COE: Supply crunch & public proposals to tweak scheme

Govt trying to ease COE supply crunch

Transport Minister proposes two measures to improve situation

By Christopher Tan, The Straits Times, 5 May 2012

THE Government is looking at ways to mitigate a drastic shrinkage in the supply of certificates of entitlement (COE) in the coming months, a situation that could drive car prices - and inflation - even higher.

Transport Minister Lui Tuck Yew, in response to a question from The Straits Times, said he has asked the Land Transport Authority (LTA) to do two things to help improve matters.

One, to see whether the market can be eased into the new growth ceiling of 0.5 per cent in vehicle population that kicks in from August. 'Rather than dropping from 1.5 per cent to 0.5 per cent, whether we can be more flexible in the implementation,' he said.

Two, whether the LTA can further defer the claw-back of past oversupply. This adjustment was originally to be made over one year. Last year, responding to appeals from the motor trade, it was spread over three years.

The adjustment currently reduces the number of COEs each month by 6 to 7 per cent.

Mr Lui said he had asked the LTA to see if it was feasible to defer the claw-back further, on account of an expected cyclical increase in COE supply from next year.

He said the LTA will get back to him by the end of the month.

Motorists need to get a COE at fortnightly auctions before they can own a vehicle in Singapore.

COE supply, determined every six months, is influenced mainly by two factors: the number of vehicles taken off the road in the preceding six months, and the allowable annual vehicle growth rate.

This rate had been 3 per cent a year until 2009, when it was halved. It was to be cut further to 0.5 per cent from August.

COE supply has been falling since 2009. Last year, there were fewer than 30,000 COEs for cars, and this year, the figure is expected to fall below 25,000.

But between 2004 and 2008, the annual average was 105,000.

The sharp decline has driven COE premiums to record or near record levels.

The COE spikes, in turn, drove inflation to 5.2 per cent in March - one of the highest rates in recent times.

At last month's tender exercise, the COE premium for cars up to 1,600cc (Category A) hit an all-time high of $64,201.

The premium for cars above 1,600cc (Category B) ended at $91,000 - not far from the record $110,500 witnessed in December 1994.

Mr Lui said he understands the concerns that have been raised by motorists, commuters and motor dealers.

'With the data that I now have, which I did not have previously... I think if we proceed with the plans we had earlier, it would put a significant squeeze on the vehicle quota numbers,' he said.

The minister said data shows motorists are keeping their cars for longer periods than before. This in turn has reduced the number of cars taken off the road in recent months.

Motor traders welcome the possibility of a reprieve from the supply crunch, even if it is a modest one.

'It's a small relief,' said Mr Ron Lim, general manager of Nissan agent Tan Chong Motor. 'The slowdown in deregistration in Category A is very significant. Even if you allow the 1.5 per cent growth rate to continue, I think Cat A will still see a 30 to 40 per cent drop in supply.

'But it will mitigate the situation in the other categories.'

Singapore Vehicle Traders Association secretary Raymond Tang has a different view, saying: 'When the Government has announced a certain regulation or policy, it should stick to it until the next announced review.

'Otherwise, it creates uncertainty and affects confidence of investors.'

He said the Government could rely more on electronic road pricing to control congestion, 'but before it can do that, a good public transport system has to be in place'.

Tie COE to cost of car, not engine size
By Julian Wright, The Straits Times, 5 May 2012

IT WAS recently reported in The Straits Times that upmarket marques now make up 45 per cent of sales in the up-to-1,600cc category, up from just 0.3 per cent in 2007. Buyers and sellers of bigger and more luxurious cars are also outbidding the others for certificates of entitlement (COEs) in the Open category, which can be used for any vehicle type but end up almost exclusively being used for bigger cars. The result is that some low-end makes that appeal to budget-conscious buyers are struggling or leaving the market.

The high prices of cars due to the bidding up of COEs has led some to suggest balloting as the solution, as Mr Chan Tau Chou did in a letter to The Straits Times Forum page last month. But balloting leads to problems. It would create a black market in which cars would still trade at roughly the same price as today, reflecting that the underlying supply and demand would not have changed, a point also made by other writers to the Forum Page such as Mr Goh Juanq Long and Mr Patrick Low.

