Opening Speech by Minister for Transport and Second Minister for Finance, Mr Chee Hong Tat, at the Second Reading of the Transport Sector (Critical Firms) Bill

Introduction

1.     Mr Speaker, I beg to move, “That the Bill be now read a second time”.

2.     Connectivity is essential to Singapore and our economy.

a.     Many Singaporeans rely on public transport for our daily activities.

i.     In 2023, we have over 7 million daily rides on our public busses and trains, serving millions of commuters across the country. 

b.     We also rely on our air and sea connectivity to bring in essential goods, support the growth of our industries, and connect Singaporeans with the rest of the world.

i.      Last year, Changi Airport served about 59 million passengers. We are now connected to about 420 cities through almost 120 airlines.

ii.    As one of the busiest ports in the world, our maritime hub is a key node in global supply chains.  Our port is linked to 600 ports around the world, and in 2023, our container throughput reached a new high of 39 million twenty-foot equivalent units.

3.     Our connectivity to the world is critical not just during peacetime.

a.     During the COVID-19 pandemic, it was our strong connectivity to the region and beyond that allowed Singapore to receive and send out critical supplies including food and medical essentials.

i.     Within Singapore, we worked hard to maintain connectivity by keeping our public transport services running, so that our essential workers could continue to go to work, to fight the crisis and keep the country going.

4.     All these benefits cannot be achieved without the safe and reliable provision of essential air, land, and sea transport services at all times and under all circumstances, including during a crisis.

Rationale for the Bill

5.     Sir, the proposed Bill today therefore aims to:

a.     Put in place measures to enhance the resilience of essential transport services in Singapore; and 

b.     Set the foundations to protect Singapore against possible future disruptions to our essential transport firms.

6.     Our objective is to help Singapore prepare for possible extreme scenarios that may happen in future, so that we are ready for these risks.

a.      For example, we cannot rule out the risk of malicious actors gaining control and adversely influencing our key transport entities, jeopardising the provision of essential transport services in Singapore.

b.     We have built strong relationships with the firms in our transport ecosystem and worked closely with firms and workers during peacetime and crises such as the COVID-19 pandemic to provide safe, reliable, and efficient services for Singapore, and we want to make sure they continue to do so in the years to come.

Regulation of other essential services

7.     We are not alone in making moves to safeguard our essential services.

8.     Other countries have taken steps to protect their strategic assets too.

a.     In 2021, the United Kingdom (UK) passed the National Security and Investments Act, which allows the government to intervene in certain acquisitions made that could harm the UK’s national security.

b.     In the United States, the Foreign Investment Risk Review Modernisation Act was passed in 2018 to expand the jurisdiction of the Committee on Foreign Investment in the US to address growing national security concerns over foreign investment in US companies or operations.

9.     Singapore already has regulations in place to safeguard some of our essential sectors.

a.     For example, the Banking and Telecommunications Acts require approval to be sought before a person acquires a certain percentage of shares or voting power in a licensee, and prior to the appointment of key personnel such as the chief executive officer.

b.     The Electricity and Public Utilities Acts also provide similar levers to safeguard the management and provision of electricity and water in Singapore, to ensure that these supplies always remain available.

c.     More recently, MTI passed the Significant Investments Review Act, or SIRA, which provides the Government with an updated set of regulatory levers to manage threats posed by significant investments into critical entities.  

10.    Likewise, MOT would like to propose measures to ensure that our essential transport systems are able to serve Singapore and Singaporeans effectively, now and in the future. 

Taking a sector-specific, calibrated and targeted approach

11.    Mr Speaker, please allow me to explain why we are introducing a transport sector-specific regulatory framework through this Bill, which is consistent across the air, land, and sea transport sectors, instead of going through a broad-based legislation like SIRA.

a.     A sector-specific approach can better allow us to customise the regulatory oversight needed for Singapore’s transport ecosystem and balance these objectives with the commercial and business impact on our transport entities and their investors.

12.    We have therefore designed our regulations in a calibrated and targeted manner.

a.     The proposed Bill does not seek to regulate the standards and performance of our entities’ day-to-day operations.

b.     Rather, it seeks to protect key transport entities against the risk of malicious actors exerting undue influence over these entities, and ensure that commercial decisions by the entities do not jeopardise their ability to provide essential transport services in Singapore.

c.     Some entities may be involved in the provision of other services outside of transport, such as food and beverage (F&B) or advertising services. The Bill will not focus on regulating these services; instead, it is targeted at the parts of the entity that directly provide essential transport services in Singapore.

13.    In addition, we also recognise that different entities play different roles to deliver a range of services.

a.     Since last year, MOT has been engaging the key transport entities to better understand how regulations can be practically implemented.

b.     We have taken in their feedback when designing this Bill, and we are mindful of the commercial impact. 

c.     MOT will therefore differentiate some controls based on entities’ roles, responsibilities, and functions, which I will elaborate in a later part of my speech. 

