Water must be priced in full to reflect its true scarcity, says Masagos

Channel NewsAsia 1 Mar 17;

SINGAPORE: Water must be priced "fully" because in Singapore, it is unlike any other ordinary commodity, said Minister for the Environment and Water Resources Masagos Zulkifli in Parliament on Wednesday (Mar 1) in response to concerns raised about the water price hike announced last week.

"We subsidise housing, healthcare, education, but not water consumption," he noted. "Water is a strategic issue. It is a national security issue. We must price water fully."

He said that even though targeted financial assistance is given to households, water must be priced correctly.

"The consumer must feel the price of water, realise how valuable water is, every time he or she turns on the tap, right from the first drop."

The price of water should reflect its long-run marginal cost (LRMC), the minister said.

The Government had last decided to revise the water price substantially in 1997, to reflect its true scarcity value. “If we needed any additional water, where would it come from? How much would that additional litre cost? That is what we call the LRMC,” said Mr Masagos.

COSTS HAVE RISEN FOR THREE REASONS

Costs have gradually gone up, Mr Masagos pointed out, adding that at some point, a price revision becomes essential.

More desalination plants have to be built to meet water demand and the Government will build three within the next three years.

In 2005, the first-year price for water from Singapore's first desalination plant was S$0.78 per cubic metre. Now, the first-year price at the newest plant at Marina East was S$1.08 per cubic metre, which is a 40 per cent increase, explained Mr Masagos.

It is also costing more to build new and replacement pipes to deliver water, as Singapore becomes more urbanised, Mr Masagos said.

While tunnelling below roads to lay pipelines minimises inconvenience to road users and the public, it costs two-and-a-half times as much as the traditional method of laying pipes, he added.

Mr Masagos also said that PUB will also have to more than double the rate of renewal of old pipelines to minimise leaks and disruptions, from the current 20 kilometres per year to 50 kilometres per year.

In addition, effluent water, left over after a greater proportion of used water is reclaimed for NEWater, becomes more concentrated and more difficult and costly to treat, he said.

But the Government has been able to keep down the cost of water and hold water prices unchanged for 17 years, as a result of research and development leading to NEWater, and advancements in desalination technology which saw the move from multi-stage flash distillation to membranes, Mr Masagos added.

“The truth is this - we are still a water-stressed nation,” he said. “Singapore was ranked first among countries with the greatest risk of high water stress in 2040, according to the World Resources Institute.”

Water conservation was something earlier generations of Singaporeans had internalised. Singaporeans put up with water rationing, supported water saving campaigns and paid the cost of cleaning up rivers, said Mr Masagos.

“That was how water conservation became our DNA,” he added.

In fact, a caller on 938LIVE's discussion on water was very upset when his colleague used the shower at work for half an hour, Mr Masagos said. "He said, 'You don't do this at home. So why do it at work? Because it's free?'"

This attitude of always wanting to conserve water, even when it comes free, is the attitude to take moving forward, said Mr Masagos.

WATER WILL STILL BE AFFORDABLE

Water will still be affordable overall, Mr Masagos stated. It will remain about 1 per cent of household income, and 75 per cent of businesses will see an increase of less than S$25 per month in water bills.

Mr Masagos added that Malaysia's Linggiu Reservoir is operating at a level below what Singapore is comfortable with and Singapore cannot discount the possibility that dry weather would persist or worsen in future when climate change becomes pronounced.

“Johor is also drawing water from the Johor River and Singapore is discussing this with Malaysia to ensure that Johor’s actions do not compromise our ability to draw the 250 million gallons per day that Singapore is entitled to from the Johor River under the 1962 Water Agreement,” he said.

- CNA/sl


Counter-intuitive to give rebates for saving water: Masagos
The Minister for the Environment and Water Resources was responding to questions by Workers’ Party MP Pritam Singh on the water price hike.
Justin Ong Channel NewsAsia 1 Mar 17;

SINGAPORE: Handing out rebates to people who save water would be “counter-intuitive” to ensuring they pay for the cost of producing water, said Minister for the Environment and Water Resources Masagos Zulkifli‎ on Wednesday (Mar 1).

“To give back that cost means we are subsidising the use of water,” he explained. “Any way we change the (price) structure of water that we have today either involves cost or is counter-intuitive to trying to promote the conservation of water.”

