[h=6]The Workers' Party[/h]
[h=1]Proposal for transforming the child care sector – NCMP Yee Jenn Jong[/h]
by NCMP Yee Jenn Jong
(attached graphs)
Mr Speaker, I like to add my suggestions for reforms to the child care industry even as the government is looking at how to boldly transform this sector.
I wish to declare that a part of my business supplies products and services to preschools. I have also previously managed and owned child care centres but have no longer been doing so for the past 7 years. This proposal is to improve the industry to benefit consumers. It will not benefit my business.
I will first speak in Mandarin.
新加坡的托儿企业开始于70年代。当时，只有几家私人运营商和非盈利运营商。
四到六岁的孩子可被幼稚园或托儿所照顾。托儿服务包括学前教育。但由于幼稚园的学费较低，幼稚园成为大多数家长为儿童提供学前教育的首选。
到了90年代，由于有更多双薪家庭的产生，托儿企业开始发展起来。在过去十年里，它的发展更急速。在工作场所开设托儿所变得常见。在2004年初, 有651间托儿所。到了今年6月,这数目增加到987间. 在这期间里，托儿所招收的儿童人数从38,455名增加到75,456名。许多组屋新镇里的托儿所供不应求, 有的报名後甚至要排队等一年以上。
包括婴儿护理在内,托儿所目前照顾近9万名儿童,跟幼稚园的9万三千名学生差不多。幼稚园登记人数在过去的十年里逐渐减少。依这个趋势来看，托儿所在数量上将快超越幼稚园了。因此，托儿所会在我们社会中扮演重要的角色。
在2004年初，托儿所平均的全日学费是每月572元。到了2008年底,学费增到699元。目前，平均学费为831元。
2008年, 政府增加托儿服务费用的津贴。全日学费每月的津贴从150元增加到300元，从以上数据来看,我们可看到的是在津贴增加的同时，托儿所的平均学费也同幅度 增加。如果我们分析私人托儿所的学费,我相信其学费的增长超过政府津贴的增长，因为它们的租金和劳工成本增加得很快。今天的早报就提到私人托儿所租金的困 难状况。
在最近的连氏基金(Lien foundation)调查，90％的托儿服务使用者认为，学前教育是昂贵或非常昂贵的。该调查还指出一个严重问题：托儿学费高使到夫妻不想要更多的孩子。
我们是否可能有大众化，价格合理，良好的托儿服务吗？我认为可以。现在，我用英语来解释。
In the child care industry, there are many private operators, most with one or a few centres while several run chain stores.
We also have non-profit operators, dominated by NTUC First Campus and PCF Sparkletots. They are called Anchor Operators, so determined after an exercise in 2009. The criteria used included: (a) $5 million paid-up capital, (b) non-profit and (c) without any religious or racial affiliation.
Anchor Operators function mostly from HDB void decks, at rents of between $2 to $4 per square metre as disclosed by MCYS. For a typical centre of 400-500 sqm, this means monthly rent of $1,000 onwards. They receive generous set-up and furnishing grants for each new centre. In addition, Anchors get recurrent grant for manpower development and learning programmes which is estimated to go into $30 million per year.
MCYS publishes upcoming new centres from HDB and SLA. From its website, I see just a few centres available to private and non profit operators. Yet at the opening of the 100th NTUC centre in October last year, NTUC declared it will open 50 new centres over the next 2 years, which is one every fortnight. PCF too had been growing just as rapidly in the last three years. Just five years ago, PCF was a small child care player. Today, it is number 2 with 90 centres, just behind NTUC. The many new centres by these two do not match the very small number of published centres for non profit operators. Are they given unpublished quotas?
We are told that the role of non profit and Anchor operators is to bring cost down while maintaining quality.
Sir, there is no magic in non profit or in Anchor Operators. The lower fees they provide can be matched by private operators. I will now demonstrate that if private operators get the same benefits as non profit and indeed the Anchor Operators, they have shown that they could match the fees of non profit peers.
