NTUC – Social Enterprise or Profit-driven Business?

MP and head of NTUC FairPrice Seah Kian Peng feels “insulted” by Workers’ Party MP Png Eng Huat’s comments questioning why NTUC FoodFare is entering the hawker centre business in Bukit Panjang.

As reported by Channel NewsAsia today, Seah asserted “…for the avoidance of doubt, NTUC FoodFare does not enjoy any subsidised rental from government or NEA (National Environment Agency) in any of the premises they occupy as Mr Png suggested. They have to make an offer and if successful, pay market rates for the (use of the) premises, like anyone else.

“Thus I find Mr Png’s insinuations insulting, not only to the co-operatives, (but) they also cast a slur on our efforts and demean the work of the many people who work in and for co-operatives.” Seah also said that co-operatives are a check on pure market forces and they have social, not political ends. (To this, I disagree, as NTUC is clearly also being used to support the PAP and government causes).

To those who are unaware, FoodFare operates a chain of food courts across Singapore and is but one of the many chain businesses operated by the NTUC Group which include insurance, childcare, supermarkets and property development (yes property development under Choice Homes business  social enterprise)

I too am insulted. Insulted by Seah’s act of indignation and his blustery defence of the NTUC.  Although he has stressed that the group does not enjoy subsidies from the government he has conveniently failed to mention that the NTUC businesses do not pay any taxes as they have classified themselves as cooperatives! No Tax means a HUGE, HUGE savings every year! Isn’t this a clear advantage in NTUC’s favour?

Shouldn’t these savings translate to much lower prices across all their businesses – cheaper food, cheaper groceries, cheaper apartments, cheaper insurance policies and lower rentals? In the FoodFare annual report, they claim that their prices are a bit cheaper than other competitors in the same area.  Well, I don’t see it when I eat at a FoodFare foodcourt having paid $5 for a plate of economy rice at one of its outlets.

With such big tax savings, shouldn’t they reduce prices meaningfully to fulfill their national mission and social enterprise roles to help consumers cope with the rising cost of living?  And please hor, don’t try to pass off the usual supermarket promotional prices and the occasional community events as fufilling their duties. As for keeping prices low at the FairPrice supermarkets, yes they have a small basket of basic essentials where they keep prices competitive, but then so do some of the other major food retailers.

The NTUC group of businesses are self-defined as a social enterprises.  Click on this link to view the full list and full scale of all the businesses social enterprises owned by NTUC.

Granted, they do have some community projects to help the needy but fact is they are being run like a mega profit-driven conglomerate.  There was a time, I heard, when one of their CEOs even took great pride in announcing to the press how much fat profits his chain of outlets made.

Once a upon a time, the NTUC group may have started with well-meaning intention of being a social enterprise to help the people and society. But somewhere along the line, they have grown and morphed into a giant GLC-that-doesn’t-pay-taxes.  Fact is,  their businesses are guided by profit maximisation doctrines and given their size, they compete intensely with SMES and MNCs for business, for commercial space and for labour resources.

And from what we have seen, they charge similar prices as other private businesses for the items they sell – be it a bottle of ketchup, a condominium or an insurance policy.  Go and have a meal at NTUC FoodFare and shop at FairPrice and the atas (pricey) Fairprice Finest and the prices speak for themselves. Come to think of it, why did NTUC even venture into operating the upmarket FairPrice Finest supermarkets? What value does it bring to their social enterprise mission and how does it benefit society?

Meantime, all other normal businesses pay taxes and many smaller players struggle to compete as they do not have the size nor the power and connections that NTUC has.

For Seah to imply that NTUC has zero advantage in running its businesses is truly disingenuous.  To what extent are the NTUC “social enterprises” really benefiting and helping consumers and to what extent are they actually hurting the business arena here is seriously open to interpretation.

A month ago, the well-respected Willie Cheng, a retired management consultant, wrote n excellent paper on Social Enterprise published by The Straits Times. In it he noted that “a social enterprise is loosely defined as a business with a social mission. However, there is a surprising lack of clarity and agreement about what it actually constitutes despite the abundance of literature and conferences on the subject.”

Cheng also noted that “currently, there is no legal structure for a social enterprise in Singapore. An organisation can choose to either be registered as a charity (in which case it forgoes doing business) or be registered as a full commercial company (where the profits can, but need not, go to charity).

He added : “Most social enterprises in Singapore are set up as private limited companies and we have to take the word of these companies that they are social enterprises”.

Do we have to take their word for it? Or is the onus on such companies to be more transparent and to start behaving more like the social enterprise that they claim to be?

Footnote: I have added this in response to those who claim NTUC pays tax.

