Closing Speech at the Second Reading of the Public Utilities (Amendment) Bill - Masagos Zulkifli

Closing Speech by Mr Masagos Zulkifli, Minister for the Environment and Water Resources, at the Second Reading of the Public Utilities (Amendment) Bill on Friday, 6 March 2020

1 Mr Speaker, I would like to thank the Members for their support and comments on the Public Utilities (Amendment) Bill. Let me run through the queries and concerns raised topically. I will begin by addressing coastal and flood-protection issues first.

AMENDMENT #1: CONFER NEW COASTAL PROTECTION FUNCTIONS AND ESTABLISH THE COASTAL AND FLOOD PROTECTION FUND

2 Er Dr Lee Bee Wah and Mr Gan Thiam Poh asked about the Government’s plans to ensure that there are sufficient funds in the Coastal and Flood Protection Fund. Climate change and rising sea levels will not only affect our current generation but future generations and beyond. Coastal protection requires hefty upfront investments. But once built, they benefit many generations of Singaporeans. This is a complex, significant, and long-haul effort, and we need to distribute the share of funding more equitably across current and future generations.

3 The $5 billion injection from this term of Government represents our generation’s contribution towards safeguarding Singapore’s continued survival. Setting up the Coastal and Flood Protection Fund now provides us with a longer runway to build up the Fund, and allows the Government to save up across successive terms. The Government will top up the Fund whenever our fiscal situation allows.

4 Given the significant outlay required, the Coastal and Flood Protection Fund will not be the only source of funding. We have to use a combination of funding tools – the Coastal and Flood Protection Fund, borrowing, budget from the Government-of-the-day, as well as Past Reserves for measures such as land reclamation. PUB is working with agencies to refine our modelling and develop more detailed plans on the type of protection measures required and the costs. This will allow the Government to better assess the funding required and financing options.

5 Mr Gan Thiam Poh asked what measures will be in place to ensure strict oversight and prudent utilisation of the Fund. First, it will be ring-fenced through this legislative amendment to fund the expenditures relating to coastal and drainage flood protection measures. Second, PUB will have oversight over the management and withdrawal of the fund. PUB will publish the fund utilisation annually in a separate section in its financial statements. Third, like any other large scaleand complex development projects the Government undertakes, coastal protection and drainage measures will continue to be subject to MOF’s evaluation and prevailing approval processes. Finally, the Government will also employ competitive tendering processes to ensure that the costs of the coastal protection and drainage measures implemented are value-for-money.

6 Mr Gan Thiam Poh asked for examples of the uses of the fund. Ensuring our flood resilience will require careful planning and seamless integration of protection measures in our infrastructure. First, to prevent sea water from flowing inland, we will need to construct structures such as sea walls, revetments, dykes, tide gates or barrages to serve as coastal defences and physical barriers. We will study the suitability of all these options for our coastline. Where feasible, we could even integrate nature-based solutions, such as the planting of mangroves to break wave energy. While structures such as tide gates and barrages stop sea water from flowing inland, they will likewise prevent stormwater from flowing out into the sea, especially when intense rainstorms coincide with high tides. As such, we will need to install outlet pumps at some of our waterways to pump floodwaters into the sea. Finally, our vast network of inland drains must also be expanded and upgraded to cater to more intense and frequent rainfall.

7 Er Dr Lee Bee Wah rightly pointed out the extent of infrastructure works required to protect our coastline. She asked if we will tap on local resources and companies in this journey. Coastal protection is a new area in Singapore and capabilities will need to be built up. We will indeed have to tap on the best engineering capabilities available. Where they are not available in Singapore, we will have to bring them in, even as we grow our own talent and capabilities. The Government and industry will have to work hand in hand. We are confident that over time, we will grow a strong and vibrant local industry, just like what we did with our water sector. We hope that our local firms will proactively build up their capabilities in coastal protection, hydraulic modelling, and flood risk forecasting just to name a few areas, and to tap on these opportunities when available.

