1. Mr Speaker, thank you.

2. Minister Lawrence Wong has given Members an overview of the macroeconomic environment, outlook for inflation and support for households.

Even as we work to manage the immediate cost pressures that businesses and households are facing, it is equally important that we strengthen our economic resilience and prepare ourselves for a possibly protracted uncertain operating environment.

3. Let me elaborate on the external developments that have led to higher energy costs and supply chain disruptions, as well as our immediate and medium-term strategies to enhance the security of our key supplies and strengthen our resilience against external price fluctuations.

I will also address Members’ questions on support for businesses and profiteering.

Energy Security and Rising Energy Prices

4. Domestically, around 95% of our electricity is generated from imported natural gas.

Our electricity generation companies (gencos) generally rely on long-term Piped Natural Gas (PNG) and Liquefied Natural Gas (LNG) contracts to meet their needs.

They use spot LNG on an opportunistic basis to supplement their long-term contracts.

By and large, this has allowed us to keep electricity prices relatively stable and mitigate the impact of global price shocks.

5. However, we cannot fully insulate ourselves from the volatilities in the global energy market.

Since September last year, a confluence of factors caused the prices of oil and natural gas to spike, and this has spilled over into our domestic energy market.

a. Increased oil and gas consumption as major economies around the world emerged from the pandemic, seasonally-high energy consumption during the winter months in the northern hemisphere, and a series of unexpected gas production outages led to a supply-demand mismatch in global energy markets.

b. Closer to home, upstream production issues in Indonesia’s West Natuna gas field and gas pressure issues from South Sumatra in the fourth quarter of 2021 caused disruptions to our PNG supplies.

As a result, some gencos had to purchase more spot LNG at elevated global gas prices to make up for the drop in PNG supplies.

6. Although some of the demand pressures have abated as winter in the northern hemisphere comes to an end, and upstream gas production issues in the Indonesian gas fields have been resolved, the gas supply situation continues to remain tight, exacerbated and made protracted by the conflict in Ukraine.

7. As I have shared with the House previously, MTI and EMA have put in place measures to secure our electricity supply and maintain the orderly functioning of the wider energy sector.

Since October last year:

a. We established a Standby LNG Facility (SLF), which gencos can draw from to generate electricity in the event of disruptions to their natural gas supplies.

b. We also put in place requirements for gencos to contract sufficient fuel to meet their commitment to customers’ demands and needs.

c. These measures will bolster gencos’ existing stockpile and provide additional layers of fuel security to cope with the short-term shocks to global gas supply.

However, they are costly and will need to be carefully calibrated to manage the cost impact on consumers.

d. To maintain power system stability and reliability, we modified Market Rules to allow EMA to direct gencos to generate electricity using gas from the SLF, if there are potential temporary shortages in energy supply.
8. These measures have ensured that we have sufficient fuel and electricity supply and stabilised the Uniform Singapore Energy Price (USEP).

The average USEP for the first quarter of this year has stabilised to around $360/MWh – around the cost of electricity production, and this is compared to an average of $460/MWh in the fourth quarter of last year.

9. Since January 2022, EMA has been working with electricity retailers and generation companies to help large consumers secure retail contracts.

a. For example, businesses can secure one-month fixed price plans and retail contracts with significant fixed price components through the Temporary Electricity Contracting Support Scheme (TRECS).

So far, there has been sufficient supply under TRECS to meet demand.

b. EMA has also worked with Sembcorp Power and Keppel Electric to offer long-term fixed price plans for business consumers with an average monthly consumption ranging from 4 megawatt-hour to 50 megawatt-hour. These plans range from 6 months to 3 years.

c. EMA’s efforts ensure that consumers, especially those affected by exiting retailers, can choose from a range of retail contracts to suit their needs.

Such longer-term contracts also provide gencos with more certainty of demand, which allow them to contract for the gas needed to serve consumers.

10. Mr Speaker, energy powers our economy and our society.

Given the uncertain global energy situation, EMA will be extending all measures, including TRECS, to end-June 2022.

This will give businesses, especially SMEs, a bit more time to respond to the evolving global energy situation.

