Working with Markets: Harnessing Market Forces and Private Sector
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Working with Markets: Harnessing Market Forces and Private Sector for Development The term “working with markets” captures the fine balance of successful URBAN SYSTEMS STUDIES URBAN SYSTEMS public-private collaboration. The first aspect involves engagement and partnerships with private enterprises through sound regulation and well- structured public-private partnerships. The second involves harnessing market forces, such as competitive pricing and bidding, to set prices for and allocate scarce resources. This study examines four aspects of working with markets in the context of land and infrastructure development in Singapore. The physical development of Singapore has been underpinned by the Government Land Sales programme, through which the government sets clear urban planning guidance and sells land with assured planning permission to reduce risks for private development. The government also used price signals for scarce resources like water to guide efficient resource usage and promote financial sustainability. Singapore’s government-linked corporations (GLCs) Working with Markets: Harnessing Market Forces and Private Sector for Development Working with Markets: Harnessing Market Forces and Private – operating on commercial principles – helped to accelerate the building of national infrastructure at lower cost, manage state assets efficiently, and allow Working with Markets: public sector agencies to focus on their core functions. Working with the private sector was taken a step further when public-private partnerships were Harnessing Market Forces introduced as a strategic procurement tool to maximise value-for-money in delivering infrastructure and services in some capital-intensive sectors. and Private Sector Singapore has taken a calibrated approach to balancing markets and state – intervening in markets, applying market mechanisms, and partnering private for Development enterprises – to develop into a liveable and sustainable city. “ What is absolutely key to understanding Singapore’s success in applying market systems to public problems is the centrality of the state in assessing, controlling and regulating the market. The hallmark of Singapore’s use of the market has been strong government control and oversight. Private initiatives do not displace government unexpectedly or haphazardly - privatization has taken place only when and where the Government has become convinced that the private sector can do the job better. Government will test and determine where markets perform functions with social objectives. It applies the same rigorous standards to testing and evaluating market performance that it does to government policies.” Lim Siong Guan and John Thomas (2001). Using Markets to Govern Better in Singapore. 9 789811 145087 rb172980_mnd_uss_market_cv_v1c.indd 1 3/10/17 6:53 PM Working with Markets: Harnessing Market Forces and Private Sector for Development Urban Systems Studies (USS) Books Financing a City: Developing Foundations for Sustainable Growth Land Acquisition and Resettlement: Securing Resources for Development Built by Singapore: From Slums to a Sustainable Living Environment Planning for Tourism: Creating a Vibrant Singapore Cleaning a Nation: Cultivating a Healthy Living Environment Urban Redevelopment: From Urban Squalor to Global City Port and the City: Balancing Growth and Liveability The Active, Beautiful, Clean Waters Programme: Water as an Environmental Asset Working with Markets: Harnessing Market Forces and Private Sector for Development For product information, visit http://www.clc.gov.sg/Publications/USS2014.htm Singapore Urban Systems Studies Booklet Series Water: From Scarce Resource to National Asset Transport: Overcoming Constraints, Sustaining Mobility Working with Markets: Industrial Infrastructure: Growing in Tandem with the Economy Sustainable Environment: Balancing Growth with the Environment Harnessing Market Housing: Turning Squatters into Stakeholders Forces and Private Biodiversity: Nature Conservation in the Greening of Singapore For product information, visit http://www.clc.gov.sg/Publications/USS2013.htm Sector for Development Liveable and Sustainable Cities: A Framework For product information, visit http://www.clc.gov.sg/Publications/books-liveable-and-sustainable-cities.htm First Edition, Singapore, 2017 Editorial Team Writers: Wu Wei Neng, Senior Assistant Director, Centre for Liveable Cities CONTENTS Jean Chia, Senior Assistant Director, Centre for Liveable Cities Ruan Ningzhen, Manager, Centre for Liveable Cities Editor: Koh Buck Song, Editor, Centre for Liveable Cities List of Illustrations ix External Research Advisors: Professor Phang Sock Yong, Vice Provost, Singapore Management University Foreword xi Choy Chan Pong, former Senior Advisor, Urban Redevelopment Authority Preface xiii Editorial Committee: Limin Hee, Director, Centre for Liveable Cities Acknowledgements xv © 2017 Centre for Liveable Cities (CLC), Singapore. All rights reserved. The Singapore Liveability Framework xvi Chapter 1 Introduction and Background 1 CLC is a division of • How Can Governments Work with Markets? 