Financial modelling for child care is straightforward. The main start-up cost is renovation, fitting out, and investment in resources. Set-up cost can be high, running into several hundred thousand dollars per centre.
In a typical centre paying competitive rents, manpower and rent account for some 80% of all ongoing operating costs. Private operators function from landed houses, commercial and government-owned buildings or purpose-built HDB void decks. Tenancy is often subjected to bidding. When tenancy expires, there is usually open bidding or adjustments to market rate. Competition has caused rents to be in excess of $10,000 to even as high as $40,000 per month in recent tenders.
Anchor Operators get choice new sites regularly at highly subsidized rents. They receive start-up, furnishing, maintenance and recurrent grants. These give them huge operating benefits over competitors.
The difference in monthly rent between non profit and private operators can be $15,000 per month or more. Divide $15,000 by a typical centre enrolment of 75 children. That works out to around $200 cost advantage per child per month. With setup grants, Anchor Operators need to provide less for amortization of investment. They get ongoing grants to defray costs. Yet with these cost advantages, non-profit’s median fees is currently just two hundred over dollars lower than that of private operators. We can find private centres whose fees are not much higher than that of Anchor Operators. Are Anchor Operators with all these cost advantages, really doing enough to keep fees affordable?
Sir, there are other industry data to support my claim.
In a parliament reply this year, MCYS disclosed that EtonHouse, a premium operator with fees of $1,500 per month, charges only $728 per month at its Hampton Preschool. The centre is a collaboration with PCF. PCF secured the site at low rent, and can enjoy other grants. EtonHouse is responsible for programme delivery, set-up and pedagogy. According to a speech by Mr Wong Kan Seng in 2009 , EtonHouse manages the centre and was selected because PCF wanted to work with a private operator that could deliver ‘high quality programmes’. While there could be variations in operations compared to a typical EtonHouse’s centre, the fact is, EtonHouse could deliver ‘high quality programmes’ at less than half of its usual fees when it operates at a void deck that enjoys subsidised rents and grants.
In the 1990s, government buildings started to provide for workplace childcare. There was an interesting practice then to charge $1 or other token monthly rent for purpose-built child care facilities which catered to children of staff working in the building. Bids were called. I noted that in open competition, these sites went to established private players whose own centres charged in the mid to upper price range.
The condition for low rent then was that fees for children of staff in the buildings must be kept low. Premium private operators could match prevailing fees of non profit operators.
Today, costs are escalating due mainly to rent and manpower. Manpower cost affects all in the industry. Anchor Operators with recurrent grants can better retain staff, head-hunt from other centres and deal with rising costs. Rent is steadily rising in our competitive market.
This has caused fees to rise. Out of pocket payments by parents in many private centres today are higher than before subsidies were increased in 2008. MCYS has no control over fees. Centres just need to give ‘ample’ notice to parents, which MCYS recommends as 3 months, and then fees will go up.
The government has announced new measures for the industry. While they may be initiated with good intent, I fear it could end up creating more unfair competition, destroying the diversity and innovation in our current system.
I have a proposal to bring costs down while pushing for quality and diversity – Child care as a public good with private partnership through contestability.
I noted that in delivering public goods such as transport, the government has pumped billions in rail and bus investments without expecting payback from private operators or charging infrastructure at market rent to them. We were told this is to bring the cost of public transport to a level that people can accept.
If we wish for young working couples to be able to afford child care and be encouraged to have more children, then we have a case to use a public good’s approach for child care.
Government can build and lease out centres at managed low rent. All its existing sites can come under the model. Based on answers in parliament, there are 290 void deck centres for non profit and 176 for private operators in void deck and JTC buildings, and another 52 in government buildings. That’s 518 centres, roughly 52.4% of all child care in Singapore. With 200 more centres to be built mostly in government controlled spaces, the share of sites under government’s control will rise.
Old schools, disused community centres and other SLA spaces can be purpose-built by the government into mega child care facilities, even housing different operators under one roof. Child care generally should be within 2-3 km of workplaces or homes. Many small void decks in new flats are not ideal for child care, limiting options in new towns. We can have mega child care sites as long as we ensure there is easy access by parents, with roads and parking well planned.
