terminal would also be completed in early 2006.

On the other hand, neighbouring governments have been slow in dismantling the restrictive regimes that control the distribution of air traffic rights to carriers. As this has a direct impact on the viability of the LCC terminal and even LCCs as a whole, may I ask the Minister to give an update on the measures the Ministry will be implementing to ensure that as many LCCs as possible use Changi Airport as a hub, especially, as I understand it, one of the key success factors for a LCC is intensive asset utilisation. What is being done to ensure that LCCs come to Singapore because we offer them the fastest turnaround on the ground, coupled with an extensive network to fly?

Mdm Cynthia Phua: While many Singaporeans are pleased to read about

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the mushrooming of low-cost carriers and how they have made travelling across boundaries at a fraction of their original cost, the underlying question is: what is the current market share of low-cost carriers at the moment? What long-term strategies does the Ministry have in respect to budget airlines so that they do not cannibalise the profits of other local airlines?

The drastic cutback in fares from these airlines also raises more than just eyebrows. It raises the question: how do these budget airlines balance their sums to remain profitable without sacrificing on maintenance to the aircraft to ensure their airworthiness and without compromising on safety standards? How is the Ministry monitoring the airworthiness of the aircraft owned by these budget airlines to protect the interests of the travelling public? I know they talk about no frills and no thrills, such as on-board entertainment, good meals and quick turnaround time at the airport. But are these all there is to it to be able to cut air fares more than 50%? Is what is cheap just as good as what is not cheap? Is travelling on low-cost carriers riskier than on the regular airlines?

Air Services Agreement

Mr Wee Siew Kim: Sir, Singapore has always maintained a liberal aviation policy to strengthen our air hub status. Presently, we have open skies deals which do away with all restrictions for airlines flying between and beyond signatory countries. We must get more airlines to fly here and encourage existing carriers to operate more flights in order to boost Changi Airport's air hub status. Currently, we are in the process of negotiating open skies deals with Australia and within our 10-member ASEAN group.

At a conference in Singapore in January, there were calls for a single open skies in Asia. May I ask the Minister if

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there are any updates on the current developments on our Air Services Agreements and what can we expect to happen in the near future. And beyond air services liberalisation, what other measures, be they creative or liberating in nature, are being taken to ensure that our air hub status grow from strength to strength?

Workload and Performance Indicators

Prof. Ivan Png Paak Liang: Mr Chairman, the Ministry of Transport has only one performance indicator in the Budget book. This is, amongst all Ministries, probably the shortest list. May I suggest that the Ministry adopt some of the following indicators:

(1) average travel speed on Singapore roads;

(2) for buses and MRT trains, average journey time, including both waiting and travel, per kilometre of journey;

(3) number of passengers and flights at airports; and

(4) number of containers and tonnes of non-containerised freight handled at ports.

Mr Yeo Cheow Tong: Sir, as Mr Ong Kian Min, Mr Wee Siew Kim and Mr Charles Chong have pointed out, the global aviation landscape is evolving and changing very rapidly. Airport competition has intensified, with the opening of many new airports, as pointed out by Mr Wee. The emergence of low-cost travel and new aircraft technology are also key trends affecting our position as an air hub. Let me share with Members our three key strategies to enhance Changi Airport's competitiveness, as asked by some of the Members.

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Sir, the first priority is to strengthen our partnership with the airlines by facilitating their growth and reducing their operating costs here. As mentioned by Mr Wee, we had a three-year, $210 million Air Hub Development Fund and a two-year, $40 million Growth Incentive Scheme, which incentivised airlines to carry more passengers to Changi. Sir, our airline partners greatly appreciated these two schemes. They have worked very well and they have helped Changi achieve a record 30.4 million passengers and 1.8 million tonnes of cargo last year. Changi's network was also expanded to more than 170 cities, making Changi one of the best connected airports in the region.

Sir, as both schemes will expire at the end of this year, we will launch a new three-year, $300 million fund to succeed them. About $100 million will be set aside each year to fund traffic development and cost reduction initiatives. The new fund will further facilitate the growth of our airline partners at Changi and position us for the long haul. We will release details of the new fund later this year.

Secondly, we will continue to upgrade Changi Airport, in both hardware and software. We have started infrastructure works to enable Changi to welcome the new Airbus A380s when they start flying next year.

We will also further improve the "Changi Experience" for passengers as well as airlines. T3 will be completed in 2008 while upgrading of T1 will begin once the upgrading of T2 is completed next year. In addition, training for frontline staff will be stepped up to improve service levels. To better meet the needs of our diverse passengers, CAAS will enhance its services by introducing multilingual signages and having more multilingual staff.

Sir, Changi's hallmark has always been its high standards of service. This

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includes services provided by various companies operating at Changi. I can assure Mr Charles Chong that we will continue to review and maintain high performance standards on all service providers at Changi, for the benefit of our airlines and passengers.

Sir, the third strategy is that we will continue to liberalise our Air Services Agreements with other countries. This will enhance Changi's connectivity and boost our hub status.

We have always welcomed foreign carriers to operate here in open competition with Singapore carriers. Last year, we facilitated the formation of three new Singapore airlines, namely, Valuair, Tiger Airways and Jetstar Asia. They will expand Changi's network and give passengers greater choice and more affordable fares. Their entry has increased competition, and further enhanced Changi's hub status.

Without a liberal aviation policy, we would have lost out on the wider economic benefits that competition brings. More airlines would mean more business for ground handlers, in-flight caterers, maintenance companies and other aviation-related companies. The economy also benefits from the expenditures from more visitors on hotel accommodation, shopping, food, ground transportation, and so on.