Mr Masagos was responding to a point made by opposition Workers’ Party (WP) Member of Parliament (MP) Pritam Singh against the 30 per cent water price hike announced as part of Budget 2017 last week.

The day before, Mr Singh had also asked for a more detailed breakdown from the Government on its water pricing methods, while WP’s Non-Constituency MPs (NCMPs) Dennis Tan and Daniel Goh both highlighted the impact the water price hike could have on the cost of living in Singapore.

On Wednesday, fellow WP MP Png Eng Huat asked about the scale of losses made supplying water. “If this Government is bent on raising the price of an essential commodity by 30 per cent, it is certainly the right time to open the books to Singaporeans to justify the increase,” he said.

In response, Mr Masagos said: “We are unable to provide details of computation because of commercial sensitivities. We still need to build more desalination plants and NEWater plants. As more desalination, NEWater and water reclamation plants are yet to be built or expanded, revealing the specifics … could prejudice future bids.”

He assured the House that the cost reflected the best the market could offer and added that technology was also taken into account in the latest review.

“Technologically, we have squeezed everything we can from the current water processing technology,” said Mr Masagos. “It will take several more years to achieve the next breakthrough and bring it to a deployable scale.”

On the magnitude of the increase, he said: “Thirty per cent price revision translates to less than a dollar a day for 75 per cent of our businesses; and still within 1 per cent of household income for water expenses."

“I am heartened that some businesses have taken this increase in context and have explicitly said that they would not increase prices,” Mr Masagos added.

SECURING WATER SUPPLY

Mr Singh further sought a number of clarifications after Mr Masagos’ speech, one of which was on how PUB assesses when to increase the price of water.

“On the issue of books in PUB, it is very complicated for me to attempt to simplify what the numbers really mean,” said Mr Masagos. “Our books are in accruals; our budget is in cash, and I have to reconcile them.”

“I will ask the Minister for Finance to look at the whole-of-government approach in funding our water infrastructure. That makes more sense. Some parts are Government-funded, some parts are PUB-funded. It does not add up if we look at each book separately.”

Mr Singh also asked if PUB would consider deepening local reservoirs to increase the local catchment.

Said Mr Masagos: “Unfortunately, the answer is not as simple as the question. Currently, studies show there’s a particular yield from a reservoir if you leave it as it is, and there’s a risk this yield can be reduced if you start disturbing the bottom of the reservoir.

“So we don’t want to do something adversely affecting the yield of the reservoir … I’ve asked our experts to study this further … But right now, the prospects are not fantastic.”

Mr Masagos also said that at present, there was no need to directly supply NEWater to homes to save costs.

“Theoretically we can, but we don’t have to right now and certainly when we need to, we have to put the right processes to ensure … it is safe for our house to drink from end to end,” he explained.

Mr Singh had also asked if there would be another price hike if water levels in Malaysia's Linggiu Reservoir dropped to zero.

“The price of water as it stands today … is the price of producing the next drop of water - if for whatever reason the next drop of water that we need to draw will be coming from desalination or NEWater, it’s already priced in,” said Mr Masagos.

“The problem is not the price. The problem is what can we do to prevent that from happening. It’s not just an issue of supply, it’s a very complicated issue should that situation ever occur to us."

- CNA/jo


Water is 'existential' issue for Singapore: Chan Chun Sing
Channel NewsAsia 1 Mar 17;

SINGAPORE: Singapore must never forget that water is an existential issue for the country, needed for its survival, said Minister in the Prime Minister’s Office Chan Chun Sing in Parliament on Wednesday (Mar 1).

He spent a good part of his speech addressing the subject of water prices, which will go up by 30 per cent over two years, as announced in Budget 2017.

“I can understand the angst of our people with the water price increase … how it will feed through to the cost of living,” said Mr Chan.

But Singaporeans must also agree that “water is existential”, said Mr Chan, adding that this has been the case since 1965 when Singapore became independent. “We have to start from this basic premise,” he told the House.

Mr Chan, who is also the labour chief, laid out the challenges that Singapore faces in managing water resources.

Demand for water has gone up, even as Singapore builds more reservoirs, desalination and NEWater plants.

He pointed out that the country now has 17 reservoirs, up from the original three - MacRitchie, Seletar and Pierce - and two-thirds of Singapore’s entire land is made up of water catchment areas. “I dare say no other country has planned it (as) such, no other city has planned it (as) such."