We can utilise unused land parcels next to primary schools. There are small plots around some primary schools which are not big enough for meaningful commercial projects. We can tap on infrastructure of the primary schools to add new preschool facilities. This will make use of unutilised space, save on infrastructure costs and cultivate exchange between preschool and primary school.
The government can negotiate as main tenant with large private landlords for sites as a bloc to supplement their bank of child care sites. It can work with property developers who get additional Gross Floor Area when they set aside preschool space at cheap rents and let the government use the space for any type of operator. We should actively pursue all options to increase the state’s child care bank to cater to the mass market.
How do we allocate these centres? Rather than have more Anchor Operators, I have another suggestion.
The Anchor Operators concept has skewed the market. It is like giving a boxer super glooves and energy boosters while tying the hands of the competitor and asking them to fight each other. The stated objective for Anchor Operators was to “develop childcare operators that will set the benchmark for quality and affordable childcare services.”
It may have allowed Anchor Operators to achieve higher quality as they get resources, economy of scale, and certainty of their leases. Is it fair to expect other operators to keep pace? Other operators get little or no state funding. They hesitate to invest, worried if others will outbid them for their centres at each renewal, which will wipe out sunk investment. New HDB sites are so few compared to unannounced sites for Anchor Operators. Anchor Operators could lure their staff away with scholarships. Instead of encouraging other operators to step up, it can cause some to think short term and extract as much out of their investment while they can.
We can apply contestability. Contest clusters of sites openly based on concept rather than on rent. This was done before, when government building sites charged token rent and selection was on other factors such as quality and fees.
There is no need for a one-time selection of new Anchor Operators which will strengthen only a select few and weaken everyone else. Worst, it may become impossible for new operators to enter the market, killing off future innovation. We need active competition to raise standards and to continuously drive innovation.
Recurrent and other grants should apply to all qualifying participants as long as they meet strict selection criteria on fees and quality. There should be no differentiation between private and non profit operators. We already know what the current Anchor Operators can do with the support they had been given. Why have we been limiting ourselves to think only selected non profit players can bring cost down? Let’s open up and see how all others, including private operators can better that in terms of price and quality, if given similar support. I believe fair competition may even force current Anchor Operators to better their pricing, ultimately benefiting consumers.
New operators can surface from time to time. Small operators may band together into economic groups to better compete.
Contestability will drive diversity and quality. Operators cannot increase fees without approval. The government will regain control over the fee process to ensure affordability.
Government can better direct its key programmes. MCYS had found it hard to get private operators to go along with some of its programmes, such as SPARK. Last month, we were told only 115 preschools had attained SPARK accreditation, of which just 39 were private operators. This is way way below the target of 85% of all centres to be SPARK-tested by 2013, a figure established by Minister of State for Education, Mr Masagos in November 2010. We can allow only SPARK-accredited operators to contest these sites.
There may not even be a need for state-run preschools. The call for nationalisation was made by many frustrated with differing standards and high costs. We can improve quality even at the low cost segment by having a critical mass of centres available in this public-good model, and the state regulate to steer quality and pricing. It can designate some centres for the low income group by packaging centres for different market segments in each tender exercise.
While this proposal is in the context of child care, it can also be used for kindergatens.
In summary, I am calling for child care to be a public good with fair contestability of sites at managed rents for all types of operators, with tighter control of fees and quality by the state. This will benefit Singaporeans as fees will drop industry-wide while preserving diversity and driving up quality and innovation. I hope the government can carefully consider this proposal.
We need to conduct in depth study to identify the real problems and decide on which party's interest to focus on before suggesting solutions for problems. Otherwise suggestions with good intent, may not end up benefiting the intended party.
For child care industry, I guess the parties are mainly the citizens (consumers), the private operators, the non profit operators (Anchor Operators), the suppliers or service providers of the operators, landlords, and the civil service (or government agency). Who's interest to focus?