The main effect of balloting would be to shift the revenue currently generated for the Government to those lucky enough to win the ballot (as they could resell their COEs to the highest bidder).

If COEs were instead tagged to the person rather than the car to make them non-transferable so as to avoid this problem, as has been suggested by Mr Martin Lee in the Forum Page, then balloting would mean those who really need a car (possibly for their livelihood) may simply miss out, while the winners of the ballot may obtain a car regardless of their particular needs or their willingness to pay. This is not only unfair, but also economically inefficient.

I think quite a different solution is called for. The one I propose seeks to address the problem that prices of COEs that apply to basic car models are being driven up by the high demand for luxury cars. Until recently, this concern had been dealt with by creating two different categories of COEs: Category A (cars with engine size not exceeding 1,600cc) and Category B (cars with engine sizes above 1,600cc). The theory was that the rich would want big cars and so would bid up the price of Category B COEs, while leaving the price of Category A COEs largely unaffected. The problem with this approach was that oil prices tripled from 2004 to 2008, causing luxury carmakers to produce more luxury cars with smaller engine sizes. This resulted in more and more marquee brands selling cars in the small-car category.

My proposal would allow the authorities to do away with categories A and B (and the Open category), so engine size need no longer be the deciding factor in the COE paid. Rather, the COE price would be tied to the underlying cost of a car; that is, the open market value (or OMV) as assessed by Singapore Customs. This is the cost to the importer (before taxes) of bringing a car into Singapore. This is how goods and services tax (GST), custom duty and the additional registration fee are currently computed for cars in Singapore. The COE would therefore no longer be a dollar amount but a percentage amount. The more expensive the car, the higher the COE premium.

Each bidder (individual or car dealer) in a COE auction would bid a percentage amount for a COE. Someone might bid 142 per cent of OMV, someone else 228 per cent. Bids would increase in increments of basis points instead of dollars during the bidding process. The highest percentage bids win.

The prevailing quota premium would be the percentage amount at which the number of bids for higher percentage amounts equals the quota of COEs available. All those bidding percentage amounts above the prevailing quota premium would receive a COE and they (or their dealer) would pay the prevailing quota premium, as that percentage on top of the OMV for the particular vehicle they choose.

To see the possible implications of such a scheme, consider six different cars, the first three belonging to the small-car category and the remaining three belonging to the large-car category (see table). The OMVs are taken from the One Motoring website for cars registered in March 2012. The COEs are taken from the latest bidding round - April 2012, second bidding. Consider how things would change if bidding was based on a percentage of OMV instead. For the sake of argument, suppose the prevailing quota premium that resulted from the bidding was 200 per cent. The implied COEs under a percentage COE scheme are given in the table, along with the predicted change to car prices.

Of course the example is only meant to be illustrative. Regardless of the exact numbers, the point is that consumers who choose to buy luxury cars will need to pay more for a COE and those buying cheaper models will pay less. Government revenues (which depend on the average COE prices across all cars sold) may not change all that much, even though the median car price should fall.
The writer is a professor in the Department of Economics, National University of Singapore.

New ideas to keep Singapore on the move
Editorial, The Straits Times, 11 May 2012

RUNAWAY prices of certificates of entitlement (COE) tend to reawaken the debate on the vehicle quota system here. All is quiet when premiums are at the $5,000 level but when it drives towards six digits, the system is once again perceived as dysfunctional.

How can this be fixed? Given the impact of COE prices on inflation, which soared to an unexpected high of 5.2 per cent in March, even short-term expedients are useful. These might emerge from the Government's study of possible adjustments to a drastic drop in the supply of COEs in the coming months. It will see whether the market can be eased more gently into a new growth ceiling for the vehicle population that takes effect from August. It will also examine whether the Land Transport Authority can defer even more the claw-back of past oversupply.