Mr Chan acknowledged that technology has helped Singapore meet some of its water demand, but its people still need to be prudent in using the resource, he said. “How many more desalination plants and NEWater plants must we build in order for water to never be a weapon pointing at our head?” he put to members of the House.

On the supply from Johor’s Linggiu Reservoir, Mr Chan warned that water needs of people in the southern Malaysian state are also increasing. They are also extracting water upstream of Linggiu Reservoir, said the minister. “That affects our yield but we want to and we are committed to work with the Malaysian and Johor government, the Johor authorities to see how we can develop the water system for both the benefit of Malaysia and Singapore.”

MORE AWARENESS ON CHALLENGES NEEDED

During the Budget debate which kicked off on Tuesday, some Members of Parliament had raised concerns over the timing of the water price hikes and their impact on the cost of living.

In response to those concerns, Minister for the Environment and Water Resources Masagos Zulkifli explained earlier on Wednesday that the costs of producing water have gone up for three reasons, and that the Government decided to revise water prices to "reflect its true scarcity value".

What the debate has shown is that more needs to be done “to socialise our people to the challenges that we are facing on water front”, said Mr Chan.

“The fact that we have such an intense discussion reflects that we have left this issue off our nation's psyche for too long.”

The minister stressed that there is never an easy way to manage the issue of price hikes but pointed out that a 30 per cent increase, after 17 years without any hikes, translates to an increase of about 1.6 per cent a year.

He said: “We can do this every year, we can do this every five years, we can do this every 10 years but regardless of which way we choose, we have to make sure we never forget that water is existential.”

Ultimately, he said the Government needs to be responsible in taking care of not only the short-term needs but also address future challenges.

“A responsible Government is not one which will raise the price and not take greater care of the poor,” said Mr Chan. “A responsible Government is one who knows what is not sustainable and puts a stop to it now.”

- CNA/gs


Water must be priced fully as it’s a matter of national security, says Masagos
SIAU MING EN Today Online 1 Mar 17;

SINGAPORE — While housing, healthcare and education are subsidised in Singapore, water has to be priced fully as it is a matter of national security, and consumers “must feel the price of water” to realise its value, said Minister for the Environment and Water Resources Masagos Zulkifli on Wednesday (March 1).

But even with the impending 30 per cent hike in water prices, the price of water here will fall short of the long-run marginal cost (LRMC) — which is the increase in cost over the long run from rising production, said Mr Masagos, who was speaking in Parliament during the debate on the Budget statement.

Speaking a day after Members of Parliament, including those from the Workers’ Party, had questioned the timing and need for the price hike, he noted that water is unlike any other ordinary commodity in Singapore.

“Water is a strategic issue. It is a national security (issue). We must price water fully … The consumer must realise how valuable water is to us in Singapore every time he or she turns on the tap — right from the first drop,” said Mr Masagos.

“With the 30 per cent increase that we have announced, the price will be close to, though slightly lower than, the price of the next drop or LRMC today. This is the best way to emphasise the scarcity value of water.”

Mr Masagos also outlined how the cost of water has gradually gone up over the years, but said that details of how the LRMC was computed cannot be revealed.

Revealing these specifics could prejudice future bids for desalination, NEWater and water reclamation plants that have yet to be built or expanded, he explained.

The LRMC of water comes from the costs of NEWater and desalination. Between the two, Singapore will have to depend more on desalination to meet increasing water demands, as there is a limit to recycling used water in the NEWater plants.

Hence, three more desalination plants will be built within the next three years.

Meanwhile, as the proportion of water being reclaimed for NEWater increases, effluent or waste water becomes more concentrated, making it difficult and costly to treat.

It also costs more to build new and replacement pipes to deliver water.

Mr Masagos noted that treated water from Singapore’s latest desalination plant at Marina East costs S$1.08 per cubic metre for the first year, which is about 40 per cent more than the corresponding price at Singapore’s first desalination plant, Singspring, in its first year.

The last revision in water prices was between 1997 and 2000, to reflect water’s true scarcity value. Back in 1997, there were elements in Malaysia threatening to block the supply of water from Johor, while Singapore was embarking on desalination to secure its water supply.

“There was no way for the Government then to move the water price to the true cost of the next litre — the price of desalination — so it was moved instead, in steps, over the period 1997 to 2000, to today’s water price,” said Mr Masagos.