The private operators and suppliers or service providers of the operators are private business entities, their primary motive is profit maximization. While the non profit operators (Anchor Operators) are not supposed to be profit driven, it may lead to inefficient service delivery, either in term cost or quality or productivity.
In my opinion, we should be focusing on the interest of the mass citizens here. Cost for raising child to parents should be kept as low as possible. Business entities should not be allowed to profiteer or have obscene profit at the expense of the parents and the society. For those parents who are willing to pay a high price for premium child care, I guess there should be no lacking in private operators if the profit is good. If such preference for premium child care is to become the standard for the mass, and the cost will be relatively higher and bear by all. But what if the mass has no such preference of high premium services, then should the mass subsidy such preference by paying more?
Those with business experiences or ideas should help the civil services to drive the child care fees down from both private and non profit operators so as to help the citizens to reduce the cost of child raising. If we can compile a list of all private operators, their fees charges and the details estimation of the break down of operating cost and profit of these private operators (anyway these are public information as one can extract these from the audited accounts they filed with ACRA); and we provide the compiled list to the civil service to compare such data with that of the Anchor Operators. The civil servants can use these data comparison to drive the fees of the Anchor Operators down by ensuring that the Anchor Operators is not making profit. Those with connections or friends in the child care industry can help to come up with such details and compile the list. Then such information can be provided to the civil servants and we can request the civil service to compare them with that of the Anchor Operators. Hopefully, this will drive the fees that the Anchors Operators charge the citizens down immediately. This benefits the citizens immediately.
Of course, if the civil service is so successful in lowering the Anchor Operator's fee, it may result in a huge gap between the fees of Anchor operators and the fees of the private operators. When the difference in fees are too large and quality differences are minor, a trigger point will reach where citizens will move to Anchor Operators resulting in the loss of business to the private operators. Private operators with such concerns may for his own self business interest not help us and provide data for us to compile the data list, but we can engage those who have past child care business experience to help us to work out such details and compile the list.
Logically, if both Anchor and private operators are given the same grants and benefits with the same operating cost, the fees of the non-profit Anchor operators should be lower than the private operator's fee because the profit of the private operators will have to be added to the cost and charge as fee to the citizens. So what goes wrong?
Like what Mr. Yee pointed out :
“The difference in monthly rent between non profit and private operators can be $15,000 per month or more. Divide $15,000 by a typical centre enrolment of 75 children. That works out to around $200 cost advantage per child per month. With setup grants, Anchor Operators need to provide less for amortization of investment. They get ongoing grants to defray costs. Yet with these cost advantages, non-profit’s median fees is currently just two hundred over dollars lower than that of private operators. We can find private centres whose fees are not much higher than that of Anchor Operators. Are Anchor Operators with all these cost advantages, really doing enough to keep fees affordable? “
In this situation, should we focus our effort to find out what went wrong and focus our effort to find out how to lower the fees of the Anchor operators? If such effort can produce fast reduction of fees charge by Anchor operators, it will provide immediate relief to the parents on their financial burden. If so, should we focus on the study of the cost, management and operations efficiency and productivity of Anchor operators instead? Those with private business experiences can compliment the lacking of business shrewdness of the civil servants to manage the Anchor operators by sharing the tricks of the private business world with them. By helping them to ask the right questions, such as why with the Anchor Operators cost advantages, the median fee is only $200 cheaper that private operators? By asking questions like:
Are the Anchor Operators paying too much for the manpower? Paying too much for their management team?
Do they constantly perform cost analysis and run cost reductions programs? Do they constantly negotiate with suppliers or service providers to reduce cost? Do they conduct work process improvement to reduce cost?
Do the Anchor Operators consolidate their purchases to get better bulk purchase discount pricing from their suppliers and services providers? Do they pass the saving in purchase cost to the parents?
