FISCAL IMPLICATIONS OF TOWN COUNCILS IN SINGAPORE

Abstract

The Town Councils (TCs) concept was implemented in Singapore after the 1988 General Election whereby the management of public housing estates currently under the responsibility of the Housing and Development Board (HDB) will be devolved to local residents. Nine TCs have been set up since May 1989 with a total of twenty-seven TCs expected to be established to cover all constituencies by 1991. It should be noted that the TCs concept has been motivated primarily by political considerations. The Government had stated that the TCs would provide a missing stabiliser in our political system. In addition, the Government hopes that the TCs would encourage a greater level of residents' participation from an otherwise apathetic nation. However, it is felt that the possible economic repercussions of a shift from a centralised mode of provision to decentralising of certain public services to the TCs merits study as well. This academic exercise, therefore, attempts to analyse the fiscal implications of the organisation, functions and financial structure of the TCs on economic efficiency. Theoretical aspects of such analysis are largely derived from the literature on fiscal federalism, which includes issues relating to local public finance. It is assessed that there is little independent distributive and stabilisation functions that the TCs can undertake. There is understandably a dearth of data concerning this new area of study. Consequently, only a detailed analysis of the theoretical implications, particularly the fiscal effects, of the TCs is possible. The analysis is based on the terms and provisions contained in the Town Councils Act and the Town Councils Financial Rules under which the TCs must operate. While the discussions with officials of the three pilot TCs (established on September 1986) injected a sense of empirical realism into the study, it is recognised that great caution should be exercised in generalising the findings based on only three TCs. However, the interviews did raise certain salient issues which are of relevance for the other TCs. It is found that as far as the size and nature of the services undertaken by the TCs are concerned, there appears to be little or no misallocation of resources. It seems that the formation of the TCs has led to a better match of residents’ wants and the provision of local public services. Hence a closer to Pareto-efficient level of allocation is attained. Financially, it is assessed that the TCs would not be viable on their own without government grants. The assessment is substantiated by the experience of the three pilot TCs whose preoccupation with technical efficiency to forestall rising operating costs has meant the relative neglect of the stated objective of greater residents' participation. There does not appear to be any improvement in the level of residents’ input into the decisions that affect them and the implementation of the policy itself. This seems to be inevitable as the management of the TCs cannot run contrary to the overall administrative environment in Singapore. There is much room and scope for further research. One of the areas that is suggested for future effort is the study of the estate management services industry from an industrial economics perspective. Finally, the study recognises the crucial role of the Government. Without the commitment of the top political leadership, the prospects of the TCs are assessed to be dismal.