He also stressed that, for three-quarters of the businesses here, the 30 per cent increase in water prices translates to an increase of less than S$25 a month in water bills.

Overall, water will still be affordable because it will remain at about 1 per cent of the household income.

Responding to a slew of supplementary questions from Mr Pritam Singh (Aljunied GRC), Mr Masagos said providing rebates to those who save water is “counter-intuitive” to getting Singaporeans to pay for the cost of producing water. “To give back that cost means we are subsidising the use of water,” he said.

Mr Seah Kian Peng (Marine Parade GRC), meanwhile, also spoke against detractors who “lost no time in politicising” the water price hike.

The accusation that the Government is “making money off water” cannot be further from the truth, he said, citing 2012 figures showing that the authorities subsidised at least 30 per cent of water in Singapore, in simple terms.


Raft of water-saving events in the pipeline
FARIS MOKHTAR Today Online 1 Mar 17;

SINGAPORE — Ahead of a water price hike later this year, a stream of activities is in the pipeline to drive home the water conservation message, including a water-rationing exercise for over 14,000 students, a campaign to encourage the drinking of tap water, and community activities to encourage Singaporeans to walk the talk in treasuring the resource.

The month-long lineup of events is being held in conjunction with the Singapore World Water Day (SWWD), which will be launched by Deputy Prime Minister Teo Chee Hean on Saturday (March 4).

This year’s water-rationing exercises will see 45 schools — 34 pre-schools, one junior college and ten primary and secondary schools — coming onboard, in hopes that water conservation habits will take among the young. Only five schools took part last year.

In some schools, students would not have access to water supply from taps or water coolers between one to four hours for a day. They are required to bring bottled water for drinking, washing their hands, and brushing their teeth.

From this month, food establishments can put up a “Drink Tap Water” label to inform consumers that they will be serving tap water. This is to highlight that the country’s tap water is of good drinking quality, and that the public should treasure this limited resource.

A “Community Meter” initiative will also be launched to measure contributions to the water cause. For sharing water conservation tips on social media or participating in SWWD events, “drops of water” will be accumulated in the Community Meter, and tracked live on the SWWD website. Participants can earn rewards such as free entry to ActiveSG’s 23 swimming pools island-wide.

PUB also announced that from next month, a four-tick rating for washing machines will be introduced under the Water Efficiency Labelling Scheme, a grading system for the water efficiency level of a product.

Last month, Finance Minister Heng Swee Keat announced a 30 per cent hike in water prices when he delivered the Budget statement, the first price adjustment in 17 years. Recently, record low water levels in the Linggiu Reservoir in Johor, which allows Singapore to draw water more reliably from the Johor River, have also raised the spectre of a disruption in water supply.

The first water-rationing exercise was conducted on Wednesday at Woodgrove Secondary School in Woodlands, where Minister for the Environment and Water Resources Masagos Zulkifli observed students carrying pails of water from a collection point to the canteen to wash their hands.

In a Facebook post, Mr Masagos noted that the last nationwide water-rationing exercise was held in 1964 due to a drought, and said that such exercises are important especially for the younger generation who have never experienced water-rationing, and “to remind ourselves that we should not take water for granted”.

At NurtureStars – one of the participating pre-schools – water supply at its six branches would be turned off for a day between 9am to 1pm. They would be taught how to efficiently use the two bottles of 1.5 litres of water they are required to bring to school.

“In pre-schools, students wash their hands quite often because hygiene is very important. But at the same time, we don’t want them to take water for granted. We want them to understand that it’s a precious resource,” the pre-school’s general manager Ng Kuan Wei said.

Woodgrove Secondary School student Teo Zhan Yue, 15, said having watched documentaries on how less developed countries struggled to obtain clean water made him realise the importance of having clean water and the need to conserve it. And he also tried to educate his younger sisters to adopt water conservation habits such as turning off the taps while brushing their teeth and taking shorter showers.

“I would previously complain to my mother about their poor habits but decided to take the approach where I myself nag and irritate them to until they get the message,” chuckled Zhan Yue, a Secondary Three student.

Meanwhile, Mr Chris Hooi, executive director of Dragon Phoenix restaurant, said that he would support the campaign to drink tap water, but he would continue to serve only bottled water at his restaurant. “My customers generally prefer bottled water and they’ll either order still or sparkling water. Plus, we’re able to charge for this,” he said.


