PROPOSALS FOR INTEGRATED RESORTS (Delay)

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PROPOSALS FOR INTEGRATED RESORTS:

(Delay): 8.

Dr Amy Khor Lean Suan asked the Minister for Trade and Industry in relation to the two Integrated Resorts, (a) what are some key considerations that have to be sorted out that have delayed the release of the Request for Proposal (RFP) for the Marina site till November 2005 and the Sentosa site till the first quarter of next year; (b) if it has been decided that a two-stage tender will be called for the Integrated Resort sites and if the tender price will remain the prime criterion for selection of the successful tenderer, given the drag high land cost can impose on the project feasibility.

9.

Ms Irene Ng Phek Hoong asked the Minister for Trade and Industry (a) why is there a delay in the invitation for proposals for the integrated resorts; and (b) whether the social safeguards, such as the proposed $100-per-visit entry fee for Singaporeans and the 50 per cent cap on casino revenue, are also being reviewed as part of the process.

The Second Minister for Trade and Industry (Dr Vivian Balakrishnan): Mr Speaker, Sir, with your permission, I would like to take Question Nos. 8 and 9 together.

Mr Speaker: Yes.

Dr Vivian Balakrishnan: Since the announcement to proceed with the Integrated Resort (IR) projects, STB and the relevant agencies have been actively engaging the potential IR investors and seeking their views on the draft specifications of the Request for Proposals (RFP). The investors have provided useful constructive feedback on a wide variety of issues, ranging from urban planning parameters to the legislative framework and RFP selection process itself.

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As a number of these issues are very complex, the agencies have been studying the issues very carefully to see how we can best address them. We want to optimise the terms of the RFP, in order to maximise the overall benefits for Singapore whilst ensuring that it is also viable for the investors.

This is why, for instance, the Ministry of Home Affairs has come up with the casino legislative framework and, in fact, launched a public consultation exercise on the draft Casino Control Bill today. This exercise will allow all stakeholders to provide their comments to the Bill, before it is formally passed by Parliament. This will also give potential investors greater certainty when they tender for the RFP.

Ms Irene Ng has asked if the social safeguards are being reviewed as part of this process. I would like to assure Ms Ng that we have no change in the social safeguards which were announced in April this year. The Government will put in place a comprehensive and stringent set of social safeguards, including a casino entry levy of $100 per day or $2,000 per year for Singaporeans.

Ms Ng has also asked about the 50 per cent cap on casino revenue. In the Request for Concepts (RFC) exercise earlier this year, we had indicated that a surcharge may be imposed if the gross gaming revenue exceeded 50% of the total annual integrated resort revenue. The intent was to signal that the integrated resorts should have a high component of non-gaming attractions in order to attract tourism. It was not meant to be a social safeguard.

We have since decided not to impose this surcharge for the RFP. This is because in our consultations, most investors have indicated that they would not be able to generate non-gaming revenue exceeding their gaming revenue for the IRs in the initial years of their

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operation. Imposing a surcharge in these circumstances will unnecessarily reduce the viability of the integrated resort project, or result in a lower level of development investment. Instead, the Government's intention that the integrated resort should be more than just a casino has already been made very clear to the investors. Proposals that do not have substantial non-gaming attractions will certainly lose out when we evaluate the tenders.

Dr Amy Khor asked about the RFP selection process. Our objective is to select the IR proposal that will maximise the overall tourism and economic benefits for Singapore, not just the value in the IR itself or the value of the land per se. Hence, we intend to evaluate the proposals based on factors such as tourism appeal, strength of concept and design, strength of partnerships and networks, as well as level of development investment. As we are still refining the selection process, we will announce more details later.

We target to launch the RFP for the integrated resort at Marina Bay by end of November 2005. The RFP for the integrated resort at Sentosa will be launched in the first quarter of next year. I wish to assure this House that every effort is being made to ensure the success of the IR project.