The larger question, of course, is how the car population, in particular, can be curbed in a fair and sensible manner over the long term to avoid the traffic gridlock seen in other cities. As in previous debates, there is no shortage of suggestions now. These range from fixing the COE scheme by adjusting its supply and demand dynamics so as to avoid a boom-and-bust cycle, to embarking on a wider exercise in 'shock therapy' to ease road congestion by raising Electronic Road Pricing charges. Whatever the measures proposed, they have been the subject of much discontent.

This is a headache that will not go away until the root of the problem is addressed - the irrepressible desire to own a car, even when it makes little economic sense to pay so much to buy and maintain one. Singaporeans are known for their rationality, yet the bidding game goes on in earnest. The reasons for personal transport are many: genuine family needs, the poor appeal of public transport and the chimerical pursuit of social prestige. It is revealing that Hong Kong, Tokyo and New York, cities also driven by affluence and aspirations but which have no quota system or high taxes on cars, have been able to manage the penchant for car ownership. Potential car buyers there are deterred by traffic jams and limited parking spaces. Commuters enjoy a good rail network.

The Government is to spend billions more to improve the transport system. But infrastructure has its limits on a small island. Ultimately, more sustainable and holistic solutions must be found to keep people moving smoothly. Such discussions can gain more traction when Singaporeans learn to yearn less for one of the common Cs of aspiration by shedding the notion that the car is something to have and to hold.

How to fix the COE scheme

WHILE the certificate of entitlement (COE) scheme is fundamentally sound in controlling vehicle population, its inherent problem is the direct linkage between new COEs being issued and the deregistration of older vehicles ('Time to rethink COE system?'; Monday).

Between 2004 and 2009, there were more than 90,000 COEs available for cars annually. The COE prices for small- and large-car categories dipped under $5,000 as recently as early 2009.

At the current monthly quota rate, just over 30,000 COEs will be available this year. Of course, with so few COEs available, prices will increase.

This leads to a 'boom and bust' cycle. When prices are high, fewer people will deregister their cars, thus fewer COEs are available. This continues until the vehicle population ages sufficiently for cars to be 'forced' off the road as their 10-year COEs expire.

Then, as more COEs are released, prices drop. This encourages drivers of newer cars to consider deregistration to buy new cars with lower COE prices, making yet more COEs available.

To suggest that the current high COE prices are a reflection of the healthy state of the economy, rather than supply and demand economics of the COE system, is inaccurate.

Simply put, prices are high because there are not many COEs available.

The only way to stop dramatic price changes is to ensure that the same number of COEs is released in every bidding exercise.

The current car population is just over 600,000. Without allowing for any growth in car ownership, this will mean 60,000 COEs being issued each year, over a 10-year period; that is, the same number being released every month.

The only factor influencing prices will then be market forces, not fluctuations in the number of COEs.

The only loophole in this proposal arises when owners choose to deregister their cars before the 10-year lifespan is up.

This can largely be stopped by not offering any COE rebates for deregistered cars, and managing traffic through other measures such as Electronic Road Pricing. People will then keep their cars longer.

Removing the 'boom and bust' cycle of COE pricing would lead to a much fairer system, while still controlling the total car population in land-scarce Singapore.

Nick Fellows
Managing Director,
Vertix Asia-Pacific
ST Forum, 5 May 2012

Add more pain for motorists to help ease congestion

SOARING certificate of entitlement prices are scotching the car ownership hopes of young adults and an entire generation of retiring baby boomers used to owning cars in the past.

The rich-poor gap will become more divisive and social discontent will increase. The Government should not take these lightly.

There are hard choices to make. We can have increasingly expensive cars that only the rich can afford, or cheaper cars but make them more expensive to drive. There is no perfect solution to please everyone.

The better alternative would be 'shock therapy' to ease road congestion, as driving is a conscious choice made by car owners.

This can be done by further raising Electronic Road Pricing (ERP) charges, and imposing tax surcharges on carparks in the Central Business District.

Motorists who drive during off-peak hours or avoid congested areas should not be penalised.

Presently, there are few perks to make car owners give up driving, especially since they have paid so much for their vehicles. There should be a clear distinction between car ownership and car usage.

Public transportation should be improved. If public transport is handled by private companies, there will always be a conflict of interest between providing convenience and profitability.

