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YESTERDAY IN PARLIAMENT

Minister: Causeway toll hikes have limited impact on firms

Ser Luck tells Parliament land transport costs constitute only small proportion of total business costs
Wednesday, October 8, 2014 - 05:50
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Mr Teo says the government has received ground feedback that others have found ways to cope with the higher charges

Singapore

THE Causeway toll hikes could affect the profit margins of some Singapore-based small and medium enterprises or SMEs, even though they are generally expected to have a limited impact on businesses here, Minister of State for Trade and Industry Teo Ser Luck told Parliament on Tuesday.

The impact on economic activity is likely to be small because land transport costs constitute a small proportion of total business costs - only around 3 per cent for companies in the manufacturing sector and one per cent for those in services. Even so, Mr Teo noted that some firms could be more affected than others. "In particular, SMEs in the sectors such as the food and wholesale sectors that frequently transport materials and goods across the Causeway would likely see a larger increase in land transport costs. Logistics firms offering trucking services via the Causeway may also pass on the increase in toll charges to SMEs."

Kurt Wee, president of the Association of Small and Medium Enterprises (ASME), told BT when contacted that SMEs in the fast moving consumer goods (FMCG) sector, for instance, would make at least two or three trips a day across the Causeway. Even though the cost increase per trip is small, it could add up to a substantial increase on a monthly or yearly basis.

Mr Teo noted that consumers could also be affected by "pass-through impact" on inflation. "In particular, as some of our food imports and lifestyle and furniture products are transported via the Causeway, the higher land transport cost may be passed on to consumers."

However, he suggested that any such impact on consumers is expected to be small, as the majority of Singapore's food imports and lifestyle and furniture products are still transported by sea or air. He said that the government would continue to monitor the impact of the toll hikes.

Mr Teo was responding to Member of Parliament Ong Teng Koon, who had asked about the business impact of Johor's decision to impose the toll, especially on SMEs which depend on goods and services rendered out of Malaysia.

Mr Teo said that some SMEs were already preparing for the impact and looking at ways to overcome it. "We have also received ground feedback that others have found ways to cope with the higher charges. This includes improving trip scheduling so that fewer trips across the Causeway are needed."

Mr Wee said that companies would have to better manage the transportation of goods from Malaysia. This could lead to, among other things, the move to bigger vehicles to achieve economies of scale and lower per unit costs.

He added that while companies may pass on the burden of the cost increase to consumers, it is likely to be a one-off adjustment for business cost.