EMA will continue to monitor the situation and consider extending the measures further if necessary, or introduce new measures if necessary.

11. But consumers must also be prepared mentally, to face higher electricity bills over time, especially if the price of oil and gas remains elevated.

Singapore is not an energy producer.

The Government can and will help to smooth out extreme fluctuations in energy prices, but over the longer-term electricity prices will have to reflect the costs of procurement and production.

It is not tenable for the Government to subsidise electricity consumption in Singapore, in order to keep domestic electricity prices lower than the global prices which Singapore must pay for energy in the first place.

a. Last week, SP announced that it would be raising regulated tariff rates for its consumers by approximately 10%.

b. Those on retail contracts are already starting to see higher electricity prices when renewing their contracts.
 
c. These higher electricity prices reflect the increasing costs of electricity production in this challenging climate, and may continue to increase depending on the direction of fuel price movements.

12. The protracted energy crunch has highlighted the need to make our power system more resilient and less susceptible to fuel supply shocks.

a. Since 2014, we have sought to diversify our fuel sources to safeguard our energy security by building a LNG terminal.

This allows us to tap gas sources further afield.

The LNG terminal has sufficient capacity to meet all our natural gas needs should PNG be unavailable.

b. In the longer term, we will continue to diversify our energy sources.

i. We will quadruple our solar deployment by 2030, to generate at least 2 gigawatt-peak of electricity by 2030.

The Government has taken the lead in accelerating rooftop solar deployment.

One example is the SolarNova programme, which aggregates demand for solar systems across the public sector.

We will continue to explore ways to maximise Singapore’s solar potential.

ii. We also intend to import up to 4 giga-watt of low-carbon electricity by 2035.

Besides decarbonising the power sector, this will also reduce our reliance on natural gas.

iii. Beyond this, we will continue to explore other low-carbon alternatives such as hydrogen, geothermal and even nuclear energy, which may have the potential to improve our energy security and our energy resilience.

13. These measures will take time to bear fruit, but we will have a more secure and more resilient power system over time.

14. The Minister for Finance has touched on Government’s efforts to help households defray utilities costs. As fellow Singaporeans, I hope that we can also do our part.

I urge all of us to conserve energy, just like how we conserve water.

Small lifestyle adjustments such as switching off appliances that are not in use, raising the temperatures in an airconditioned environment by 1-2 degrees and using the fan instead of air-conditioning where possible, can go a long way in maintaining a sustainable, secure and resilient energy future for all of us.

Security of Key Supplies

15. Let me now address Members’ concerns about the security of our supplies of key commodities such as food and fuel, as well as rising costs.

16. As the Minister for Finance mentioned, the Government is closely monitoring food prices and will continue to ensure that basic food necessities remain accessible and affordable for everyone.

We are also keeping a close watch on global supply chains and our stock levels of essential food items to ensure that Singapore continues to have access to adequate supplies.

Thankfully, our supply of essential food products has not been significantly affected by the Ukraine-Russia conflict and we have not had to draw on our food stockpiles.

But we will continue to diversify our import sources. We will not rest on our laurels. We will ramp up our stockpiles and supplies from alternative sources where needed to ensure that we have continued access to basic food necessities.

17. I would also like to assure the House that we have put in place measures to ensure that we have adequate fuel supplies, including petroleum.

Members will appreciate that it would not be appropriate for me to share the specifics of this plan for security reasons.

18. Mr Speaker, many businesses are facing cost pressures and have had to raise the prices of their goods and services as a result.

a. For example, pump operators have raised petrol and diesel prices to reflect the rise in crude oil prices over the past months.

b. Some landlords have also passed on increased utility costs to their tenants, including those in food courts and coffeeshops.

The Code of Conduct for Leasing of Retail Premises, which was issued by the Fair Tenancy Industry Committee (FTIC) last year, sets out guidelines on how landlords can do so.

19. Often, these increases are understandable as businesses are also facing pressure on their bottom-lines.

20. But there are also many other businesses that have gone out of their way to hold prices steady and offer discounts to consumers.

