Convening of Anti-profiteering Task Force in Light of Water Price Increases

14 Er Dr Lee Bee Wah asked the Minister for Trade and Industry (Industry) (a) whether the Ministry will set up a committee to look into any attempts against profiteering with the rise in water and electricity rates; (b) whether the Ministry will look into setting up a mobile app to get feedback on profiteering; and (c) whether there are plans to guide and assist businesses to cope with the increase in business costs due to such rises.

15 Mr Liang Eng Hwa asked the Minister for Trade and Industry (Industry) whether the Ministry intends to reactivate the anti-profiteering task force to step up surveillance against possible profiteering activities due to recently announced water price hikes.

The Minister of State for Trade and Industry (Dr Koh Poh Koon) (for the Minister for Trade and Industry (Industry)): Madam, can I have your permission to take Question Nos 14 and 15 together, please?

Mdm Speaker: Yes, please.

Dr Koh Poh Koon: Madam, the measures on water tariffs, diesel and carbon tax announced at Budget 2017 are targeted and are expected to have a moderate impact on overall business costs, with the impact differentiated across different industries. Utilities cost, which includes water and electricity costs, accounts for a relatively small share of business costs for firms in the services sector, at less than 1%, on average, for most services industries.

Electricity prices are revised every quarter according to prevailing gas prices, which are indexed to global oil prices. There has been a general decline in our electricity tariffs over the past three years due to the low global oil price. The current electricity tariff is around 16.9% lower than that in the second quarter of 2014.

The Consumers Association of Singapore (CASE) will step up its education efforts to encourage consumers to exercise their choice and make informed purchasing decisions. Consumers can opt to buy from businesses which continue to offer competitive prices and products that cater to their consumption preferences. CASE will also keep watch on price increases and look into feedback on alleged profiteering. Consumers who wish to provide feedback can go through CASE's hotline, website or mobile app. They can also do so through Government feedback channels, such as the feedback unit Reaching Everyone for Active Citizenry @ Home (REACH). Hence, the Ministry of Trade and Industry (MTI) does not see the need to set up a committee to look into profiteering at this point.

Madam, the Government will continue to monitor the impact of the Budget 2017 measures on industries and calibrate our economic support policies as appropriate. The most sustainable strategy for businesses to manage cost increases and stay competitive is to transform by upgrading capabilities for higher levels of productivity and innovation. Our SMEs can approach any of the 12 SME Centres for customised service and advice on business development and how they can tap on Government assistance to strengthen their businesses. In particular, SPRING's Capability Development Grant (CDG) provides support for SMEs in building capabilities to grow their businesses by defraying up to 70% of the qualifying project costs.

Through the Local Enterprise and the Association Development (LEAD) scheme, SPRING also works with our Trade Associations and Chambers (TACs) to strengthen their internal capabilities and the roles they can play in driving industry transformation and growth.

Mdm Speaker: Er Dr Lee Bee Wah.

Er Dr Lee Bee Wah (Nee Soon): Mdm Speaker, I have one supplementary question. With the impending increase in water price in July, a lot of the fear among residents is that the price of a cup of coffee may go up. One dollar may become $1.15, and then next, it may become $1.30. I would like to ask the Minister of State because he mentioned earlier that if there is feedback, to report it to CASE. Do they have to go down personally or just a phone call will do, or will it be made easier for residents to give their feedback?

Dr Koh Poh Koon: Madam, I thank the Member for her clarification question. As I had said earlier in my reply, there are various avenues to feed back to CASE, either through their hotline, mobile app or website.

Mdm Speaker: Mr Liang Eng Hwa.

Mr Liang Eng Hwa (Holland-Bukit Timah): Madam, from the Minister of State's reply, it seems that CASE will be the agency that will be the watchdog for anti-profiteering. I would like to ask the Minister of State whether CASE does have the resources and the regulatory power, as well as the investigative resources, to do that because there are cases all around the neighbourhood and sometimes you may just want to report, and whether they have that ability to do that. I think that is important.

Dr Koh Poh Koon: Madam, pertaining to the issue of coffee price increase which I think both Members are asking about in the neighbourhood shops, it is quite easy to understand that the cost of coffee is not just on water alone. There are other issues that businesses cope with, like rental costs, workers' cost, as well as their pricing strategy. Price increases can happen with or without an increase in water price, and businesses do make their calculated decisions on how to price their product.

In that sense, this is where education on consumers' rights and choices is also important. Coffee can range from a simple 3-in-1 that you buy as a packet or it can be as expensive as a latte. So, in between, the price range is quite huge and businesses do make their decisions on how to price the price of a cup of coffee. Consumers, therefore, have to make a choice to also encourage businesses to price the product to be sustainable in terms of getting the right customers. If there is a need to feedback, they can send it to CASE, and if CASE feels that there is sufficient indication that there is a consistent amount of complaints coming in about one particular retailer, then we can look at how best to facilitate further investigations.