Dr Amy Khor Lean Suan (Hong Kah): Given that there is considerable coordination required among the different agencies and Ministries due to the complexity of the project, and the different agencies and Ministries may sometimes have conflicting but nonetheless necessary objectives to safeguard, may I ask the Minister whether this could inevitably cause some delays in the progress of the IR project? And would the Minister agree that such coordination issues could also delay the progress of the

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IR when it is operationalised and developed? If so, would the Ministry put in place an inter-Ministerial committee to look specifically into the development and operation of the IR over the medium to long term to ensure its success as well as meeting the objectives and concerns of all the stakeholders concerned?

Another question I would like to ask the Minister is if there could also be any possibility of a further delay in the launch of the RFPs, given that we are now seeking feedback from the public regarding the guidelines as to the use of the IRs. And has the Ministry actually taken into consideration the possibility of investors' waning interest if there are further delays, in view of impending competition from other countries, like Thailand?

Dr Vivian Balakrishnan: Mr Speaker, Sir, there will be no further delays in the Request for Proposals. Have there been conflicts between the agencies? No, there have been no conflicts between the agencies, but I am sure Members of this House will appreciate that in dealing with complex issues like these, it is beneficial for all the agencies to examine the issues from different perspectives. The examination of the issues from multiple perspectives, I think, will give us a more robust and a more sensible answer at the end of it. We are almost at the end of this process, and I can assure the House that there will be no further delays and that the RFP will be an exercise which will generate the optimal outcome for Singapore.

Ms Irene Ng Phek Hoong: Sir, I want to thank the Minister for the assurance that social safeguards will not be removed. But can I ask the Minister whether the 50% cap on casino revenue being removed will mean that the IRs will be dominated by gaming activities as a

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source of attraction and revenue, especially in the early years, and whether this will mean that it is indeed going to be more a casino than an entertainment centre?

Dr Vivian Balakrishnan: Mr Speaker, Sir, the IRs will certainly not be dominated by gaming facilities. To give Members an idea of scale, the floor area for gaming will not be allowed to exceed 15,000 square metres or, in fact, if you include circulation, 18,000 square metres. This is a very, very small proportion of the total development of the IR which will have, in terms of floor area, 500,000 square metres. So, there is no possibility of this dominating the development. In any case, all the investors understand that our intention is that this is not meant to be one big gambling hall. If any investor submits such a proposal, I can almost certainly guarantee that the Government will not select such a proposal. Remember that at the end of this, we are trying to ensure that an integrated resort is built, which will attract tourists, and gaming per se will not achieve that objective.

So, let us wait for the proposals to come in, and you will see the basis on which we will select these proposals.

Mr Low Thia Khiang (Hougang): Sir, while the Minister says that the potential IR operators may not just be concentrating on gaming because there are certain requirements for them, in terms of how much floor area they take on for gaming, but when the surcharge on 50% revenue cap is removed, what is there to prevent the operator in the future to concentrate more on the gaming part? For the other non-gaming components, like facilities, they may allow it not to be upgraded or pegged towards international standards, and we therefore lose the purpose of having an IR to attract tourists.

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Dr Vivian Balakrishnan: Mr Speaker, Sir, as I said earlier, the amount of physical space that can be used for gaming is severely constrained. Secondly, because of the strict social safeguards, the local market is also constrained. Bearing in mind the size of the investment that we are trying to attract here, it will not be viable if they were to depend only on gaming revenue. But having said that, this is a business and we should not unnecessarily constrain the business by putting on this 50% cap when it is not practical in the first instance. If you do that, all that will happen will be that they will have to scale back their cash flows, which will mean scaling back the level of development investment and which will mean, in effect, that we will also have a scaled down integrated resort. So we have structured it in such a way that our intentions are clear, the business case is also clear to the investors - that they will have to make their money from not just providing gaming facilities but, indeed, the non-gaming facilities. And the more of such activities that they can grow, and the higher the commercial value that results from such activities, then they win and we win.

Mr Low Thia Khiang: Sir, I would like to ask the Minister, in the consideration to remove the 50% cap on the casino revenue, on whose interest is the Government looking after? Is it the investors' interest who would not be viable or the interest of Singaporeans who might become social gamblers or problem gamblers?