For example, NTUC FairPrice has rolled out initiatives to help consumers stretch their dollar, such as by providing a 5% discount on 100 key essential items every Friday.

These comprise household staples such as rice, oil, eggs, milk and vegetables, and should help to mitigate some of the cost pressures felt by households.

Giant has also committed to keeping the prices of essential items stable, and recently expanded coverage to include close to 150 essential products.

I thank these companies for doing so.

Monitoring Anti-Competitive Behaviour

21. Some Members have also expressed concern about profiteering behaviour.

I would like to assure the House that the Government keeps a close watch on the prices of essential goods and services and will not hesitate to investigate anti-competitive behaviour.

a. The Competition and Consumer Commission of Singapore (CCCS) keeps a close watch on the movements in pump prices.

So far, movements in pump prices largely mirror the movements in crude oil prices, though they have increased to a smaller extent.

As of end-March 2022, crude oil prices were about 40% higher than in January 2022, while the price of petrol and diesel were, on average, about 15% and 30% higher respectively.

We have no evidence to suggest that there is collusion among the petrol retailers.

CCCS will take firm enforcement action, including imposing financial penalties on infringing firms, if there is any evidence of anti-competitive behaviour, such as coordinated price increases, and this applies across the board to any industry.

b. To deter unreasonable pricing, we will also support consumers in being well-informed on alternative options.

The Price Kaki application and the Fuel Kaki website developed by the Consumers Association of Singapore (CASE) allow consumers to easily compare the effective prices of groceries, hawker food items and retail pump prices across different retailers.

CASE will also enhance the Price Kaki application to enable users to compare the prices of similar items by their weight and volume.

This will help consumers make better purchasing decisions where retailers choose to maintain prices but reduce the quantity of products.

c. The Committee Against Profiteering (CAP) has also been reconvened ahead of the GST increase.

The role of the CAP is to investigate feedback on unjustified increases in the prices of essential products and services using the GST increase as an excuse.

i. CAP Chairman MOS Low Yen Ling has shared that the work of the Committee is more complex due to the current inflationary climate.

Nevertheless, the CAP will review and evaluate all the feedback it receives and engage businesses where necessary.

The CAP may name and shame businesses that use the GST increase as an excuse to raise prices.

22. Mr Speaker, Sir, I can understand why Members are concerned about anti-competitive behaviour.

Such behaviour artificially inflates costs to households and businesses.

We will work closely with our industry partners to diversify our supply chains, investigate anti-competitive behaviour, encourage price transparency, and enable free market competition to function as it should.

Ultimately, this is the best way to safeguard all of our consumers’ interests.

Addressing Businesses and Household Concerns over Rising Prices

23. Members have asked what the Government can do to help businesses and households cope with the rising costs.

I would like to assure Members that we are committed to partnering with Singaporeans to ride through this difficult period.

At the same time, we must also be prepared for longer-term trends that may put further upward pressure on prices.

The Minister for Finance has touched on some of these trends in his speech.

24. Allow me to elaborate.

25. First, we will work with a range of stakeholders to carefully manage the various cost drivers faced in the near term.

a. The Minister for Finance has touched on measures to help households manage the higher costs of living.

b. The Government has also set aside considerable resources to help businesses, especially SMEs, cope with higher costs.

i. The Small Business Recovery Grant provides $1,000 per local employee, and up to $10,000 per firm.

The Grant will help eligible firms in sectors most badly affected by COVID-19 restrictions and is also available to SFA-licensed operators and stallholders in markets, hawker centres, coffeeshops and food courts.

All in all, the Grant will provide $175 million of support for small businesses.

IRAS will notify businesses of their eligibility and disburse the grant from June this year.

ii. The $500 million Jobs and Business Support Package, including the extended Jobs Growth Incentive, will support firms with their investments in workers.

iii. The Progressive Wage Credit Scheme will also support businesses with their manpower costs as they uplift the wages of our low-wage workers.

The Minister for Finance announced a $2 billion injection to this Scheme at Budget this year.

iv. The extension of the enhanced enterprise loan schemes will facilitate SMEs’ continued access to financing and ease their cashflow.

v. These measures were announced at Budget just last month, and reflects our commitment to supporting our businesses through this difficult period.