A more extensive and reliable MRT and bus network would make it easier for motorists to switch, and this can be done only through more government investments and subsidies.

The Government's recent $1.1 billion aid package can be seen as a subsidy to public transport users through SMRT and SBS Transit. These companies should be nationalised to make it easier for subsidies to flow through without raising public ire.

The money raised through higher ERP and carpark tax surcharges, for example, could be used to slash bus and MRT fares to make the difference between driving and using public transport more stark.

Lastly, taxi services should be improved. Surcharges and fees that discourage good service should be removed.

Also, taxi companies should not charge for call bookings since these help drivers in their search for fares.

Cabbies picking up passengers at Changi Airport should be assured of a minimum charge to compensate them for short trips from the airport. The number of taxis should also be increased to provide more choices for commuters.

Kuo How Nam

ST Forum, 5 May 2012 

Abolish COE scheme

WHILE the certificate of entitlement (COE) scheme has been very effective in controlling the car population here, it is not the right tool to manage traffic congestion ('Time to rethink COE system?'; Monday).

The stiff COE prices are counter-productive, as car owners would want to make full use of their vehicles after paying so much for them. This is evident from the daily congestion during peak hours on our roads, including those with Electronic Road Pricing (ERP) gantries.

The Land Transport Authority (LTA) should abolish the COE scheme and focus on using the variable costs of car ownership to manage traffic congestion.

Fuel and parking costs can be increased further to manage the general traffic in Singapore, while ERP could be priced higher to target specific roads during peak hours.

In fairness to car owners who have already paid for their COEs and will expect to pay much more for fuel, parking and ERP charges if the COE scheme is abolished, the LTA should consider refunding them the remaining value of their COEs.

Besides being an ineffective tool to manage traffic congestion, the COE system has distorted car prices and transferred the potential revenue of car distributors to the Government through the cap on car sales.

The price distortion has favoured the distributors of luxury cars and has put a damper on the aspirations of many to own a car.

Abolishing the COE system will level the playing field among car distributors and give many aspiring car owners a chance to make their dream come true.

Daren Lau
ST Forum, 5 May 2012

Vicious circle of COE prices

THE fluctuation in certificate of entitlement (COE) prices will worsen in future ('Time to rethink COE system?'; Monday).

The reason is simple. To the well-off, a $100,000 COE works out to a cost of $10,000 annually, which is cheap.

When COE prices head south in, say, two years, these car owners will scrap their vehicles to retrieve a chunk of the COE rebate, $80,000, to buy a new car whose COE may cost only $20,000.

That is also why COEs go through vicious boom-bust cycles.

Lau Kim Lon
ST Forum, 5 May 2012

Driving a car shouldn't turn into privilege for only the rich

THERE has been no lack of suggestions to criticisms of the ineffectiveness of the certificate of entitlement (COE) scheme.

Proposals include having a balloting system, non-transferable COEs, a separate taxi COE category, tagging COE to the driver and having pro-rated credit of COE at the prevailing level for early scrapping of vehicles ('Steep COE prices: Balloting fairer and cheaper' by Mr Chan Tau Chou, April 19; and 'COEs: Aim for steadier prices and flexi-supply' by Mr Patrick Loh; April 24).

Many of the ideas warrant further thought. Rather than react predictably by telling the public to seek the public transport alternative, I hope transport officials will view these suggestions positively.

If driving a car becomes a privilege only for the ultra-rich, then the billions of taxpayer dollars spent on road infrastructure cannot be rationalised.

Singaporeans do acknowledge and accept that the nation is land-scarce and thus a quota control mechanism is required. However, the authorities must also accept that the current system is flawed and has outlived its usefulness apart from curbing the vehicle population. A fresh alternative is called for.

Daniel Cheng
ST Forum, 5 May 2012

Make owning a car 'uncool'

TO DISCOURAGE car ownership, make it 'uncool' to own one ('Time to rethink COE scheme?'; Monday).

Do not build more carparks, and make it more difficult to drive around.

Create more green alternatives such as bicycle corridors in the city centre. If properly planned and if the necessary resources are allocated, Singapore could well promote itself as Asia's cycling city.

