Speech by Senior Minister of State for Transport Dr Janil Puthucheary on Second Reading of LTA (Amendment) Bill

1.     Mr Deputy Speaker, Sir, on behalf of the Minister for Transport, I beg to move, “That the Bill be now read a second time.”

Planning for the Future

2.     Singapore has come a long way since we debated whether to build our first MRT line many years ago. We are in a much stronger fiscal position today. However, building a new line remains a major decision due to the large upfront capital outlay involved. For example, the construction of the Downtown Line cost $21 billion, or close to 5% of our GDP in 2017. This escalation in costs over time is not just due to inflation, but also because we are building under more challenging conditions, for example, deeper MRT tunnels and stations amidst our increasingly built-up environment.

3.     Although the development costs are hefty, the benefits extend over many generations of Singaporeans. We should be responsible and set aside funds to invest in our rail network for the benefit of future generations.

4.     This is why the Government announced the Rail Infrastructure Fund, or RIF, earlier this year at Budget 2018. The RIF will enable the Government to save up when our fiscal position allows. This will smoothen out the large capital outlay for rail projects.

5.     In line with this, the Ministry of Transport proposes to enact the LTA (Amendment) Bill to formalise the establishment of the RIF. Let me now explain the key provisions in this Bill.

Setting up the Rail Infrastructure Fund

6.     As the developer of the rail network in Singapore, the Land Transport Authority (LTA) is well placed to hold, manage and administer the RIF. Clauses 4 and 6 of the Bill establish the RIF as a Statutory Fund under LTA and assign the function of managing the RIF to LTA.

7.     Clause 6 further sets out the sources of money for the RIF. This enables the Government to set aside money from the Consolidated Fund or Development Fund for the RIF through Supply Law.

8.     Clause 6 also defines the purposes for which LTA is empowered to withdraw moneys from the RIF. Essentially, this ensures that the RIF is only used for the development of the MRT and LRT network. The key uses of the RIF are:

a.     First, to expand the MRT and LRT network. This includes constructing rail infrastructure such as stations, tunnels and tracks, acquiring the first set of operating assets such as trains, performing investigative studies, as well as associated costs such as the cost of land. The RIF may also be used to replace existing operating assets, if such replacement is required to operate the expanded rail network. For example, when we build rail extensions that connect to existing lines, operating assets on the existing lines may need to be replaced to allow both sections to interface properly;

b.     Second, to replace, upgrade and add rail infrastructure, such as tunnels and tracks, for existing rail lines. The development of a rail line does not end after it is constructed. We will need to continually invest in the upgrading and renewal of the rail civil infrastructure as they age, to ensure safe and reliable operations. These renewal works will similarly require large capital outlays. It is prudent for us to put aside money in anticipation of such spending; and

c.     Third, to invest in accordance with the standard power of investment for Statutory Boards. This is to enable the RIF to keep up with inflation. The investments made using the RIF moneys will be held within the RIF, to ensure that the proceeds continue to be ring-fenced for the development of the MRT and LRT network.

9.     Currently, the moneys in the Railway Sinking Fund (RSF), which is another Statutory Fund under LTA, may also be used to acquire operating assets. Clause 5 distinguishes the use of the RIF from that the RSF. The RIF is intended for the expansion of the rail network and the acquisition of the first set of operating assets necessary to enable this expansion. On the other hand, the RSF is intended for the renewal of rail operating assets, such as trains. While the RIF is solely made up of Government subsidies, the RSF comprises a mix of Government subsidies and Licence Charge collected from the rail operators under the New Rail Financing Framework. This distinction reflects the allocation of financial responsibility between taxpayers and commuters – tax dollars will be used to invest in the civil infrastructure and the first set of operating assets. Thereafter, every generation of commuters will need to pay part of the recurrent cost of operating the rail network, including the renewal of operating assets. This ensures that the burden on taxpayers remains sustainable.

Conclusion

10.     The Rail Infrastructure Fund will allow us to save up and re-invest in our future, to benefit generations of Singaporeans to come.

11.     With that, Mr Deputy Speaker, I beg to move.