Cooperatives don’t pay tax here and one of NTUC’s pillars Chandra Das has been quoted in an interview as confirming this. As for the 20% that they do pay it is not to the IRAS hence it is not tax. Under the Cooperatives Society Act, these companies pay: 20% of any surplus in excess of $500,000 to either the CCF or the Singapore Labour Foundation (SLF), as society may opt.

Read Chandra’s interview here where he admits the group doesn’t pay tax and then tries to pretend it does. NTUC doesn’ t pay income tax to IRAS period. http://www.sncf.org.sg/web/index.php?option=com_content&view=article&id=68&catid=5&Itemid=53

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14 Responses to NTUC – Social Enterprise or Profit-driven Business?

  1. ;Annonymous says:

    You have omitted Comfort del gro. It started off as a true co-operative. The taxi drivers were the owners who could sell their taxis at the end of the hiring term. As usual somewhere along the line the taxi drivers became only hirers. It is time for patriots to put an end to all this.

  2. Yes you have a point but my article is specific to NTUC group this time because of Seah’s comments in Parliament. Hypocrisy should always be unmasked.

  3. Pingback: NTUC – Social Enterprise or Profit-driven Business?  |  The Temasek Review - Temasek Review Emeritus - The Temasek Review - The Online citizen - The Temasek Times

  4. Please note that Co-operatives do pay taxes. Please do not misguide the public.

  5. Pingback: Daily SG: 7 Mar 2013 | The Singapore Daily

  6. This is for those who are stoutly defending NTUC. Cooperatives dont pay tax here and Chandra Das has been quoted in an interview as admitting to it too. As for the 20% that they pay it is not to the IRAS hence it is not tax. Under the Cooperatives Society Act, these companies pay: 20% of any surplus in excess of $500,000 to either the CCF or the Singapore Labour Foundation (SLF), as society may opt.

    Read Chandra’s interview here where he admits the group doesnt pay tax and then tries to pretend it does. NTUC doesnt pay income tax to IRAS period. http://www.sncf.org.sg/web/index.php?option=com_content&view=article&id=68&catid=5&Itemid=53

    • diealsomustbelikethat says:

      you left out the front bit.

      (2) Every society shall contribute —
      (a) 5% of the first $500,000 of the surplus resulting from the operations of the society during the preceding financial year to the Central Co-operative Fund; and

      so essentially, they are paying less tax on the first $500,000 of surplus and a 20% tax on the subsequent surplus.

      isn’t it a form of tax as well, even though not income tax?

      • It is still not tax. Corporate tax is more complex and could well work out to be much more than a contribution to the Society And let’s not forget NTUC has many companies in its enormous empire and every single entity would be taxed if they weren’t grouped under the Cooperative umbrella.

  7. roger says:

    i’m struggling to see what is the foul here.

    1. by virtue of being a cooperative, ntuc has strong claims to be a social enterprise. there is absolutely nothing wrong with them being profitable or to be profit-driven. they have to make money for their members to benefit.

    2. ntuc doesn’t pay tax. so? they are a cooperative, registered as such and complied as such. and they still pay 20% of their profits to the SLF, which means their profits are channeled back to employees. what is so sinister about this? instead of paying iras, they pay back singapore workers (slf), which only makes sense because they are a cooperative and not a private company. what are you suggesting? that non-profit organisations pay corporate tax when they are not corporates? huh?

    my sense is that you don’t quite understand what is a cooperative. a cooperative is owned by its members. ie. the members work for themselves. this distinguishes them entirely from a private company – the staff do not own the company, shareholders do. hope this clarifies.

  8. Roger, you have obviously not read my commentary properly or have deliberately misunderstood it. Suggest you read it again to grasp the crux of the issues. No where did I say NTUC is doing wrong as a cooperative or that it is wrong to make money for its members. Question is, is it fulfilling its larger mission of helping the people of Singapore by helping to keep prices down as far as possible or is it charging ahead with making as much profits in as many businesses as possible? NTUC is also competing with many SMEs as the group has become so incredibly large with its finger in every business from cradle to grave literally. If you shop at NTUC Unity pharmacy and buy insurance from NTUC you will find that they charge the same if not higher than some competitors for several products.

  9. Yenny says:

    I agreed with you, Jentrified Citizen. Being a cooperative, its larger mission is to help people by bringing prices down but I notice that unless there is a promotion/discount for certain items which make prices more attractive than others (like Ang Moh, Shop n Save, Seng Shiong), some of its regular merchandises at Fairprice are priced higher than other supermarkets.

  10. Pingback: NTUC – Social Enterprise or Profit-driven Business? | sgpvb

  11. Angry Citizen says:

    NTUC, PAP government, government departments, government agencies, government linked companies…they are all the same. Somewhere along the line they forgot they are to serve the people. Just take the Comfort taxi drivers. From owners they have now reverted to mere hirers slaving away as hirers like the old days.

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