AMENDMENT #2: LEGISLATIVE SAFEGUARDS OVER DBOO PLANTS

8 I will next address the questions on safeguards over PUB’s DBOO plants.

9 Mr Gan Thiam Poh asked about the feasibility of the DBOO model and whether other operating models for water plants have been considered.

10 Besides the DBOO model, PUB also employs other models. For example, PUB employs the Design-and-Build model, where it partners the private sector to design and build the plant, while PUB owns and operates the plant.

11 As I explained in my opening speech, the DBOO model has been useful in allowing us to tap on private sector innovations and cost efficiencies to deliver water services more effectively. By combining design, build, own and operate functions in the same DBOO contract, it gives the private sector a strong incentive to ensure that the project design takes into consideration operational and other lifecycle costs.

12 The DBOO model also strengthens the capacity of the private sector. When companies undertake DBOO projects, they develop a track record that allows them to grow in our region and compete on the world stage.

13 Mr Gan Thiam Poh asked about PUB’s ability to maintain oversight over concession companies which are struggling.

14 As I explained in this House in April 2019, even though PUB does not interfere with the business decisions made by the concession companies, PUB monitors the performance of the plants under the DBOO model to ensure that the concession companies can meet their contractual obligations to PUB. Concession companies are required to submit financial reports to PUB on a regular basis.Where there are issues, PUB will require the concession companies to rectify them; failing which, PUB may exercise its rights to terminate the DBOO contracts and take control of the plants. This contractual oversight will continue and with the new legislative mechanisms, we will have greater assurance and oversight over our DBOO plants.

15 Er Dr Lee Bee Wah rightly pointed out that PUB has been partnering with the private sector under the DBOO model for over 10 years. The majority of these partnerships have been successful. Given this, why the decision to introduce legislative levers over DBOO plants now?

16 Allow me to explain. As part of our regular review of the safeguards over DBOO plants, we observed that unlike other critical infrastructure, the Government did not have legislative safeguards for critical water infrastructure under the Public Utilities Act. We concluded that it would be prudent to put in place similar safeguards, especially as more DBOO plants are being completed.

17 Er Dr Lee Bee Wah also asked if the legislative levers over DBOO plants are triggered by the Hyflux situation.

18 The review to enhance our oversight over DBOO plants started before the Hyflux situation emerged. That said, the Hyflux situation was a reminder that we need to exercise proper oversight over our DBOO plants which are a key part of our water supply infrastructure, and have effective levers to intervene when necessary in order to ensure Singapore’s water security. As mentioned in my opening speech, PUB has in place robust contractual safeguards which allowed us to successfully execute the contractual remedies for the Tuaspring Desalination Plant.

19 With the additional legislative safeguards introduced under this Bill, we will further strengthen our oversight over critical water infrastructure and enhance our levers, in case it is necessary to intervene.

20 Er Dr Lee Bee Wah and Mr Gan Thiam Poh also asked for elaboration on when and how Special Administration Orders will be invoked, versus the existing contractual safeguards.

21 PUB’s interest is in safeguarding Singapore’s water security. The grounds under which the Minister can impose Special Administration Orders are: first, the designated party is, or is likely to be, unable to pay its debts; second, the occurrence of a public emergency; third, the Minister considers it in the interest of the security and reliability of the supply of water in Singapore; and fourth, the Minister considers it in the public interest. These are similar to those found in the Special Administration Order regimes of other essential services.

22 I would like to assure the House that the power to issue a Special Administration Order would not be exercised lightly. Such Orders are meant to ensure Singapore’s water security, and would be used only under exceptional circumstances. PUB will continue to rely on existing contractual remedies under the Water Purchase Agreements as far as possible.

Conclusion

23 Mr Speaker, Sir, as I have said in my opening speech, PUB’s role continues to evolve. This Bill is an important step forward as PUB builds up its Coastal and Flood Protection role, strengthens its oversight over water concession companies, implements smart water meters, and enhances the security of water tanks.

24 Sir, with that, I beg to move.