The recent news on Sheng Siong's acquisition of a few wet markets and its attempt to privatize it stirred my interest. I am not an economics student but I do see how all this whole matter runs against the good intent of free market and the public interest. Do pardon me if my propositions make no economical sense.
My propositions are as follows,
Market failure as a result from the privatization of wet markets
The purpose of a free market is to facilitate the self-correcting mechanism that involves the market actors, the great scheme of thing is for prices to decrease and quality to increase. One characteristic of a free market is the lack of government intervention and this can be seen from the privatization of the wet markets, commercial entities being the wet markets' landlords instead of HDB.
In a perfect competition, this looks all rosy. Tenants have the freedom of choice to operate in a private wet market that offers a rate that is acceptable to them and wet markets' operators with this understanding, will base their rates that are most acceptable to prospective tenants, thus, achieving an economic equilibrium.
However, problem arises when the wet market operator operates a number of wet markets, in this case, Sheng Siong, thus, granting them the inequitable advantage in determining rates that are not in the interest of the tenants. It presents a "take it or leave it" scenario which regrettably, leads to the tenants having to set a higher profit margin to offset the higher rent they have to pay. This gives rise to another issue which I will explain in the next point.
Diminishing value of wet markets being an alternative to supermarkets
Wet markets are often seen as a no-frill alternative to supermarkets and the rise in prices brought forth from the increased rental rates makes it less attractive an alternative to supermarkets.
With prices being more or less equal, there is no incentive for consumers to patronize wet markets. With price not being the main factor, other factors like, convenience, cleanliness and wider range of products start to take precedence. In fact, a housewife who was interviewed had commented that it may deter her from patronizing wet market should price increases.
Wet markets as public facility
The purpose of wet markets are to serve the general public and serve as a correcting mechanism in the FMCG sector. It can then be said to be a form of public facility.
In a perfect market, consumers have the freedom to choose from whom they acquire their goods. Supermarkets aside, if goods from a privately operated wet market is more expensive than a government operated one (i.e. HDB), consumers have the freedom to procure their goods from the latter.
The above may seem correct, justifying Sheng Siong's decision to raise rental rates. But, let's take a closer look at this hypothesis, if a privately operated wet market located near where I stay, i.e. Hougang, retails goods at a 30% premium, am I to travel to the nearest government operated wet market that is located at Pasir Ris? The freedom to choose exists but has become less realistically feasible.
The bottom line is, free market is desirable only when it is non-detrimental to public interest and in this case, it seems to be.