Masagos: Consumers must feel the full price of water
Ronald loh, THE NEW PAPERAsiaOne 2 Mar 17;

Environment Minister says water is a "national security issue"

Water prices were increased substantially to reflect its true scarcity value, Minister for the Environment and Water Resources Masagos Zulkifli told Parliament yesterday.

As MPs debated the Budget for the second day, he addressed the hot topic of the tariff hike announced by Finance Minister Heng Swee Keaton Feb 20.

Mr Heng had said the price of water will go up - the first increase in 17 years - by 30 per cent in two phases, starting from July 1, to pay for more costly methods of obtaining fresh water from seawater and get people to conserve water.

On Tuesday, several MPs raised concerns that the price hike could hit smaller businesses with higher costs.

Yesterday, Mr Masagos said water is unlike any other ordinary commodity in Singapore.

"Water is a strategic issue. It is a national security issue. We must price water fully," he said.

"The consumer must feel the full price of water and realise how valuable and precious it is, every time he or she turns on the tap, right from the first drop."

He explained that water costs have also gone up.

For example, the first-year price of desalination for Singapore's first plant - the SingSpring Desalination Plant - in 2005 was 78 cents per cubic metre (m3), but the first-year price for the latest plant at Marina East was $1.08 per m3, about 40 per cent more.

Mr Masagos said there is a limit to recycling water, hence the need to rely on desalination plants, of which three more will be built in the next three years.

He also said PUB is more than doubling the rate of renewal for old pipelines from the current 20km per year, to 50km per year, to minimise disruptions.

This - coupled with the depletion of Johor's Linggiu Reservoir, which Singapore draws water from - means it was urgent that policies and the right pricing are in place to moderate demand to ensure a secure water supply.

Mr Masagos said awarding rebates to those who save water would be counter-intuitive to ensuring they pay for the cost of producing water.

"To give back that cost means we are subsidising the use of water. Any way we change the structure of water that we have today either involves cost or is counter-intuitive to trying to promote the conservation of water," he said.

Hougang MP Png Eng Huat had earlier called the quantum of increase "puzzling" and for the Government to open its books to justify the increase.

But Mr Masagos said he was unable to provide details of the computation because of commercial sensitivities.

Aljunied GRC MP Pritam Singh asked if PUB would consider deepening local reservoirs to increase the local catchment.

Mr Masagos said the answer was not as simple, as studies show that a reservoir's yield can be reduced if the bottom of the reservoir is disturbed.

But he said water prices will remain affordable, with 75 per cent of businesses seeing a hike of less than $25 a month.

One- and two-room HDB households will not see any rise on average, while other HDB households will see monthly bills go up by $2 to $11 a month.

"Water will still be affordable. It will still remain within 1 per cent of household income," Mr Masagos said.


Price hike debate should remind S’poreans of water’s importance: PM
Today Online 3 Mar 17;

SINGAPORE — Addressing a growing public debate about the Government’s move to raise water prices by 30 per cent, Prime Minister Lee Hsien Loong and Finance Minister Heng Swee Keat said the Republic has to price water properly in order to be able to continue investing in new infrastructure that would maintain a reliable supply.

In a Facebook post on Thursday (March 2), Mr Lee reiterated comments by several ministers in recent days that water is a “strategic resource, and a matter of national security” for Singapore.

“The Pioneer Generation knew this. So do the generations of servicemen and women who have defended Singapore,” he added. “In this situation, we have to price water properly. Then every time we turn on the tap, we are conscious of how precious each drop is.”

As Singapore builds more NEWater and desalination plants to meet its needs, the cost of producing water has gone up, and “tariffs must rise”, Mr Lee noted.

He urged Singaporeans to see the price hike in perspective, saying many households will get additional rebates to help cope while the water bills for some 75 per cent of businesses will go up by less than S$1 a day.

“I hope this public debate reminds us how important and valuable water is, and how we can all help to conserve water, so that we always have enough water in Singapore,” he added.

Mr Heng, who announced the price hike last month, struck a similar note as he responded to a slew of questions and comments by Members of Parliament who spoke on the issue during this week’s debate on the Budget statement.

Among them were Workers’ Party MPs, who sought more clarity on how the quantum of increase was determined, and the timing of the hike.

On Thursday, Ms Sylvia Lim (Aljunied GRC) pointed out that the reasons for the water price hike so far were long-standing ones, but water prices did not change for 17 years.