It all starts with a shift towards more security, protection and respect for pedestrians and cyclists. The area around every school, health centre or hospital should be considered 'pedestrian protected', accessible through multiple zebra crossings.

Car ownership has increased significantly in HDB estates. Pedestrians, especially children, should be protected through zebra crossings (there are hardly any within estates today) and more speed reduction measures. Replace 'watch out for cars' road signs with those bearing the message: 'Watch out for pedestrians'.

Have large, segregated and protected bicycle highways that offer another way of moving around within densely populated estate areas and towards shopping centres, schools, supermarkets and recreation areas. Is it really necessary to ferry schoolchildren in school buses within a range of 2km?

Triple Electronic Road Pricing charges and petrol prices, keep public transport fares low, allow taxis to use bus lanes and install motorcycle-only lanes. Also, convert sections of Orchard Road to allow only pedestrian traffic.

Bruno Serrien
ST Forum, 5 May 2012

In Hong Kong...
'A resident must be relatively wealthy to own a car.'

MR PHANG FOOK GHAY: 'The current approach to limiting car population via certificates of entitlement and charging for usage via Electronic Road Pricing is sound. In Hong Kong, the cost of owning and maintaining a car is significantly higher than in Singapore. Parking spaces at apartment blocks are sold separately and rented out to whoever is able to pay the asking rates. This means a Hong Kong motorist not only buys the car, but must also buy or rent a 'home' for it. Office parking in downtown Causeway Bay costs $600 to $700 per month, so a Hong Kong resident must be relatively wealthy to own a car.'

ST Forum, 5 May 2012

Big family
'Increasing ERP gantries and rates is not the answer for people like me.'

MR FREDERICK GOH: 'I need a car as I have a family of five and public transport is not a viable option when we go out ('Time to rethink COE system?'; Monday). My work takes me to remote places and at odd hours, hence public transport is again out of the question. Increasing the number of Electronic Road Pricing (ERP) gantries and rates is not the only answer, and certainly not the solution for people like me.'

ST Forum, 5 May 2012

Time to rethink COE system?
No real slowdown in car population growth, just inflation, social discontent
By Christopher Tan, The Straits Times, 30 Apr 2012

IF THE purpose of the Certificate of Entitlement (COE) system was to slow the growth of Singapore's vehicle population, it hasn't been working all that well. At least, not when it comes to cars - the main target of the quota system.

The system, officially called the Vehicle Quota System, was put in place in May 1990 as the Government deemed the prevailing vehicle growth rate of 3.5 per cent unsustainable in the long term.

The system was to cap growth at 3 per cent per annum, to be in line with the pace of road network expansion and me-dian income growth of Singaporeans.

An analysis of growth trends 20 years before the system was introduced in 1990, and 20 years after it, shows the car population has, on average, been growing faster post-COE than pre-COE.

According to data from the Registry of Vehicles and the Land Transport Authority, the average growth rate was 3.5 per cent per annum from 1971 to 1990. It rose to 4 per cent from 1991 to 2010. The growth rate after COEs were introduced was 14 per cent faster than before.

Why? Here's one theory: Before the quota system, consumer behaviour was influenced more acutely by factors such as economic slowdowns, oil crises and changes in tariffs. But with a quota system in place, consumers become shielded from natural market forces. While the quota system put in place a growth ceiling, it also established a 'floor' that prevents the market from collapsing - even in the depths of recession.

An example of the latter was well demonstrated in 2004, when Singapore sank into a deep recession. Car sales grew 19.2per cent that year.

The year before, when the country was in the throes of the Sars epidemic, sales grew 29.1per cent.

But what would have happened if there had been no quota system in place? Would Singapore have become as gridlocked as cities like Jakarta, Manila and Bangkok?

Maybe. Then again, maybe not.

While growing income tends to fuel the desire to own cars, there comes a point when the pattern goes into reverse.

A paper written by United States transport researcher Joyce Dargay and economist Dermot Gately (Income's Effect On Car And Vehicle Ownership Worldwide: 1960-2015) asserts that car ownership grows slowly when income levels are low. When a country reaches 'middle-income' status, the ownership growth rate becomes twice as fast. And when income goes beyond a certain level, the car ownership growth rate actually reverses.

