Mr Chan Soo Sen at the Committee of Supply Debate [in response to cuts (o) to (r) under Head V]

SPEECH BY MR CHAN SOO SEN, MINISTER OF STATE FOR TRADE AND INDUSTRY DURING THE COMMITTEE OF SUPPLY DEBATE(MINISTRY OF TRADE AND INDUSTRY) ON MONDAY, 6 MARCH 2006 (IN REPLY TO CUTS (O) TO (R) UNDER HEAD V)

Government-Linked Companies

I would like to thank members for their comments. Mr Lawrence Leow asked Government to ensure that when we divested companies, we do not create dominant market players that would undermine competition in the marketplace. As a general rule, Government would observe the yellow-pages rule and divest out of business where there is active private sector participation, and there is no strategic value to Government of owning such businesses. The state of competition in the industry post-divestment would be a key consideration in any decision to divest Government holdings so we will proceed with a lot of caution.

In the case of JTC, we have announced on 21 Nov 05 that JTC would divest its ready-built industry facilities in certain market segments, including 71 high-rise factory blocks, three business park buildings, one warehouse and 800 units of workshops. Since then, JTC has appointed a financial consultant to formulate a divestment plan, which includes exploring the possible modes of divestment and the implementation timeline. The plan will factor in the need for competitive market forces to work well post-divestment and we expect the divestment plan to be finalized by the middle of this year.

The divestment of these JTC properties will enhance market competition in the provision industrial space over the long term. Companies will have more choices in the supply of industrial space to meet their various needs, especially in the high-rise factory segment, where JTC will divest its 21% market share. Private sector industrial developers will be able to operate flexibly to accommodate industry needs and to provide good customer service. We will monitor the supply of industrial space and provide for an orderly release of industrial land sites through the Government Land Sales programme. This will help ensure that prices do not escalate unduly due to tightness of supply. In other words we understand all your concern; we’ll proceed carefully so that there would not be undue increase in business cost.

Town Councils

Mr Chew Heng Ching asked for speedier liberalization of the electricity market so that town councils can benefit from choosing their retailers. I believe this call would have resilient in other sectors too. Since the electricity retail market started progressive liberalization in the year 2001, about 10,000 electricity consumers have become contestable. This includes about 172 electricity accounts that belong to the town councils. Town councils may approach EMA on how to apply for contestability, as there are criteria that they have to meet such as consumption of at least 10,000kWh per month and other technical requirements. Town councils with contestable accounts have generally been satisfied with the utility savings achieved.

But EMA is currently exploring how to leverage on new technology to achieve costs savings in retailing electricity to smaller consumers, so that they can also benefit from contestability. EMA will announce the details once they are ready.So hopefully it would not take too long.

Consumer Protection

Mr Yeo Guat Kwang spoke on the Consumer Protection (Fair Trading) Act or CPFTA. I like to assure Mr Yeo that anything to do with protecting consumer’s interest will be positively taken into consideration by my Ministry. In fact, following Mr Yeo’s suggestion at the Committee of Supply last year to review the CPFTA, MTI has set up a Taskforce to do so. The Taskforce is co-chaired by MTI and CASE and it includes representatives from consumer and business bodies as well as public agencies. The Taskforce has made several useful recommendations, one of which is to extend the scope of CPFTA to cover financial services so MTI supports this recommendation and is currently working with MAS on the implementation details.

Mr Yeo also highlighted the difficulties faced by specified bodies such as CASE in dealing with errant retailers. The CPFTA has clearly laid out the circumstances under which specified bodies can file an injunction order. If an errant retailer refuses to cooperate or sign a Voluntary Compliance Agreement (VCA), I would encourage the specified body to follow through with the enforcement procedures and obtain an injunction order against the retailer. I think this maybe a little bit troublesome but it will send a clear and strong signal that the specified body will not hesitate to act against such retailers so it may look for a good case at which to implement this procedure.

Mr Yeo also raised the matter on so called Lemon Law. This was something that the Taskforce had also considered but given the extensive effect of these laws and recent developments in other countries, the Taskforce has recommended that further study be done.

MTI will take into account the Taskforce's various recommendations, and conduct a public consultation for the proposed changes to CPFTA regulations.

As far as the regulation on time-share is concerned, complaints against time-share companies have remained high, with 158 complaints lodged with CASE last year.

MTI agrees with Prof Ivan Png’s workgroup that there should be proper disclosure of material information by time-share companies, so that consumers can make informed choices. But MTI does not believe that the solution lies in incorporating a Code of Governance for time-share companies within CPFTA. Such a code is better set by the industry, or a consumer body like CASE. The CPFTA is also not designed to have an ongoing monitoring mechanism to ensure that a timeshare company will continue to abide by a code of governance after a sale. This is better undertaken through an industry or consumer-led scheme like Case Trust, where there is an accreditation system to ensure continued compliance.

So in short, I want to assure Mr Yeo again that through the mechanism of consultation with CASE would continue to improve the measures with the interest of our consumers. Thank you.