Mdm Speaker: Er Dr Lee Bee Wah.

Er Dr Lee Bee Wah: I would like to ask the Minister of State, for coffee shops in the neighbourhood, when one coffee shop increases by, say, 10 cents, very soon, the rest will follow suit. So, how is CASE going to handle cases like this? For example, will hawker centres set the standard of the price of drinks? Actually, the residents have no choice. Once the price goes up in one shop, the rest will follow suit.

Dr Koh Poh Koon: Madam, I would like to say that sweeping statements like this saying that all coffee shops will raise prices just because one shop raises it, is not fair to all retailers because I think there are also retailers that came out and said that they would not increase their prices. For example, in an article published in TODAY newspaper on 23 February 2017, in response to the increase in water prices, several coffee chains here, including Toast Box and Ya Kun Toast, have said that they would not increase their prices in the near term. So, I think there are different pricing strategies by retailers. We should not make sweeping statements here to say that just because one coffee shop increases its price, every other coffee shop would necessarily follow suit. And if they do so, then I think consumers should make their choices and decide whom to patronise.

Mdm Speaker: Er Dr Lee Bee Wah.

Er Dr Lee Bee Wah: Mdm Speaker, if I remember, I read in the newspapers that the association for coffee shops said that they would not increase the price in July. But from now to July, there is no increase in water price, of course, there is no price increase justifiable from now until July. But what will happen after July, nobody knows. And from observations in the past, it is quite true that when the price in one goes up, the rest, one by one, will go up. So, that is the concern. That is why the residents are so upset about the increase in the water price. It is because they worry about the increase subsequently in the prices of food and drinks.

Dr Koh Poh Koon: Madam, I think we are making an assumption that the price will increase after July, which is in the future. At this point in time, let us not prejudge the businesses' behaviour. And if it so happens then, then I think this is where CASE's hotline, website and mobile apps will be available for feedback to be received.

Mdm Speaker: Mr Liang Eng Hwa.

Mr Liang Eng Hwa: Madam, I just want to find out from the Minister of State why do we not consider setting up an anti-profiteering task force like what we did some years back or perhaps consider having the Competition Commission to look into this task of anti-profiteering.

Dr Koh Poh Koon: Madam, I think the previous committee on profiteering was set up in response to a more broad-based increase in the Goods and Services Tax (GST) which affects all goods and services where it can then lead to a very broad-based impact on overall costs. This water price increase is very targeted. It affects business segments more than others, and even in the retail services sector, as I have said earlier, the cost increase is not expected to be more than 1% or 2%. So, we do not expect a broad-based impact on the actual costs of businesses. We will continue to keep a watchful eye on how this will impact, say, after the price goes up in July.

Secondly, the Competition Commission looks at anti-competitive behaviour, not necessarily to look at profiteering. Businesses all need to make profits, and it is very hard to prove what exactly is over-profiteering because businesses must take into account the cost of their business as well. Rental price will increase over these few months and that leads businesses to increase the price of their products and services. If we were to impose certain restrictions on that, then we are going to make it difficult for businesses to price their products accordingly, to take their costs into account.

Mdm Speaker: Mr Lim Biow Chuan.

Mr Lim Biow Chuan (Mountbatten): Mdm Speaker, if I may just further address some of the concerns since CASE has been mentioned a couple of times. I wanted to request consumers to also exercise their right of choice, because if all consumers do not exercise their right of choice and just pay whatever a coffee shop demands, then, of course, you will be supporting the price increases arbitrarily.

From CASE's point of view, we will continue to monitor prices of drinks in coffee shops and in the event that one coffee shop raises its price more than others, we will be happy to publicise coffee shops which have not raised the price of their coffee and other drinks. Basically, this is to create a more competitive situation where consumers then have a choice. I would urge consumers also to refer feedback to CASE and we will follow up with MTI if there is a need to do so.

Mdm Speaker: Mr Louis Ng.

Mr Louis Ng Kok Kwang (Nee Soon): I just want to ask why exactly are we diverting the feedback towards CASE, which is a non-Government organisation, instead of MTI taking the feedback and investigating; and, secondly, whether MTI feels that CASE has sufficient manpower and resources to take up the additional caseload now.

Dr Koh Poh Koon: Madam, in my reply, I did not say that the consumer cannot feedback to MTI or any of the Government agencies, even through the REACH portal, for example. They can do so. But CASE, as an organisation that helps to educate consumers, plays an important role here in helping consumers to understand their purchasing power as consumers and to be able to exercise that. That, in itself, is a good signal to the business community to price their products in a reasonable way.

Mdm Speaker: Next question. Assoc Prof Randolph Tan.