Moreover, the impending carbon tax has a two-year lead time for implementation, but no announcement was made two years in advance for the water price hike, she pointed out, adding that perhaps July 2015 — two months before the General Election was held — was not a good time for the announcement.

Mr Heng said the carbon tax is new and details have to be studied carefully.

Fundamentally, the point is whether Ms Lim agreed on water’s strategic significance, he added.

Mr Heng also said that the cornerstone of Singapore’s water policy is in pricing the resource on sound economic principles to reflect its long run marginal cost.

Currently, the Government spends more than it collects on the water system, with the PUB’s revenue from users just enough to cover operational costs and the depreciation of water works, pipelines and other related plants, Mr Heng added.

The imbalance is set to get worse over the next five years as the PUB embarks on new multi-billion-dollar water infrastructure projects, such as sewerage networks and deep tunnel systems.

“Singaporeans have enjoyed uninterrupted and high quality drinking water through rainy weather and droughts alike,” Mr Heng said.

“This is not mere good fortune or our birthright. Rather it is the result of long term planning, can do attitude, innovation and sound policy.”


Water price hike: Govt has to do 'right, responsible thing' in sending price signal, says Heng Swee Keat
The Finance Minister rounds off three days of Budget 2017 debates by addressing the concerns raised on the water price hike and Government expenditure.
Justin Ong Channel NewsAsia 2 Mar 17;

SINGAPORE: The Government has to do the "right and responsible thing" when it comes to sending the right price signal on water consumption, Finance Minister Heng Swee Keat said on Thursday (Mar 2) in response to questions from the Workers’ Party (WP) on the timing of the 30 per cent increase announced at Budget 2017 last week.

WP members had raised this repeatedly in three days of debate and Non-Constituency Member of Parliament (NCMP) Leon Perera sought clarification again after Mr Heng’s round-up speech.

“The Government did have the option of either pre-announcing and/or staggering or deferring (the price increase),” said Mr Perera. “Given the Government has shared that the reasons behind this are not political, can the minister help Singaporeans understand a little better what are the non-political reasons?”

Said Mr Heng: "The fact is, first and foremost, do we agree that the price signal is important so that consumers know what the actual cost of the resource is, and therefore can then take action to mitigate use?”

“If the answer is yes, then there’s never a good time. Because I don’t think any finance minister finds it a popular thing to come here and say, ‘I’m going to increase this and increase that’. I don’t take great joy out of announcing all these increases.”

“But… The right and responsible thing is to make sure the correct price feeds through to the economy early enough, and that if we do things early, often we also have the ability to provide the mitigation support package,” he added. “We’ve got to make sure we do things correctly.”

CARBON VS WATER?

Earlier, WP chair and Aljunied GRC MP Sylvia Lim said the reasons for the water price hike provided by Environment and Water Resources Minister Masagos Zulkifli were “longstanding” and “did not come up suddenly”.

“The last 17 years, the price has been unchanged. Did it not cross the Government’s mind before this year that it will want to raise the price of water?” she asked.

“By contrast, there is a two-year lead time for the impending carbon tax. Why was it not possible to prepare Singaporeans for an increase to take effect in July, with an announcement similarly two years ahead of time? Perhaps July 2015 was not a good time to make such an announcement,” she said, alluding to the general election in 2015.

Mr Heng replied: “The carbon tax is new and details have to be carefully studied. But the more fundamental point is whether Ms Lim agrees that water is of strategic significance and that we each should do our part.”

MP Christopher de Souza, who sits on the Estimates Committee, said the comparison between the carbon tax and water price hike was not a fair one, and that it was like comparing "chalk and cheese".

“They are completely different subjects. For carbon tax, you’ve got to look at our how commitment is corralled within the overarching Paris Agreement and how it impacts all members who’ve ratified that and therefore a longer runway is completely justifiable,” he said.

“Versus … a situation where water is precious, a commodity, scarce and we have to act promptly.”

REVIEWING GOVERNMENT EXPENDITURE

Ms Lim also asked whether the Government had done adequate reviews of past and current initiatives, to weed out wasteful or ineffective expenditures.

She highlighted that there had been previous initiatives similar to the Committee on the Future Economy (CFE). “In 2010, the Economic Strategies Committee’s (ESC) aim was to grow productivity by two to three percent yearly over a decade. Which should bring us to a 30 per cent productivity increase by 2019,” said Ms Lim.

