Debated in Parliament on 18 Aug 2015.
Order for Second Reading read.
Mdm Speaker, I beg to move, "That the Bill be now read a Second time."
Changi Airport connects Singapore to the world. It also supports a vibrant aviation industry that is itself an important engine of growth and creator of good jobs.
Changi Airport has grown rapidly over the years. In the last decade, passenger traffic at Changi grew on average 6% each year, driven by strong growth of air travel to, from and within the Asia Pacific. While growth has slowed recently, our long-term prospects as an air hub remain bright, with air traffic in the Asia Pacific projected to double in the next two decades.
Although Singapore is well-positioned to tap this growth, we must have adequate capacity to continue offering the high-quality passenger experience and extensive connectivity that Changi is renowned for. Construction of Terminal 4 and the expansion of Terminal 1 are in progress. These projects will raise Changi Airport's capacity to 85 million passengers per annum when completed.
However, even with these developments, Changi's capacity is projected to be fully-utilised by the end of the next decade. This is why we are expanding Changi Airport by building Terminal 5.
Terminal 5 will be built in phases. Upon completion of the first phase, Changi's capacity will be doubled from what it is today to about 135 million passengers per annum. When fully completed, Terminal 5 will have a capacity bigger than Terminals 1, 2 and 3 combined.
It is our intention for the cost of the expansion to be borne jointly by the airport operator, airport users and the Government, in a way that allows Changi Airport to remain cost-competitive as a global air hub. Given its scale and complexity, the project will inevitably require a sizeable, long-term financial commitment by the Government. Hence, as the Deputy Prime Minister and Minister for Finance announced at Budget 2015, a Changi Airport Development Fund (CADF) will be established to set aside funds for the expansion while we have the fiscal resources to do so, even as we continue developing and refining the plans
Page: 84
before starting construction.
This Bill seeks to amend the Civil Aviation Authority of Singapore (CAAS) Act to establish the CADF. Let me highlight the key provisions of the Bill.
The new section 25A establishes the CADF as a statutory fund to be administered by CAAS under the direction of the Transport Minister. It also sets out the sources of monies for the Fund.
Section 25B lists the permissible uses of the CADF. These include major airport development works as well as construction, upgrading and replacement of air navigation facilities and other facilities and buildings required for airport operations at the expanded airport. The Fund may also be used for the acquisition, improvement and replacement of other capital assets required for the operation of the expanded airport, for the carrying out of surveys and studies for the expansion, and to cover expenses related to the management and administration of the Fund.
Mdm Speaker, Singaporeans are proud of Changi Airport. It is a globally recognised symbol of Singapore's connectedness, efficiency and customer service. Most Singaporeans would not disagree with our founding Prime Minister, the late Mr Lee Kuan Yew, who said that the construction of Changi Airport was "the best $1.5 billion investment we ever made".
Similarly, the expansion of Changi Airport is a major investment for Singapore's continued economic vibrancy. It will generate significant benefits, not just for the aviation industry but also for Singaporeans and our larger economy. And, if I may say so, it will strengthen our air hub for this and future generations of Singaporeans.
There is, therefore, a case for the Government to co-invest in the project. Given the magnitude of the project, the outlay required of the Government will be sizeable and it is only prudent that we start to set aside funds for the project now, in the form of the CADF.
As a start, the Government has set aside S$3 billion of initial capital to be injected into the CADF. More will be added in the years to come, as the Budget allows. Mdm Speaker, I beg to move.
*Question proposed. (proc text)]
Page: 85
Mdm Speaker, CAAS has set up the Changi Airport Development Fund which is expected to receive an initial injection of $5 billion for the development of Terminal 5.
It was reported sometime in November 2013 that Changi Airport Terminal 4 (T4) will be a test-bed for new concepts and technologies for the coming Terminal 5 and the three existing terminals.
Currently, Terminals 2 and 3 have not even reached full capacity. In view of this, would it be prudent for the Government to do more feasibility studies, rather than just projections alone, before embarking on another major airport development, that is, Terminal 5?
I am generally against the development of independent funds. Surely, there are other avenues to fund development of the infrastructure, such as the Ministry of Finance's (MOF's) Reinvestment Fund System.
An officer in CAAS has access to the Reinvestment Fund System and can put up papers to MOF requesting development funding. After all, we have already invested as much in the Airport without the use of an independent fund. Are the Directors-General in CAAS worried about the amount of paper work for submitting multiple reinvestment funds?
I see no good reason why we need a new flow of funds to construct infrastructure, such as runways and hangars. Will this eventually be a black box in the future? How can we ensure that future Members of Parliament remember this fund and can check out this fund?
Allow me to remind hon Members that public money has funded and will continue funding the growth of the airport through the agency, CAAS. But the assets are then transferred to private hands, such as Changi Airport Group (CAG), without strong recourse. Can CAAS or MOT confiscate CAG's airport assets when the Government wants to? Is this still the working model for a new Singapore in the 2020s?
Assoc Prof Fatimah Lateef (Marine Parade): Madam, I stand in support of this Bill. This Fund is important and we must ensure its sustainability. Just a few clarifications to make.