The global car market today confirms this. Car sales in developed markets such as America, Europe and Japan are slowing, while sales in China and India are in the fast lane.

Singapore's per capita gross domestic product ($63,000 last year) is among the highest in the world. So, even if its car ownership growth rate was relatively fast in the 1990s (assuming the COE system was not in place), the pattern could well have gone into reverse gear by the mid-noughties.

Today, when COE premiums are heading towards record levels, the quota system causes unintended ill-effects too. High inflation is one. Ironically, public transport fare adjustments are influenced greatly by the inflation rate.

The other major ill-effect is social discontent. Like all auctions, the COE system favours those who are most able to pay. When the supply of certificates is constricted (as it is now), COEs invariably end up mostly with wealthy consumers, who buy bigger and costlier cars.

Interestingly, this contrasts with a common criticism of the high ad valorem taxation regime preceding the quota system. When car registration taxes added up to more than 220 per cent of a vehicle's open-market value (OMV, or roughly its pre-tax cost) before 1990, well-heeled buyers complained that the system placed an inordinately high penalty on bigger, pricier cars.

Car taxes today amount to 120 per cent of OMV.

If there was an attempt to incorporate social equity into the quota system by segregating COEs according to car engine size, it is now negated by an increasing number of premium brands with small-engine models.

In the first quarter of this year, brands such as Mercedes-Benz, Volvo and Audi accounted for 45 per cent of sales in the up-to-1,600cc COE segment. Five years ago, they had a mere 0.3 per cent slice of the segment.

This only serves to widen the gap between the haves and the have-nots.

So, after 20 years, perhaps it is time we took a long hard look at the COE system, to examine its relevance and to see if it can be improved upon.

In doing so, it might be useful to look at how other cities without a quota system have coped - Hong Kong, for instance.

Hong Kong has 59 cars per 1,000 residents - half of Singapore's 117. Taipei has 250 cars per 1,000 residents, but the annual mileage of cars there is half that of those here. Ditto Tokyo.

New York is another example. The Big Apple is one of the wealthiest cities in the US, but its car ownership rate is among the lowest (230 per 1,000 residents).

These cities share a common denominator: a superior rail network and limited parking facilities. In the case of New York's Manhattan, 60 per cent of work trips are made by public transport. In Hong Kong, the figure is 90 per cent.

None of them has a quota system, or even high taxes on cars. They rely instead on letting the motorist bear the brunt of driving: jams and the frustration of not being able to find parking.

That, however, exerts a huge environmental cost. Singapore can do better. We have electronic road-pricing. All we need now is a policymaker brave enough to expand the gantry network and treble or quadruple ERP rates.

After all, it is ultimately congestion we are tackling. ERP, if priced right, will be more efficient at controlling congestion than a vehicle quota system.

And if a quota system is deemed still necessary, we should have one without the sharp supply fluctuations that send premiums to $90,000 in one year, and $5,000 in another.

COEs: Aim for steadier prices and flexi-supply

BALLOTING for certificates of entitlement (COEs) creates its own set of problems, including the possibility of a black market ('Steep COE prices: Balloting fairer and cheaper' by Mr Chan Tau Chou; last Thursday).

We must admit that there has been a problem of acute fluctuation of COE prices in the past three years.

A steady increase in car population controlled by bidding against a fixed quota should result in steady price levels.

The problem is that the variance in the quota has been too wide, from 1,839 for Category A in January 2009, to only 554 in January this year.

This shortage of COEs will ratchet prices upwards, and restrict new car purchases to a very elite group of owners, and this is not likely to be a short-term issue.

The Government should allow current car owners the option of giving up their COEs at the market price.

For example, a motorist with a seven-year-old car could have the option of scrapping his vehicle early and receiving 30 per cent of the current COE price in cash or transferable credit.

The option will act as an incentive for motorists, who enjoyed the benefit of lower-priced COEs, to cash out and make gains.

The long-term result is a more flexible COE supply and a steadier trend in prices.