14.    Finally, the Bill serves to harmonise our laws across the transport sector, to reduce the regulatory burden on entities as they evolve, as well as provide greater consistency on commercial and investment controls in the Singapore transport ecosystem.

a.     This Bill seeks to introduce a common regime covering both licensees and non-licensees across air, land and sea, to apply a consistent set of regulatory controls and to create a transparent and predictable regulatory environment for the entities. 

Key Features of the Bill

15.    I will now go into the key features of the Bill; The Transport Sector (Critical Firms) Bill makes amendments to the following Acts:

a.     The Bus Services Industry Act, BSI Act;

b.     The Civil Aviation Authority of Singapore Act, CAAS Act;

c.     The Maritime and Port Authority of Singapore Act, MPA Act; and

d.     The Rapid Transit Systems Act, RTS Act.

16.    After they are amended, these Acts will continue to be administered by the relevant Authorities of these Acts, namely the Civil Aviation Authority of Singapore, CAAS, the Land Transport Authority of Singapore, LTA and the Maritime and Port Authority of Singapore, MPA. These Authorities will also be responsible for designating relevant entities under the framework. 

Who will be designated?

17.    Allow me to explain how we plan to classify the affected entities. 

18.    The Bill is not intended to apply to every entity which provides a transport service in Singapore. Instead, we will take a targeted approach, by regulating entities within the transport sector that meet the following criteria:

a.     First, they are involved in the provision of essential transport services in the air, land, or sea transport sectors, and 

b.     Second, they are strategically important within the sector, for example if the services they provide are not readily replaceable, due to significant market share or specialised expertise.

19.    Clauses 3, 19, 30, and 47 together with the new Schedules set out the definitions for “essential transport services” under each sector by listing out the key services necessary for Singapore’s air, land, and sea transport networks.

a.     For land, we intend to include, among other things, public bus and rail services.

b.     For aviation, we plan to include, among other things, airport and ground handling operations, and passenger and cargo air services at Changi Airport.  

c.     For maritime, we plan to include, among other things, port and marine services and facilities, as well as services which support the provision of sea transport, such as water supply and bunkering.

 20.    Clauses 8, 23, 33 and 52 of the Bill insert provisions empowering the regulatory authorities to designate entities that are involved in the provision of essential transport services in Singapore. Entities can be designated as a:

 a.     “Designated operating entity”, if they directly provide any essential transport service in Singapore and are strategically important within the sector, or a

b.     “Designated equity interest holder” if they hold an equity interest in a designated operating entity, and have a strong nexus of control over their subsidiaries that are designated operating entities. This is because such individuals or organisations may influence key decisions related to the provision of essential transport services in Singapore.

21.    For the rest of my speech, I will be referring to both designated operating entities and designated equity interest holders collectively as “designated entities”.

22.    The designation process will be initiated after the Bill is passed and the law is brought into force. We intend for the relevant firms to be designated by the end of this year, if Parliament approves the Bill.

a.     The notifications of designations will specify the date on which designation of a company takes place, and will be published in the Gazette at least 14 days before the date that designation takes effect. This isprovided for in the new section 28E of the BSI Act, the new section 64 of the CAAS Act, the amended section 86D of the MPA Act, and the new section 21E of the RTS Act.

Controls for Designated Entities

23.    The Bill will introduce legislative levers across the four Acts in three aspects:

a.     Ownership controls

b.     Management appointment controls; and 

c.     Operations and resourcing controls.

Ownership Controls

24.    Ownership of a firm allows parties to exercise influence over its direction, management, and decisions.

25.     The Bill will allow relevant Authorities to have oversight of significant changes in effective control of designated entities, through the following requirements:

a.     Any person who becomes a 5% controller of the designated entity, which is when we consider a person to be a substantial shareholder of a company, must notify the relevant Authority within 7 days after becoming a 5% controller.

b.     Any person who intends to become, or cease being a 25%, 50% or 75% controller of the designated entity must seek the relevant Authority’s approval. At these levels of shareholding, controllers hold significant influence over a company, such as the ability to pass and block ordinary and special resolutions.

26.    In addition, the relevant Authority’s approval must be sought for:

a.     Any person intending to become an indirect controller, meaning someone that is able to exert control over the directors or trustee managers of the designated entity; or

b.     Any person intending to acquire and continue operating without disruption, any part of the designated operating entity’s business relating to the provision of essential transport services. This is to provide the relevant Authority with oversight over all acquisitions of the entity, or parts of the entity, regardless of whether there are significant changes to its service provisions.

27.    Lastly, designated entities must notify the relevant Authority within 7 days after becoming aware of any of the ownership changes which I just described.

Management Appointment Controls

28.    The second set of controls pertain to the appointment of management by designated entities.

a.     These controls allow the relevant Authorities to be kept apprised of any changes to the key personnel responsible for the management of our critical transport firms, and operations affecting the continued provision of the essential transport service.

29.    The Bill will require:

a.     Designated entities to seek the relevant Authority’s approval for the appointment of its CEO and Chairperson of its board of directors; and

b.     Designated operating entities who are also licensees to seek the relevant Authority’s approval for the appointment of its CEO, Chairperson, as well as all directors of its board.

