Look at hawker stall rents first

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Cheap and good – that is what Singaporeans expect of their hawker food. Rising operation costs are, however, forcing food prices to go up, prompting a re-think of how hawker centres are run. The government has proposed outsourcing the management of four hawker centres to a social enterprise. Will that work?

This social enterprise, operating on a  not-for-profit model, will share operating surpluses among stakeholders, such as  hawkers, managers and the National Environment Agency, as “social benefits”. But  it will still face the same problem of high rentals.

Mr Leong Sze Hian agreed. Writing for The Online Citizen, he argued: “Shouldn’t we be examining what is arguably the biggest cost item for most stalls – rental?”

If hawkers have to pay high rentals, they will be forced to pass on the cost to their customers through higher food prices. Subsidised cooked food stallholders pay monthly subsidised rents of $260 to $320. Monthly subsidised rentals run from $5 to $184. Market rents are much higher.

Singaporeans want cheap and readily available food. But at whatever prices they sell their food, hawkers must be able to cover costs. To keep hawker prices low, management has to set low rents.

Unlike normal business operations, a “non-profit” social enterprise should have more leeway to maintain reasonable rents.

Going beyond rent

Going beyond rent, there are other questions about the not-for-profit model. KF Seetoh, founder of Makansutra, said the media had not gone beyond the facts and official statements. “The  government has been running hawker centres for decades, and now, they suddenly  believe there could be non-profit groups out there that can do a better job. I  mean, where will the groups come from?”

In response to Seetoh’s questions  on Facebook, Richard Tan, head of NEA’s hawker division, said: “At the  end of the day – it is to see who can manage centres more efficiently – the  private sector or NEA.”

The nuts and bolts of the operating model have yet to be worked out. According to Tan, the master tenant (MT)  will receive a management fee for managing the centre. “If the MT is good he  should be able to reduce maintenance cost to arrive at a surplus which will be shared. ”

The Hawker Centres Public Consultation Panel said potential management models should be based on three principles, in  descending order of importance: maximising community benefit, creating employment opportunities for lower-income and less privileged groups and providing platforms for individuals who wish to join the food industry.

Seetoh also wondered what kind of key performance indicators the social enterprise would have to meet. These KPIs are not publicly available.

What assessment criteria that are  available might be gleaned from the panel’s recommendations, above and beyond the principles mentioned above. These include aesthetically pleasing designs,  promoting social graciousness by encouraging a tray return system, energy  efficiency, and healthy food options.

Previous attempts for social  enterprises to run hawker centres have failed, notably the Kampung at  Simpang Bedok. Nevertheless, the government seems intent on tackling the issue  of rising food prices. This is a positive sign, suggesting a move away from pure  profit motive and towards social good.