Price still important in awarding of state land

Although I agree that price should not be the sole factor in determining the use of state land, it must still be the key factor in land-scarce Singapore ("Want more hip Dempsey clusters? Don't award land to highest bidder"; last Tuesday).

State land should be utilised to give the maximum benefits to society over the long run.

These benefits can manifest in the form of better health, richer culture and avenues for inspiring creativity.

This applies to places like Ang Mo Kio-Bishan Park, which took up valuable land parcels and was strongly supported by residents nearby.

One reason was that they wanted new places for leisure, but the more important reason was that it gave an additional boost to their property value.

Ultimately, it is the bottom line that matters when it comes to winning the community's support as to how land should be used.

Another reason why price should be emphasised as the main factor is that Singapore is a land-scarce country.

With limited land for commercial operations or development, the land authority must maximise both the monetary and non-monetary value of the land so as to be answerable to the taxpayer.

When the difference between the highest bid and winning bid is about three times, as seen in Dempsey, the long-term benefits must be carefully measured against the loss of millions in rental income.

Lastly, if the bidding outcome for land no longer goes to the highest bidder, there is the risk of distorting market forces.

This is because charging significantly less than the market rate may encourage inefficiency over the long run.

While the intention may be to let new businesses find their footing with low rent temporarily, it is possible that such a move would restrict the growth of these businesses to areas with preferentially low rent.

This may make them lose out greatly in the fiercely competitive global marketplace.

Lionel Loi Zhi Rui

A version of this article appeared in the print edition of The Straits Times on January 04, 2016, with the headline 'Price still important in awarding of state land'. Print Edition | Subscribe