Minister Lim Hng Kiang's written reply to Parliament Questions on CAP

Question No 851 of Notice Paper No 276 of 2008 

Name and Constituency of Member of Parliament
Mr Seah Kian Peng, Marine Parade GRC

Question
To ask the Minister for Trade and Industry what measures are being taken by the Committee Against GST Profiteering in adopting a proactive approach to ensure that businesses do not profiteer by maintaining high prices despite the recent fall in prices of commodities.

Answer
1.The Committee Against GST Profiteering (or CAP) was set up when GST was first introduced in 1994. Its role is to investigate specific complaints on using the Goods and Services Tax (GST) as an excuse for profiteering. The most recent increase in GST was in Jul 2007. Since then, CAP has worked with grassroots organizations and the Consumers Association of Singapore (or CASE) to investigate 274 cases of potential GST profiteering. Grassroots leaders have visited individual stall owners and worked with them to resolve the issue. For chain stores, CASE has written directly to the businesses asking them to explain their reasons for increasing prices. No new complaints pertaining to GST profiteering have been received by CAP in the past eight months.

2.High prices are not always due to profiteering. In a competitive and open economy such as Singapore, prices move up and down in response to changes in supply and demand. Most price increases that Singapore experienced in the past year can be traced back to increases in global prices such as the price of commodities. For instance, higher oil prices have translated to higher pump prices, taxi fares and airfares.

3.Consumers naturally expect prices to adjust when the price of commodities fall. Global commodity prices have eased from their peak in Jul 2007. This already has, and should continue to help ease domestic price pressures in the coming months. On a year-on-year basis, the overall Consumer Price Index (or CPI) inflation has come down from its high of 7.5% in the second quarter of 2008, to 6.6% in the third quarter.

4.Consider energy prices. Retail petrol prices have declined in tandem with world market trends. The price of one liter of Grade 95 petrol was about $2.30 at its peak in Jul 2008 but has since dropped to about $1.55, a 33% decrease. Taxi and airline companies have also announced adjustments of their fuel surcharges.

5.However, there is often a time lag between import and retail prices. This is because retailers often purchase their goods in bulk, or sign contracts on advance orders, thereby locking in prices that could be higher than current market prices. The time-lag not withstanding, a random survey of rice sold in our supermarkets suggests that between May 2008 and Jan 2009, retail prices of rice of 5kg and 10kg-pack declined between 5% to 17%.This shows that international prices of commodity filter through our distribution channels which we believe are efficient because of large number of players.

6.Ultimately, market competition as defined by the presence of many buyers and many sellers would provide the best defense against unreasonable price increases. By creating a conducive and competitive business environment for enterprises to thrive, we ensure that consumers have a wide range of choices. This allows consumers to switch to cheaper alternatives should some business charge unreasonable prices. For instance, consumers now have the choice to switch to cheaper house brands, as more local supermarkets widen the variety of products under their house brands.

7.There may be some businesses that maintain high prices unreasonably. The public can report any such cases to CASE which will not hesitate to investigate further. In addition, to encourage competitive pricing from retailers, CASE has been publishing price surveys on groceries on its website since May 2008. Consumers should make full use of these price surveys to make informed choices when they make purchases.