Firstly, I note the use of the CADF for infrastructure, physical works and planned developments. Can I ask how about ad hoc interventions which need to be put in place when certain needs arise and changes that need to be implemented quickly, for example, in handling situations with emerging infectious diseases, which can come about very suddenly
Page: 86
and very quickly? We have seen some of these in the event of SARS and MERS-coronavirus not too long ago.
There may, indeed, be some physical changes which need to be implemented quickly. Can these funds be mobilised or are there other sources of funding or a contingency budget that Changi Airport can tap on for these?
Secondly, under section 25B, whereby it is stated that the funds can be used "for making grants or giving loans to others for any purpose referred to above", can I seek clarification on this? What kind of loans, in particular, and who does the word "others" refer to?
In conclusion, Madam, Changi Airport has been a Singapore icon. Indeed, we must continue to keep up, upgrade, maintain, transform and retransform it, as relevant. With that, I support the Bill.
Senior Minister of State Josephine Teo.
Mrs Josephine Teo : Mdm Speaker, let me thank Assoc Prof Fatimah Lateef and Mrs Lina Chiam for speaking in support of the Bill. Let me attempt to respond to their queries.
Firstly, on the points raised by Assoc Prof Fatimah Lateef, she asked whether the CADF can be used to fund ad hoc items, such as capital expenditure needed to address public health threats. The CADF is not intended for such purposes as it is meant to fund the expansion of Changi Airport. Its uses are circumscribed. It has to be related to the expansion of Changi Airport and the related acquisition of capital assets to support the operation of the expanded airport. It is the responsibility of the airport operator to put in place measures to address such emerging threats, as Assoc Prof Fatimah Lateef highlighted, and to bear the costs associated with such measures.
Assoc Prof Fatimah Lateef also asked what kind of loans can be made from the CADF and to whom these loans might be made. In addition to funding the expansion of Changi Airport, the CADF can also be used to make loans to the airport operator to allow the airport operator to construct facilities or acquire assets to support the operation of the expanded airport. These loans will be made on terms to be negotiated between CAAS and the airport operator.
Turning now to the points raised by Mrs Lina Chiam, there are essentially three. The first is whether it would be prudent for us to conduct more detailed feasibility studies before
Page: 87
embarking on the building of Terminal 5. That is exactly what we are doing, whether you term it as feasibility studies or detailed design studies. At this stage, we are doing land preparation works, but we have not started constructing Terminal 5. We are at the design stage. And it is precisely at this design stage that we will look at the needs of an air hub of the future, in particular, how we can maintain a very high level of service standards and, at the same time, increase the productivity of the manpower that we will need to operate Terminal 5.
From what I can understand, Mrs Chiam has expressed the concern as to whether we are rushing into things. From the design stage to the construction stage to the testing stage, to the operation stage of a terminal of the scale of Terminal 5, it would easily take 10 years. So, we are talking about a terminal that could, at the very earliest, be operational in the middle of the next decade. It is not too early at all to start now if we want to have something available to us in the mid-2020s, because that is when we project that the capacity of Changi Airport, even with the enhanced capacity of Terminal 4 and Terminal 1, will be almost fully utilised. We have to get this infrastructure ready, otherwise we will be behind time. So, it is not a hasty decision. This has been thought about for a long time and we have to get down to building up Terminal 5. There is actually no more time to lose, in my view.
The second point is: why set up a dedicated fund, the CADF? You already have Reinvestment Fund, why not use it to pay for the airport development? Two things: one is that for something as important and as long term as air hub development, you really need to have the certainty of funds, whereas the nature of the Reinvestment Fund is that it is subject to competition every year. Every cycle, Ministries, Statutory Boards, if they have a good idea, will have to compete for Reinvestment Fund; it is not assured funding. Until it becomes a programme that is proven, it does not enter into a specific Ministry's funding and you use Reinvestment Fund for that purpose. That is one reason.
The second reason is that, given the amount we expect to be needed for Changi Airport's development, it is not possible for the entire amount to be met by the total size of the Reinvestment Fund. There is just not going to be enough of it.
The third point the Member raised is whether in a dedicated set-up like the CADF, it becomes possible for the rules of prudence and good governance to be circumvented. The answer is no. The use of the fund is circumscribed. That is why we are coming to Parliament to expressly lay out the uses of the Fund. Even in the disbursements and in terms of the commitments that can be met by the Fund, these will be subject to all the usual rules that we have implemented within the public sector. Bearing in mind that this Fund will be administered by CAAS, which is a Statutory Board, the same rules that apply to all other projects they fund will apply to the projects funded out of the CADF as well.
Page: 88
I hope that I have addressed the questions raised by both Mrs Lina Chiam and Assoc Prof Fatimah Lateef.
*Question put, and agreed to.*
*Bill accordingly read a Second time and committed to a Committee of the whole House.*
*The House immediately resolved itself into a Committee on the Bill. – [Mrs Josephine Teo.]*
*Bill considered in Committee; reported without amendment; read a Third time and passed.*
Page: 89
PAPERCUTS