Sir, increased competition therefore helps to grow the market, and brings win-win benefits to the economy and the man-in-the-street. I am hopeful that other countries would also come to realise the wider benefits of competition, and a more open aviation regime.

Sir, let me move on to the specific case of the LCCs.

Mr Wee, Mdm Phua and Mr Ong commented on the contribution of low

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cost carriers, or "LCCs", to Changi Airport, and asked about our strategy to facilitate their growth.

Sir, the LCCs serving Changi have grown rapidly in their first year. They now account for 7% of Changi's weekly flights and 5% of Changi's overall traffic. More significantly, traffic growth on key routes served by LCCs exceeded Changi's overall traffic growth.

For example, on the Singapore-Bangkok route, year-on-year traffic for the last quarter of last year grew 18%, much higher than Changi's overall growth of 11%. The growth on the Singapore-Hong Kong route is even more impressive at 26% over the same period.

Mr Charles Chong asked if the LCCs will discourage full service airlines from either coming here or expanding their services here. Sir, let me take the example of Hong Kong. Today, two of our new carriers, Valuair and Jetstar Asia, operate 14 weekly services each to Hong Kong. Have their entry discouraged the airlines? Sir, I do not think so. Not only have SIA and Cathay Pacific maintained their services, Cathay Pacific has, in fact, recently added another seven weekly services, an increase of 20%. I think this shows that increased competition has also grown the overall pie for all the players.

We also recognise that the operating model of LCCs is different from the full service carriers. Many charge low fares by doing away with "frills" such as aerobridges, in-flight meals, and assigned seating. And as Mr Wee mentioned, by having faster turnaround of aircraft, I am happy to inform Mr Wee that we have been able to satisfy the LCCs in terms of aircraft turnaround time. And to meet the more basic needs of LCCs, we are building a "no frills" low-cost terminal, which will be completed early next year. The new terminal will also allow for even quicker embarkation and disembarkation

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of passengers, and even faster aircraft turnaround times. So this will definitely help anchor us as a LCC hub in the region.

Sir, Mr Ong Kian Min asked what assistance we will give to the LCCs should they face problems. Sir, our aim is to work with our airline partners, whether they are full service or LCCs, to anchor their growth and position here, and make sure that they are here for the long term. And as we have shown during the SARS crisis, if and when there are new crises which result in a drop in business, we will step in with temporary relief measures to help all our partners, whether they are LCCs or full service.

Sir, Mr Ong also asked whether the airlines and the LCCs negotiate new air links on their own. Let me clarify that it is the job of the Government to negotiate Air Services Agreements with other countries. But before we do so, we will consult our carriers, both full-service and low-cost, about their future plans. And once we have obtained the additional air rights, the carriers will have to make their own commercial calculations as to which specific route to apply for. I believe our holistic approach will enable us to also develop into a key hub for regional LCC operations.

6.30 pm

Sir, Mdm Cynthia Phua asked how do we avoid cannibalisation of businesses by the LCCs. Sir, the LCCs are here to stay. They are a fact of life. If we do not have our LCCs, the LCCs of other countries will fly here and they will take the business. So it is better that we have our own LCCs and we work with them and the other LCCs of other countries to further grow the market. This way, the pie will grow and, in the process, our economy will benefit greatly from such growth.

Mdm Cynthia Phua also was worried about the safety of the LCCs and asked

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whether, basically, they are riskier. Sir, CAAS adopts a stringent safety regime in the interest of the safety of the travelling public. Our safety standards are in line with international standards established by the ICAO. All Singapore-registered carriers, whether they are full-service or low-cost carriers, are subjected to thorough inspections, audits and safety oversight. CAAS conducts comprehensive and systematic evaluation on our carriers before issuing them the operating licences, and it also carries out periodic safety inspections thereafter.

Sir, with regard to the foreign carriers, the airworthiness of foreign carriers operating in Singapore, including LCCs, is certified by their own national civil aviation authorities. CAAS only conducts initial checks on new foreign carriers, such as the verification of relevant documents issued by their national regulators. Nevertheless, as an added safety measure, periodically, CAAS will visually conduct safety inspections on foreign aircraft arriving at Changi.

Sir, Prof. Ivan Png commented that we only have one work performance indicator and he asked for a few of them to be included in the Budget book. Sir, let me explain to him that my Ministry and our statutory boards do, in fact, routinely monitor the performance indicators that he mentioned, as well as many other key indicators. The key performance indicators for our land transport, airport and port are presented on the websites of MOT, LTA, CAAS and MPA to allow the public and interested parties convenient access to the up-to-date data. So, instead of once a year, we have the data there and we update them. The information is also available in various public domains, for example, the annual reports of the statutory boards and the Annual Economic Survey published by MTI.

The performance indicators of CAAS and MPA are not included in the Budget book as they are self-funding statutory

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boards. So, in any case, there is no way that we can put them there. For land transport, I will definitely ask MOT to consider including some of the indicators currently displayed on the website in the Budget book as well.

The Chairman: We have some time for clarifications. No clarification. Mr Ong, can you withdraw your amendment?

Mr Ong Kian Min: I would like to thank the Minister and the Minister of State for their comprehensive replies to the matters raised and for clarifying the Ministry's position on transport issues. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn .

The sum of $290,418,390 for Head W ordered to stand part of the Main Estimates.

The sum of $1,776,154,600 for Head W ordered to stand part of the Development Estimates.