Steady COE prices will be necessary for bidding of COEs by car buyers rather than distributors, which have historically gained from sharp COE price drops and are reluctant to give up control of the bidding process to retail buyers.

This could even be a contributing factor to the high COE prices that we are currently witnessing.

We have dropped the ball on the COE scheme before by creating too much supply, which resulted in prices that were too low. Let us not swing the other way now.

Patrick Loh
ST Forum, 24 Apr 2012

Rising premiums
'A vicious circle.'

MR TAN BENG GUAN: 'According to the Land Transport Authority, the average number of cars up to 1,600cc scrapped each month this year is less than half the monthly average from July to December last year ('COE prices set to soar even higher'; April 14). While I agree that the vehicle population must be curbed for better traffic flow, the current certificate of entitlement (COE) quota system of creating supply based on the number of vehicles scrapped is creating a vicious circle of continual reduction in COE supply on the back of the decline in the number of cars scrapped, raising premiums further.'

ST Forum, 24 Apr 2012

Keeping it honest
'In designing a balloting system, tag COE to the person. Make it non-transferable.'

MR MARTIN LEE: 'Mr Chan Tau Chou has raised a valid point ('Steep COE prices: Balloting fairer and cheaper'; last Thursday). In designing a balloting system, tag the certificate of entitlement (COE) to the person rather than the car. Make it non-transferable to prevent abuse and profiteering. To make up for the shortfall in tax revenues, Electronic Road Pricing (ERP) rates can be increased. This will shift the cost of owning a car more towards the usage and will help to further curb the number of vehicles on the road. The present system results in people maximising the use of their cars, as the amount paid for COEs is significantly higher than ERP rates.

ST Forum, 24 Apr 2012

Supply and demand
'Not a coincidence that when COE prices spike, so do the prices of used cars.'

MR GOH JUANQ LONG: 'While balloting may lead to cheaper certificates of entitlement (COEs), it may push up the resale price of used vehicles, or what is commonly known as the 'body value' of the car ('Steep COE prices: Balloting fairer and cheaper' by Mr Chan Tau Chou; last Thursday). This is simply a demand-and-supply issue, with lower supply of vehicles on the road and a generally large and constant demand. The prices of cars will remain stiff regardless of whether we regulate via COE prices or body value. It is not a coincidence that when COE prices spike, so do the prices of used cars. Balloting's other disadvantage is that people may ballot for COEs and, if they are successful, resell them for a profit. Mr Chan likens balloting for cars to the prevailing system for new flats, arguing that it will lower car prices. But if we were to hark back to 2008 and 2009, when the supply of new flats was low, there was a massive number of people who failed to secure them and were forced to buy in the resale market, raising resale flat prices drastically. When the supply of new flats increased dramatically last year, resale flat prices fell.'

ST Forum, 24 Apr 2012

Steep COE prices: Balloting fairer and cheaper

IN THE light of the unhappiness over soaring certificate of entitlement (COE) prices of late, I question the wisdom behind the system of car ownership in Singapore.

The stated purpose of COEs is to limit car ownership and, hence, ease traffic congestion. The outcome has struggled to match the goal.

The high COE prices indicate that the system influences who buys a car - those who can afford it - more than it limits car numbers.

This is obvious from the fact that the Government has to intervene by reducing the annual vehicle growth rate to 0.5 per cent come August, from 1.5 per cent currently and 3 per cent before 2009. ('COE prices up because economy is doing well, says Lui'; Monday)

The number of cars sold can at most match the number of COEs available, regardless of the COE price. This means it is unnecessary to have a price beyond an administrative fee required to run the system, which is meant to control car ownership and not generate revenue.

If important aspects like housing and education can be subject to balloting, surely a system can be designed to ballot for cars.

In hindsight, the unintended knock-on effect of high COE prices outweighs its limited success so far.

For the convenience of owning a car, the average family is saddled with a debt of tens of thousands of dollars - money that can improve its quality of life in many other ways.

Most people pay for their cars in instalments, reducing personal savings and spending power over several years.

If they were to divert a part of that money towards retail, education, health care and such, that would surely do Singapore a lot more good.

Chan Tau Chou
ST Forum, 19 Apr 2012