Nov 05, 2013

    Renewing JTC leases? Raise productivity first

    The Business Times

    INDUSTRIALISTS who want their leases at JTC-owned factories renewed will have to show that they are taking serious steps to raise productivity.

    It is an important criterion, said Mr Teo Ser Luck, Minister of State for Trade and Industry.

    "Because moving forward, we have to maximise the value of certain spaces as well, and we want to strengthen SMEs, so we put in that productivity element to say that if you want to renew, no problem, but we also want you to strengthen your own business using the same space... We want to see you, for instance, automate certain parts so you are more productive."

    The new productivity criterion will see firms submitting a proposal on how they intend to raise efficiency levels and set milestones when they ask to renew their leases. The proposals will be reviewed by both JTC and Spring Singapore, said Mr Teo.

    JTC, in response to The Business Times' query on the productivity criterion, said that it will apply not just to lease renewals, but also to applications for industrial land.

    The goal is to create a win-win situation, where land use can be intensified in space-starved Singapore, while companies can benefit by becoming more productive.

    JTC "will look at the industry that the industrialist is operating in and the activities that it proposes to undertake, the value-add it would generate, the amount of investments in plant and machinery that it will put in, and the quality of the jobs that it will create", it said.

    On the issue of industrial rent, Mr Teo said that the government is keen to push out supply of space as a means to keep the pace of rent increases in check.

    Overall, he believes that rolling out more industrial space is a better way to rein in rising rent, compared with JTC returning to its former role as an industrial landlord providing low rent - which many SMEs are hoping for.

    "The thing is whether JTC, in the longer term, can continue to subsidise the industrial rent rate, because there are other operators where companies take up factory space with."

    As tenants pay market rent at such privately owned factories, the efficiency of the market will be affected if the Government provides subsidised rent. "That is also why, for the economy as a whole, it may not be positive for future growth," he explained.

    Similarly, the Government is studying ways to help SMEs cope with their commercial-rent woes, but has ruled out action such as setting caps to rental increases, or rental ceilings.

    "We are thinking of some programmes and schemes to see what we can do but you can't directly intervene in the market. And we should not, because this is market driven," said Mr Teo.