We are closely monitoring the situation and will provide more support for affected sectors, if needed.

c. As electricity prices rise, being energy efficient will become increasingly important to managing business costs.

i. We have already put in place several measures to help businesses improve their energy efficiency.

For example, NEA's Energy Efficiency Fund provides grants for manufacturing companies to adopt energy efficient technologies; BCA's Green Mark Incentive Scheme provides grants for building owners to improve the energy performance of existing buildings; and ESG's Enterprise Sustainability Programme supports local enterprises to optimise energy and carbon use.

ii. We understand that more businesses will be looking at ways to improve their energy efficiency and make their operations greener and more sustainable during this period.

The Government will do our part to assist companies in this transition.

We are studying various options such as expanding the range of supportable solutions or making it easier for businesses to apply for existing grants.

d. Fuel intensive sectors, such as the transport and logistics sector, have also been hard hit by volatile petrol prices. We encourage our firms to double down on operating more efficiently and sustainably.

This includes taking part in industry initiatives to share jobs to optimise asset utilisation and use fleet management systems to track and monitor fuel consumption.

e. By being more resource efficient, businesses can better deal with unexpected, exogenous shocks that come our way. This goes a long way to improving our resilience and our energy security.

26. Second, we will continue to work with industries and firms to transform and improve their overall productivity, so as to sustain real wage growth for Singaporeans.

a. In Budget this year, we announced that we are setting aside around $600 million over the next four years under the Productivity Solutions Grant (PSG).

The PSG supports companies as they adopt various solutions to improve their productivity.

b. We have also expanded the coverage of the SkillsFuture Enterprise Credit (SFEC) to allow more smaller and micro enterprises to benefit.

c. MOF had also announced a new $70 million grant to be administered by NTUC to support companies with Company Training Committees (CTCs) to implement their transformation plan, redesign jobs and upskill workers for better workforce productivity.

d. At the Committee of Supply last month, MOS Low Yen Ling also announced the Food Services and Retail Business Revitalisation Package which will provide additional support to our food services and retail companies to improve their productivity, build the companies’ capabilities to pivot and transform, hire and train more local workers, and stay competitive and relevant.

e. I urge all of our firms to tap on these resources; there is no better time than now, to tap on these resources, to adapt and transform, and better position themselves for the future.

27. Finally, we must and will continue to strengthen our links with the rest of the world.

As a small country, we cannot close ourselves off from the rest of the world just to avoid importing inflation or exposing ourselves to volatilities in the global markets.

Staying connected to global markets is essential to helping our businesses grow beyond our borders, attracting investments into Singapore, and creating good jobs for Singaporeans.

This is underpinned by our wide network of Free Trade Agreements, which create opportunities for our businesses in other regions, and provide benefits such as tariff savings, investment protection, amongst others.

We will continue to strengthen regional and international economic integration and help our enterprises, especially the SMEs, utilise and benefit from our network of Free Trade Agreements (FTAs).

Conclusion

28. Sir, as a small and open economy, we are not and will not be able to be fully insulated from global shocks. But make no mistake:

a. One, we will continue to safeguard the security of our essential supplies, such as energy and food, and refresh our strategies for a more resilient economy.

b. Two, even when prices do go up, we will do our best to cushion the impact.

c. Three, we will closely monitor price movements and will not hesitate to take enforcement action against anti-competitive behaviour.

d. Last and not least, we will continue to monitor, to watch the situation closely and will consider providing further assistance if needed.

29. The past two years have indeed been challenging for all of us.

Many businesses have been looking forward to riding the wave of a strong recovery in the global economy as we emerge from this pandemic.

The Ukraine conflict and global inflationary pressures adds considerable volatility and stress to what is an already challenging business environment.

But let’s not be pessimistic about the future.

We will need together, as a nation, to strengthen our defences against external shocks, to pivot and transform our businesses to adapt to the changing global environment, and we have done this many times before..

Above all, we will need to work together, the people, the businesses, and the Government, so that we can weather the headwinds and emerge stronger.

30. Thank you.