Do the Anchor Operators have related companies (different profit center) profiteering from supplies of products and services to the Anchor Operators? Or other dealing such sublet rental arrangement, rebates, cost sharing or business arrangement, with their related companies that result in profit or indirect gain of their related companies although the child care operations itself is non-profit?
Season businessman can share their private business experiences with the civil servants and share with them not to just accept the Anchor Operators answers without thinking and probe further. As most private businessman, for obvious reasons, will always tell others that they have little profit or even no profit or have not benefited from this transactions or deals. For example, if the civil servants ask the Anchor Operator whether they are profiting from it's child care operations, and if the Anchor Operators reply with the statement like “We are not profiting or benefiting from the operations as we are non profit Anchor operators”, then they should behave like those in private business and probe further to see whether that is a “statement of truth” or a “statement of 此地无银三百两” (“There is no 3 millions ounces of sliver here”)?
If we can suggest or recommend ways to help the civil servants to drive cost efficiency and the productivity improvement of the Anchor Operators, and ways to track the actual cost of Anchor Operators (such as zero based costing), and ways to ensure that there is non-profit for Anchor operators when they price their fees, then this maybe the faster way that the citizens/parents can benefit greatly by having a lower child care cost. This lighten their financial burden and benefits them. That will in turn drive the fees of private operators down as well.
Why should we help? Because high fees and excessive profits that operators made from child cares will burden our fellow citizens/parents, affect their quality of live, and comes with the associated social cost.
For a lighter note, share the story of “此地无银三百两” (“There is no 3 millions ounces of sliver here”):
http://hanyu.iciba.com/chengyu/647.shtml
从前有个人叫张三，喜欢自作聪明。他积攒了三百两银子，心里很高兴，但是他也很苦恼，怕这么多钱被别人偷走，不知道存放在哪里才安全。带在身上吧，很不方 便，容易让小偷察觉；放在抽屉里吧，觉得不妥当，也容易被小偷偷去，反正放在哪里都不方便。 他捧着银子，冥思苦想了半天，想来想去，最后终于想出了自认为最好 的方法。张三趁黑夜，在自家房后，墙角下挖了一个坑，悄悄把银子埋在里面。埋好后，他还是不放心，害怕别人怀疑这里埋了银子。他又想了想，终于又想出 了一个办法。他回屋，在一张白纸上写上"此地无银三百两"七个大字。 然后，出去贴在坑边的墙上。他感到这样是很安全的了，便回屋睡觉了。 张三一整天心神不定的样子，早已经被邻居王二注意到了，晚上又听到 屋外有挖坑的声音，感到十分奇怪。就在张三回屋睡觉时，王二去了屋后，借月光，看到墙角上贴着纸条，写着"此地无银三百两"七个大字。王二一切都明 白了。他轻手轻脚把银子挖出来后，再把坑填好。 王二回到自己的家里，见到眼前的白花花的银子高兴极了，但又害怕了起来。他一想，如果明天张三发现银子丢了，怀疑是我怎么办？于是，他也 灵机一动，自作聪明拿起笔，在纸上写到"隔壁王二不曾偷"七个大字，也贴在 坑边的墙角上。〔注〕：后来人们根据这个民间故事，把这句话"此地无银三百两，隔壁王 二不曾偷"当作一个成语，用来比喻自作聪明，想要隐瞒，掩饰所干的事情， 结果反而更加暴露明显了。
Once upon a time a man accumulated three million ounces of silver, but he was worried that it might be stolen by thieves. He could not find a place to keep those silver safely. He finally figured out the best way. He digged a pit near the wall of his house and buried the money inside. After that, he was worried that others know that there are silvers buried there. He wrote a note “ There is no 3 millions ounces of sliver here” and pasted the note on the wall. He felt safe and went to sleep. His neighbor saw what happened, and digged out the silvers after the man went to sleep. His neighbor then pasted a note “ your neighbor never steal” on the wall after he took the silver. This folk tale, and the phrase "There is no 3 millions ounces of sliver here, your neighbor never steal" is used to express the act of trying to conceal or hide but resulted in more exposure or completely exposed metaphorically.