Dr Vivian Balakrishnan: Sir, I said earlier in my answer, the 50% cap is not a social safeguard. It was never intended as a social safeguard. It was an economic consideration and it was meant to send a signal that Singapore is not interested in a gambling hall. But when we say "integrated resort", we mean what we say. We believe the signal is clear. We believe that the potential investors know

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what they are looking for. And, in any case, we will make the final decision on which proposal succeeds. On that point, I want all Members to understand that we are not reducing our social safeguards. This has nothing to do with social safeguards. This is about an economic signal that is being sent and we believe now that we can achieve this without having to impose arbitrarily this 50% cap.

Dr Amy Khor Lean Suan: Sir, in order to encourage the operators and ensure that in future, they would put in as much effort as possible to make the non-gambling portion of the development successful and therefore increase the revenue portion from that element, would the Ministry be considering imposing the 50% cap later on down the line?

Dr Vivian Balakrishnan: The answer is no.

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HDB FLATS:

(Repossession): 10.

Dr Amy Khor Lean Suan asked the Minister for National Development (a) how many Housing and Development Board (HDB) flats have been repossessed by banks since bank loans for the purchase of HDB flats were implemented for purchasers who do not qualify for HDB subsidized loans; (b) if the Ministry knows how many more flats are pending repossession by banks as the purchasers are unable to service their loans; and (c) if HDB has assisted any of these cases by allowing them to rent a flat and, if so, how many.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, since the implementation of bank origination of HDB market rate loans on 1st January 2003, banks have completed the mortgagee sale of 15 flats, as at 30th September this year. There are another 61 cases where the banks have already

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secured the buyer for the flat and have submitted the resale application for HDB's approval. Together, these 76 cases constitute about 0.1% of all bank loan cases to-date, which number about 65,000.

Besides these 76 cases, there are about 100 cases that are pending mortgagee sale by the banks.

The assistance that HDB will provide these lessees whose flats have been repossessed will depend on individual circumstances and will be considered on a case-by-case basis. As at 30th September 2005, HDB has granted approval for 20 mortgagee sale cases to rent a flat.

To be considered for subsidised rental housing, households must meet HDB's eligibility criteria and must be facing severe financial difficulties.

Sir, I would like to remind all flat buyers that they must exercise financial prudence in their home purchases and buy a flat that is within their means. Those who borrow from the banks to buy HDB flats are subject to the terms and conditions imposed by the banks. If they default on the loan payment and are unable to make alternative repayment arrangements, they risk having their flats repossessed.

Dr Amy Khor Lean Suan: I would like to ask the Minister how does the number of 76 cases of flats repossessed compare to purchasers who were not asked to get loans from the banks when there were only HDB loans available. My other question to the Minister is: for those in financial hardship, dire financial needs, when the flats are repossessed and if they do not qualify, say, for rental flats and exemption cannot be given, would the Ministry consider putting in place some policy or guideline as to whether such displaced owners can get HDB financing

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because many of them actually have got credit rating problem and would not be able to get subsequent bank loans?

Mr Mah Bow Tan: Sir, the situation before 1st January 2003 when HDB was giving out market rate loans was that there were very few HDB cases of mortgagee sales by the HDB. However, I think that is not a useful comparison because HDB, as the Member knows, has a much more sympathetic approach towards such cases. When the policy was made to open up the housing loan market to the private sector, in this case to the banks, the objective was to give buyers more choices. The buyers who took market rate loans from the banks fall into two categories: first, those who are eligible for HDB concessionary loans. These buyers could easily have got a HDB concessionary loan but they did not. One of the reasons could be because, at that time, the banks were offering very attractive rates.

Second, there is the category where they are not eligible for HDB concessionary loans. But that does not mean that they are living in the streets, or in the void decks, or in Changi beach park. They have a choice. They are not eligible for the concessionary rate loans for several reasons. (1) They could be PRs; (2) they could be private property owners; (3) they could be high income households, those earning above $8,000; (4) they could be those who have already taken at least two HDB concessionary loans; or, (5) they could have taken one loan but are downgrading. For the last category, as Members may know, we have been fairly sympathetic in looking at these cases.

