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Minister Vivan fails miserably in his “social enterprise” hawker centre initiative with runaway rentals

Hawker centres run by social enterprises to help make hawker food affordable was in fact discussed in Parliament by then Environment and Water Resources Minister Vivian Balakrishnan way back in 2012.

At a Parliamentary debate on 6 Mar 2012, Vivian told the House, "We intend to accept the recommendations (by Hawker Centre Public Consultation Panel) and the management of the new centre should be by social enterprises, probably a co-operative, and I hope there will be more than one co-operative or other social enterprises that will step up to the plate."

He said that details of such social enterprise hawker centres like who to accept as a hawker, the food mix and pricing, should be done at the local level rather than at the Ministry level. "I do not want, on the Ministry level, to be overly prescriptive," he said.

During the debate, then NCMP Yee Jenn Jong from WP showed concerns regarding the model of letting social enterprises run hawker centres. He was concerned about potential rising rentals imposed on the hawkers by these social enterprises.

Mr Yee asked Vivian, "Will the Ministry be keeping a very close watch on the rents and the way the operations will be run? I consider the provision of hawker centres to be essential social goods, to make food prices affordable to everybody."

"I am concerned that sometimes when we let market forces take over the provision of social goods, we can end up with rising cost, just like we saw industrial spaces going to REITs and then prices have been creeping up. So, is there some assurance that there will be very close monitoring on the way this is run, especially when more and more hawker centres are being run by social enterprises?" he asked.

Vivian promises to keep close tab on social enterprise hawker centres "very, very closely"

Vivian replied, "Hawker centres are social infrastructures. Therefore, as the ultimate landlord, we are not trying to maximise rentals from it."

"I am keen to accept the recommendation for social enterprise because, if you remember, when I first announced that we would reverse this policy, I said that I wanted the management to be a not-for-profit model. Basically, you still need to be viable and to make ends meet. But you are not out there as a real estate player and you are not engaging in arbitrage. And what starts off as a hawking business becomes a real estate business," he added.

"What I am hoping to do by changing this hawker centre policy is, number one, increase the supply of places. That should have some effect on prices, both in terms of rental as well as the prices charged by hawkers. But having said that, I do not believe that simply lowering rentals by itself will necessarily lead to lower prices charged by hawkers. At the end of the day, they are people making a living. They will also try to charge what the market will bear."

Vivian also said that if the people who are working at such hawker centres Singaporeans, locals or people within the community, can make a living for themselves and can prepare cooked fresh food, good enough for their own families and friends to eat, it will be "an achievement".

Vivian further gave assurance to Mr Yee that his ministry will be watching the development of hawker centres run by social enterprises very closely. "I give the Member the assurance that we will certainly be watching it very, very closely, and to watch the evolution of these new generation hawker centres, that it does not deviate from the original objective," he assured.

Mr Yee thanked Vivian for the answers but cautioned that it's easier to control one or 2 hawker centres run by a particular social enterprise than half or even more hawker centres run by many social enterprises, as they can become a "very sizeable market force".

"So, would we want to start thinking right now how do we set the KPIs to ensure that the outcomes will always be affordable food, whether it is done through fixing the rent that they can charge to the hawkers or through other means? I think we should think seriously about this rather than leave it to market forces," Mr Yee advised.

Makansutra founder Seetoh reveals sorry state of affairs

On Tue (28 Aug), Makansutra food guru KF Seetoh published a write-up on his blog revealing the sorry state of affairs the whole Social Enterprise Hawker Centre (SEHC) initiative has become. Many are run like commercial food courts, he observed.

"They (social enterprises) operate the new hawker centres like a hard core commercial Food Court management system. Hence, I am seeing some issues that raises some concerns," Mr Seetoh said.

Contract agreements from hawkers at SEHCs revealed that on average, they are paying about $4000 a month on stall rentals.

Mr Seetoh fumed, "These hawkers in the new hawker centres pay in total (with a laundry list of extra services and charges), an average of $4000, more than what it cost the highest bidder in Maxwell Hawker Centre - arguably the most popular hawker centre in Singapore - where it hovers between two to three thousand dollars a month in total."

Some of the private coffeeshop stalls in better locations offer cheaper rents with less stringent rules compared to these SEHCs, Mr Seetoh added. One hawker told Mr Seetoh, "Social enterprise hawker centres are not sustainable. Just you wait, a lot of such hawkers are calling it quits soon."

Then there are a number of hidden charges written inside the contract agreements, like imposing a Gross Turnover Profit percentage, charges for crockery washing, collection and return and even a "brazen clause" that hawkers need to pay a "consultant" $600 a month to have them spot check their food quality and operation.

The best part is that if the hawker fails to pay the $600 "consulting fee" in time, he will be charged 12% interest or "such higher rate as may be determined from time to time by the Consultant" for any outstanding amount owed - aka "Ah Long" style of "O$P$" but minus the pig’s head and splattering of red paint on walls.

In any case, given that hawker stall rentals at SEHCs have skyrocketed and SEHCs have used "Ah Long" style of management operating these hawker stalls, as revealed by Mr Seetoh and warned by Mr Yee earlier in Parliament in 2012, one can only conclude that Vivian's ministry has failed to keep watch on these SEHCs "very, very closely".