“However, after seven years, productivity improvements are way off target and weak in domestically-oriented sectors. What lessons have we drawn from here? And can these be applied to CFE strategies?”

Ms Lim then illustrated her point using the Productivity and Innovation Credit (PIC) scheme.

"The PIC is a huge scheme with the Government putting (in) billions of public funds. Do we know whether the results were worth the huge cost? As it turns out millions of dollars were also sucked out of the system through fraudulent or dubious PIC claims. What lessons have we learnt from this? We now read that the SkillsFuture scheme - launched just last year - has also been subjected to a potential fraud of S$2.2 million already paid out."

“We’ve seen the productivity data that seems to be very mixed and weak in domestic sectors for the last couple of years. Can the minister elaborate further on whether there has been any publicly published Government report that shows the effect of PIC schemes on productivity?” she asked.

“In terms of productivity growth, over the period from 2011 to 2016 it has been above 2 per cent and within range of what ESC has set out to do,” said Mr Heng. “So these measures, in terms of productivity numbers, yes, have achieved that sort of outcome.

“That is why last year I spoke about why we need to move on to take more targeted measures, because we ought to engage in the next phase.”

DERIVING REVENUE SOURCES

Ms Lim further raised a point on whether the Government had "completely recognised its sources of revenue".

She said: “10 years ago, revenue from land sales was in the region of S$4 billion to S$5 billion. Today, we see revised land sales figures for this financial year to be S$11.8 billion, and projected for the coming year to be S$8.2 billion.”

“Tapping on land sales to fund annual budgets is internationally accepted and practiced by other governments,” said Ms Lim. “As our expenditures are expected to rise in coming years, is it not reasonable to seriously think about utilising land sales revenue to fund the Budget, and reduce the need to tax people further?

Mr Heng, however, explained that proceeds from land sales go into past reserves. “It’s because of this prudence that we are able to build up our reserves and we are now drawing a part of its returns for expenditure,” he said. “We must stay disciplined in spending returns of our reserves, so they remain a stable and sustainable source of revenue over the long-term.”

- CNA/jo


Water fees 'cover only PUB ops and asset depreciation'
Chong Zi Liang AsiaOne 3 Mar 17;

The money that people pay for using water is enough to cover only the operations of national water agency PUB and the depreciation of its water works, pipelines and water reclamation plants, Finance Minister Heng Swee Keat said yesterday.

The annual surpluses PUB gets are transferred to its reserves to finance its plants and equipment, he told the House, addressing the issue of the water price hike that surfaced throughout the Budget debate.

"The Government pays for part of the total cost of securing a safe and clean supply of water for our people and businesses," he added, as he underlined the strategic value of water and updated members on plans for investments in the water system.

PUB intends to invest $4 billion on additional water infrastructure in the next five years.

The sewerage network will be improved as well.

A deep tunnel sewerage system, costing more than $4 billion, will be completed in 2025.

Another $3 billion will be spent on other sewerage network projects, and to strengthen the resilience of the water supply, in the next five years.

These expenses exceed the revenue from the water conservation tax, which is expected to be about $1.6 billion in the five-year period, he added.

Over the past three days, MPs had voiced residents' concerns that business and living costs were expected to go up with the 30 per cent hike in water price, which will take effect in two phases, starting in July this year.

Others, however, stressed that water is a precious resource as Singapore's existence hinges on it, and that the price of water should reflect its value.

"Water sufficiency is a matter of national survival," Mr Heng said, as he noted how founding Prime Minister Lee Kuan Yew "obsessed over water since the Separation Agreement".

"Securing a sustainable water supply for Singapore has been an all- consuming pursuit of the Government since Independence. We lodged our water agreements with the United Nations, invested in a strong defence force and developed strong capabilities in water technologies," he added.

"Singaporeans have enjoyed uninterrupted and high-quality drinking water through rainy weather and droughts alike. This is not mere good fortune or our birthright. Rather, it is the result of long-term planning, a can-do attitude, innovation and sound policy," he said.

Mr Heng reiterated a point Environment and Water Resources Minister Masagos Zulkifli made on Tuesday, that the cornerstone of Singapore's policy on water is pricing it on sound economic principles to reflect its "long-run marginal cost" - that is, the cost of supplying the next available drop of water, which is likely to come from Newater and desalination plants.

