COVID-19 (Temporary Measures) (Amendment) Bill

Mr Speaker, I beg to move, "That the Bill be now read a Second time".

This Bill comes before Parliament in the midst of very serious challenges faced by us, which both Ministers and Members of Parliament have spoken about a number of times.

In my speech, I will explain why we need this intervention, explain the principles behind the Bill and set out the key features of the Bill.

Just under two months ago, I moved an urgent Bill in this House – the COVID-19 (Temporary Measures) Bill, which I will refer to as “COVID 1”. COVID 1 was, in itself, a major intervention.

In my speech then, I explained why intervention was needed – economic shock, unprecedented in magnitude in terms of impact and the speed with which the impact was felt.

I also set out the principles for such intervention. The starting point is always the sanctity of contract – a fundamental, key aspect of the rule of law and we do not lightly intervene.

But sanctity of contract cannot be an absolute. I said that intervention is needed when the core interests of our people are at stake and there is a need to safeguard the fundamental integrity of the economic structure for the common good. Such intervention has to be reasonable and of generally limited duration.

In COVID 1, we put in what I called a “legal circuit breaker”. It provided a framework to hold in abeyance the strict enforcement of certain legal rights for a period of time.

The objective was to give businesses some cash flow relief and breathing space to make adjustments. For example, if a business tenant is unable to pay rent during the relief period because of COVID-19, the landlord cannot evict the tenant during the relief period. The moratorium runs until 19 October 2020.

At the time, I emphasised that COVID 1 only deferred contractual obligations. I also explained to this House that the Bill gave businesses breathing space. It also gave the Government some time to take in feedback, assess the evolving situation, conduct a deeper analysis and decide whether more substantive interventions were needed.

Over the past two months, we have done precisely that. We have monitored feedback, assessed the situation, thought carefully about what else needed to be done. And we have decided to intervene in a more substantive way to deal with the issue of rent. And also, intervene in some other areas. I will explain why.

Two months ago, the circuit breaker began. For many, including the businesses most affected by those measures, April now feels like a lifetime away.

Globally, we were looking at 1.2 million infections and 67, 000 dead. As of 1 June, we are looking at more than 6 million infections and more than 370,000 dead.

Various restrictions had already been put in place by then, but the circuit breaker caused a substantial increase in the restrictions.

The situation today? The Deputy Prime Minister and other Ministers have explained in considerable detail.

I will just recap two key points. The economic situation and outlook has deteriorated substantially. MTI is now forecasting a contraction of between 4% and 7%. And there is a lot of uncertainty.

We are taking a cautious approach in lifting the circuit breaker measures. Many industries are affected. And for some, the impact has been near catastrophic.

Latest data from the Department of Statistics, some just released today. If you look at F&B sales in March 2020, they declined by 23.7%. In April 2020, they declined by 53% on a year-on-year basis. Retail sales, if you exclude supermarkets, hypermarkets and convenience stalls, retail sales in March 2020 declined by 13.3%. In April 2020, nearly 61%.

These numbers do not even show the full impact of the circuit breaker because data for May 2020 is not out yet. We can, obviously, expect the numbers to be very weak.

Revenue has fallen but meanwhile fixed costs continue. For many businesses, in the F&B, retail sector, two significant components of such costs are manpower and rent.

As regards manpower, the Government through the various Budgets has put in the Jobs Support Scheme, waived the Foreign Worker Levy and put in a number of other schemes to help, together with partners like NTUC.

This Bill seeks to deal with the rental obligations, amongst other things.

Many landlords have taken a helpful approach and a long-term view. They have shared the burden with their tenants.

Nevertheless , we received a lot of feedback from struggling SMEs that they need more time to recover. Many cannot operate until Phase Two, and even then only partially.

Landlords’ concessions have been uneven. Many landlords have rendered substantive assistance, but several others have not.

The point is that accumulated arrears should be handled fairly.

I will share one piece of feedback as an illustration. This is a tenant who is a mother of two young children. She started a company two years ago, providing enrichment lessons to children. She leased some space for the business as a sub-tenant. She renewed her lease for one year, just before COVID-19 hit.

All revenue that came in went to support the business – payment of rent, salaries for trainers and other operational costs. But from February 2020, parents began to keep students away. Classes have been suspended since March 2020. Her landlord has offered her 10% discount for April and May 2020.

COVID-19 is quite an unforeseeable event, both in magnitude and speed of impact. It is wiping out the hard work that many people have put in into their businesses.

So, if landlords insist on payments that tenants cannot afford, tenants will have to give up. Landlords then have to take their chances to recover something in the insolvency proceedings, together with other creditors.

Landlords will then also have to find replacement tenants. In this market, not realistic.

Therefore, it is in everyone’s interests to take a sensible approach, ensure everyone comes out of this together, ready to recover.

If you look at restaurant booking platform Chope, they did a survey: 81% of their respondents said they would not be able to operate beyond the next six months, based on cost and revenue that they had during the circuit breaker period.

After watching all of this carefully, taking in the feedback, looking at the numbers that were coming in, we decided that there is a need for a substantive intervention.

The challenge that rent poses to small businesses, is not a problem unique to Singapore. A number of other countries have seen that and they have intervened. I will just give the examples of Australia and Germany.

In Australia, landlords are required to offer rent waivers and deferrals to SME tenants. And SME tenants are allowed to repay the deferred rent over a period of at least 24 months, interest-free.

In Germany, landlords are not allowed to terminate a tenancy for non-payment of rent. And arrears with accumulated interest can be repaid before 30 June 2022; that means, two years of extension.

Let me now move, Mr Speaker, to the premises underlying this Bill. What is necessary in this situation is a fair sharing of obligations because of the exceptional times that are before us. The fair sharing has got to be between the Government, the landlords and the tenants.

On the Government’s part, you have seen four Budgets amounting to almost $93 billion, including two months' rental assistance for retail, F&B tenants; one month for office and industrial tenants, as well as broad salary support and other credit-easing facilities.

So, if you look at the rest of the burden, what is a fair sharing of the remainder between landlords and tenants? And the related question is, will the market left to itself be able to find an equilibrium that reflects the principle of fairness?

The answer to these two related questions depends on a number of points.

First, all Singaporeans, including landlords, have a shared interest in seeing our SMEs do well. Second, in a climate like this, expecting market forces to push towards a fair equilibrium is not realistic. Third, what is the alternative if we do not intervene?

SMEs play, as I have said, a critical role in the Singapore economy. In 2019, the 260,000 SMEs in Singapore contributed to 45% of our GDP and 72% of our employment.

If many of our SMEs for whom a stable cash flow is fundamental, are unable to survive, the domino effect on the rest of the economy will be very substantial and a lot of jobs will be at stake. Our people will suffer.

For landlords, their asset value will be affected by the broader economy. There is a clear correlation between growth of property prices and economic growth. If our SMEs do well, the economy is given a boost, property owners will continue to enjoy the stable value of their assets. If viable SMEs go under because of temporary cash flow difficulties, the economy as a whole suffers, the value of property will also suffer.

So, the essential point: everyone has a stake in the viability of the SMEs.

My third and final point is: go back to the eligibility criteria. They cover SME renting commercial, industrial or office space for the operation of their business and those with a turnover of not more than S$100 million per annum and where they had a reduction in turnover of more than 35%, which is a substantial hit.

Order. Let me call on Deputy Leader.