As Lawrence Wong tries to implement cooling measures on coffeeshops, Low Thia Khiang already sounded warning horns a decade ago

Minister for National Development Lawrence Wong revealed on Wednesday (11 Jul) that the Housing and Development Board (HDB) will evaluate bids for coffee shops on factors beyond the tender price. Such factors would include things like the business proposals, productivity and operating processes.

The 4G Minister was responding to MP for Nee Soon Lee Bee Wah who asked if the current tender system "drives up the rent, and subsequently the cost of food sold at coffee shops". She had noted that some shops in her constituency had been open for as little as a year before closing as the rental costs were not sustainable.

She raised the concern that such stalls may not be able to survive: "We will have to be very mindful because if we do our sums, a small coffeeshop [would have a winning bid of as much as S$30,000 - or even S$40,000 – for a month’s rental. In turn], how much do they have to charge the stalls? We can easily calculate if they can survive or not."

Minister Wong said that HDB had conducted a 2-year experiment where tender bids were subjected to a system where a quality score accounted for 50% of the evaluation. In one case, the wining bid for a tender in Choa Chu Kang was 40% per cent lower than the highest bid as the operator offered affordable food options and had initiatives to improve productivity.

Moving forward, this system will now apply to all outlets which HDB oversees – it is expected that approximately 31 outlets will be completed by HDB in the next 5 years. HDB said in a separate statement that "residents can look towards an enhanced customer experience in addition to a good variety of affordable food options."

Low Thia Khiang sounded the warning bell, but was ignored by Grace Fu

Back in 2007, HDB announced that it was building a new market and food centre at Sengkang Square to the delight of residents. Shortly after, their elation turned into disappointment when it was revealed that the winning bid was for a $500,100. Stall rentals had ranged from $2,000 and $6,000 a month, compared to as little as $56 a month for a HDB-run centre.

This prompted the then Hougang MP Low Thia Khiang to raise the issue in Parliament.

“If we apply the principle of maximizing economic benefit… these iconic features of Singapore would become super markets and food courts in no time. The current trend of the Government to release land for tender by private developers to build and operate markets and hawker centres is worrying.”

The then-Minister of State for National Development Grace Fu then replied:

“Generally, the Government sets aside land in the new towns for commercial development by the private sector. This gives private operators the flexibility to decide on the type of eating and marketing facilities to meet the changing needs of residents.”

In other words, Low had sounded the warning but this was dismissed by the government. Over the next few years, this ‘flexibility’ that the PAP government adopts had proven to be disastrous as HDB coffeeshop changed hands for record prices.

In 2013, a coffeeshop at Hougang Avenue 4 sold for $23.8 million. Barely 2 years later, a new record was set a Bukit Batok Street 11 for $31 million. Tenants at the latter were notified that their rentals had increased by 10% almost immediately after the acquisition. Earlier this year, coffee shop chain Broadway acquired 23 stalls for $200 million.

On Facebook, one Matthew Chua commented that the rents for these hawkers increased by $300 per month each year and attributed it to the reason “why we keep seeing stalls fold or move elsewhere”. Another Dougblas Oliverio commented that “these consortiums are monopolising and enriching themselves” and consumers suffer at the end of the day.

A subsequent feature by newspaper TODAY had shown that hawkers were paying as much as $11,000 a month for a 200 sq ft space at the Bukit Batok Coffeeshop. Consumers also saw increases in the prices of their foods, with the price of a minced meat noodles increasing by almost 10% at $3.50, up from $3.20 before.

Given that this issue has been long-standing and entrenched, do you think that Minister Wong’s assurance is enough?