"This ensures that users will conserve water, and we can make timely investments in the water system," he said.

Yesterday, Ms Sylvia Lim (Aljunied GRC) of the Workers' Party asked why a proposed carbon tax will be implemented only in 2019, but Singaporeans were not given a similar two-year notice for the increase in water price.

Mr Heng said the carbon tax is new and it will take time to study carefully the details before rolling it out.

"A more fundamental point is whether Ms Lim agrees that water is of strategic significance and that we should each do our part," he added.

Prime Minister Lee Hsien Loong joined the discussion on the water price hike with a Facebook post yesterday, saying he hoped the debate in Parliament on the issue will remind Singaporeans of the value of water:

"The water price increase has triggered sharp reactions from Singaporeans. Two ministers - Chan Chun Sing and Masagos Zulkifli - spoke about this in Parliament yesterday(Wednesday).

They explained why water is an existential issue for Singapore, and why this price increase is unavoidable.

Singapore is an island, yet we are one of the most water-stressed countries in the world.

We have enough water today only because of our unremitting efforts since independence. For us, water will always be a strategic resource, and a matter of national security.

The Pioneer Generation knew this. So do the generations of servicemen and women who have defended Singapore.

In this situation, we have to price water properly.

Then every time we turn on the tap, we are conscious of how precious each drop is.

We last revised water prices in 1997 - a long time ago. Since then, we have developed Newater.

We have also invested in desalination, which is cheaper than before but still expensive.

We need to build more Newater and desalination plants.

That is why the cost of producing water has gone up, and tariffs must rise.

We should see the 30 per cent increase in perspective.

Many households will get additional U-Save rebates.

So one- and two-room HDB households will not see any nett increase at all.

For most other HDB flats, the nett increase will only be between $2 and $11 per month.

For three-quarters of businesses, water bills will go up by less than a $1 per day ($25 per month). Minister Masagos shared these in his speech.

I hope this public debate reminds us how important and valuable water is, and how we can all help to conserve water, so that we always have enough water in Singapore."

5 KEY QUESTIONS ON WATER

1. WHY MUST THE PRICE OF WATER RISE?

The price of water has to reflect what is called the long-run marginal cost (LRMC) - that is, the cost of supplying the next available drop of water.

This is likely to come from Newater and desalination plants.

As there is a limit to recycling used water in Newater plants, three desalination plants are being built within the next three years.

As more used water is reclaimed for Newater, the liquid waste is more difficult and costly to treat.

Building pipes to deliver water has also become pricier, as Singapore becomes more built up.

Pricing water right will ensure users conserve it, and enable investments in water infrastructure.

2. WHY HIKE THE PRICE NOW?

The price of water has not gone up in 17 years, since 2000. There is never a good time to raise prices, noted Finance Minister Heng Swee Keat.

But the costs of producing water are rising. PUB plans to invest $4 billion in additional water infrastructure over the next five years.

The Government is also making investments in the sewerage network.

This includes the Deep Tunnel Sewerage System, which will be ready in 2025 and will cost more than $4 billion.

Another $3 billion will also be spent on other sewerage network projects, and to strengthen the resilience of the island's water supply.

Also, water levels in Johor's Linggiu Reservoir, from which Singapore draws its water, have been falling in recent years, and climate change could worsen matters.

3. HOW DID 30 PER CENT FIGURE COME ABOUT?

The Government still needs to build more desalination plants and Newater plants.

So details on the costs involved in aspects of water production are commercially sensitive, and revealing specifics could prejudice future bids.

But Environment and Water Resources Minister Masagos Zulkifli told MPs that even with the 30 per cent hike, the price of water would be below cost.

4. HASN'T TECHNOLOGY HELPED?

Technologically, Singapore has squeezed everything it can from the current water processing technology.

It will take several more years to achieve the next breakthrough and bring it to a deployable scale.

5. WOULDN'T THERE BE A KNOCK-ON EFFECT ON OTHER COSTS?

The price hike translates into 75 per cent of businesses seeing an increase of less than $25 per month in water bills - or less than $1 a day.

Some businesses have said they will not increase prices.

Extra U-Save rebates for households means those in one- and two-room HDB flats will not see any increase on average.

For other HDB flat types, monthly water bills will go up by between $2 and $11 per month.

Overall, spending on water will remain at about 1 per cent of household income for most families.