3 • Examples of Working with Markets in Singapore 6 Set up in 2008 by the Ministry of National Development and the Ministry of the Environment and Water Resources, the Centre for Liveable Cities (CLC) has as its mission “to distil, create and share Chapter 2 Navigating the State-Market Relationship 9 knowledge on liveable and sustainable cities”. The CLC’s work spans four main areas—Research, • 1950s to 1970s – From Colony to Independence 10 Capability Development, Knowledge Platforms, and Advisory. Through these activities, the CLC hopes • 1980s to 1990s – Rethinking the Role of the Private to provide urban leaders and practitioners with the knowledge and support needed to make our cities better. For more information, please visit www.clc.gov.sg. Sector in the Economy 11 • 2000s and 2010s – Making Markets Work Better 13 Research Advisors for the CLC’s Urban Systems Studies are experts who have generously provided Chapter 3 Shaping Singapore: Urban Transformation through their guidance and advice. However, they are not responsible for any remaining errors or omissions, which remain the responsibility of the author(s) and the CLC. Government Land Sales 15 • 1960s: A New City Centre is Born – Urban Renewal Takes Off 20 For product information, please contact • 1970-1973: Supply Constraints – Scaling Down of Land Sales 29 CLC Publications • 1974-1982: GLS Evolves Further in an Era of Rapid +65 66459576 Centre for Liveable Cities Urban Development 32 45 Maxwell Road #07-01 Reclaimed Land Creates Comprehensive The URA Centre 38 Singapore 069118 Development Opportunities [email protected] • 1983-1990: Recovery from Recession and the New Focus of GLS 40 ISBN 978-981-11-4508-7 (print) • 1990s: Meeting New Development Needs 44 ISBN 978-981-11-4509-4 (e-version) Determining the Fair Market Value of Industrial Land 46 All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, Auction versus Tender in the Sale of GLS Sites 52 including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher. • 2000s: Redeveloping the City, Opening up Every effort has been made to trace all sources and copyright holders of news articles, figures and information in this book New Growth Areas 57 before publication. If any have been inadvertently overlooked, the CLC will ensure that full credit is given at the earliest Reserve Prices in the Sale of GLS Sites 60 opportunity. Influencing the Market with the Project Completion Period 66 Cover photo: Clarke Quay and Riverside Point. Image courtesy of William Cho. Meeting Short-term Office Needs with Flexible Transitional Office Use 68 Chapter 4 Pricing Public Utilities and Services 71 • Water Pricing for Cost Recovery and Demand Management 73 LIST OF ILLUSTRATIONS • Efficient Water Pricing for Long-term Sustainability 76 Diagrams Chapter 5 Role of Government-Linked Corporations in Urban Development 83 • The Singapore Liveability Framework xvi • The Housing and Urban Development Challenge and the Role of GLCs 84 Exhibits • Resources Development Corporation 87 • Exhibit 1: Changes in Water Tariff since 1972 78 • Pidemco 91 • Exhibit 2: Domestic Water Consumption in Singapore • Working with Private Companies in Public from 1995 to 2016 78 Housing Development 94 Working with Markets to Establish Prefabrication Technology 96 • Exhibit 3: Definition of a Government-Linked Company 85 • Privatisation, Corporatisation, and the Changing • Exhibit 4: PPP Procurement Process 111 State-Market Relationship in the 1980s to 2000s 101 • Exhibit 5: Water and Waste-to-Energy (WTE) PPP Projects Chapter 6 Testing New Ground with Public-Private Partnerships 107 in Singapore 113 • PPP Amid Privatisation; Harnessing Cost Efficiencies 115 • Exhibit 6: Selected PPPs in Singapore 114 • Mitigating Technology Risk through PPP 119 • Exhibit 7: DBOO Structure 129 • Structuring Water and Waste PPPs; Challenges • Exhibit 8: DBOO Payment Structure 130 and Responses 126 • Injecting Innovation; Developing New Markets for Singapore as a ‘Hydrohub’ 130 Photographs Working With the Private Sector to Develop the Sports Hub 134 • Singapore’s largest power station, Senoko Power Station, in 1986 5 • Lessons from Singapore’s Experience 140 • News reports on the Government Land Sales programme 17 Chapter 7 Working with Markets to Enhance Liveability • Congested pedestrian