Whichever category they belong to, my point is that they do have a choice and the opening up of the market rate loan to the banks has given them this choice, and 65,000 flat buyers have exercised this choice. But I must also add

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that even as they are given this choice, they must exercise it responsibly, they must continue to make sure that they buy a flat which is within their means and that they are able to service the loan, and if they are not able to do so, they must also be aware that they are now subject to a contract between them and the bank, whereby if they do not fulfil their part of the contract, they may be subject to repossession. Different banks will have different policies and they will be different from the HDB. But those who exercise this choice that has been given to them must exercise their choice responsibly and must be fully aware of their consequences.

So the issue is not a comparison between the situation before and after 1st January 2003, but a comparison between the number of mortgagee sale cases versus the total number of bank loan cases, that is, between the 76 cases in relation to the 65,000 bank loan cases. This is not an exceptionally high level as far as the housing loan market is concerned, according to the banks. It is, in my opinion, not an excessive number. I do not think it is realistic to expect that there will be no such cases. But, so far, the number of cases has been within what the industry considers to be acceptable.

What about those who do not qualify for rental flats? Can there be some guidelines for HDB finance to be made available to them? In the first place, as I indicated earlier, those who are taking bank loans, who go this route, are already those who are not eligible for the HDB concessionary loans. There are many cases and they fall into one of the five categories that I mentioned earlier - the private property owners, the PRs, the high income households and those who have availed themselves of more than their fair share of housing subsidies through the concessionary loans. So I think it is difficult for us to make concessionary

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loans easily available for this group of people. In the first place, they really should not be purchasing a flat if they are not able to afford it and if they do not exercise their choice responsibly and if they choose to proceed, I do not think HDB should be in a position of providing such a big safety net for them.

Having said that, of course, Mr Speaker, Sir, as I have indicated in this House many times, once in a while, we do come across cases where the circumstances are exceptionally dire, exceptionally worthy of our reconsideration and, under those circumstances, we will not close the book and we will look at it sympathetically.

Mdm Ho Geok Choo (West Coast): Mr Speaker, I would like to ask the Minister at what price are the banks actually forced selling these flats and whether these prices are far below the market rate. If so, would there be an impact on the HDB property market, although the number at this point in time is actually very negligible to cause any stir? But, going forward, what really would be the impact and, also, the impact on the banks who are giving out such loans and the implications on the borrowers?

Mr Mah Bow Tan: Sir, I am not privy to that information, it is a private matter between the bank and the borrower or the potential buyer. So I am not able to enlighten the Member on this. But, generally speaking, because the cases of default are not excessive and they are within the norms of the industry, I do not think there will be any significant impact on the market.

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HDB FLATS:

(Concessionary interest rate): 11.

Mr Ong Kian Min asked the Minister for National Development (a) whether the concessionary interest rate

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offered by the Housing and Development Board (HDB) to HDB lessees is a flat rate fixed for the term of the loan; (b) under what circumstances will the HDB adjust upwards the interest rate of a lessee's housing loan; and (c) whether the concessionary interest rate will be adjusted upwards when the HDB lessee takes up the HDB Reduced Payment Scheme or HDB Deferred Payment Scheme.

Mr Mah Bow Tan: Mr Speaker, Sir, the HDB concessionary interest rate is currently pegged at 0.1% above the CPF Ordinary Account (OA) interest rate. The CPF OA interest rate is reviewed quarterly, in January, April, July and October. The HDB concessionary interest rate is also reviewed quarterly and it is revised in tandem with any revision in the CPF OA interest rate. It is not fixed for the term of the loan. The HDB concessionary interest rate currently stands at 2.6% per annum, as the CPF OA rate is 2.5%. So it is 0.1% higher.

When HDB mortgagors with concessionary loans are offered the Reduced Repayment Scheme or Deferred Payment Scheme, their mortgage interest rate is not adjusted.