Operations and Resourcing Controls

30.    Finally, the Bill will introduce controls over operations and resourcing to ensure that companies are equipped and able to operate their services under all circumstances, including times of crisis, and in the event of significant changes within each sector.

31.    We propose that designated entities should notify their respective Authorities as and when there are material developments or events, so that the relevant Authorities are kept aware of events that could materially impede or impair the provision of essential transport services in Singapore, and are able to take mitigation measures early, and as needed. 

a.     While current licensing regimes for each sector may also include notification requirements, this Bill codifies the notification requirements across all transport sectors for designated entities. 

32.     The Bill will require designated entities to notify the relevant Authority of such events, for example if a designated operating entity outsources a material function in providing essential transport services in Singapore, or if they face material events or legal proceedings that may impair or impede the provision of essential transport services in Singapore. This list of events will be circumscribed.

33.    To help companies to comply with these requirements, the relevant Authorities will issue a set of advisory guidelines after the Bill is approved by Parliament and comes into effect. These advisory guidelines willprovide practical guidance for these notification requirements.

a.     We have provided for this by Clauses 13, 25, 41, and 55 of the Bill.

34.    Next, the Bill inserts provisions extending the relevant Authority’s step-in powers via a Special Administration Order to cover designated operating entities and licensees across the air, land, and sea transport sectors. This is to safeguard service continuity in extreme scenarios and unlikely events, such as where a designated operating entity or licensee becomes unable to provide essential transport services safely and reliably.

a.     Currently, the relevant Authorities could issue Special Administration Orders to their licensees, as a safeguard in extreme scenarios.

b.     The step-in powers in this Bill are similar in scope, in that they extend to designated operating entities that directly provide essential transport services in Singapore but are not licensees.

35.    I wish to assure Members that step-in powers will be exercised as a last resort, to deal with extreme scenarios. They are meant to safeguard the provision of essential transport services in Singapore.

a.     For example, this could include when a designated operating entity becomes insolvent and unable to pay its debts, and this in turn jeopardises the continued provision of essential transport services.

b.     We will not intervene in the commercial operations and affairs of the entities in the normal course of business.

36.    If we need to use the proposed step-in powers, we will exercise them judiciously and only for the period which they are required for.

a.     The new section 33E of the BSI Act, the new section 75 of the CAAS Act, the new section 89B of the MPA Act and the new section 27D of the RTS Act in the Bill update the related provisions in existing Acts.

i.     For example, the Bill will provide for the issuance of ancillary directions, to specify the period in which the step-in order will take effect and other relevant conditions to achieve the purposes of the order when step-in powers are exercised.

37.    Lastly, business continuity planning requirements.

38.    The Bill introduces the power for CAAS to impose requirements for business continuity planning for designated operating entities in the air transport sector. They will not apply to designated equity interest holders.

a.     The Bill does not cover these requirements for designated operating entities in the land and sea transport sectors, as we can subject them to similar requirements via licence conditions.

Remedial Directions, Penalties, and Appeals

39.    Let me now touch on the general and miscellaneous provisions under the Bill.

40.    The Bill will allow the relevant Authority to issue remedial directions for breaches of controls relating to ownership and management appointments, among others.

a.     These remedial directions could include directing the disposal of equity interest and removal of key appointment holders if prior approval was not sought or if conditions of approval were breached.

41.    The Bill will employ the following penalties to enforce the regime:

a.     We have specified penalties for the breach of any control (including conditions of approval) relating to ownership, management appointments, and notification requirements for certain events, the breach of any remedial direction, as well as non-compliance with duties under a special administration order.

b.     The penalties will take reference from penalties under existing Acts, which take into account the operating environments within each sector.

42.    The amended section 41 of the BSI Act, the new section 67K of the CAAS Act, the new section 86HD of the MPA Act and the new section 28 of the RTS Act provide for avenues of appeal to the Minister against certain decisions made by the relevant Authorities, including the designation of an entity, refusal to grant approvals required for controls over ownership or management appointments, and the issuance of remedial directions.

Amendments introduced by Notice of Amendment 

43.    Sir, I would like to highlight that MOT will be moving a Notice of Amendment during the Committee stage to address two drafting changes: 

a.     First, we seek to amend clause 39 to remove subsection (3) of the new section 86HB of the MPA Act as it is not necessary in view of subsection (2) of the same.

 b.     Next, we propose to make a technical amendment to clause 19 for consistency with the prevailing legislative drafting style for the numbering of sub-paragraphs.

Conclusion

44.    Mr Speaker, Singapore’s connectivity is one of our greatest assets, and something we must continue to safeguard carefully to protect the interests of Singapore and Singaporeans. 

45.    We shall do so in a calibrated and targeted manner, by striking a balance between what is useful and practical for our transport sector and minimising the commercial and cost impact on companies and investors.

46.    We will continue to work closely with the industry and stakeholders on the implementation of this Bill.

47.    Sir, I beg to move.